Genesis/DCG - Is the Last Potential Forced Seller Safe Now?
Google Facing Existential AI Threat & Is Crypto a Security or Beanie Baby?
Theo Delarosa
February 07, 2023
🗓 Daily Bullets - Tuesday, February 7th
Today’s newsletter is 1516 words—a cool 7-minute read.
The Crypto market continues ranging - meanwhile we may have seen one of the last large potential forced sellers secure a safe path out of danger. The crypto community comes together to help victims of the deadly earthquake in Turkey, Lido announces V2 upgrade and the first ever ETH withdrawals were successful on testnet.
Today we’re looking at:
- 🏦 Genesis/DCG - Is the Last Potential Forced Seller Safe Now?
- 💻 Google Facing Existential AI Threat - Introducing Bard
- 👨⚖️ Is Crypto a Security or Beanie Baby? SEC Insider Trading Legal Argument
🎧 Listen: The Crypto Illuminati Twitter Spaces
🏦 Genesis - Is the Last Potential Forced Seller Safe Now?
What you need to know: Genesis, which filed for bankruptcy in Jan 2023 after suspending redemptions and new loan originations, has now agreed to a restructuring plan with Gemini and creditors.
Key Details:
- DCG intends to sell its subsidiary Genesis' crypto trading business as well as its lending arm
- Gemini agrees to contribute $100M to compensate Earn users
- DCG sells $22M worth of Grayscale shares to raise funds
- Agreement includes a potential sale of Genesis Global Trading
- DCG exchanges $1.1B note for convertible preferred stock and refinances existing loans
- All Genesis entities will be consolidated under Genesis Global Holdco
Significance: There were fears that forced selling resulting from this bankruptcy could send further shockwaves through the already fragile post Terra/3AC/FTX crypto industry and this agreement may seemingly mitigate those fears.
With the Fed’s monetary stance softening, could the worst be behind us?
Looking Forward: Work remains to be done for completion, including due diligence and judicial approval of the plan and there could still be large institutional players left to collapse, however the industry landscape can breath a little easier with this sword over our necks lifting.
💻 Google Facing Existential AI Threat - Introducing Bard
The quick take - Google announces its new AI chatbot, Bard, in response to ChatGPT from OpenAI. Bard will be available "in the coming weeks" and is the latest development in the surge of interest of AI technology which has also taken crypto by storm.
Key Details:
- Bard uses a smaller version of LaMDA, Google's powerful AI model
- Unlike ChatGPT, Google will not integrate Bard into its search box
- Bard will enhance conventional search by synthesizing responses for questions with multiple answers
- Google plans to make the underlying technology available to developers through an API
- ChatGPT is built on top of GPT, an AI model invented at Google, improved by human feedback
- ChatGPT's growing popularity has led to speculation of challenge to Google's search dominance
Concerns: Text generation technology, like ChatGPT, is prone to fabrication and biases and still needs improvement before going mainstream.
Significance: With the meteoric rise of ChatGPT, Google found itself facing an existential threat. Google has such a monopoly on the search engine business, that most people naturally use the verb “google” to indicate looking something up. What powerful brand recognition!
Looking forward, could AI disrupt that massive market share Google commands? Perhaps and that’s why Google sees fit to accelerate their AI plans. It’s looking more and more like AI will be a sector to watch in the coming years, whether it be in crypto or not.
👨⚖️ Is Crypto a Security or Beanie Baby? SEC Insider Trading Legal Argument
Long story short: Ex-Coinbase manager pled guilty in crypto’s first insider trading case. Lawyers representing him and his brother attempted to dismiss the SEC’s insider trading case arguing that the nine tokens at issue are not securities, in part because they were sold on the secondary market. Generated at least $1.5M from illicit activities. Brother sentenced to 10 months in prison.
Key Details:
Lawyers argue:
- The nine digital assets involved are not securities but rather utility tokens necessary for network use
- The SEC was wrong to consider the tokens as securities, comparing them to Beanie Babies and baseball cards
- The SEC's definition of securities using the Howey Test is inadequate and could have broader implications for the industry
- SEC also failed to "adequately allege scienter" (intent or knowledge of wrongdoing)
Significance: This case could have broader implications for exchanges as the SEC attempts to push through this definition of crypto assets as “securities” - giving them more control and oversight. On one hand, the SEC should be careful when it comes to what it designates as a security and should not issue blanket jurisdiction in this emerging and developing sector which could stifle innovation but what the defendants did is genuinely wrong and efforts should be put in place to mitigate this behavior everywhere.
Most people would agree that what the brothers did was wrong. They used their unfair and insider knowledge as an advantage to profit at the expense of unsuspecting retail. This exact phenomenon has plagued financial markets, brokers, exchanges for decades. It is wrong to use your privileged access to information to profit!
Final note: Crypto is full of genuine cases of insider trading - a phenomenon we have seen time and time again on-chain as insiders load up before major announcements and then sell into the announcement hype. Binance even recently announced a 90-day token sale policy for employees and family members to fight insider trading. Safety and compliance checks need to be in place.
✅ Daily Bullets
- Ethereum Zhejiang testnet successfully processes first-ever ETH staking withdrawals
- Uniswap founder denies wronging Balance.io co-founder saying he was offered Uniswap investor ownership and later a cash repayment, refusing both offers
- Crypto firms banned from Super Bowl television ads this year
- DEX aggregator CoW Swap exploited for 551 BNB worth approximately $180,000
- Lido Finance is rolling out several key new upgrades in its latest V2 update. Rewards from staking ETH on Lido will now be distributed by Aave on Ethereum, Arbitrum, and Optimism
- Stargate vote successful to re-issue a new STG and airdrop it to all STG holders
- Dell will join Google, FIS and Abrdn on the governing council of the enterprise network Hedera
- Yuga Labs reaches settlement in Bored Ape NFTs trademark lawsuit with Ryder Ripps collaborator
- ENS DAO voted to sell 10,000 ETH ($16.5M) to fund the project’s activities for the next 18 to 24 months
- Acala EVM+ now live on mainnet, bringing full evm+substrate compatibility to Polkadot’s DeFi appchain
- The UK's central bank, the Bank of England, has unveiled the model for a digital pound
- File hosting giant WeTransfer and blockchain platform Minima introducing an NFT minting service in March
- Crypto.com partnered with Korean drama distributor Studio Dragon to issue NFTs
- The co-founder of Web3 metaverse game engine “Webaverse” revealed they were victims of a $4M hack
📊 Market Dashboard
- 📈 Top 500 Gainers: ZEON, FIS, LAT, SDAO, REI
- 📉 Top 500 Losers: GZONE, MTL, LGX, REP, DAWN
Chart of the Day - DeFi TVL
- Despite the rally in crypto prices since January, DeFi TVL still hasn’t been able to reclaim the $55B level it lost in November during the FTX collapse.
📚Research/Reads
- A potential turning of the macro market tides is underway | Glassnode | Shifting Tides - source
- Strong growth in the number of transactions, TVLs, and cross-chain data | Canto Eco Checklist, Trending L1 with DeFi Components - source
- The dYdX Foundation made an abrupt change to its project’s tokenomics | Did dYdX violate the law by changing its tokenomics? - source
- From early adopters using technology to automate financial services to a comprehensive revolution of the financial sector | The history and evolution of the fintech industry - source
- How the Ethereum Foundation drives innovation through delegation | A Philosophy of Subtraction - source
- The objects we use to store value will evolve to match new realities | Storing Value in Digital Objects - source
- $3B+ lost to smart-contract exploits in 2022 exposes the immaturity of the security landscape | Web3 Security: Securing the Path to Crypto Adoption - source
- Modelling the distribution of rewards by validator cohort | Partial withdrawals after the Shanghai fork - source
- The next evolution unlocked by the blockchain | The Rise Of UGC 2.0: User Generated Collects - source
- The trial between NFT artist Mason Rothschild and French luxury house Hermès came to a close | Hermès vs. MetaBirkins: The NFT Case That Could Have Major Trademark and Artistic Consequences - source
🎁 Bonus - a16z responds to Uniswap voting controversy
a16z released clarification over their voting power in Uniswap governance. Claims they delegate more votes than they vote with themselves and issued a statement explaining their views on decentralized crypto governance.
Seeing many false claims about a16z crypto's voting power in Uniswap Foundation governance. Let me clear it up:
🗳️ We delegate ~40m votes to outside groups (with no conditions on how they vote).
⚖️ We vote with 15m tokens (less than half what we've delegated to others).
— Eddy Lazzarin ☀️🔭 (@eddylazzarin)
Feb 7, 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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