Coinbase Staking & Securities Worries
Andre Cronje vs Justin Tron & Bitcoin Ordinals Against the “Soul” of Bitcoin?
Theo Delarosa
February 09, 2023
🗓 Daily Bullets - Thursday, February 8th
Today’s newsletter is 1182 words. A cool 5 minute read.
The crypto market is struggling - It’s looking pretty red out there, the same bullish momentum that carried us through January is faltering now in February. With the drop in prices also comes a predictable rise in drama. It seems that no one can ever agree on anything. We’ve got more SEC FUD, arguments on the validity of narratives and Bitcoin evolving.
Today we’re looking at:
- 💰Coinbase Staking & Securities Worries
- ⚔️ The Duality of Man: Andre Cronje vs Justin Tron
- 👻 Bitcoin Ordinals - Against the “Soul” of Bitcoin?
💰Coinbase Staking & Securities Worries
Another day, another FUD - Coinbase’s CEO sounded the alarm that the SEC would like to get rid of crypto staking in the U.S. for retail customers. SEC Chair Gary Gensler has previously expressed that Ethereum's PoS transition could classify tokens as securities.
To catch up, the SEC classifies a security as an investment contract that represents ownership in an asset (stocks, bonds, real estate investment trusts) with the expectation of profits from the efforts of others.
The SEC uses the Howey test to evaluate whether an asset is a security based on four factors: investment of money, common enterprise, expectation of profits, and dependence on the efforts of others. If a crypto asset meets these criteria, it will be classified as a security and subject to SEC regulation.
Case against calling it a security: Staking is an important innovation that fosters scalability, increased security and reduced carbon footprints and new technologies should be encouraged to grow and not stifled by lack of clear rules.
Hot Take: Many will try to use legal jargon, semantics and other technicalities to prove why staking and various other crypto activities don’t count as securities but the cold hard truth is that people are investing their money into these areas due to the financial incentives. People are expecting a return on their money. Plain and simple.
Go Deeper: 1st, 2nd, Paradigm on staking
⚔️ The Duality of Man: Andre Cronje vs Justin Tron
The duality of man - AI, as almost everyone knows, has been on a multi week rampage, gathering both supporters and naysayers. On the same day that Yearn and Fantom founder Andre Cronje calls out people pivoting to AI as grifters, Justin Tron announces a $100M AI developer fund.
Significance: This highlights a key debate. Is AI just another fad or does it have substance? Many people are split and everyone seemingly thinks their bags, projects and ideals are the right ones. As we see in many cases, no one can agree on anything.
Team AI: Areas identified by Tron for the use of AI include payments and e-commerce, currency settlement, data management, market and investment analysis and content generation.
Team Anti-AI: Andre on the other hand says AI and blockchain are not complementary because:
Blockchain = slow, transparent, secure & AI = high throughput, opaque, blackbox
Which team will win? Will the lack of fundamentals be enough to take the wind of the sails of AI or will it be enough to capture the imaginations of the next wave of crypto people?
Go Deeper: Andre Cronje, Justin Tron
👻 Bitcoin Ordinals - Against the “Soul” of Bitcoin?
Quick Take: Bitcoin network activity has spiked to a two-year high due to the popularity of the Ordinals protocol, which enables NFTs to be stored directly on the Bitcoin blockchain, as opposed to services like IPFS or Filecoin.
Data: The use of Ordinals has resulted in some of the largest blocksizes in the history of Bitcoin, with many blocks hitting the 4 MB block size limit. There has been over 13,000 Ordinals transactions, 526MB of Bitcoin blockspace usage and 6.77 BTC of Ordinals related spend.
Significance: The increased demand for block space has also led to an increase in transaction fees and a rise in miner fees which are positive for the long-term security of the Bitcoin network.
The popularity of Ordinals has sparked a debate within the Bitcoin community about the "right" use for the Bitcoin blockchain, as Satoshi Nakamoto was against non-financial uses of Bitcoin.
Like with almost everything else in the world, people aren’t able to agree on anything! Are NFTs good for Bitcoin and are they the next iteration of an evolving technology or should we be purists and never change, iterate or innovate?
✅ Daily Bullets
- Kraken is under investigation by the U.S. SEC for possible sale of unregistered securities to U.S. investors
- Aave's GHO stablecoin goes live on Ethereum's Goerli testnet
- Startup Anima plans to add OpenAI's chatbot technology to its AR-powered virtual pets called Onlybots
- Bitcoin Punks are the first byte-perfect uploads of the original Ethereum CryptoPunks onto the Bitcoin Blockchain using Ordinals
- Web3 payments firm MoonPay partnering with NFT marketplace LooksRare
- MakerDAO community proposed creating a liquidity market called Spark Protocol, which is a fork of Aave's v3, for lending and borrowing crypto assets focused on DAI
- Flux Finance launches lending token collateralized by U.S. Treasury debt
- BAYC freezes Dookey Dash leaderboard with nearly $73M in trading volume and plans to award gamers based on how high they scored
- Tether reports $700M Q4 net profit in latest attestation report
- Brave mobile browser adds support for Solana on iOS and Android
- MetaMask integrated with Onramp.money, an Indian provider of crypto-to-fiat on-ramp services
📊 Market Dashboard
📈 Gainers:
- GAS - NEO gas token
- COVAL - NFTs
- PRQ - Monitoring & Intelligence
📉 Losers:
- CRTS - Vote to Earn
- OPUL - DeFi Real World Assets
- CCD - L1 Blockchain
Charts of the Day - RPL vs LDO TVL
Spurred on by the rally in liquid staking derivative tokens, RPL has reached an all time high TVL of just shy of 1B - 64.5% of which is staked WETH and 35.5% is RPL.
Compare that to frontrunner Lido Finance which has not yet recovered from the chaos of 2022
📚Research/Reads
- The crypto industry needs to start playing by the rules for adoption to increase | The Seventh Bull Cycle - source
- Primary and secondary transactions | Crypto and securities: New interpretation of US Howey test gaining ground - source
- Our decisions can be more precise and effective | The Value of Probabilistic Thinking: Spies, Crime, and Lightning Strikes - source
- Bitmex Research |Bitcoin Ordinals Data - source
- Many groups likely to be disappointed with the outcome of Genesis’ Chapter 11 bankruptcy filing | What creditors can expect from Genesis’ bankruptcy and what others can learn - source
- L2 season is upon us | The State of Optimism - source
- Messari Report | State of Synthetix Q4 2022 - source
🎁 Bonus - Dramarama Corner
Umami Finance CEO dumped all their tokens resulting in a 50% drop in price - massively causing a stir among the community. Always something juicy going on. Next steps: The team plans on continuing as a DAO minus the CEO. When in doubt - regroup.
This is the situation rn at @UmamiFinance :
@IntrinsicDeFi dumping his tokens on the community - while folks like myself are not able to withdraw funds threw the UI - although told we are
Team has resigned and is going to move forward to a DAO structure
— DeFi Advisoor (@DAdvisoor)
Feb 9, 2023
We hope you find this issue engaging and enlightening. As always, we welcome your feedback and suggestions for future issues.
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