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#85 More than ETFs
Your dose of crypto context and opportunities to start the week.
We're currently riding the crypto bull wave, and while it's a thrilling ride, there's no guarantee it'll last forever. But can we enjoy it for a moment? Instead of drowning again in discussions about regulations and macroeconomics, could we return our attention to the fascinating projects working hard to improve crypto?
In today's issue, we've got the lowdown on what's fueling the crypto frenzy – those ETFs, of course – but we're also diving into the exciting world of specific names such as dYdX, Chainlink, Polygon, and trends such as staking. Because we believe they are here to stay.
1. Bitcoin spot ETH | Another week riding the ETF hype wave.
We have no further solid news about it, but the sentiment remains as bullish as it gets. Last week, it was enough with two small-sized indicators of bullishness.
One was the listing of BlackRock’s proposed ETF on the Depository Trust and Clearing Corporation website. This is a meaningless step since the DTCC also lists eligible funds before their approval as part of their process. But whether it was because of naïveté or superstition, markets reacted.
The other, is an observation a finance lawyer shared on Twitter, which could indicate that Blackrock is seeding its ETF. Planting an ETF (Exchange-Traded Fund) involves an initial investment made by an authorized participant or fund sponsor to establish the fund's assets. This investment kick-starts the ETF's creation and allows it to start trading on an exchange.
These events may seem insignificant, except for the fact that they fall on fertile ground and push the narrative further that bitcoin is close to becoming a much more compliant and accessible asset.
2. Reputation | Crypto fights back.
The Wall Street Journal published an article speaking about how terrorist organizations in the orbit of Hamas used crypto to obtain funds. The report cited information from analytics firm Elliptic, and it prompted an aggressive response from US legislators, led by anti-crypto army general Elizabeth Warren, demanding harsher legislation.
In response, Elliptic claimed that their conclusions and data had been misunderstood and misrepresented.
Elliptic further tracked some of the funds, noting that “only $21,000 in cryptocurrency has been donated since Oct. 7, and thanks to the efforts of crypto businesses and researchers, much of this has been frozen — preventing Gaza Now from being able to use these funds.” ‘No evidence’ Hamas raised millions in crypto, Elliptic says.
In parallel, Chainalysis, Elliptic’s competitor analytics firm but a partner in the struggle against the forces of misinformation, joined the conversation.
“To the untrained eye, it might appear that $82 million worth of cryptocurrency was raised for terror financing,” Chainalysis wrote.
“But it is much more likely that a small portion of these funds was intended for terrorist activity and a majority of the funds processed through the suspected service provider were unrelated.”
The Wall Street Journal has not responded to crypto’s request for a rectification.
3. L1 | dYdX launches its own chain.
dYdX is a perpetual contracts trading platform. They recently made a bunch of significant announcements centered around the launch of their own custom-made blockchain. Their journey will test relevant assumptions about the future of blockchain infrastructure and deliver invaluable lessons for crypto as an ecosystem. We’ll try to write the shortest possible summary for those who want to keep up.
Do you know what perpetuals are? Here’s ChatGPT with a brief explainer. “Perpetual contracts are a type of cryptocurrency derivative product that allows traders to speculate on the future price movements of cryptocurrencies without an expiration date, unlike traditional futures contracts”. dYdX has long been a leading decentralized perpetual trading platform in crypto.
dYdX was built initially with Starkware's zero-knowledge technology and operated on Ethereum. However, Starkware's technology was costly due to a code license, and Ethereum's fees and speed were unsuitable for dYdX's ambitious volume and speed requirements.
So, dYdX decided to build and migrate to their own chain. They built a bespoke chain using the Cosmos stack in June 2022. Cosmos was the primordial soup for the appchain thesis: the idea that many crypto protocols would benefit from developing and owning their own blockchain. A thesis that, over time, Layer 2 ecosystems have appropriated to a certain extent.
We’ll never know if dYdX would’ve taken a different route had L2s matured earlier. But in any case, their chain is now, and it is tailored to the needs of a perpetual exchange marketplace. Around the concept of the new chain, dYdX has made some other significant moves.
They’ve turned the company into a Public Benefit Corporation (PBC), a type of organization with the hybrid purpose of generating benefits for the company as a means to benefit society and the environment.
They’ve announced the launch of the DYDX token, an evolution of the current token that will have, on top of the prior governance utility, uses for staking and security.
The conversion into a PBC and the token deployment are strong moves in dYdX’s commitment to decentralization, both a core value proposition of the protocol and a defense mechanism against possible regulation.
dYdX is a living and walking case study in the appchain thesis and an example of a decentralization best case.
L2 | Polygon reborn
Polygon is walking the talk of their 2.0 vision.
(Polygon 2.0) roadmap seeks to establish Polygon’s various scaling solutions as an interoperable ecosystem, launch a new staking layer, and unify its PoS Chain and ZkEVM networks. Polygon Deploys POL Token On Ethereum.
Polygon is a veteran project in the field of scalability solutions for Ethereum. It has hopped onto virtually every technical trend, from the early manifestation of sidechains to the latest wave of zero-knowledge rollups. Following a new roadmap, Polygon wants to rebrand as an ecosystem of zero-knowledge powered solutions, with a new token in the middle: The $POL, an evolution of MATIC, now with native staking and even re-staking capabilities.
5. Staking | Proof of Strength
With Shanghai now fading into the horizon in our rearview mirror, the transition of Ethereum from Proof of Work to Proof of Stake has been highly successful. It has not only improved Ethereum's sustainability but has also reshaped its economic model and elevated staking into a category of its own.
In Proof of Stake chains, users can actively participate in chain security by staking their funds and earn rewards through newly minted tokens—attempts to manipulate the blockchain result in punitive measures like removing assets (slashing).
Staking as a model, also beyond the confines of Ethereum, has become one of the most solid sources of revenue in crypto. It is a way for many investors to earn a relatively safe and predictable profit based on the situation of an L1, and the expectations deposited on it. A new report by Staked.us proves the strength of the trend. The report claims that the average staking rate of the top 35 Proof of Stake assets has reached an all-time high.
6. Chainlink | The Strongest Link
Chainlink is one of the healthiest projects in crypto these days. Oracles are an indispensable element in virtually every crypto protocol, especially in hot trends such as the tokenization of Real World Assets.
Cryptocurrency oracles are intermediaries that fetch real-world data for smart contracts and DApps on the blockchain, enabling these applications to make decisions based on external information. They bridge the gap between blockchain networks and real-world data sources. For example, in order to trade tokens that have some relation to the price of gold in traditional markets, oracles gather that information for the blockchain in a precise and reliable manner.
Besides being a necessary tool in the relationship between crypto and TradFi, Chainlink can also brag about some of the most essential partnerships in its category in their conquest of sectors such as inter-bank messaging, securities settlement or RWA.