Losers from Crypto Legal Chaos

also, what about the winners?

Your daily snapshot from the Messari screener.

Such a joy to come back to the Soviet States of America this past weekend following a jam packed (and amazing!) trip in Osaka, Japan for Devcon V. As I caught up on the crypto news onslaught that dropped between the time we left Japan and landed stateside, I couldn’t get that iconic opening scene from The Newsroom out of my head.

[Believe me, I wrote and deleted many a tangent in this paragraph, but suffice it to say many US professionals are fed up with the ever darkening political and regulatory fronts, and considering international options. The US is squandering its edge in tech (Silicon Valley), finance (New York), and free market capitalism (ok, maybe this has been declining for a while). The future of financial services will likely be in Asia. In fact, it’s no longer a sure thing to me that holding crypto will even remain legal in the US in a few years.]

We witnessed a four-pronged attack on the US crypto scene in less than 72 hours last week. I’ve got you with the cliff notes below, or you can watch NLW’s terrific breakdown of the events in this week’s Narrative Watch.

Grim, but all is not lost!

Here’s a primer on everything that happened, along with a glass half-full rendition of what went down and who the winners are amidst the recent tumult.

1) The SEC rejected the Bitwise Bitcoin ETF.

What happened: The Commission believes crypto markets are too susceptible to price manipulation to support an exchange traded fund on the New York Stock Exchange. They didn’t buy Bitwise’s assessment of “real” exchange volume, presumably because many of the exchanges the firm relied cited were not registered or regulated in the US.

Kill shot: “Binance, based in Malta and the single largest bitcoin trading platform among the platforms the Sponsor identifies as “real”—representing 39% of the purportedly “real” bitcoin volume—has not registered with either FinCEN or the NYSDFS; four of the ten platforms the Sponsor utilizes—representing 69% of the purportedly “real” bitcoin volume—do not have a BitLicense from the NYSDFS; and half of the bitcoin platforms the Sponsor utilizes lack internal or third-party market surveillance tools.”

Double kill: The SEC said they couldn’t be sure “where price formation occurs”, and whether the market’s tail was wagging the dog. Could price discovery actually be happening on exchanges with fake volumes and minimal surveillance, and then that manipulated spot price was causing movements on real exchanges? This is a question that will not be answered in the near- or medium-term absent major global surveillance-sharing agreements, some of which may require buy-in from foreign domiciled exchanges that don’t want to invite the scrutiny. Do not hold your breath for a US-listed ETF.

Big Losers: Other bitcoin exchange traded products in the US and internationally; non-accredited investors with IRAs and brokerage accounts.

Winners: Crypto brokerage services (Fidelity, Tagomi) who will win clients that may otherwise have waited for an ETF; DCG’s Grayscale.

Grayscale is by far the biggest winner here. It has a medium-term monopoly on access to the public markets given the exotic structure of its “Sidedoor ETFs” quoted on OTC markets. There are structural problems with these products from a retail investor’s standpoint (as we’ve written before), but they will probably swell in AUM as they’re lucrative for institutional investors, who can usually exit their position after a year at a significant premium to spot. Also they are the only public market option in town for retail purchasers. Grayscale now has four of these things in the wild: the Bitcoin Trust, Ethereum Trust, the Ethereum Classic Trust, and as of today, the first publicly traded, market-cap weighted index fund. Beyond that, Grayscale owner Digital Currency Group seems likely to be the first publicly traded U.S. crypto company.

***

2) The SEC stops Telegram’s $1.7 billion token distribution in the US.

What happened: This happened late Friday afternoon, and will provide entertainment for the next several weeks leading up to Telegram’s October 31 network launch deadline. The company first unveiled plans for its “Telegram Open Network” in early 2018, when it raised a massive round led by blue chip VCs like Benchmark, Sequoia, and Lightspeed. They have stayed quiet ever since while working towards a launch. Lots of schadenfreude around TON to date as no one really knows exactly what the token will be used for or whether its tech actually works.

Why it matters: This would be the largest private token sale to hit the liquid crypto markets…ever. (EOS was a continuous year-long ICO, not a private sale.) It’s also the most aggressive action the SEC has taken against a token project to date. Something that seems to stem primarily from two conclusions at the SEC: 1) Telegram pitched investors on the “chance for 0x-50x returns on their investments” and 2) the company raised massive sums of money from funds that would have no realistic use of that many tokens outside of speculation. So moar clues on what will cause the SEC to crack down on projects vs. let them off lightly. tl;dr: “actually no, the SAFT won’t save you.”

What’s next: Who knows? TON has to launch by October 31, or Telegram will need to return funding or negotiate an extension with its backers, 25% of which are U.S. funds. Telegram allegedly sent a note to investors aiming for the latter, a one year extension to ensure it could continue to work towards a launch and address its legal issues. It’s unclear whether TON could simply return funding to its U.S. backers and launch as originally anticipated.

Winners: The SEC. Swinging the lumber around on a Friday afternoon with two weeks to spare on a $1.7 billion global market event is probably the Super Bowl of regulatory actions for these staffers.

Losers: Filecoin, Dfinity, Polkadot, others? Filecoin and Polkadot each at least have much larger decentralized communities and working code out of the gates. But you can’t be feeling great if you’re a SAFT issuer right now.

Also, Telegram’s private investors. The holding period just got longer, and the investment just got riskier. I suppose they can ask for money back, but that’s still a “loss” in VC. Although, they could very well have caught a break if things get delayed and crypto markets re-surge in 2020 (a more favorable dumping environment).

Stay tuned.

***

3) The IRS publishes a ludicrous tax guidance update.

What happened: What the actual fuck, man. Come on. The agency says forks or airdrops can create taxable events once a user exercises “dominion or control” over the new assets. They define this as having clear custody of a forked asset accessible via a private key or a hosted wallet. The amount would be taxed as ordinary income, which would be recognized at the fair market value of the new cryptocurrency when it’s actually received.

So. Many. Questions. What if I don’t know about the airdrop? What if it’s a minor fork? What if it’s a major fork, but it causes a significant loss of an investor’s principal a la a corporate spinoff? How do you redo your tax basis? What if you never sell or transfer the asset? How and when do you assess fair market value? What happens if the value of the forked currency tanks as people rush to sell to cover their tax gains? Do you owe more than you ever even knew you had?

What they should have done: It would have been clearer to say that holders should recognize ordinary income only upon the movement of their assets rather than the fair-market value upon a fork or airdrop (when they are highly illiquid, or when price discovery is difficult or impossible). Or, you know, not tax every single crypto transaction that ever occurs and create impossible tax reporting requirements. We like the French model here.

Big Losers: funds, exchanges, anyone that custodies client funds

Winners: Coin Center, The Blockchain Association, tax lawyers, who will be tasked with un-screwing this whole thing.

I guess they got Al Capone on tax evasion, so that’s probably the route they’ll take to behead everyone in the US crypto scene as well. (Ugh, that’s a bad comparison…)

***

4) Libra partners get threatened, defect, but Libra keeps chugging.

What happened: Senator Sherrod Brown of Ohio and Senator Brian Schatz of Hawaii sent love letters to Visa, Mastercard, and Stripe as well as some of the other major participants in Facebook’s Libra, basically saying: “That’s an awful nice business you have. Be a real shame if something happened to it [if you follow through and join the Libra Association].” Seven of the original 28 committed partners dropped out including nearly all of the major financial players (PayPal, too.)

Crystallized reaction (good thread):

What’s Libra again? It hasn’t launched yet, but its the Facebook-incubated stablecoin to be comprised of USD, Euro, Yen, GBP, and Singaporean dollars. Libra is to be governed by a consortium of 100 companies who vote on technical decisions in return for earning interest on the underlying deposits. Basically a bona fide decentralized central bank with 2 billion+ citizens out of the gate. (They’re recruiting former Central Bankers to lead the association according to The Information.) It’s been a shitshow ever since the unveiling. Regulators in France, Germany, India, and (ding, ding, ding) the good ole USA have pushed back sharply. Odds of a 2020 launch seem low, but they are trekking forward regardless.

Losers: Anyone delusional enough to believe in the U.S. Congress; Facebook - you have to believe this criticism will be relentless and ongoing.

Winners: U.S. Treasury Secretary Steven Mnuchin (a modern day Dr. Evil); Libra?; all crypto holders.

Libra! Twenty-one organizations still signed the Libra Association charter earlier today, despite the high-profile defections and not-so-veiled threats from the Senate. They also have a monster board in David Marcus (Calibra, ex-PayPal), Katie Haun (a16z, former federal prosecutor); Wences Cesares, (Xapo, Silicon Valley’s Bitcoin “Patient 0”); Patrick Ellis, (PayU); and Matthew Davie (Kiva). They also claim to have 180 eligible entities interested in taking spots as validators, and replacing the seven defectors. I cannot wait to watch Zuck testify next week. 10/23. (Mark your calendars.)

Everyone wins! Aside from getting to watch Zuck on a booster seat in front of Congress again, everyone wins from Libra’s fight. The optimal outcome for the industry is for Libra to ultimately die a hero’s death. They and their partners must go to the mat fighting for regulatory approval in the coming years, and somehow find a way to survive and advance until bitcoin gets through its next phase of growth. We need Facebook - the big bad wolf of tech - to take every bullet possible on behalf of the broader industry. The longer Libra survives, the longer bitcoin and other decentralized platforms are truly out of the limelight.

***

This was a meaty one. Shorter one tomorrow.

Have a great week. Viva la revolucion.

-TBI

P.S. Have questions? Want to troll us? Let us know on Twitter.


Messari Compression Algorithm

Quick Bits (Don't read that, I read it for you)

  • ✋ Telegram ($GRAM) has responded to a recent court order by the Securities Exchange Commission in a letter to its token investors. The team said they are "surprised and disappointed that the SEC chose to file the lawsuit." The SEC claims the company sold unregistered securities, but Telegram says that it has tried to communicate with the regulator and solicit feedback over the past 18 months regarding its TON blockchain project.

  • 🤔 The SEC, FinCEN and the CFTC issued a rare three-party joint statement on Friday regarding digital assets, which emphasized that people who engage in digital asset activities must abide by their anti-money laundering and countering terrorism financing obligations via the Bank Secrecy Act. The Agencies stated that digital assets for the purposes of the statement "include instruments that may qualify under applicable U.S. laws as securities, commodities, and security- or commodity-based instruments such as futures or swaps."

  • 🇮🇪 Cryptocurrency exchange Coinbase has been granted an e-money license by the Central Bank of Ireland, CoinDesk reports. Coinbase UK CEO Zeeshan Feroz said the exchange is one of the very first firms to receive the license from the central bank, following a Dublin office opening a year ago.

  • 🎁 Over the next six months, the Zcash ($ZEC) community will be developing a wrapped token to be used on Ethereum ($ETH). Josh Swihart, VP of marketing and business development at the Electric Coin Company (ECC) noted,"If you want to do lending, if you want to do DAOs [decentralized autonomous organizations], all of that stuff could be done with zcash as well. … Ultimately, we want zcash shielded [addresses] to be usable in ethereum smart contracts."

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Messari's Weekend Reads - Issue #47 😎

reading, sleep, and self-care

Your daily snapshot from the Messari screener.

After 23 hours of travel getting back from DevCon we will keep things for this week. Enjoy our weekend reads and for our subscribers, keep an eye out for an in-depth piece on IEOs this Sunday.

Messari’s weekend reads:

The Messari Team

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Messari Compression Algorithm

Content and thoughts from around the web as summarized by the Messari team.

Quick Bits (Don't read that, I read it for you)

Choke Points (Exchange News)

  • 👀Bakkt is eyeing the launch of an additional derivative tied to the bitcoin market, according to several sources with knowledge of the firm's product roadmap.The firm is hoping to beat rival CME Group, which said last month that is launching its own option contract tied to the cryptocurrency in Q1 2020. "I expect CME and ICE to battle like hell for dominance in this space," one source told The Block. (share or read more)

Startup Signals (ICOs, Cryptos, and Startups)

  • 💵The founders behind Nuo, a lending protocol build on Ethereum, raised $3 million to build a new digital banking platform called Juno. The seed round was led by Polychain Capital and Sequoia Capital’s Surge program, with additional participation from Dragonfly Capital, ConsenSys Labs, Astarc Ventures, Singapore Angel Network and several angel investors, including Balaji Srinivasan. (share or read more)

The Powers That Be (Legal/Reg/Policy)

  • 🇷🇺Russia’s central bank sees no strong reason to launch a national cryptocurrency that would override the potential risks, according to its head, reports CoinDesk. Elvira Nabiullina, chairwoman  of the Bank of Russia, said her institution had been investigating the possibility of a central bank digital currency (CBDC) and the need the launch the new technology “is not obvious for us.” (share or read more)

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DAO Winners & Losers

DAOs will change venture capital for the better

I just watched the opening 10 minute drum performance at DevCon, and it was actually pretty cool / less cringe than it may end up looking online.

Also on brand for the new “ETH is money” / “we’re not all vegans” direction some of the hardcore community has gone in recent months. More on DevCon tomorrow.

DAO Winners & Losers

There are a number of exciting applications of DAOs - distributed autonomous organizations - that we expect will emerge in the coming years.

Some of these were covered in our recent Unqualified Opinions podcast with Aaron Wright of OpenLaw. a16z’s Jesse Walden also had a terrific thread breaking down recent DAO experiments earlier this year.

It’s early, but DAOs are worth the hype, and this is the second straight Ethereum event I’ve attended where the buzz around them has been palpable.

Moreover, the industry may actually be mature enough technically to support some of these entities today, especially since Ethereum is triangulating on higher-value transaction settlement vs. high-throughput distributed applications.

It’s a far cry from 2016 when “The DAO” almost brought down Ethereum.

What am I excited about in particular?

  • Managing mutuals or “shared risk” pools, particularly in unique (read: more expensive) end markets of coverage. I’ve always liked the idea of cross-border insurance products in particular, as they fit into my “ethical, maybe technically illegal” bucket of crypto product innovations.

  • Coordinating and allocating “public” goods more efficiently…things like developer grants in crypto (MolochDAO), whistleblower or white hat hacker bounties, or simple charitable gifts.

  • VENTURE CAPITAL DISRUPTION

The last one is where I’ll offer thoughts today, because I’m sure someone will resurrect the venture capital DAO soon, and it’s going to be wildly misunderstood on all sides.

For starters, believe me: DAOs are NOT going to replace venture capitalists.

Startups and early-stage communities will always benefit from well-networked, strategic investors more than dumb pools of passive capital. In theory, a DAO could contain more well-connected, strategic investors than the venture capital community. In practice, early experiments are more likely to attract passive capital.

It’s difficult to drive any sort of meaningful, active engagement from community investment funds, which highlight the tragedy of the commons:

Someone still needs to do the work of sourcing/selecting deals, supporting investments, and shepherding them to some sort of positive financial exit. There’s too much wet code there, and it’s better to have a person or team with some sort of investment acumen and reputational skin in the game steering the ship.

This is especially true since venture capital is more competitive and easier to access than ever before. I don’t envision many scenarios where a crowd-curated DAO is able to access deals more efficiently than their Patagonia-cloaked counterparts. Early iterations will struggle with adverse selection issues.

The better way to look at DAOs is that they present a radical change in how easy it would be for venture capitalists to raise money from new LPs. This could give rise to a new type of strategic, value-added investor.

Imagine a DAO that raises $1 billion, but instead of allocating capital to investments, the entity allocates to new managers.

Who would be the winners and losers in that paradigm?

Winners: 

  • Emerging market investment targets. Fund managers with local ties and relationships could find it easier to raise money from a global capital pool and deploy resources to local teams.

  • Sin industries. It’s tough for major pensions or endowments to - even indirectly - fund porn, drugs, and gambling. Individuals, especially those who may be protected by anonymity, may have fewer inhibitions.

  • Mega long-term bets like virtual world infrastructure, space travel, quantum computing, etc. Things that no one but the tech oligopoly dares to fund because they don’t fit the typical 5-7 year investment horizon of VCs.

  • Global unaccredited investors. DAOs can take their money without the antiquated rules of the SEC.

  • Non-U.S. VCs. If DAOs open up massive pools of retail investment capital, US funds won’t necessarily be able to access them given restrictions they will have about accepting commitments from non-accredited investors.

  • Actual value-added individuals whose specialty is in communication/branding, network, and relationships. The first three people I thought of here were @melt_dem @katherinewu & @soona (all three moved to VC in the past two years, so maybe it’s moot), so maybe DAOs will also empower women GPs, in an industry biased against women and POC.

Losers: 

  • Late stage money. This is already a brutally competitive industry. You can envision highly specialized investment managers swooping in to late stage deals with “2 and 10” or even “2 and 5” structures in return for lower minimum return thresholds. They could pass more of the capital gains to DAO holders. Over time, this would drive market rates for “carry” down significantly for all but the very upper echelon of managers. (This seems like less of a risk in early stage VC.)

  • “Let me know how can I help and who else is investing” Patagonia-nites. It’s no longer valued or impressive to merely wear a vest and chase hot deals. Having a traditional fund becomes less of a moat as entrepreneurs can consider investments from managers who have access to potentially massive amounts of follow-on capital.

What do you think?

-TBI

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Messari Compression Algorithm

Content and thoughts from around the web as summarized by the Messari team.

🔐 [Analysis] Crypto Mega Theses - From April worth a Re-Read

Multicoin’s Kyle Samani broke down his firm’s three “mega theses” for crypto as an asset class. The firm invests in:

  1. Open finance infrastructure, tools that will support the interoperability, programmability, and composability of all financial assets (stocks, bonds, currencies) and global capital markets activity.

  2. Web3 infrastructure that will help power distributed applications and marketplaces and allow users control their own data and maintain sovereignty from trusted third parties.

  3. Non-state money, which the team believes will come from a digital store of value (e.g. bitcoin), the most useful reserve currencies that power smart contract platforms (e.g. ETH), and algorithmic stablecoins that optimize for price stability. 

It’s a must read piece on why crypto matters, and is a mental model consistent with our own at Messari.

Quick Bits (don't read that, I read it for you)

  • 🤔CME Group has no current plans to offer physically-settled bitcoin futures contracts according to global head of equity index and alternative investment products Tim McCourt. CME recently announced that it is going to launch bitcoin options contracts in Q1 of 2020, based on “increasing client demand” and “robust growth” in its bitcoin futures markets. (share or read more)

  • 😞 TipJar, a cryptocurrency micropayment service built on for ERC-20 tokens on the Ethereum blockchain network, is shutting down, The Block reports. A TipJar developer announced the news on Reddit on Sunday, saying that the service has lately received “very little activity.” (share or read more)

  • 🏛A class-action lawsuit was filed today against Bitfinex, Tether and others was filed in the United States District Court in the Southern District of New York, The Block reports. Relying on publicly available documents, plaintiffs describe a “sophisticated scheme that coopted a disruptive innovation — cryptocurrency — and used it to defraud investors, manipulate markets, and conceal illicit proceeds.” The new federal court class-action lawsuit alleges over $1.4 trillion in damages suffered by class members. (share or read more)

  • 💰NuCypher raised $10.7 million in new funding to help bring data privacy to decentralized applications (dApps) built on Ethereum ($ETH). The funds were raised via a SAFT (Simple Agreement for Future Tokens) at a valuation of $133 million. The round was led by Polychain Capital, with participation from Y Combinator, Bitmain, Bitfury, Arrington XRP Capital, and Notation Capital, among others. (share or read more)

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Toxic Pragmatism

independent brains require thicker skin

Konnichiwa from DevCon V!

Programming for the event starts this morning (evening NYC time). I’m heading over to the Eth 2020 roadmap sessions shortly (I wonder if they’ll launch on time…zing!), and will recap those sessions and the plenary sessions with Aya (EF Director), Vitalik (ethgod), and the 1.x and 2.0 overviews for those who were unable to make it to Osaka.

But first, steak.

(My cow got a degree in tastiness.)

Speaking of toxic bitcoin maximalism, this happened on my way back after dinner:

The only real problem I have with this tweet is that @messaricrypto wasn’t tagged. All mentions are good when it comes to building awareness about our token registry!

I’m half kidding, of course. While we don’t mind criticism, it’s rarely as blunt as Matt’s tweet, and rarely sparks as much engagement.

It did get me thinking about cancel culture, and what I’ll call “toxic pragmatism” in crypto, which is the situation you get when you’re kicked out of a tribe for having a “not right” opinion that normalizes “bad behavior”, even if you’re pretty measured and centrist about the position itself and your rationale makes sense.

We see this everywhere today, but I’ll skip the longer meta conversation, which is more political that I’d like to delve into in these missives.

Instead we’ll focus on why we’re doing what we’re doing at Messari, and why our sort of toxic pragmatism is good for an industry whose core is arguably built around twitter armies and no-nuance memes (social scaleability!) more than technical advancements.

First, the basics...

As you probably know, Messari runs a token transparency registry, where 65+ global teams go through our disclosures application, get vetted by our research team, and agree to certain ongoing disclosures.

I wrote about why we approached the crappy data problem from this angle in the height of ICO mania back in 2017. Even though many assets have corrected 90-99%+ since (as we, and others, predicted they would), we still believe in the right of these teams to continue to experiment…provided they aren’t egregiously fleecing investors.

Our mission is the same now as it was then: promote transparency and smarter decision making in crypto.

But there’s a healthy tension here: we don’t want to promote or condemn projects and hurt our reputation for neutrality. At the same time, we’re proud of the brand we’ve built, and some (incorrectly) equate the Messari registry as a stamp of approval, or a “buy” rating vs. what we’ve always said it is: a pass-fail rating for teams that provide some minimal degree of transparency. We actually work hard to limit our direct criticisms of projects — even those we think are questionable in value! — because our larger aim is to standardize a much-needed disclosures norm.

We’re Switzerland here.*

[*For those who’ve followed me for a while, you know how taxing it is for me to play this role.]

Some are going to condemn us for selling out and normalizing vaporware. But the same critics tend to attack - indiscriminately - anything that isn’t their favorite crypto. 

It’s important to give builders a fair shake at raising money in novel ways and allow them to innovate so long as they aren’t exploiting their end customers. This caveat is important. Teams that pump and dump to enrich their founders and dupe investors, should, as Matt so eloquently puts “go fuck themselves.”

Everyone else, let’s see which of these experiments end up bearing fruit long-term. 

Some assets which I thought were garbage initially (ETH, BNB, MKR, ZEC, NMR, etc.) have made me question my initial skepticism since via their team’s execution and creativity. When I’ve been right about a shitcoin, I’ve prevented someone from losing 99% of their money. When I’ve been wrong, I’ve often prevented someone from making a 1000x+ gain.

So the math simply works in favor of open-mindedness provided the information playing field is fair, and the next incremental buyer can understand as much about a liquid tradable crypto asset, as a16z.  

I think most of our fellow toxic pragmatists agree with our approach. 

But to really grok why we’re focused on building an open-sourced “EDGAR for crypto” as a foundational product (a "shitcoin legitimacy machine" to critics), you have to understand our team’s ethos, which boil down to core beliefs in free people, free thinking, and free markets.

Said another way, you can’t be libertarian, free-market, innovative capitalists, and also shut down conversation around everything but bitcoin.

Can we do better? Of course! 

We’re a small team that’s just getting started.

But if you want us to do better, then give us feedback! What objective information can we do a better job of collecting and standardizing for the benefit of the industry? 

We have the resources to work on this for years now, and it pays to be pragmatic when you’re playing the long game. 

-TBI

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Messari Compression Algorithm

Content and thoughts from around the web as summarized by the Messari team.

🔐 [Analysis] Testing Testnets - Incentives for Early Protocol Users

Messari registry participant Elrond ($ERD) recently launched a testnet competition, “Battle of Nodes”, encouraging participants to both secure and attack the network and offering a reward pool of $50,000 to do so. As part of our research team’s first weekly long form research piece, Wilson Withiam took a look at various smart contract platforms that launched recently or plan to in the near future and compared ways they incentivize early developer involvement.

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Quick Bits (don't read that, I read it for you)

  • Algo Capital, which recently raised $200 million for its venture firm supporting the Algorand ($ALGO) ecosystem, lost around $3 million after attackers seized control of a hot wallet controlled by the CTO Pablo Yabo.

  • PayPal announced that it will not join the Libra Association as a member of Facebook's Libra Network, according to comments shared to Twitter by Bloomberg tech reporter Sarah Frier. "We remain supportive of Libra’s aspirations," PayPal said in a statement.

  • A high severity security vulnerability was discovered in the Cosmos' ($ATOM) Tendermint consensus engine. It was discovered through their bug bounty program and a patch released by the team shortly after.

  • Ethereum infrastructure provider Infura has officially been acquired by ConsenSys. Originally a "spoke" that was funded by and run as part of ConsenSys Infura will now operate as a wholly owned business within the organization.

Did I miss something?

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Wences's Big Hair (and Weekend Reads)

reading, sleep, and self-care

Your daily snapshot from the Messari screener.

We’ll be in Osaka next week for Devcon. Hit us up if you want to meet! If you’ve got a long weekend flight: subscribe to the Unqualified Opinions podcast and listen to some of my chats with Devcon speakers like: Taylor Monahan (MyCrypto), Sergey Nasarov (Chainlink), Doug Petkanics (Livepeer), and Ameen Soleimani (MolochDAO)… not to mention dozens of other attendees and sponsors.

See you in Japan!

Meme of the week…

Wences in incognito mode:

(meme courtesy of @Ryan0Walker)

Schadenfreude of the week…

They say Bitcoin is a Ponzi:

And, of course, our weekend reads…

Messari’s weekend reads:

  • Institutional Cryptocurrency Adoption — ‘How’ and ‘Why’ Matters More than ‘When’ - Evan Feng

  • How Discount Brokerages Make Money - Patrick McKenzie

  • The Threat to Limit Capital Flows to China and Pending Impeachment Conflict: Next Logical Steps in a Classic Dangerous Journey? The 1935-45 Analogue - Ray Dalio

  • Aggregators - Ash Egan

  • State of Crypto Markets in Asia - Bobby Ong

  • Five Ways a Nuclear War Could Still Happen - Tom Nichols

Have a good weekend y’all.

The Messari Team

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Messari Compression Algorithm

Content and thoughts from around the web as summarized by the Messari team.

🤝 [Analysis] Institutional Cryptocurrency Adoption — ‘How’ and ‘Why’ Matters More than ‘When’

Many long-term crypto bulls take for granted inevitable institutional investor participation and adoption, often without thinking through the How or the Why, and instead wondering perennially about the When. In the October issue of his thematic overview series, Evan Feng of Tapestry Capital leverages his past life as a buy-side analyst to not only think through why some of the more common hedge fund and mutual fund would decide on initial allocations to digital assets, but how specifically and numerically that decision would work its way through the existing market structure via a modeling exercise.

As it turns out, urgent net inflows against the backdrop of a disinflationary asset does present a very real catalyst for price appreciation, but it all hinges on the long-term fundamentals of the asset class, which may not look quite as familiar to traditional investors at first blush. (share or read more)

Quick Bits (Don't read that, I read it for you)

Choke Points (Exchange News)

  • 🇯🇵Six Japanese brokerage firms including Nomura Securities have formed the Japan STO Organization, a self-regulatory organization focused on security token offerings (STO). The group will issue rules and guidelines for issuing STO's as well as regulating members and lobbying to support STO development in Japan. (share or read more)

Startup Signals (ICOs, Cryptos, and Startups)

  • 🔐Qualified custodian BitGo has offered staking support for Dash ($DASH) and Algorand ($ALGO), offering returns between 7-13%. The firm has also acquired Hedge, a staking infrastructure provider to further build out its services. (share or read more)

The Powers That Be (Legal/Reg/Policy)

  • 🧐In a letter sent to Federal Reserve Chairman Jerome Powell two U.S. lawmakers have asked the Fed to look at adopting a digital currency for the U.S. dollar. Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.) argue that the U.S. has "the ability and the natural role to develop a national digital currency." Specifically, the Congressman stated,

    “We are concerned that the primacy of the U.S. Dollar could be in long-term jeopardy from wide adoption of digital fiat currencies. Internationally, the Bank for International Settlements conducted a study that found that over 40 countries around the world have currently developed or are looking into developing a digital currency.”

(share or read more)

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