Darwinia Network

Katherine Ross

2023 has been a tumultuous year following the late 2022 collapse of FTX and the slew of bankruptcies that happened after the UST depeg.&nbsp;



It’s also been a year with a lot of legal action, and we mean a lot. From bankruptcies to regulatory lawsuits to class action suits, there’s been a boat load of back and forth.



But, when looking at the most notable cases this year, only a few come to mind.



Let’s start with the most obvious ones: the Securities and Exchange Commission’s cases against Binance and Coinbase.&nbsp;



The suits shocked the crypto world this summer after being filed back to back. While the companies face some of the same charges, the lawsuits are inherently different.



<h2 class="wp-block-heading">SEC v. Binance</h2>



The <a href="https://blockworks.co/news/sec-allegations-against-binance">regulator accused Binance</a> of not only offering unregistered securities, but also of commingling customer funds.&nbsp;



The lawsuit, filed back in June, also named Binance CEO Changpeng Zhao, BAM Trading and BAM Management — the latter two entities run Binance US.&nbsp;



The unregistered securities claims by the SEC target BNB, Binance’s native token, and BAM Trading’s staking program.&nbsp;



Binance filed a motion to dismiss back in September, but the SEC pushed back against the filing earlier this month.&nbsp;



The defendants made the argument that the commission had failed to “plausibly” allege securities violations and that the SEC was overstepping its regulatory reach.&nbsp;



The SEC, in its response, said that the invocation of the major questions doctrine — a Supreme Court <a href="https://www.supremecourt.gov/opinions/21pdf/20-1530_n758.pdf">ruling</a> that seeks for agencies to prove “clear congressional authorization’ for the authority it claims.”



The case, however, is ongoing.



Now, keep the overreach argument in mind for Coinbase.&nbsp;



<h2 class="wp-block-heading">SEC v. Coinbase</h2>



A mere day after the SEC targeted Binance, it unveiled another lawsuit. This time, the regulatory agency targeted Coinbase.&nbsp;



While some of the accusations in the Binance suit may have come as a shock, the Coinbase suit wasn’t too surprising. The US-based exchange had already received a Wells notice, which is the SEC’s warning before action is taken, earlier this year.&nbsp;



In fact, Coinbase had actually served the SEC with a suit prior to the SEC serving Coinbase. What goes around… it seems.&nbsp;



On June 6, the SEC announced that it was targeting Coinbase for alleged securities violations and accused it of operating as an unregistered exchange.



“But while paying lip service to its desire to comply with applicable laws, Coinbase has for years made available for trading crypto assets that are investment contracts under the Howey test and well-established principles of the federal securities laws,” <a href="https://blockworks.co/news/sec-sues-coinbase">the SEC claimed in June</a>.



<a href="https://blockworks.co/news/coinbase-binance-suits-different">One lawyer told Blockworks at the time</a> that while there were similarities between the Coinbase and Binance suits, there’s a “fundamental difference” between them. That difference? Coinbase is being accused in a “straight registration violations case.”



But let’s talk about a similarity the two have, which brings us right back to the major questions doctrine.&nbsp;



Coinbase has also <a href="https://blockworks.co/news/coinbase-sec-motion-securities">used major questions in its attempt to dismiss the suit</a>. It’s also claimed that the regulator can’t “seize power” in regulating crypto, and <a href="https://blockworks.co/news/sec-cant-seize-power">therefore doesn’t have the authority it claims to bring a case against the exchange</a>.&nbsp;



In its case against the SEC (not the SEC’s case against Coinbase, don’t get them confused!) Coinbase tried to push the SEC for clarity on crypto regulation. <a href="https://blockworks.co/news/sec-responds-coinbase-mandamus">However, the SEC pushed back against it</a>.



Similarly to the suit against Binance, this case is ongoing.



<h2 class="wp-block-heading">Legal woes of Celsius</h2>



Unlike the rest of the cases, Celsius didn’t face just one suit. Are you ready for some alphabet soup?



The Federal Trade Commission, SEC, Commodities and Futures Trading Commission all filed suits against Celsius, with a few naming ex-CEO Alex Mashinsky.&nbsp;



On the same day, the Department of Justice unsealed an indictment against Mashinsky as well.



The <a href="https://blockworks.co/news/sec-sues-celsius-former-ceo-for-market-manipulation-securities-fraud">SEC accused both the bankrupt lende</a>r and its former CEO of unregistered and “fraudulent” crypto asset sales.&nbsp;



The <a href="https://blockworks.co/news/cftc-ftc-sue-celsius">FTC accused Celsius of duping customers</a> into depositing crypto by claiming that deposits were safe. Spoiler alert: They weren’t.



It also announced a $4.7 billion settlement with Celsius — but not Mashinsky.



The CFTC accused Celsius of acting as an “unregistered commodity pool operator of the Celsius Pool by soliciting, accepting, and receiving assets for the purpose of trading commodity interests” and for defrauding investors.&nbsp;



The DOJ specifically targeted Mashinsky, and it was <a href="https://blockworks.co/news/doj-freezes-mashinsky-assets">later revealed that they also froze his assets.&nbsp;</a>



The Justice Department claims that Mashinsky “orchestrated a scheme to defraud customers of Celsius Network” alongside the former Chief Revenue Officer Roni Cohen-Pavon.



Mashinsky <a href="https://blockworks.co/news/mashinsky-files-dismissal-ftc">filed a motion to dismiss</a> the FTC’s suit against him in September.



<h2 class="wp-block-heading">New York Attorney General vs. Gemini, Genesis, DCG</h2>



Say that five times fast.&nbsp;



Back in October, the NY AG released a “sweeping lawsuit” targeting Digital Currency Group, DCG CEO Barry Silbert, ex-Genesis CEO Michael Moro, Gemini and Genesis.&nbsp;



The <a href="https://blockworks.co/news/genesis-gemini-nyag-lawsuit">suit claims that both Gemini and Genesis conspired to commit</a> two schemes with the Gemini Earn product, leading to investor losses of over $1 billion in November of last year.&nbsp;



Oh, and also that Gemini Earn falls under the definition of an investment contract.



“The Genesis Entities, DCG, Moro, and Silbert falsely assured counterparties and the public that Genesis Capital was ‘well-capitalized’ and that DCG ‘absorbed the losses’ from the Genesis Entities,” the complaint claims.&nbsp;



Through this, Gemini “falsely” claimed to the public that the Genesis Capital loan book was overcollateralized, which was not the case.



Gemini used the suit as a way to show that it — alongside Earn users — were “victims of a massive fraud and systematically ‘lied to’ by these parties about ‘Genesis’s financial condition.&#8217;” It also pushed back against being named in the suit, claiming it was just a victim and was also “defrauded.”



Gemini targeted Silbert, Genesis and DCG following the fallout of the Earn program. It filed a lawsuit against Silbert and DCG earlier this year as well.



DCG, on the other hand, claimed it cooperated with the NY AG’s investigation and was “blindsided by the filing of the complaint.”



Yes, this case is also ongoing.



<h2 class="wp-block-heading">USA v. Sam Bankman-Fried</h2>



Alright, this isn’t technically a 2023 court case since the original charges were announced back at the end of 2022, but it’s definitely one of the biggest cases to go to trial this year, so we saved the best for last.



A panel of jurors <a href="https://blockworks.co/news/sam-bankman-fried-found-guilty">found Bankman-Fried guilty</a> of all seven counts of fraud as his October trial came to a close.&nbsp;



The trial, which lasted a month, saw former FTX insiders including Bankman-Fried’s ex-girlfriend and former inner circle take the stand and testify that, at Bankman-Fried’s urging, FTX commingled customer assets prior to its November 2022 collapse.&nbsp;



There were also a number of highlights from the trial, from jurors (who would later find Bankman-Fried guilty) <a href="https://blockworks.co/news/sam-bankman-fried-trial-sleeping-juror">falling asleep</a> during testimonies, to Ellison explaining how <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-6">FTX and Alameda used alleged Thai sex workers</a> in an attempt to bribe Chinese officials.



Bankman-Fried’s courtroom days aren’t over, however, as he still faces a possible 2024 trial centered on his political donations.&nbsp;



At least that indictment was filed in 2023!



Bankman-Fried’s sentence remains unknown, though he has a date set earlier next year with Judge Lewis Kaplan to decide how long Bankman-Fried will remain behind bars.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

From SBF to Binance: Biggest court cases of 2023

Hannah Finnerty

It’s the most wonderful time of the year — that “wonderful” misery you find yourself in as you frantically brainstorm thoughtful gifts for everyone in your life.



At least one of those people is into crypto (that’s why you clicked on this article, after all).



Maybe you have no idea where to start (“What is this bitcoin thing, anyway?”). Maybe you’ve already thought of the usual suspects: a hardware wallet (smart, but overdone), $25 worth of a random token sent to their wallet (well intentioned, but lazy and uninspired — the crypto version of a gift card), and an NFT (okay, but you’ll get decision fatigue from picking which one).



Either way, I’ve come up with a handful of options that are sure to bring a smile to their face, even if the markets take a tumble.



<h4 class="wp-block-heading">For the aspiring real estate mogul:&nbsp;</h4>



Perusing Zillow used to be entertaining. But peeking at property prices these days has me weeping while I write another rent check (yes, a check). Instead of buying real property, give your loved one the gift of virtual real estate. Get them in on the ground floor of metaverse development. It’s more original than an acre on the moon, and at the very least it’ll probably be a first at your family festivities.



<h4 class="wp-block-heading">For the person who read every word of Blockworks’ SBF trial coverage:</h4>



They followed <a href="https://blockworks.co/tag/sbf-trial">Sam Bankman-Fried’s trial</a> from afar. Now, give them a piece of the action. Plane tickets to New York City and a few nights at a hotel are all they need to attend <a href="https://blockworks.co/news/sbf-guilty-verdict-sentencing">his sentencing hearing</a> currently scheduled to start March 28, 2024.



(You might also need to gift a sleeping bag or collapsible lawn chair so they’re cozy and comfortable while they wait for a seat in the courtroom at 3 am.)



<h4 class="wp-block-heading">For the one that takes musical theater a little too seriously:</h4>



Speaking of New York, take your friend or family member to Broadway for the world’s first musical all about crypto. Rather originally dubbed “<a href="https://www.cryptothemusical.xyz">Crypto: The Musical</a>,” the show is described as having “the comedy of Book of Mormon, the heart of Legally Blonde, the realism of Hamilton.” A tall order.



For the low, low price of $1,000 in USDC or USDT, you too can reserve 1 VIP ticket. The troupe is planning to make its Broadway debut in the spring of 2024.



<h4 class="wp-block-heading">For the one decorating for the holidays on Nov. 1:</h4>



This <a href="https://oldworldchristmas.com/products/bitcoin-ornament">bitcoin ornament</a> will help their tree sparkle a bit brighter for years to come.



<h4 class="wp-block-heading">For the self care-obsessed:</h4>



They’ve probably been to a spa before, but have they been to a <a href="https://blockworks.co/news/brooklyn-bitcoin-mining-spa">day spa powered by Bitcoin</a>? 



Bathhouse, located in Brooklyn, regulates the temperature of its thermal pools with byproduct heat from bitcoin miners. A day pass is $45-$70 and includes access to multiple Bitcoin-heated pools, saunas, steam rooms and a heated hammam. They also offer massage services.



Few things are better than unwinding in a vat of bitcoin juice.



<h4 class="wp-block-heading">For the page turner:</h4>



Skeptic musings, historical takes on SBF, and crypto smut: You’ve got plenty of options to choose from. The highlights:



<ul>
<li>Zeke Faux’s Number Go Up. An investigative reporter&#8217;s take on crypto. A skeptic of the crypto space, Faux starts the book off: “From the beginning, I thought that crypto was pretty dumb. And it turned out to be even dumber than I imagined.” Our opinion editor <a href="https://blockworks.co/news/crypto-book-scam-tether-ftx">couldn’t put it down</a>.</li>



<li>How the FTX Bankruptcy Unwound Crypto’s Very Bad Good Guy, by Brady Dale. A crypto history, focused on the <a href="https://blockworks.co/news/brady-dale-sam-bankman-fried">tale of Sam Bankman-Fried prolific rise</a> to Bahamas-penthouse stardom and subsequent tumble to despised industry villain.&nbsp;</li>



<li>Going Infinite. Yet another postmortem of the FTX catastrophe, albeit one much more favorable to Bankman-Fried. Our opinion editor had some <a href="https://blockworks.co/news/sam-bankman-fried-michael-lewis">choice words</a> for Michael Lewis’ SBF bootlicker prose.</li>



<li>My First Crypto Sex Party. Yes, the <a href="https://blockworks.co/news/first-crypto-sex-party-bitcoin-erotica">crypto erotica crossover</a> your gift recipient has been waiting for. I would imagine the audience for this 27 page-book by Honey Justine is pretty limited, but who am I to judge?&nbsp;</li>
</ul>



<h4 class="wp-block-heading">For the HODLrs who wants to evolve into their final form:</h4>



Can you imagine unwrapping anything more exciting than a <a href="https://www.blockworksresearch.com">subscription to Blockworks Research</a>? (I’m a company woman, what can I say?) For the day traders of crypto, this is the gift that keeps on giving. Access to in-depth reports written by some of the brightest minds in crypto? Sign me up!



<h4 class="wp-block-heading">For your buddy who’s iced up:&nbsp;</h4>



Diamonds are a degen’s best friend. There’s no shortage of crypto inspired jewelry out there, but this <a href="https://lirysjewelry.com/products/nft-crypto-man-charm-in-solid-gold-or-silver?variant=42576254992620&amp;currency=USD&amp;utm_medium=product_sync&amp;utm_source=google&amp;utm_content=sag_organic&amp;utm_campaign=sag_organic&amp;gclid=Cj0KCQiAmNeqBhD4ARIsADsYfTcLmnr-38zRrVay_Xyx6SHdXCeDNwcXNjRz6DL67fJCdGtxEUXUhpwaAp_bEALw_wcB">Crypto Punk necklace</a> is a not-so-subtle nod to their fat bag and Web3 interests. (There’s also a cubic zirconia option if you’re looking for something a bit cheaper — no judgment, this cycle has been hard on all of us.)



<h4 class="wp-block-heading">For your friend at the office:</h4>



Socks. A tried and true classic. A little impersonal, but can you really go wrong with <a href="https://cryptowardrobe.com/products/ethereum-socks">Ethereum socks</a>? Nothing wrong with sticking to the basics.



Alternatively, give them <a href="https://www.coingecko.com/en/coins/unisocks">SOCKS</a>, an ERC-20 token that can be burnt to redeem an <a href="https://socks.uniswap.org">actual pair of socks</a>. Only 315 SOCKS are still in circulation, going for a mere $35,000 a pair — you could give them the rarest (and most expensive) pair of socks they’ll ever own.



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


<div class="wp-block-post-author-biography">Hannah Finnerty is Blockworks&#8217; editorial operations manager and is based in the US. Hannah previously worked in podcast production for The National in Abu Dhabi. She graduated from Bowling Green State University with a degree in multiplatform journalism and Middle Eastern politics. Contact Hannah at hannah@blockworks.co.</div>


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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Gifts for the crypto lovers in your life (that aren’t NFTs)

David Canellis

Some victims of the $48 million KyberSwap hack are no doubt waiting anxiously for the DeFi platform’s attacker to make their next move.



Others, though, seem to be taking a more proactive approach: talk directly to the exploiter through the Ethereum blockchain.



“Hello! You did amazing job, you are amazing man!” one person wrote in a message attached to a transaction overnight.



“Im drained for over $155k USDC, you can check my wallet. Could you please send some $ to help my family? I can get you the funds into any wallet just help me out please! :(.”



Other messages are much more formal: “Hello sir/madam! I was lp [liquidity provider] on [Arbitrum] — 259809.7 DAI.”



“I would like to negotiate, and ask how much would you be willing to take as a bounty? I believe code is law, and its totally up to you. Thanks in advance!”



KyberSwap aggregates liquidity across DeFi into a single pool, enabling services such as decentralized exchanges and wallets to offer end-users instant token swaps through a web of smart contracts.



Chain watchers first <a href="https://twitter.com/spreekaway/status/1727462694138024249">spotted</a> something was up with KyberSwap on Wednesday evening. Millions of dollars in crypto were suddenly siphoned from KyberSwap contracts deployed to Ethereum, Polygon, Coinbase’s Base, Arbitrum and Optimism, with the latter two hardest hit.



A complicated series of flash loan attacks and other targeted exploits had <a href="https://twitter.com/0xdoug/status/1727613541115429314">resulted</a> in emptied token liquidity pools.



<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/ Finished a preliminary deep dive into the Kyber exploit, and think I now have a pretty good understanding of what happened. This is easily the most complex and carefully engineered smart contract exploit I&#39;ve ever seen&#8230;&mdash; Doug Colkitt (@0xdoug) <a href="https://twitter.com/0xdoug/status/1727613541115429314?ref_src=twsrc%5Etfw">November 23, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



KyberSwap responded by urging users to pull funds from the platform, with about $77 million quickly withdrawn. Now, less than $8 million is kept with KyberSwap, per DeFiLlama.



So far, the stash remains in the hacker’s various addresses. After the attack subsided, the hacker initiated <a href="https://etherscan.io/tx/0x7a8912583520304ce2364fa165dafe94461a91ab2dcf45dab942e296594dc40a">a transaction</a> with the following message:&nbsp;



“Dear Kyberswap Developers, Employees, DAO members and LPs, Negotiations will start in a few hours when I am fully rested.”&nbsp;



That was about a day and 18 hours ago. Nothing since.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/Qa4Bi4XQdpFucYMd0vZJt1jSqbNzxAXJl2LUcp4eX-WF_5lCXaTLGcuag-adxrf8cxjnZ0KQZ1XhqevIIW-5depXGNsK205H2UfLpTLnGY9xO6Mjj7tBbtHk9yMls9I5XSBtOOv9MLOXWpFzomh8Khc" alt=""/><figcaption class="wp-element-caption">Ethereum allows messages to be added to the input data field when sending transactions. This one cost about $2.</figcaption></figure>



While some messages tell the hacker they could keep some of the crypto if they return the rest, it’s unclear whether notes like “if that money are gone my children can school anymore, because don&#8217;t have money again, please help me” are legitimate stories from real victims.



Some messages are more lighthearted: One says: “hi. congrats for the hit thats a crazy thing, you looks like a smart, arrogant &amp; funny guy, could we talk in telegram or else? :)”



Another: “Hi legend pls send me 1mill to become the top g for life, thx love u”



There are others that offer advice: “I don&#8217;t know what you want to do next, but just want to remind that stablecoins like USDC have an address blocking function in the smart contract code.” A few even apparently sent tips, including some for 0.001 ETH ($2.06) and one for 0.0000069 ETH ($0.014).



Often hackers wait days, months, or even years before attempting to launder stolen crypto. Sometimes, the hacker returns the funds after taking 10% or 20%, playing off the whole thing as a gray-hat stunt.



Who knows where the Kyber case will end up.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/YZ0qPRtT3xcaAOvr2JREsX_dWSkjDfC-HUqtIhY_wMqLu3d6KEt9oVxAX4JLe22URrmhMwtTTxX9k-XHJYjfegLD5aigo5RazgEMq3yGHdZac8Hz_y9Wkf-QNJk5r9IgmzyaRLSsF9hfxorYHO3cYhY" alt=""/><figcaption class="wp-element-caption">Whether it’s real or pretend, this message is still sad</figcaption></figure>



In any case, it wasn’t bad enough that Ethereum network participants had to cryptographically verify the integrity of CryptoDickButts and Pixelverse Poops.



Now, they must forever ensure nonsense like, “Could you teach me your ways senpai? I too would like to make generational wealth in seconds please,” remains untampered-with, forever written to the blockchain. Great.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Fan mail and ETH tips sent to KyberSwap hacker who stole $48M

Macauley Peterson

In just a few days, the amount of value sent into the Blast deposit contract on Ethereum has increased by an order of magnitude to $390 million.



A smart contract, advertised as a “bridge” for a yet-to-be-developed optimistic rollup, has received about $340 million in ether and $50 million in stablecoins since launching Monday.



The <a href="https://etherscan.io/address/0x5f6ae08b8aeb7078cf2f96afb089d7c9f51da47d">contract</a> is controlled by a <a href="https://app.safe.global/settings/setup?safe=eth:0x67CA7Ca75b69711cfd48B44eC3F64E469BaF608C">Safe 5-key multisig</a> where 3 keys are required to execute transactions. However, one of the 5 keys has no transaction history, and the other 4 show initial ether deposits from the same Ethereum <a href="https://etherscan.io/address/0x62abcf00d56057edcbcd8122dc06ab6a1fa643dd">account</a>.



There is no way for an outside observer to know whether the five keys were generated by five independent entities or people.



A thread on X from Blast <a href="https://x.com/Blast_L2/status/1728096111313973317?s=20">claims</a> they are using best practices, and that the signers &#8220;are deeply technical engineers who have experience with high stakes applications ranging from financial applications to smart contracts.&#8221;



<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">You want to make sure that each signing key of a multisig is independently secure. This helps make the multisig antifragile. Each key should be in cold storage, managed by an independent party, and geographically separated.&mdash; Blast (@Blast_L2) <a href="https://twitter.com/Blast_L2/status/1728096108378025998?ref_src=twsrc%5Etfw">November 24, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Development of the project, backed by VC firms Paradigm and Standard Crypto, along with a slew of influential <a href="https://twitter.com/mrjasonchoi/status/1726830156545994959/photo/1">crypto personalities and traders</a>, is being spearheaded by <a href="https://blockworks.co/tag/blur">Blur</a> co-founder, Tieshun Roquerre who goes by the pseudonym “Pacman.”



The <a href="https://x.com/PacmanBlur/status/1628223380314001408?s=20">former</a> Thiel Fellow and <a href="https://tieshunroquerre.com/">MIT dropout</a> previously told Blockworks that the project uses “the same security model” as other L2s specifying Optimism, Polygon, and Arbitrum.



However, each of these networks, while not fully trustless, has additional security components besides a multisig. For instance, Arbitrum has a publicly elected “security council” with 12 members, only two of which are on the <a href="https://blockworks.co/tag/offchain-labs">Offchain Labs</a> development team.



Blockworks contacted Paradigm and Standard Crypto and Pacman for clarification.



Deposited ether cannot be withdrawn until February 2024, when the development team must modify the deposit contract, presumably alongside the launch of an actual rollup.



Ethereum layer-2 tracker L2BEAT lists the project in it’s “<a href="https://l2beat.com/scaling/summary#upcoming">Upcoming</a>” section, but were it active today it would rank between zkSync Era, which launched mainnet in October 2022, and dYdX V3 the StarkEx rollup that has been active since April 2021.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/PVUJako77FavDnqoiTYlTrj0sPNQvQrbkUG0sEYcExADFS16O0xNPE-VJ7_Ky8c1-zwACTHspHhHW9Z9q54FAdgmzSvPVdrkyFURSTBLyrmxm1ZySD2pzaB_Tk1GUkeWu9om6ped5WAWqnk54_LW-NA" alt=""/></figure>



Active Ethereum L2s; Source; <a href="https://l2beat.com/scaling/summary#active">L2BEAT</a>



One depositor tossed 10,000 ETH, worth $21 million at the time, into the contract in a <a href="https://etherscan.io/tx/0x1e701748ca280f83fbf9d3432d7ab2df14fc82af4acd69049bb34fbdf80914b6">single transaction</a>.



<h2 class="wp-block-heading">“Collective brain of Crypto Twitter” weighs in</h2>



Many crypto observers have expressed surprise at Blast&#8217;s rapid growth in the face of uncertain risks.



Blast has touted on its X account that ether staking represents “risk-free return,” a view which Lido DAO members, including Blast investors, have expressed lacks nuance.



<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">important to clarify that this statement is false. while i am of the opinion that staking needs to be made as close to risk-free as possible, we are not there today. there are governance, contract, and operator risks involved. anyone using Blast needs to keep these in mind <a href="https://t.co/8z9dVJhr6J">https://t.co/8z9dVJhr6J</a>&mdash; sacha💧 (@sachayve) <a href="https://twitter.com/sachayve/status/1726992845431848990?ref_src=twsrc%5Etfw">November 21, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Orlando Cosme, founding attorney of OC Advisory, criticized the project, calling it an “onchain hedge fund” that is “proving regulators’ point.”



<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">Blast is proving regulators’ point. An onchain hedge fund controlled by a 3/5 anon multisig isn’t defi. It’s “trust me bro.” And centuries of “trust me bro” is why financial regs exist. Crypto’s value add—and why crypto needs diff regs—is trust reduction. We can do better.&mdash; orlando.btc (@Orlando_btc) <a href="https://twitter.com/Orlando_btc/status/1727738246401077737?ref_src=twsrc%5Etfw">November 23, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



A straw poll conducted by Tangent Ventures founder Jason Choi, seeking to tap “the collective brain of CT,” has garnered over 2,500 respondents. The unscientific opinion poll puts the odds of an exploit of the deposited crypto assets between now and February at 64%.



<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">Will Blast bridge be exploited before February?&mdash; Jason Choi (@mrjasonchoi) <a href="https://twitter.com/mrjasonchoi/status/1727912768312115558?ref_src=twsrc%5Etfw">November 24, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Offchain Labs’ Chief Strategy Officer, A.J. Warner, noted Thursday <a href="https://x.com/ajwarner90/status/1727552749535941004?s=20">in an X post</a> that the Arbitrum development firm had considered a similar design but opted not to pursue it.



<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">Btw, this doesn’t mean staking bridged funds is per se a bad idea. There are ways to manage/disclose risks etc. in theory. It’s just obvious that the way Blast is doing it isn’t how we would approach it.&mdash; A.J. Warner (💙,🧡) (@ajwarner90) <a href="https://twitter.com/ajwarner90/status/1727566510900588899?ref_src=twsrc%5Etfw">November 23, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Very few of the listed investors have publicly addressed criticisms of the project to date, though some <a href="https://x.com/Evan_ss6/status/1727161373950615693?s=20">claim</a> to have privately communicated concerns.



Dovey Wan, a Blast investor and Founder of Primitive.Ventures, <a href="https://x.com/DoveyWan/status/1727519384179294574?s=20">promoted</a> the project’s success attracting capital as having “pre-bull energy,” and “strong pumpanomics,” while hand waving away concerns over the security of funds, by acknowledging “it&#8217;s just a multisig managed by 5 [profile pics] online.”



Wan urged crypto users to “bridge for culture bridge for fun bridge for what you can afford to lose it all,” alongside the vacuous caveat that the promotion was “no FA DYOR” — not financial advice, do your own research.



Updated Nov. 24, 2023 at 12:37 pm ET with update from Blast on multisig.

Blast TVL hits $390 million, with no product

Terraform Labs and former CEO Do Kwon remain locked in a legal battle with the US Securities and Exchange Commission over the now-infamous depeg and collapse of the stablecoin UST.



The lawsuit was filed back in February, less than a year after the depegging triggered a domino effect for crypto firms. UST’s collapse led to multiple bankruptcies and exposed the weaknesses within FTX’s now-failed exchange empire.&nbsp;



Yet — as evidenced by the trial of former FTX CEO Sam Bankman-Fried — both FTX and Alameda were in trouble prior to the depegging.



The SEC’s lawsuit <a href="https://blockworks.co/news/do-kwon-indicted-for-fraud">isn’t the only one that Kwon faces</a>. Kwon was indicted in March by a grand jury on fraud charges — including wire fraud, securities fraud and commodities fraud. South Korean authorities also issued a warrant for his arrest in October of last year.



<a href="https://blockworks.co/tag/do-kwon">Kwon</a> faces possible extradition to either the US or South Korea after fulfilling a four-month sentence in Montenegro. 



The Terraform Labs founder was initially denied an appeal by the Montenegrin high court following a March arrest for forging travel documentation. But new reporting from the <a href="https://www.scmp.com/news/asia/east-asia/article/3242774/extradition-south-koreas-cryptocurrency-king-do-kwon-approved-montenegro-court?utm_source=rss_feed">South China Morning Post</a> indicates that the High Court has cleared the path to extradition, leaving it up to government officials to decide where Kwon will ultimately be sent.



Read more: <a href="https://blockworks.co/news/sec-terraform-labs-ust-depeg">Jump Crypto president pleads the Fifth when asked about alleged Do Kwon bribe</a>



Both the SEC and Terraform have filed motions seeking a summary judgment, which would avoid the case proceeding to a full trial. The motions come after an October deadline for discovery, or the process of obtaining information ahead of a trial.



In the SEC’s motion, the regulator claimed that Terraform and Kwon “struck a secret side-deal with a third party to push UST back up to $1, in exchange for selling that party LUNA at dramatically reduced prices.”



The name of the third-party was redacted from the public filing.



The SEC also claimed that Terraform offered unregistered securities, a claim the regulatory agency has made against other crypto companies, including Binance, Coinbase and Ripple.&nbsp;



However, a decision handed down in the SEC’s case against Ripple may have weakened the claims — at least, that’s the argument Terraform’s counsel attempted to make earlier this summer.



After a judge ruled that Ripple’s <a href="https://blockworks.co/news/judge-rules-ripple-xrp-not-security">programmatic sales did not constitute securities offerings</a>, <a href="https://blockworks.co/news/terraform-lawyers-use-ripple-ruling-dismiss-suit">Terraform filed a motion to dismiss</a>, claiming that the ruling confirmed “the legal insufficiency of the SEC’s argument that UST, LUNA, wLUNA, MIR and mAssets were securities because of the way they were allegedly sold.”



Read more: <a href="https://blockworks.co/news/do-kwon-us-deposition-impossible">Do Kwon deposition in the US is ‘impossible,’ lawyers argue</a>



Judge Jed Rakoff, who’s overseeing the case, failed to agree however. In a 50-page opinion, Rakoff denied the motion and gave an interpretation of the Howey test — the test used by the SEC to determine what constitutes a security — at odds with the interpretation from Judge Analisa Torres, who oversaw the Ripple judgment.&nbsp;



“Simply put, secondary-market purchasers had every bit as good a reason to believe that the defendants would take their capital contributions and use it to generate profits on their behalf,“ Judge Rakoff ruled in late July.



The SEC, in its request for summary judgment, argued that Rakoff should issue a ruling without going to trial because there’s “no genuine dispute as to any material fact.”



Read more: <a href="https://blockworks.co/news/terra-ceo-kwon-return">‘Of course Kwon is welcome back,’ says Terra interim CEO</a>



Terraform and Do Kwon made the same argument in their motion for summary judgment, albeit for the opposite reason.&nbsp;



“After two years of investigation, the completion of a discovery period that resulted in the taking of more than 20 depositions, and the exchange of over two million pages of documents and data, the SEC is evidentiarily no closer to proving that the Defendants did anything wrong,” lawyers for both Kwon and Terraform asserted at the end of October.



Rakoff, however, in his denial of the aforementioned dismissal asserted that the SEC made both “factual allegations” and “asserted a plausible claim.”



The judge has yet to issue a decision on the summary judgments requests.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Where things stand: The SEC vs Do Kwon and Terraform Labs

Bessie Liu

The crypto ecosystem has achieved an array of major technology milestones over the past year.&nbsp;



Despite a series of unfortunate events in 2022 — with the collapse of the Terra ecosystem, and then later the bankruptcy of Sam Bankman-Fried’s FTX — the blockchain tech space proved resilient in 2023.



In particular, we’ve seen developments in the infrastructure and technology sectors with new innovations designed to make blockchains faster, more secure and private.&nbsp;



<h2 class="wp-block-heading">Major advancements in zero-knowledge technology&nbsp;</h2>



This year marked the launch of a series of zero-knowledge (zk) rollups.&nbsp;



First, we saw the launch of <a href="https://blockworks.co/news/zksyncs-evm-era-opens-to-the-public">zkSync Era</a>, followed closely by <a href="https://blockworks.co/news/polygon-unveils-zkevm-the-holy-grail-of-scaling">Polygon’s zkEVM</a>, later <a href="https://blockworks.co/news/linea-mainnet-ethereum">Linea</a>, and more recently, the <a href="https://blockworks.co/news/ethereum-rollup-zksharding-nil-mainnet">=nil; Foundation</a> —&nbsp;just to name a few.



Rollups share the same goal: make blockchains operate more efficiently by reducing the amount of block space needed to make a transaction by executing more transactions off-chain. This will, as a consequence, also reduce gas fees and fixed costs.&nbsp;



Zero-knowledge rollups, in this particular case, are not only able to perform off-chain executions, but they are also able to determine if the information is accurately executed without disclosing the information on the mainnet.&nbsp;



This differs from optimistic rollups, which automatically presume that information is accurate and rely on fraud proofs to challenge suspicious transactions.



It is important to note that more work still needs to be done to ensure zkRollups are completely decentralized and permissionless. Existing zero-knowledge technology is subject to upgradability risks.



&nbsp;These risks refer to whether or not a blockchain can be upgraded or subject to changes — with blockchains being more secure if they can not be upgraded.



<h2 class="wp-block-heading">More interconnected blockchains</h2>



Blockchain interoperability also made some impressive improvements this year.&nbsp;



From the introduction of <a href="https://blockworks.co/news/chainlink-ccip-launch">Chainlink’s CCIP </a>to LayerZero&#8217;s recent partnership with <a href="https://blockworks.co/news/layerzero-google-cloud-oracle-operator-messaging">Google Cloud</a> and <a href="https://blockworks.co/news/jpmorgan-tokenized-blockchain-portfolio-avalanche">JPMorgan</a>, cross-chain interoperability protocol teams are actively working on connecting various private and public blockchains.



Blockchain interoperability protocols enable smart contracts across different blockchain networks to communicate with each other and facilitate the transfer of liquidity.&nbsp;



This is typically achieved through burning tokens in the smart contract of a source chain and then minting new, corresponding tokens on a destination chain.&nbsp;



Another way to transfer tokens is through bridging, where tokens are locked on a source chain and then minted natively on the destination chain.&nbsp;



Such tools can enable users of various blockchains to seamlessly swap, lend and stake their tokens across various ecosystems for a small gas fee.&nbsp;



<h2 class="wp-block-heading">Bringing more real-world assets on-chain through tokenizations</h2>



To bring more liquidity on-chain, developers real-world asset (RWA) protocols are also looking at ways these assets could serve as collateral through tokenization.



RWAs in the space could include assets such as cash, gold, real estate and US treasury bonds, for example. One of the most well-known RWAs today would be stablecoins — like Circle’s USDC and Tether’s USDT, which are widely used across DeFi protocols.&nbsp;



Some of the protocols behind on-chain financing include <a href="https://blockworks.co/news/centrifuge-real-world-assets-tokenization-ethereum">Centrifuge</a>, <a href="https://blockworks.co/tag/maple-finance">Maple Finance </a>and <a href="https://app.blockworksresearch.com/research/goldfinch-a-strong-contender-in-the-on-chain-private-credit-markets">Goldfinch</a>.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

3 of the biggest blockchain tech developments in 2023

Molly Jane Zuckerman

Reading is my passion. Crypto is not.&nbsp;



However, I find reading so important that I’ve still made a point of stressing the need to read books (ideally fiction) in order to be better at your job — even if your job is in the crypto industry. In fact, I’ve written a <a href="https://blockworks.co/news/dear-crypto-read-a-book-already">whole column</a> begging the crypto industry to read. (My favorite <a href="https://www.reddit.com/r/CryptoCurrency/comments/13pjpc8/comment/jl9v7mj/?utm_source=share&amp;utm_medium=web3x&amp;utm_name=web3xcss&amp;utm_term=1&amp;utm_content=share_button">response</a> to said column: “How is crypto going to read a book, it doesn’t have eyes.”)



For this end-of-year crypto reading last wrap-up, I will be making several concessions by adding in some non-fiction to my recommendations — as well as some light warnings of books that crypto people should stay away from.



Top of my list for best crypto books in 2023 is Number Go Up, the story of both Tether and Sam Bankman-Fried, written by Bloomberg journalist Zeke Faux. As I wrote in my <a href="https://blockworks.co/news/crypto-book-scam-tether-ftx">review</a>, the best types of non-fiction books are those that read like fiction — and this is one of them. While Faux began the book with the idea of finally uncovering all of Tether’s secrets, his failure to do so led him to a much more timely story — putting him in the room with Bankman-Fried right up until his arrest last November. I’d compare Number Go Up to the more scintillating non-fiction books, right up there with Midnight in the Garden of Good and Evil.



Moving forward, my second book recommendation for 2023 is an oldie, but a goody: Cryptonomicon by Neal Stephenson. Even though this hefty novel was written in 1999, Stephenson’s science-fiction tale of a twisted World War II includes some of the first imagining of how a digital gold currency would work. And if you like Cryptonomicon, I’d recommend that you go even further back to his 1992 Snow Crash, where he used the word “metaverse” for the first time. Even though, unfortunately, Stephenson made his own (possibly misguided) foray into actual cryptocurrency with a metaverse blockchain project, that doesn’t take away from the importance of his earlier writings.



My third book recommendation is a bit more unusual to find in a crypto reading list — Vera Wong’s Unsolicited Advice for Murderers by Jesse Q. Sutanto. I’ve <a href="https://blockworks.co/news/crypto-murder-mystery-books">written already</a> about my frustrations with the new prevalence of using cryptocurrency and NFTs as plot devices in murder mysteries, but this story of an elderly tea expert in Chinatown solving a murder is a delightful read. You’ll be less surprised than I was when you discover NFTs lie at the heart of the murder, because this book is on a crypto reading list already.



Last but not least, I’d be remiss if I didn’t include a brief note on the two crypto books that I read this year that I would not recommend to any crypto person. The first is Michael Lewis’ Going Infinite, which I <a href="https://blockworks.co/news/sam-bankman-fried-michael-lewis">panned</a> as an overly enthusiastic portrait of Bankman-Fried that glosses over all of the bad parts. The second is My First Crypto Sex Party, which is the latest in a line of <a href="https://blockworks.co/news/first-crypto-sex-party-bitcoin-erotica">very silly crypto erotica</a> — the book is 27 pages too long, and it’s only 27 pages long.



And then, just because I loved it so much, the last book on my crypto book list is Biography of X, by Young Lions award winner Catherine Lacey. It has nothing to do with cryptocurrency, blockchain or any metaverse, but as <a href="https://blockworks.co/news/dear-crypto-read-a-book-already">I’ve written before</a>, sometimes just reading a good novel will make you better at other parts of your life.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Your 2023 crypto reading list

<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="256" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024&amp;h=1024" alt="" class="wp-image-60166" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



Crypto stamp collecting should never, ever catch on.



My dad is a stamp collector. Last month, he expanded his stamp collection with something a little bit new — an NFT stamp, issued by the Austrian post office.



For those who don’t know, stamp collecting is a serious hobby. The most expensive stamp ever was issued in British Guiana in 1857 and sold at Sotheby’s for almost $9.5 million. The cheapest and easiest stamps for you to buy are at your local post office for around $.60. Somewhere in the middle are Crypto Stamps (of cryptostamp.com), which go for 9.90 euros ($10.82) each.



The website for Crypto Stamps, which are issued by the real Austrian post office, looks like the lowest level NFT scam site ever, weird capitalizations, poor English and all.



Case-in-point, under their roadmap for the bear Crypto Stamp that my father purchased, it reads:&nbsp;



<figure class="wp-block-image"><img decoding="async" loading="lazy" width="1536" height="1352" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png" alt="" class="wp-image-74276" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png?w=292 292w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png?w=297 297w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png?w=249 249w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/image-4.png?w=80 80w" sizes="(max-width: 1536px) 100vw, 1536px" /></figure>



This is a real screenshot from the Austrian post office&#8217;s Crypto Stamp website (automatically translated)



Regardless of looks, the Crypto Stamp did really arrive in the mail — a physical “twin” stamp for the NFT stamp that would live on the blockchain. You might read this and think, nice! This is a real-world example of an NFT use-case, combining collecting with the blockchain to add value and make use of blockchain’s immutability to improve upon a well-known hobby.&nbsp;



Some stamp collectors, or philatelists, feel the same way.&nbsp;One stamp blog I found wrote the following:



“One fact we have to face is that physical stamps may soon be confined to the same realms as LPs, books and DVDs [&#8230;] If that happens then crypto-stamps might well hold the key to the future of philately.”



But after setting up my dad’s Crypto Stamp with him, I feel certain that this is all just a load of baloney.



The process of how to activate your Crypto Stamp leaves a lot to be desired. Despite the fact that my father printed out the five pages of instructions from the website and stapled them together (how Web1 of him), the guide on turning the little cardboard stamp (and the safe that evolves the stamp) he received into the mail into a blockchain-based NFT was nonsensical.



My plan had been to sit back, relax and watch an avid stamp collector collect his new NFT stamp.&nbsp;



The complexity of the process meant that I had to jump in — and even my five years of crypto journalism experience plus the several NFTs in my MetaMask wasn’t enough to actually get my dad his Crypto Stamp.



The first hurdle was realizing my dad didn’t know what private keys were. Luckily, I was around to stop him from uploading his Crypto Stamp private keys into the cloud for anyone to steal.&nbsp;



The second, and largest, hurdle was realizing that cryptostamp.com assumed that you already had a MetaMask wallet. No problem, we easily downloaded the browser version.&nbsp;



The third hurdle was that we had to open both the Crypto Stamp Safe and Stamp simultaneously and then click “morph” to turn the NFT from a baby bear to a baby bear holding a pacifier. (What this has to do with Austria’s post office, who knows.)



Read more from our opinion section: <a href="https://blockworks.co/news/us-dolla-ponzi-scheme">The US dollar? Yeah, that’s a Ponzi scheme</a>



Unfortunately, after an hour and a half of playing around with the website, it proved to be absolutely impossible to get the baby bear Crypto Stamp to show up in MetaMask. At first, I thought that the lag was due to slow block times on Polygon’s network — or as my dad put it, “Are crypto miners in Mongolia going, hmmmm, time to make Zuckerman’s NFT stamp?”&nbsp;



Eventually, I realized it was because the website itself must be broken in some fundamental way. Or they didn’t give us enough information to finish the job. Or we didn&#8217;t MetaMask correctly. Who knows.



While I’m an out and proud crypto skeptic, I did always think that NFTs had some value if they were used by industries where they could fit right in —&nbsp;like collecting Pokemon cards…or stamps.



The main takeaway from this playful experiment of a stamp collector attempting to collect an NFT stamp is not just that the whole process was prohibitively confusing, but that the NFT stamp itself didn’t seem to spark the same amount of joy as a regular stamp did for a true philatelist.&nbsp;&nbsp;



And while not all stamps are used to mail letters —&nbsp;as my father told me, some post offices specifically put out collectible Elvis or Princess Di stamps to collect that pure profit —&nbsp;an NFT collectible stamp seems to have even less utility than a real collectible stamp. Not only can you not mail a letter with it if you wanted to, you spend hours on a computer trying to make sense of toggling between Ethereum and Polygon on MetaMask.&nbsp;



Both types of stamps were never meant to be mailed, but the NFT version sucked all of the pleasure out of stamp collecting. Adding a digital baby bear stamp to your collection shouldn’t be eons harder than sticking a physical stamp in a book.



Later that night, we checked MetaMask again to see if the baby bear had made over the Web3 airwaves yet, or somehow gotten “stuck in Web2,” as my dad said. Nothing.



My stamp collecting father’s final words on the matter are reminiscent of how many NFT collectors probably feel now that the market has so thoroughly bottomed out — “I had a lot of fun with you, but what do I have at the end?”



Still nothing.



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



I don’t care much about tech, I don’t care a whole lot about finance, either. I care about writing stories and watching weird things unfold. And that’s why I’ve ended up in crypto. But because I’m missing that passion for what crypto and blockchain are all about — finance, tech, privacy, yadda yadda — I’m going to write instead about what I am actually interested in. Everything about crypto that has very little to do with crypto. That’s what this column will be about. All the tangential stories that come out of the blockchain and crypto space, what I think about them, and how I navigate it all as a skeptical former Russian literature major. It’s precisely my perch as an outsider that lets me do what I do: Opine on all sides of any crypto issue, no strings attached, no skin in the game. If you want to talk crypto with me, let’s go off topic.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

NFT stamp collecting is a dud

Uniswap (<a href="https://blockworks.co/price/uni">UNI</a>) is the best performing top cryptocurrency since word of Binance’s <a href="https://blockworks.co/news/brian-armstrong-binance-new-chapter">$4 billion settlement</a> with the US Department of Justice (DOJ) first broke.



UNI, a governance token for the top decentralized exchange by trade volume, has jumped more than 22% over the past three days, from around $5.20 to $6.35.&nbsp;



The move has swelled UNI’s market cap by more than $750 million to $4.8 billion, it&#8217;s highest point since August. UNI is now valued above bitcoin cash (<a href="https://blockworks.co/price/bch">BCH</a>), although it’s still 86% down on its all-time high set in 2021.



Bloomberg first reported word of Binance and former CEO Changpeng Zhao’s run-in with the DOJ on Monday. Zhao <a href="https://blockworks.co/news/doj-indictment-binance-changpeng-zhao">stepped down as CEO</a> the next day and pleaded guilty to Bank Secrecy Act violations as part of a plea deal. 



Prosecutors are now <a href="https://www.reuters.com/technology/us-prosecutors-want-binances-zhao-remain-us-until-sentencing-filing-2023-11-22/">pushing</a> for Zhao, who was released on $175 million bond, to stay in the US until sentencing in February.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/15862663/embed#?secret=Dde0GES4Js" data-secret="Dde0GES4Js" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Uniswap is way up while most top cryptocurrencies are basically flat</figcaption></figure>



Crypto prices initially held steady but by the time official confirmation came on Tuesday, 5% had been wiped from the market&#8217;s total cap, equal to $68 billion per TradingView data.



Binance’s native cryptocurrency <a href="https://blockworks.co/price/bnb">BNB</a> slid up to 10% while bitcoin and ether slipped around 4% each.



Crypto overall has since fully recovered, now back at $1.4 trillion — still up by more than a quarter since BlackRock filed its <a href="https://blockworks.co/news/blackrock-spot-bitcoin-etf-rumors">spot bitcoin ETF application</a> in June.&nbsp;



The DeFi sector is particularly sharp. The total value of all DeFi token projects is now $57.75 billion according to TradingView, up by more than a quarter over the past month. 



DeFi is now at its largest valuation since August 2022, only weeks before FTX went bust.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/15863488/embed#?secret=t8EMscbSNW" data-secret="t8EMscbSNW" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Click the swatches to toggle assets on the chart (hint: remove everything but DeFi)</figcaption></figure>



BNB still has a ways to go, however. Out of the top 30 or so cryptocurrencies by market cap, BNB has been the second-worst performing since just before Bloomberg’s Monday report, down 5.7% as of 8:30am ET. Polygon (<a href="https://blockworks.co/price/matic">MATIC</a>) had shed 6.8%.



Uniswap’s overperformance could be attributed to kneejerk reactions from investors looking for a narrative to latch onto amid the chaos.&nbsp;



After all, the US government has notched a big win against the largest centralized crypto exchange for lax money laundering protections. Similar actions against decentralized exchanges could be more difficult.



Uniswap Labs (the startup) has also seen <a href="https://blockworks.co/news/uniswap-fees-dexs-trading">rising revenues</a> after adding a 0.15% fee on certain trades through its interface in October, although those won&#8217;t flow down to the protocol or token holders directly.



Updated Nov. 23, 2023 at 10:21 am ET: Clarified revenue reference.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Uniswap price pumps, DeFi hits 14-month high amid Binance drama

Ben Strack

“So I heard BlackRock launched a bitcoin ETF,” your uncle might say at the Thanksgiving table.&nbsp;



How will you respond?&nbsp;



Well, first you can clarify that he (let’s call him Jim) means an ETF, or exchange-traded fund. And while the asset management giant indeed wants to bring such a product to market, it does not yet have approval. 



“Oh, I see,” Uncle Jim says as he collects another forkful of mashed potatoes. “I can’t say I know much about it beyond all the headlines.”



He’s right — the story has been the subject of numerous stories in recent months. Yet, misconceptions persist.&nbsp;



BlackRock is not the only one pursuing a bitcoin ETF. About a dozen companies — <a href="https://blockworks.co/news/spot-crypto-etf-ark-invest-21shares">including Ark Invest and 21Shares</a>, as well as Fidelity, Invesco and Bitwise — have similar proposals before the US Securities and Exchange Commission.&nbsp;



Grayscale Investments has said its Bitcoin Trust (GBTC) <a href="https://blockworks.co/news/grayscale-bitcoin-etf-milestone">is ready to operate as an ETF</a> upon receipt of necessary regulatory approvals.



Your dad’s brother then asks: “So, do you think this whole bitcoin ETF thing will happen then? And what’s the big deal anyway?”



Read more: <a href="https://blockworks.co/news/bitcoin-spot-etf-analysts-gold">To gauge impact of bitcoin spot ETF, analysts look to gold</a>



Feel free to opine on the topic if you wish. But here are some facts to have at the ready.&nbsp;



First, the SEC has consistently blocked bitcoin ETFs from coming to market for a decade or so. These funds, if approved, would hold BTC directly and give investors exposure to the asset within an investment vehicle accessible via traditional brokerage accounts.&nbsp;



<a href="https://blockworks.co/tag/etfs">ETFs</a> — which hold roughly $7 trillion in assets — are a tool used by retail investors and financial advisers alike.



Bloomberg Intelligence analysts say they think the chance of spot bitcoin ETF approval by Jan. 10 — the SEC’s <a href="https://blockworks.co/news/sec-decision-date-bitcoin-etf#">deadline to rule on a bitcoin ETF proposal</a> by Ark Invest and 21Shares — is 90%.



<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">Since it feels like everyone is asking. Events of the last few days haven’t changed my &amp; <a href="https://twitter.com/EricBalchunas?ref_src=twsrc%5Etfw">@EricBalchunas</a>’ odds. We can’t go any higher than 90% by Jan 10th. That said, things are continuing to move forward in our view.&mdash; James Seyffart (@JSeyff) <a href="https://twitter.com/JSeyff/status/1727112423042331030?ref_src=twsrc%5Etfw">November 21, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“But what are they basing that on?” Uncle Jim asks. “Why would the SEC all of a sudden approve a bitcoin ETF?”&nbsp;



There are a few factors at play here, and you could explain — if he has the patience to listen, since Ol’ Jim’s eyes may have found the Lions game on the television behind you. Perhaps Jared Goff connected with Amon-Ra St. Brown for a go-ahead score. When did Detroit’s football team get good?



But back to bitcoin ETFs — what’s different now?&nbsp;&nbsp;



<a href="https://blockworks.co/news/blackrock-clout-bitcoin-etf-approval">BlackRock filing for a spot bitcoin ETF</a> in June certainly turned heads. The company manages more than $9 trillion in assets and has only ever had one product proposal denied by the SEC in nearly 600 attempts, according to Bloomberg Intelligence data. BlackRock’s push spurred a new wave of bitcoin ETF proposals across the financial sector.



Elsewhere, Grayscale <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf#">won a court case against the SEC in August</a> — a ruling that limits the criteria on which it would be able to deny the conversion of the Grayscale Bitcoin Trust (GBTC) to an ETF, should it try to do so again.&nbsp;



The SEC had a chance to challenge the legal decision as late as last month, <a href="https://blockworks.co/news/sec-grayscale-spot-bitcoin-etf">but opted not to</a>.&nbsp;



Beyond that, fund issuers have amended their bitcoin ETF proposals, signaling an ongoing dialogue with the SEC.&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">&#8211; This still is &quot;in-kind&quot; creation/redemption, but they&#39;ve introduced Coinbase as prime broker to assist in this process. So APs can simply transfer balances held at the PB to create rather than transfer BTC on-chain.&mdash; Scott Johnsson (@SGJohnsson) <a href="https://twitter.com/SGJohnsson/status/1726655292312825880?ref_src=twsrc%5Etfw">November 20, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



21Shares president Ophelia Snyder said during a Monday interview on Bloomberg TV that <a href="https://blockworks.co/news/21shares-bitcoin-etf-approval-incoming">there has been a “pattern break”</a> as issuers have begun to offer more information on what these products would look like.&nbsp;



“That’s really positive, because, very candidly, change in behavior might actually result in a change of outcome,” Snyder added.&nbsp;



As recently as Monday, members of the SEC’s division of trading and markets <a href="https://www.sec.gov/comments/sr-nasdaq-2023-016/srnasdaq2023016-301739-769762.pdf">met</a> with executives from BlackRock and Nasdaq about the proposed iShares Bitcoin Trust.&nbsp;



“I guess only time will tell,” Uncle Jim concludes at the dinner table, seemingly ready to move on to dessert.



Right he is.&nbsp;&nbsp;



The table topic indeed shifts. Your sister was asked about her love life. Someone just brought up the 2024 presidential election.&nbsp;



Is it time for pie yet?



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Bitcoin ETFs might come up at Thanksgiving — here’s what to say

Jack Kubinec

A group of seven Uniswap DAO delegates who vote over 80% of the time — but possess marginal voting power —&nbsp;moved closer to receiving a voting power boost after a Wednesday temperature check vote.&nbsp;



The proposal would split 10 million uniswap, worth around $60 million at current prices, among “underrepresented” DAO delegates with less than 2.5 million uniswap. A DAO borne out of Georgia Tech’s blockchain club and the trading firm Wintermute were the two most popular delegates in the temp check. 



The <a href="https://gov.uniswap.org/t/temperature-check-delegation-of-uni-to-active-but-underrepresented-delegates/22238?u=doo_stablelab">proposal</a> now faces an on-chain vote before delegates would receive uniswap (<a href="https://blockworks.co/price/uni">UNI</a>) from the DAO’s treasury. To be clear, the UNI would not be funds the delegates could spend or trade, but would bump up their share of voting power on future governance matters.&nbsp;



As with many <a href="https://blockworks.co/tag/daos">DAOs</a>, Uniswap’s DAO allows token holders to either vote themselves or <a href="https://docs.uniswap.org/concepts/governance/guide-to-voting#:~:text=Delegation%E2%80%8B&amp;text=Delegating%20UNI%20binds%20the%20voting,best%20interest%20of%20Uniswap%20Governance.">delegate</a> their voting power to another wallet address. There are more than 30 delegates with at least 2.5 million delegated votes, the line the proposal sets for “underrepresented.” Variant Fund general partner Jesse Walden is the second-<a href="https://sybil.org/#/delegates/uniswap">largest</a> delegate with around 8 million tokens.



Read more: <a href="https://blockworks.co/news/uniswap-dao-vc-governance">Uniswap’s DAO poised to try its hand at venture capital</a>



The governance service provider StableLab authored the delegation proposal and would also receive governance tokens were it to pass. StableLab also proposed and <a href="https://www.tally.xyz/gov/rari-foundation/proposal/66726109600671652856639226642372993908424788433801728846371611962551475607579?chart=0">passed</a> a delegation incentive program this week at Rari DAO.



Doo Wan Nam, chief operating officer of StableLab, told Blockworks that the experiment in recognition for active delegates is important for accountability, as delegates who failed to maintain 80% participation would lose the extra votes.&nbsp;



Wan Nam acknowledged the difficulty in subjectively analyzing whether an active voter is a good voter, though. Are delegates voting flippantly or deeply researching both sides of a proposal?&nbsp;



“We have to start with something that’s objective,” Wan Nam said. 



The move comes as Uniswap’s voting delegation has been slowly consolidating. A Dune Analytics dashboard <a href="https://dune.com/butterd/uniswap-governance-power-structure">shows</a> that in 2023, the number of votes cast per governance proposal has stayed more or less constant while the number of voters participating has generally declined.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Uniswap DAO to weigh giving ‘underrepresented’ delegates more voting power

Casey Wagner

A month after both companies were hit with a lawsuit from New York Attorney General Letitia James, Genesis Global has sued Gemini Trust and associated users in an attempt to recover over half a billion dollars.



In a complaint filed in New York bankruptcy court Tuesday, Genesis Global alleges Gemini Trust received more than $689 million in withdrawals in the three months before the crypto lender filed for Chapter 11 bankruptcy.&nbsp;



Gemini, the custodian and authorized agent for Earn users, was the recipient of withdrawals Earn users made during the “bank run” spurred by the spring 2022 market collapse. Up to 232,824 Earn customers pulled money from the platform, the lawsuit alleges.&nbsp;



Earn was a program owned by Gemini and Genesis where customers could lend cryptoassets in exchange for interest. Under their agreement, Genesis acted as the borrower and reinvested crypto assets in order to generate yield. Gemini processed withdrawals.&nbsp;



Read more: <a href="https://blockworks.co/news/dcg-statement-gemini-earn-genesis-recovery-unsecured-creditors">Gemini Earn users could be made whole through plan, DCG says</a>



“As a result of these withdrawals, [Gemini] benefitted at the expense of [Genesis’s] other creditors, and continues to benefit to this day through their retention of the property [Genesis] seeks to avoid and recover here,” the complaint reads.&nbsp;



Genesis filed for bankruptcy in January 2023 after the collapse of several of its counterparties, <a href="https://blockworks.co/news/ftx-meltdown-timeline">including exchange FTX</a>.&nbsp;



James announced her <a href="https://ag.ny.gov/press-release/2023/attorney-general-james-sues-cryptocurrency-companies-gemini-genesis-and-dcg">lawsuit</a> against Gemini, Genesis and parent company Digital Currency Group (DCG) on Oct. 19.&nbsp;



Read more: <a href="https://blockworks.co/news/gemini-accuses-genesis-of-manipulating-the-voting-process-in-ftx-settlement">Gemini accuses Genesis of manipulating the voting process in FTX settlement</a>



James’ office alleges Gemini and Genesis Capital conspired on two “fraudulent schemes” with their Gemini Earn product, <a href="https://blockworks.co/news/genesis-gemini-nyag-lawsuit">resulting in investors losing more than $1 billion in November 2022</a> when withdrawals from the platform were suspended. DCG “coordinated” with the companies to perpetuate the scheme, the complaint alleges. Earn also constitutes an investment contract under the Howey test, James added.&nbsp;



Days after the joint suit was filed, Gemini sued Genesis, <a href="https://blockworks.co/news/gemini-sues-gensis-gbtc-shares">alleging that the bankrupt crypto lender owes Gemini</a> roughly $1.6 billion worth of Grayscale Bitcoin Trust (GBTC) shares.



“Genesis has repeatedly taken actions to harm Earn Users and to hinder and delay Earn Users’ recovery of their digital assets,” Gemini said in its complaint.&nbsp;



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Genesis attempts to recover $689M from Gemini in new lawsuit 

Taproot Wizards, the bitcoin ordinals startup that announced a $7.5 million round led by Standard Crypto last week, is bringing on the pseudonymous developer Rijndael as its chief technology officer.



Co-founded by Udi Wertheimer and Eric Wall, Taproot Wizards is a generative art collection inscribed with bitcoin ordinals, a recent add-on to the network that lets data be inscribed as NFTs and other digital collectibles.&nbsp;



Bitcoin ordinals have seen a November spike in popularity, spurring nearly $30 million in transaction <a href="https://app.blockworksresearch.com/assets/btc/analytics?tags=btc">fees</a> since Nov. 4, per Blockworks Research. Largely due to blockspace demand created by ordinals, bitcoin transaction fees have become more expensive than Ethereum’s for the first time in three <a href="https://x.com/laurashin/status/1726467957180559467?s=20">years</a>.



Read more: <a href="https://blockworks.co/news/bitcoin-ordinals-ethereum-flippening">Ethereum won’t flip Bitcoin anytime soon, but Ordinals could change that</a>



Before coming to Taproot Wizards, Rijndael <a href="https://x.com/rot13maxi/status/1727357668778529204?s=20">says</a> he worked as the technical lead at Amazon’s NFT project and more recently on Bitkey’s self-custody wallet.&nbsp;



In an X thread announcing the career move, Rijndael <a href="https://x.com/rot13maxi/status/1727357689804509521?s=20">lamented</a> the inability for “less-dogmatic Bitcoiners” to take part in the bitcoin community “without picking up a very particular set of puritan values.”



“The <a href="https://blockworks.co/tag/ordinals">Ordinals</a> ecosystem has a real opportunity to expand what we think of as Bitcoin culture, and give more kinds of people an opportunity to connect with a Bitcoin that they can relate to,” Rijndael <a href="https://x.com/rot13maxi/status/1727357691457343953?s=20">wrote</a>. 



Read more: <a href="https://blockworks.co/news/avalanche-ordinals-asc20-transaction-record">Avalanche gets the ‘Ordinals’ bump, sets new transaction record</a>



The incoming CTO also <a href="https://x.com/rot13maxi/status/1727357792984641645?s=20">said</a> he’s looking to hire a full-stack engineer.



Taproot Wizards plans to mint 2,121 of its <a href="https://blockworks.co/tag/nfts">NFTs</a>, which are variations of a Microsoft Paint drawing of a wizard <a href="https://www.reddit.com/r/ads/comments/1q1h40/magic_internet_money/">posted</a> to Reddit to promote bitcoin a decade ago.



Generative NFT projects like Taproot Wizards have been among crypto’s most successful to date. Bored Apes and CryptoPunks <a href="https://www.cryptoslam.io/">are</a> the second and third-highest selling NFT collections ever, according to CryptoSlam, with both being stored on the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> blockchain.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Bitcoin ordinals startup Taproot Wizards hires CTO after seed raise

Crypto markets stabilized Wednesday after a brief dip Tuesday following news that Binance and former CEO Changpeng Zhao had entered into an agreement with the US government, terms of which include Zhao’s guilty plea and a payment of $4.3 billion in fines and forfeitures from Binance.&nbsp;



Bitcoin and ether posted gains this morning, rallying around 2% and 5%, respectively. Stocks also opened in the green, with the Nasdaq Composite up around 0.8% and the S&amp;P 500 gaining about 0.6% in the half hour after the open.&nbsp;



Crypto’s rally is not surprising, analysts say, as <a href="https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked">Binance’s settlement with the US Department of Justice</a> is largely being perceived as a step in the right direction, and not just for the exchange. 



“This is very good news for the industry as a whole,” Noelle Acheson, author of the Crypto is Macro Now newsletter, said. “It’s not just the<a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry"> ‘cleaner image’ that the Binance settlement</a> and change of leadership confers on all market service providers, as the DOJ has shown that its arms are long. It’s also the removal of an ominous overhang, a dark cloud of ‘regulatory risk’ that many feared could break Binance, which would have been really, really bad for investors, traders and savers everywhere.”&nbsp;



Read more: <a href="https://blockworks.co/news/brian-armstrong-binance-new-chapter">Binance fallout ‘opportunity to start a new chapter for this industry’: Coinbase CEO</a>



Tuesday also saw the release of the minutes from the Federal Reserve’s last policy-setting meeting, which showed a decidedly dovish shift that, after digesting the news, traders seem to like.&nbsp;



A key point in the minutes was the central bank’s decision to make all future meetings “live,” or strictly dependent upon on economic data, which at the time of the decision would suggest more rate hikes could be possible if inflation flares up again, Tom Essaye, founder of Sevens Report Research said.&nbsp;



Still, Wednesday’s equity rally could be short-lived if traders’ expected rate-cut timeline plays out.



“Market-based <a href="https://blockworks.co/tag/fed">Fed</a> policy expectations barely budged at the release and continue to call for a first rate cut in May with additional cuts to follow over the summer and into the fall, which should remain a tailwind for stocks near-term,” Essaye added. 



Risk assets, like crypto, are also poised for a correction based on inflation data and Fed interest rates, analysts from Amberdata said in a <a href="https://blog.amberdata.io/crypto-options-analytics-nov-19-2023-lower-cpi-btc-remains-bullish?utm_medium=email&amp;_hsmi=283468019&amp;_hsenc=p2ANqtz-9ent7hGR_5e_v_Bzyc5FZ8N-60tojjzls03DXKfW5ivPCy4nDmESdvEaaaCRqZPwTEkSBGqAarlGvNzghFk-bRyyfj9Q&amp;utm_content=283468019&amp;utm_source=hs_email">report</a> Tuesday.&nbsp;



“Looking ahead into the end of the year and the start of 2024, risk assets are going to be data dependent as ‘hot’ data will warrant a hawkish reaction in markets and potential resurgence in volatility,” Essaye said.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Crypto’s rally on Binance news could prove to be short-lived

Spool Finance has launched v2 of its DeFi middleware product in hopes of becoming a gateway for institutions to enter decentralized finance.&nbsp;



Spool v2 was created with an eye to regulatory compliance following feedback from the traditional finance institutions Spool is courting with its DeFi product. Two major institutions could join the fray through Spool by the end of next year, the project’s lead contributor said, but declined to name them.



To assure regulatory compliance, Spool was advised by the white-shoe Swiss law firm Bär &amp; Karrer.&nbsp;



The Spool protocol <a href="https://medium.com/spoolfi/spool-genesis-a-comprehensive-launch-guide-3eb5cee328ff#9cd7">launched</a> in March 2022 as a “set it and forget it” solution for DeFi investment. The platform creates automated yield strategies from DeFi protocols based on an investor’s risk appetite.



Read more: <a href="https://blockworks.co/news/empire-web3-defi-tech-mainstream-institutions">The ‘next leg’ of DeFi users will be institutions, Blockchain Capital’s Larsen expects</a>



Spool is organized as a <a href="https://blockworks.co/tag/daos">DAO</a> that hires employees with specific mandates to develop the business side of the protocol. It has no formal legal organization.&nbsp;



Upon launching, Spool had trouble garnering interest from institutional investors, said Simon Schaber, Spool’s chief business development officer.



“When I went to them, I said, ‘Look, we’ll offer you fully transparent, everything in-house, compliant.’ They said, ‘Yeah but look, Simon, there&#8217;s this huge player called <a href="https://blockworks.co/tag/celsius">Celsius</a>. They&#8217;ve got a shitload of funds under management. They&#8217;re too big to fail. Why don&#8217;t we just put it into Celsius?” Schaber said.



<a href="https://blockworks.co/news/celsius-to-file-for-bankruptcy-imminently-report">After Celsius crashed</a> alongside a few other centralized yield-generating products in crypto, Spool started seeing more serious institutional interest in Q3 of 2022.



Now, alongside its more DeFi-native clients, Spool is working on deals with Fintech firms as well as small and regional banks, Schaber said, adding that the protocol was also in serious talks with one of the ten largest asset managers in the world as well as one of the largest banks, though he would not disclose which.



Vault creators can <a href="https://docs.spool.fi/spool-v2/features-of-v2">charge</a> management fees in Spool v2.



Spool made smart contracts a large part of its pitch to investors, Schaber said. While traditional fund management software can go offline or change hands, leading to renegotiation of terms, Spool’s permissionless software functions indefinitely.&nbsp;



In v2, vaults can now be “gated,” meaning addresses can only interact if they adhere to know-your-customer (<a href="https://blockworks.co/tag/kyc">KYC</a>) or some other criteria, and “multi-asset,” where investors can combine assets in a vault. 



Schaber said on-chain and off-chain assets could be combined through its institutional partnerships, combining liquid staking tokens with dividend-focused real estate in a mutual fund, for instance.



<a href="https://blockworks.co/tag/tokenization">Tokenization</a> of so-called “real-world assets” is <a href="https://blockworks.co/news/tokenized-machine-real-world-assets">anticipated to be a major driving narrative</a> in crypto <a href="https://blockworks.co/news/blackrock-ceo-us-lagging-innovation-tokenization">over the coming years</a>.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

DeFi protocol Spool rolls out compliance-focused ‘V2’ to court institutions

When the world was enthralled by the alien mummy hoax out of Mexico City a few months back, ResearchHub co-founder Patrick Joyce — alongside other ResearchHub insiders — quickly put up a total of 42,500 ResearchCoins (RSC) for anyone who would run tests on purported DNA samples of the “bodies.”



The crypto bounties, together worth $660 at the time but $7,400 today thanks to a recent 1,000% pump, were available days before local doctors ran lab <a href="https://www.euronews.com/next/2023/09/20/mexicos-controversial-alien-bodies-undergo-lab-tests">tests</a> on the supposed specimens.&nbsp;



Those tests didn’t really say much. Just that the skeleton was complete and hadn’t been assembled by piecing together multiple remains.



On ResearchHub, however, someone <a href="https://www.researchhub.com/post/1082/dna-analysis-request-mexico-uap-genomics-data">found</a> the DNA samples were “highly contaminated.”&nbsp;



”Basically, these said &#8216;mummies&#8217; have been exposed to so much environmental contamination, that finding actual genes belonging to these &#8216;aliens&#8217; would be a tough ask,” the researcher said.&nbsp;



The analysis didn’t exactly prove the mummies weren’t aliens,&nbsp;just that it may be impossible to tell at all. They were paid 8,000 RSC for those findings, worth $140 back then but now more than $1,100.



All this can solve science’s problem with gatekeepers, says ResearchHub, a startup co-founded by Brian Armstrong in 2020. The Coinbase CEO — who also serves as ResearchHub’s chief executive — has been <a href="https://blockworks.co/news/coinbase-ceo-stocks-stake">selling off 2% of his Coinbase stake</a> to fund ResearchHub alongside other initiatives, such as life extension unit NewLimit.



Scientific progress, as it stands, is nudged along by researchers who share their findings in papers, passing them onto scientific journals for review and, hopefully, publication.&nbsp;



Those scientific journals are known to be incredibly <a href="https://www.theguardian.com/science/2017/jun/27/profitable-business-scientific-publishing-bad-for-science">profitable</a>, mostly because they receive papers for free (and can even be paid to publish articles) while subscriptions can cost thousands of dollars per year. The process is slow, and in some cases, discriminatory and exploitative.&nbsp;



ResearchHub wants to sidestep journals and overhaul the incentives of publishing science through an ERC-20 token and open source software sensibilities:



Pay academics crypto to review papers. Pay researchers for their work with upvotes and tips. Open crypto bounties to inspire researchers to direct their efforts on stuff that matters. Earn crypto for contributing to discussions that actually move forward science that matters.



“We think the incentives of scientific funding and publishing are broken, and that blockchain can help,” says ResearchHub.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/mLIQDCKbYC3GOUp5ZpUpnydetz6s8BAKU0Dow3mX_GiDOh0kYgiLsdsYBa_x6lSsW6A4ArsvUUuHxDCv9Th7cpI9Z12IgOoAxdKmoyigp8llBl33KqV19S5qFemnasTWyTjt9DM_qNS9PiumNyez_P8" alt=""/><figcaption class="wp-element-caption">ResearchHub is where crypto funds real science</figcaption></figure>



The platform itself is pitched as a GitHub for scientists, though in presentation it’s more like Reddit.&nbsp;



Users open discussions about different media. Instead of celebrity highlights from the Graham Norton Show, posts revolve around research papers, technical questions and even pop science content like the Huberman Lab podcast.



There is no equivalent to subreddits, instead topics are posted to “Hubs,” intended to be moderated sections devoted to particular topics — of which there are currently more than 62,000 — such as biology, computer science, psilocybin, entrepreneurship and geology.



ResearchHub users can earn small amounts of RSC for interactions like sharing research paper PDFs (as long as there’s no copyright) and posting comments in discussions. Users can also earn RSC by peer-reviewing scientific papers or through tips from other users.



Crypto bounties, like the alien mummy bounty, are however where ResearchHub really shines. Users post their analyses as replies in the thread. If the person who placed the bounty agrees their request has been fulfilled, they close the bounty and the website tallies the RSC to the user. The user can then withdraw those points as RSC, distributed by a ResearchHub Foundation hot wallet.



About half of the alien mummy bounties were paid out, while some commenters were in total tipped a few hundred RSC ($5 then, $56 today) for just participating in the thread.



“If you want someone to peer-review your new manuscript, place a peer review bounty on it,” ResearchHub says. “If you want a layman&#8217;s summary of a new paper you don&#8217;t understand, place a summary bounty on it. If you want help with a new method in your lab, create a question and place a RSC bounty on it.”



Users can also raise crypto to fund proposed studies via “preregistration,” which entails laying out plans to tackle specific research in a forum post before any science is done.



One <a href="https://www.researchhub.com/post/1156/effects-of-music-on-lettuce-germination-and-growth-in-a-hydroponic-system-preregistration-v2">post</a> has garnered nearly 123,000 RSC ($21,600) in tips across two preregistrations to study whether playing different types of music to lettuce makes it grow faster, although significant chunks of that came directly from co-founder Joyce and other ResearchHub employees. RSC is of course up for grabs to eventually peer-review the findings.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/QzDk15zlQru5gCHVs1h39lcgN5W12QpKttqRzOmnEhMC9wPM-uspXk-ShJzaSZ7yTfcy-ggezz-veNCkUu1nwfqaRtNjmU2kbPXhfcjJz4IuP80V_D6zSMpkUllAh6o4bPoH_sT-hXW511w5JzK6HGU" alt=""/><figcaption class="wp-element-caption">Real science funding in real time</figcaption></figure>



“Activity on the platform has been increasing over time, but one of the most exciting and promising things happening on the platform is the peer reviews,” a ResearchHub Foundation core member told Blockworks.&nbsp;



“We’re waiting on more data, but so far it’s really encouraging, in that we can drastically reduce the amount of time needed to make a peer review when we financially incentivize those reviews.”



<h2 class="wp-block-heading">Millions in ResearchCoin paid out over the years</h2>



ResearchHub itself doesn’t exist on a blockchain, DMs don’t need micropayments and it’s not censorship resistant or a <a href="https://blockworks.co/news/polymarket-titanic-betting-prediction">prediction market</a> (it’s a Squarespace site hosted by Amazon). Any blockchain, crypto or Web3 element here comes from the ERC-20 token alone.



ERC-20s are tailor-made cryptocurrencies (“programmable money”) issued on Ethereum. They’re minted for practically <a href="https://blockworks.co/news/coinbase-apologizes-pepe-newsletter">countless use-cases: Memecoins</a>, stablecoins, capital raises, fractionalizing art <a href="https://nftevening.com/b20-token-an-introduction-to-fractional-nft-art-with-beeples-cryptoart/">ownership</a>, KickStarter-style fundraising and even <a href="https://www.iamacoin.com/">conceptual art</a>.



In ResearchHub’s case, the platform is operated by a startup called ResearchHub, co-founded by CEO Armstrong and Joyce, a former medical student. The startup is backed by Replit CEO Amjad Masad, Y Combinator CEO Garry Tan and Vercel founder Guillermo Rauch among other tech superstars.



Pitchbook lists ResearchHub with a headquarters in Washington DC while Crunchbase says San Francisco. (ResearchHub did not return requests for comment).



ResearchCoin, on the other hand, is maintained by a separate entity, the ResearchHub Foundation, <a href="https://docs.google.com/document/d/1TFCcDu6QuCfXTJXYA1aYXwlY_H_ITtSQrFCtkXZZmOo/edit#heading=h.aqs09b7dowdn">registered</a> to the Cayman Islands, a popular <a href="https://www.lexology.com/library/detail.aspx?g=728402fa-4228-4282-afe0-bb242d58c163">choice</a> for entities tied to DAOs.



Armstrong <a href="https://barmstrong.medium.com/update-on-researchhub-and-researchcoin-4029941647b8">says</a> ResearchCoin was actually created by the Foundation and his US-based startup decided to adopt the coin for use on its platform. He’s also promised to recuse himself from any potential discussions related to listing RSC on Coinbase.



There was no initial coin offering (ICO) for ResearchHub and the Foundation has not conducted a token sale, a core Foundation member told Blockworks.&nbsp;



The first distributions went to users for their on-platform interactions, they said. RSC made its way to decentralized exchange Uniswap last year through a pool <a href="https://etherscan.io/address/0xec2061372a02d5e416f5d8905eea64cab2c10970">contract</a> opened by an address tied to a Foundation core member, and those markets have determined its value. With this, the Foundation has <a href="https://etherscan.io/address/0xec2061372a02d5e416f5d8905eea64cab2c10970">acted</a> as an RSC liquidity provider on Uniswap, which helps to keep spreads in check (and earns some yield).



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/15851156/embed#?secret=haWFfwey80" data-secret="haWFfwey80" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">ResearchCoin’s fully-diluted cap has exploded from about $5 million to $160 million in one year</figcaption></figure>



The Foundation and its treasury are in part run by a DAO, currently with 37 members who vote on Foundation <a href="https://snapshot.org/#/researchhub.eth">decisions</a>. It has previously applied and won DAI grants through Gitcoin, which it has used to buy RSC to fund more research bounties on the platform.



RSC payments to users are doled out monthly through a Foundation hot wallet. On-chain data shows around 61 million RSC sent out to users and contributors over the three years of the token’s existence.&nbsp;



At current prices, that’s more than $10 million in crypto paid out in the name of scientific progress, but the value of the tokens at time of distribution would be significantly lower.



Even if some of those funds ended up with ResearchHub <a href="https://docs.researchhub.com/researchcoin/rsc-tokenomics/rsc-distribution">insiders</a> for their contributions to the platform, all that crypto represents is money that simply wouldn’t have gone to scientists and researchers if ResearchHub never existed.



<h2 class="wp-block-heading">The innovation of ERC-20s</h2>



Before ResearchHub, there were already a ton of platforms working to change science publishing for the better.&nbsp;



Publons helps academics track and showcase their papers. Authorea supports collaboration on research papers, and functional and well-respected <a href="https://arxiv.org/">open</a> <a href="https://www.biorxiv.org/">repositories</a> for preprint scientific papers already serve the scientific community well.



Even GitHub itself, after which ResearchHub says it’s modeled, hosts communities which together consume and discuss research papers. None of them have their own cryptocurrency.



There could be more fundamental concerns: A wildly successful ResearchHub would centralize scientific publishing — a field that’s already quite decentralized despite the gatekeeping journals — around the ResearchHub portal and its volatile cryptocurrency. Would that be good for science?



In any case, incentivizing scientific progress has always taken money. But dollars and euros tend to run out. The ResearchHub Foundation probably wouldn’t last long if it paid for user engagement in US dollars without a clear revenue stream or constant funding.



An ERC-20 token is really intended to fix that. ResearchHub Foundation minted 1 billion RSC which were totally worthless — until they hit Uniswap — which changed everything.



This is the key “innovation” that ERC-20 tokens provide: value generation. Once traders decided that RSC tokens were worth more than zero, ResearchHub was almost instantly bootstrapped (the startup, not the Foundation, separately raised $5 million earlier this year to continue developing the platform).



On paper, the Foundation’s treasury works out to be more than $140 million at current prices — compared to less than $12 million one month ago — money that can pay for a lot more user engagement moving forward. However, RSC markets are shallow, with CoinGecko reporting a 2% drop if about $8,000 RSC was sold at once.



The Foundation still <a href="https://etherscan.io/token/0xd101dcc414f310268c37eeb4cd376ccfa507f571#balances">controls</a> more than 80% of the supply and says it will at most <a href="https://docs.researchhub.com/researchcoin/rsc-tokenomics/rsc-emission-schedule">release</a> 50 million RSC per year (about 6% of its current treasury).&nbsp;



Whether the Foundation opened the first Uniswap liquidity pool probably doesn’t really matter, at some point a user surely would have. It’s still these kinds of tokenomics that allow crypto startups to sidestep traditional capital raises.



The ERC-20 perpetual innovation machine usually goes:



<ol>
<li>Create an ERC-20 token.</li>



<li>Build a platform.</li>



<li>Offer ways to earn and spend the token (giving it value).</li>



<li>Sell the token to fund growth (and pay contributors with it).</li>



<li>Embrace disruption.</li>
</ol>



ResearchHub is today somewhere between step 3 and step 4.&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">A group of researchers from <a href="https://twitter.com/UniOfYork?ref_src=twsrc%5Etfw">@UniOfYork</a> found brain oscillations (theta/alpha bands) crucially impact spatial memory. Simultaneous videos revealed increased power in brain regions, hinting at Alzheimer&#39;s therapy via oscillation manipulation. Peer Review👉<a href="https://t.co/MtjBfuXhI3">https://t.co/MtjBfuXhI3</a> <a href="https://t.co/GyvhzE1dRL">pic.twitter.com/GyvhzE1dRL</a>&mdash; ResearchHub Peer Review Alerts (@RHF_Alerts) <a href="https://twitter.com/RHF_Alerts/status/1727018359441744022?ref_src=twsrc%5Etfw">November 21, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">This paper’s peer-reviewer earned 5,000 RSC ($722)</figcaption></figure>



Granted, it’s Ethereum that gives ResearchCoin most of its powers. Anyone in the world can technically earn, send, receive and trade RSC through the Ethereum blockchain and Uniswap, they just need a smartphone and an internet connection.&nbsp;



That’s revolutionary in and of itself, even if we’re desensitized to the whole thing by now.



<h2 class="wp-block-heading">Is this time different?</h2>



Blockchain tech, through an ERC-20 token and a platform known as Civil, was <a href="https://civil.co/">meant to save</a> journalism in much the same way that ResearchHub wants to save science publishing. That is, fund good work and realign broken incentive systems once and for all (except Civil actually ran on smart contracts and even <a href="https://www.coindesk.com/markets/2018/12/21/civil-backed-news-site-stores-full-article-on-ethereum-blockchain/">wrote</a> immutable articles to the Ethereum blockchain).



Tokens were also meant to revolutionize <a href="https://www.digitaltrends.com/computing/dentacoin-bitcoin-for-dentistry-patients/">dentistry</a>, <a href="https://bitcoinmagazine.com/business/civic-demos-proof-concept-beer-vending-machines-launches-id-codes">vending machines</a> and even <a href="https://www.coindesk.com/markets/2014/02/05/cryptocurrency-auroracoin-given-to-every-person-in-iceland/">Iceland</a>, but none of those proposed use cases have panned out, either.



ResearchHub and ResearchCoin are, fundamentally, token economy experiments. If they work, science would have another avenue for crowdfunding research which could impact the world in untold ways for the better.



But just like all the token economy plays that came before it, the future of ResearchHub relies heavily on whether markets for RSC rise or fall.&nbsp;



At least right now, markets say they’re experiments worth conducting — for science.



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



Don’t miss the next big story – join our <a href="https://blockworks.co/newsletter?source=end" target="_blank" rel="noreferrer noopener">free daily newsletter</a>.

Darwinia NetworkRING

market data

Darwinia Network Stats

What is the market cap of Darwinia Network?

What is the current trading activity of Darwinia Network?

What is the current price of Darwinia Network?

How many Darwinia Network are there?

What is the relative popularity of Darwinia Network?

latest Darwinia Network news