#14 Crypto fundraising trends, Meta, Botto, Shiba Inu and Axie
Venture capital is bullish, Botto gets one month old, Faceabook changed its name, Shiba Inu rides on lulz.
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Crypto Fundraising Trends
Investors are no longer asking why but how to enter crypto. Nearly 9 in 10 investors surveyed by Fidelity Digital Assets said they found digital assets appealing, while “only” 52% currently hold them in their portfolio. There are presently many gateways into crypto available for the remaining 48%. New ones pop out now and then—the latest, the brand new Bitcoin futures ETF available for US investors.
There are broadly three ways for institutional investors to approach crypto: direct purchase of cryptoassets investment in crypto-related funds or products, and last but not least, investing in crypto startup fundraising rounds.
Venture Capital is one of the strongest signals of optimism in the ecosystem. While other types of investment might seek fast returns, venture capital is, by definition long-term focused, and motivated by trust. VC investors hand money to builders who they believe can bring future profits.
In first three quarters of 2021, venture capitalists poured a record $21.4 billion into cryptocurrency and blockchain-related companies, in 1,196 deals, according to Pitchbook, a market data provider. That is more than five times as much money compared to last year. How Venture Capitalists Think Crypto Will Reshape Commerce (NYTimes)
5x. That’s how much more trust VCs have poured into the system.
According to Pitchbook, too...
...a larger and larger percentage of total global venture funding is finding its way into the blockchain/ cryptocurrency ecosystem, with that number rising from 1.6% in 1Q20 to 4.7% in 3Q21. Strong Crypto Fundraising Trends Set to Continue (GSR.io)
Fundraising monitoring company Dovemetrics recently published their Q3 report, where they break down the investments into categories:
CeFi. It stands for Centralized Finance and includes companies offering crypto-based financial services, such as exchanges, loans, etc. Coinbase or Binance are examples of CeFi companies.
DeFi is for organizations building Decentralized Finance protocols, like Uniswap, Curve, or Balancer, where users interact with the platform without an intermediary.
Web3 is currently a miscellaneous category that encompasses projects building blockchain or crypto versions of more traditional services. Decentralized social media, software frameworks, blockchain analytics fit within this category. Research firm Messari, which provides data dashboards, intelligence reports, and real-time coverage of assets, was one of the Web 3 funding round recipients lately.
The infrastructure category includes projects setting the technical foundations for other projects to work, such as Layer 1 and Layer 2 protocols or mining companies. For example, smart contracts platform Avalanche or mining company Genesis Digital Assets have raised rounds of over $200M this quarter.
NFTs include every company in the orbit of this new asset: marketplaces, gaming companies, or metaverse builders.
According to Dovemetrics, Q3 brought $8.2B to the ecosystem, a 47% increase over Q2. While the most significant slice of the pie belongs to Centralized Finance, which attracted half the funds ($4.1B), the most outstanding growth comes from the NFT sphere, with a 249% increase in funding and more than $1B. DeFi, on the other hand, was a little underwhelming.
Interestingly enough, while funding has significantly increased in capital raised, the number of rounds has not grown proportionally. Instead, Q3 has seen larger rounds, led by the likes of FTX’s $900m round in July, Revolut’s %800M, or Sorare’s $680M.
Maybe an even stronger signal of optimism comes from the fundraising activity of venture capital firms themselves. Andreessen Horowitz leads the way: after their $2.2B fund launched mid-year, the firm is putting together an even bigger fund, probably going up to $6.5B.
Besides the breathtaking numbers of A16Z, there are dozens of VCs raising funds. Even Sequoia is planning a structural change to make the firm better positioned to invest in crypto.
“The history of crypto shows that asset prices may fluctuate, but innovation continues to increase through each cycle.” Andreessen Horowitz dixit.
⬡ Six Angles
We select six topics to illustrate the very different angles crypto can be approached from. We could choose dozens, but six is the atomic number of carbon… and otherwise we'd be writing for ages.
1. NFTs | Botto turns one month old
For those of you who haven’t been following, Botto is our generative art / NFT / governance project we have been working on for over a year that finally saw the light on October 8th. Read this recap to get up to speed, or this chart below to get a glimpse.
There are many things to say about Botto (it’s been quite a hectic month), but let’s go over the fun part for starters: the auctions.
We’ve been through three auctions already, and here are some fun and exciting insights about them, in no particular order.
The first one was Asymmetrical Liberation. It was sold to @Rarest2012 for Ξ79.42 (≈ $325,500 at the time of the sale). The winner outbid Starry Night at the last minute. Starry Night is the NFT fund launched by Singapore-based crypto VCs Three Arrows Capital and NFT anonymous investor Vincent Van Dough. If you want to know what the guys at Three Arrows Capital do, check their investments. If you want to see Van Dough’s, check his OpenSea account. Probably nothing.
But we are even prouder of Rarest2012: the genesis piece buyer received two heart-stopping offers for Asymmetrical Liberation a few days later. The highest went up to 250ETH. This was his response.
The second auction was the sale of Scene Precede. Surprisingly enough, the price of artwork number two went higher than the genesis piece. Scene Precede was sold for Ξ100 ≈ $430,230
The buyer was some @lorenzom. Just some anonymous buyer until you start sniffing around. Sometime before placing the winning 100ETH bid on SuperRare, @lorenzom had received a 100ETH transfer from CozomoMedici, Snoop Dogg’s NFT hoarding alter ego.
Before our third auction, the team incorporated two relevant changes in the selection process, following recommendations from Mario Klingemann and the Discord community: the number of voting points available for users was too small. It was making users conservative in the number of votes, and therefore the feedback was not enough. Neither were the number of artworks open for voting. Botto was meant to produce 50 new pieces every week, but Mario suggested we pumped the number up for training purposes. So for auction number three, users got to see 350 new works, alongside the initial 200.
In the last auction, Trickery Contagion was sold for 35ETH, bringing the total amount of Botto sales close to the million dollars.
Some say the sale was a little on the low end, although the outlier was more the 100ETH. One of the reasons discussed in the community was around the actual art piece: until the last minute, the race to the auction was between Trickery Contagion and Opinion Cover. The winner finally was, in many people’s opinion, the more conservative choice.
This week’s vote was pretty & safe (trickery contagion) over gritty & thought provoking. Discord user
What do you think?
FlamingoDAO announced they had been the ones taking the auction. DAOs are Decentralized Autonomous Organizations, or, in other words, communities with a checkbook. Flamingo is probably the most famous one devoted to NFTs.
This is all for now in the Bottosphere. We’ll keep you posted!
2 Metaverse | Facebook goes full Meta
Facebook officially changed the name of the company to Meta. The last page of the chapter that Mark Zuckerberg started writing when he said Facebook would become a “metaverse first” company. The first line of a new chapter where Facebook/Meta will invest $10B in developing the new digital world.
First, the facts: Facebook, the company, not the app, changes its name to Meta and now has this squiggly blue M as a logo. They want to move from being linked to a social media product to being perceived as a metaverse builder.
Then the concept: the metaverse is a broad, blurry concept that is being defined as we speak. Below there’s a great way to frame it:
The metaverse is a moment, not a place. 🤯
Our lives have been going digital for 20 years already, and this has just been the beginning. Social lives, very digital. Work, made more digital by a virus. Leisure, education, economy...you get it.
Finally, the debate: crypto has been developing the building blocks for some of the most essential facets of the digitalization of life: identity (who we are online), ownership (how do we possess and trade digital assets), or finance (how do we exchange value). And they’ve been doing so in a decentralized manner, precisely to avoid the extractive mannerisms of corporate giants like Facebook, who have built platforms where users create value without receiving the rewards proportionally.
Who will win the race?
3 Memecoins | Shiba Inu run
Lately, Shiba Inu has been on the news for drawing one of those rollercoaster price charts crypto is so famous for and got the media scratching their heads. So let’s see what’s behind this phenomenon—the short answer: lulz.
Shiba Inu belongs to the category of “memecoins.” It is a token that was born as a mockery of another already joke token, Dogecoin.
Crypto loves confusing the rest of the world: a coin that has nothing behind it besides an internal internet joke is something that crypto natives take very seriously. That is how Dogecoin has eventually become a legitimate investment.
Shiba Inu was born in 2020 as an alternative to Dogecoin. It uses the same breed of dog as a symbol, and its authors have referred to it as “dogecoin killer” occasionally. But both tokens are hardly anything else than a community of people playing the game. Their valuation has more to do with moods and popularity: often, peak prices have come after celebrities, like Elon Musk or Snoop Dogg, joke on Twitter about it.
Their variation is also closely linked to the general market situation. The current rises have happened, non-coincidentally, at times of Bitcoin and Ethereum all-time highs. Moments of prosperity push people to seek the next short-term win. And, in that sense, a token whose value is pegged to euphoria looks like a good play.
PSA: Beware of coins with dogs.
4 Transparency | Post mortems
DeFi protocol Cream finance was hacked for more than $130M. The incident pushed their token to the ground and sent shockwaves across DeFi, with other relevant tokens suffering the consequences of the inflicted fear.
Security in crypto is one of the main concerns institutional investors indicate when they are considering entering DeFi, and rightfully so. The industry is evolving fast, and loopholes are discovered in the most painful way possible.
But there is one positive thing to point out: crypto’s transparency and resilience prevails in these cases. There is one literary genre worth noting: the post-mortem.
Post mortems are in-depth analyses of the details of a hack. They are usually written by the organization, which expands on all the factors involved in the mishap. The team provides code snippets, links to transactions, wallets, blocks, etc., where all the traces of the hack remain and can be checked by the community, alongside apologies, conclusions, warnings, and future measures.
Hacks happen, and that is a shame. But there is not one incident in crypto without public, transparent, shared learnings.
5 Regulation | US report on stablecoins
Some news on the regulatory side from the US. The President’s Working Group of Financial Markets recently issued their much-awaited report on stablecoins. The PWG is a consulting body composed of representatives from the Treasury, Fed, SEC, and CFTC. So, no specific actions are happening after this doc—just some solid legal opinion.
This sharp Twitter analyst called it a “nothingburger.”
In a sentence, the report calls for Congress to legislate the industry and suggests issuers of stablecoins should be policed like banks.
"The rapid growth of stablecoins increases the urgency of this work," the report stated. "Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy." Reuters.
The report has met mixed reviews from the industry. There is clear support from major, good guy players like Circle and polite nods from other actors who appreciate the regulatory efforts but wonder about some gray areas.
There still seems to be a lack of understanding of stablecoins as something different, and regulators are still trying to apply former frameworks to this new reality.
There’s still no clarity on who does what from policymaking and supervisory standpoint.
At least we are seeing another face of the regulatory process, after watching it recently unfold more like aggressive enforcement, as the action from the SEC against Uniswap, Coinbase, or Terra have shown.
6 Gaming | Axie launches a DEX
Axie Infinity recently launched a DEX on Ronin to trade between AXS, SLP, USDC, and WETH. Don’t worry if you didn't understand most of the sentence. We’re here for you. Let’s go through the terms.
Axie Infinity is the most important representative of crypto gaming. The game has made “play to earn” mainstream by coming up with the right combination of good game design and good token design.
In Axie Infinity, users play a card game of sorts using potato-shaped pokemon with different abilities. Users need to purchase Axies to play and are rewarded in tokens. Soon Axie will also include the possibility of buying and using virtual land in their game.
A DEX is a decentralized exchange: a digital platform that allows users to perform financial operations such as exchanging currencies, lending, or borrowing without a counterparty or an intermediary.
Ronin is Axie Infinity’s own blockchain. Axie used to run on Ethereum, but transaction fees were too high and transaction speed too low. The launch of a proprietary blockchain made Axie far more agile and boosted its outreach.
AXS and SLP are Axies’ native tokens. Players can use them for store and in-game purchases. USDC is a US Dollar pegged stablecoin that is very useful as an intermediary coin in exchanges. WETH is “wrapped ETH” Ethereum “translated into Ronin,” used for the same purpose as USDC.
This is what gaming platforms of the future might look like: half games, half financial service infrastructure for the commercial activity inside them.
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