June 20, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits✍️✍️✍️

  • Three Arrows Capital got liquidated in FTX, Deribit, and BitMEX.
  • Celsius made an official comment to the community on the paused withdrawals.
  • Coinbase gets sued for promoting UST and not disclosing risks.
  • Terraform Labs and Do Kwon face a class action lawsuit for selling unregistered securities.
  • Lido DAO proposes to reduce the existing scope of governance of its token holders.
  • FBI warns about crypto scams on LinkedIn.
  • Noah Davis will be leaving Christie’s to work as Brand Lead for Yuga Labs.
  • Trading volume in Punks rose before Garga’s announcement that the new legal terms for Punks will be rolling out in a few weeks.

Today in Crypto Adoption…

  • Meta (disclosure: I write a Meta Bulletin newsletter) is partnering with Balenciaga, Prada, and Thom Browne, to launch a digital fashion marketplace.
  • The Bank for International Settlements (BIS) Innovation Hub will launch three crypto projects.

The $$$ Corner…

  • Ethereum Layer 2 Immutable launched a $500 million fund for blockchain and web3 gaming.
  • FTX will acquire Bitvo, a Canadian crypto platform.
  • zCloak Network, a zero-knowledge proof startup, raised $5.8 million.
  • SKNUPS, a digital fashion collectibles startup, raised $3.5 million in pre-seed funding.

What Do You Meme?

What’s Poppin’?

A Solend DAO Proposal Stirs Controversy

By Juan Aranovich

Yesterday morning, Solend DAO, a DeFi lending and borrowing protocol on Solana, passed a controversial governance proposal.

The proposal aims to “mitigate risk imposed by a user with a large margin position on Solend,” as was explained in a blog post. In short, the DAO member proposed to temporarily take over the whale’s account to liquidate its position over the counter. In this way, they claimed, the liquidation would not impose a systemic risk to the protocol and the entire blockchain.

According to the blog, and confirmed by on-chain data, this user has 5.7 million SOL deposited (~$170 million) and $108 million of borrowed USDC and USDT. If the price of SOL were to drop to $22.30 (it was at $33.80 as of press time), the account would become liquidatable for up to 20% of the borrows (~$21 million). “Letting a liquidation of this size to happen on-chain is extremely risky,” they said.

According to the Solend DAO team, “It’d be difficult for the market to absorb such an impact since liquidators generally market sell on DEXes” and “Solend could end up with bad debt.”

The team has been making efforts to contact this user via on-chain message and via Twitter, but received no response. Stating “there is no perfect solution,” they decided to put out this proposal for a vote, which passed with overwhelming support – 97.5%.

However, 90% of the total votes came just from one wallet, calling into question how decentralized it was.

Social media was up in arms, with numerous people saying the vote went against the ethos of crypto and decentralized finance. Cobie, co-founder of Lido and UpOnlyTv, called it “Comedy”. Dylan LeClair, senior analyst at UMXO Management, criticized the proposal and implied that Solend is not a decentralized protocol. “‘Decentralized’ in name only,” he wrote.

However, others thought differently. “Code is not law; we make the laws together,” tweeted a Solana developer.

SLND, the token of the Solend protocol, dropped 2.5% on a day when many crypto prices rose, with BTC and ETH pumping nearly 9% and 14% respectively.

Recommended Reads

1) Interview with Vitalik and his dad on Fortune:

2) Grant Stenger on what is the point of crypto:

3) “History is not on the side of the crypto’s grave dancers” by Simon Black:

On The Pod…

Mika Honkasalo, independent crypto researcher, discusses what is happening with Celsius and Three Arrows Capital, the importance of having proper risk management, and the contagion effects on the industry.

Show highlights:

  • why is it so significant that Celsius paused withdrawals

  • what is stETH and why is it important to understand the Celsius situation

  • how the Luna/UST debacle started a contagion effect in the crypto space

  • why Celsius’s investors won’t bail the company out

  • what will happen to Celsius’s retail customers

  • what Three Arrows Capital (3AC) is and whether they have a solvency problem

  • how 3AC was levered long and whether they had poor risk management

  • who will be hurt if 3AC goes under

  • what would be the effect of 3AC and Celsius collapsing

  • which types of funds that Mika will be eyeing to see if they also end up in a similar situation to 3AC and Celsius

  • why Mika would counsel anyone who keeps their money with centralized crypto lenders to scrutinize their practices

Book Update

My book, The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze, which is all about Ethereum and the 2017 ICO mania, is now available!

You can purchase it here: http://bit.ly/cryptopians