#72 Altman, Musk and Zuckerberg

In the middle of the summer slumber, three entrepreneurs emerge as the leading forces in crypto

The story with interest rates continues as expected: across the globe, central banks are keeping up with small hikes, satisfied with the results they seem to be getting from them. Inflation is decreasing, though still far from the desired rates, so the predictions remain the same -interest rates will probably still see another hike before the end of the year.

But the macro narrative has not woken crypto markets up, and the effects of the Ripple case have had a very short lifespan. Besides some potential regulatory surprises, there are no short-term catalysts in sight, and price action remains flat.

News is coming from the outside of crypto, from entrepreneur royalty, like Elon Musk, Mark Zuckerberg, and recently anointed Sam Altman from Open AI. Musk keeps shaking Twitter, Zuckerberg has updated his allegiance to the metaverse, and Altman is using crypto to solve some challenges brought up -drumroll- by AI.

1. Identity | Worldcoin

Sam Altman is the CEO of Open AI, the company behind chatGPT, the flagship application of the AI revolution. Altman, together with Alex Blarnia, launched Worldcoin to create the foundations for a new digital identity system meant to be the backbone of a new financial network. A mission of this size requires a grandiose name such as Worldcoin and can only be received with a mixture of curiosity and reluctance.

Worldcoin wants to create a global system for a digital identity through Proof of Personhood and has turned to crypto for this because only blockchain technology can guarantee the decentralization, ownership, and censorship resistance of identity.

Worldcoin scans people's irises through Orbs, a dystopian piece of hardware equipped with a camera. Once a user's humanity is proved, they will own a digital identity that will eventually be the basis of a more secure global financial market.

Worldcoin's vision is commendable. Decentralized identity indeed holds the key to many challenges in crypto, even in finance, from Sybil resistance to governance. But people are rightfully suspicious of giving Worldcoin too much power. Crypto has taught us to be careful with our trust, and Worldcoin still brings up too many questions with their closed-source hardware and software solutions and the questionable tokenomics of their token launch.

2. Twitter | The Everything app

When Elon Musk flaps his wings in Palo Alto, it unleashes a tornado in the rest of the world. Recently, Musk revamped Twitter's identity. The kind of thing no consultant would have ever suggested him to do. Musk has changed the blue bird and the naïf name for an X. A letter shared by some of his most notorious creations, like X.com (his payments company that eventually merged with PayPal), SpaceX, or his son X Æ A-Xii.

This bold move reminded everyone of the mogul's vision behind his purchase of the social media platform: Musk wants to create an "everything app" similar to what WeChat is in China. Messaging, social media, and payments. And Musk is one of the most prominent, albeit irregular, ambassadors of crypto.

The transformation led to spikes in the price of Doge, Musk's pet crypto, as well as renewed developer enthusiasm towards ideas like payments between Twitter accounts or mint-with-a-tweet NFT services.

3. Metaverse | Meta doesn't budge

Before Musk, Mark Zuckerberg had already rebooted his company by rebranding it from Facebook to Meta. His goal here was to walk the talk of his commitment with the metaverse: that foggy term that encompasses virtual worlds, hardware, gaming, and social experiences.

So far, his bet has not reaped any benefits. Quite the contrary.

Meta reported second-quarter earnings on Wednesday and said that its Reality Labs unit, which develops virtual reality and augmented reality technologies needed to power the metaverse, logged a $3.7 billion operating loss. Meta's Reality Labs has now lost more than $21 billion since the beginning of last year

Zuckerberg's vision of the metaverse is very different from the one that emerges from crypto. Zuck dreams of a closed world of personal interactions that generate data and business for his stakeholders, which is okay, but crypto thinks of the metaverse as the interoperable, decentralized utopia where web 3 manifests.

These two visions are as compatible as TradFi and DeFi, so people in crypto would do well to wish Zuck the best.

4. Real World Assets | The flippening

Once upon a time, investors turned to crypto for juicy APRs. But with the combination of central bank's fight against inflation and the spectacular collapse of some crypto bubbles like Terra, the tables turned, and now the most interesting investments are off-chain.

Real World Assets, or RWA, is the trend that encompasses crypto products backed by off-chain assets. Fiat-backed stablecoins are one of the most straightforward RWAs, and so are experiments with the tokenization of securities, real estate and the likes.

For a while now, RWAs have been one of the most promising long-term trends in crypto. And, as of late, they are also a trend in the present tense. This week we learned that the Avalanche Foundation will allocate $30M to the purchase of RWA on their L1, and that Italy's central bank will cooperate with Polygon in an initiative to make Italian financial institutions familiar with tokenization.

5. Regulation | The US changes gears

We can't claim to be legal experts, but the recent regulatory trends in the US clearly show a change of stance. Two different House Committees recently approved FIT21 (short for Financial Innovation Technology for the 21st Century) Act.

FIT21's process brings two new things to the table. On one hand, it has received bipartisan support, including votes from the democratic side, which has lately been more aggressive against crypto. And on the other, it is the first piece of legislation that addresses crypto directly instead of as part of a broader text.

FIT21 coexists in time with other less flattering regulatory initiatives, like the CANSEE one, meant to impose harsher KYC and AML demands on DeFi. But that's business as usual. FIT21 isn't, and that's why it's news.

6. L1s | Solana returns

There's a narrative around the resurgence of Solana. This L1, flagship of the “Ethereum killer” movement, got a beating when FTX collapsed. It currently stands at #11 in TVL (below Cronos, Pulse, or Mixin) when it probably deserves a much higher position in terms of brand awareness and relevance. Let's check the data:

• TVL is $312M. Ethereum is $25B, Arbitrum $2.1B, Optimism, and Polygon ~$900k. But it's the highest it's been in 2023.

• The three top protocols have increased their TVL by more than 25% in the last month.

• 95k daily active users (Arbitrum and Optimism have between 100k-150k).

• It's the 4th chain by the number of developers, but the numbers have been consistently falling.

• $SOL price is also at year highs. It seems to have recovered from the depths of the ~$10 mark from post-FTX times, and lately, it's been moving around $25.

So…everything sounds pretty inconclusive. It does seem like Solana deserves a better position than what it has now, but the L1 narrative needs stronger reasons to believe since L2s are where things are happening lately.