June 30, 2021       /       Unchained Daily       /       Laura Shin

Daily Bits ✍️✍️✍️

What Do You Meme?

What’s Poppin’?

ICP, the native utility token of Dfinity’s Internet Computer is poppin’ — well, sort of.

The ICP token is designed to allow users to participate in and govern the Internet Computer’s blockchain network. The details are complex, but the main idea behind the platform is to re-build the internet in a way that routes data ownership away from big-tech companies like Amazon and Facebook.

On Monday, the New York Times published an article on ICP titled “The Dramatic Crash of a Buzzy Cryptocurrency Raises Eyebrows” with the help of data compiled by Arkham Intelligence. (You can find the NYT article here and the Arkham research paper here.)

The New York Times was not using hyperbole to describe ICP’s price action as a “dramatic crash.”

At one point earlier this month, the price of ICP fell 95% from its launch event in May, spiraling from $730 to $30 and washing away $300B in value in terms of market capitalization. (In the last week, the price has climbed, perhaps due to Goldman Sachs’s June cryptocurrency report, “Digital Assets: Beauty Is Not in the Eye of the Beholder,” which praised ICP as “innovative.”)

Even by crypto standards, a 95% price decrease from a token that was briefly the third-largest crypto asset by market cap is worth looking into, and, as Arkham argues, retail investors deserve an explanation for why they collectively lost millions, if not billions, of dollars.

The Arkham report is eye-opening, unveiling a collection of findings that suggests collusion amongst Dfinity and ICP insiders. Indeed, after analyzing ICP and Dfinity, Arkham says they “believe that possible insiders connected to Dfinity have been dumping billions of dollars of ICP on exchanges at the expense of small early supporters and retail investors.”

The report delves into two concerns:

  1. It appears the Dfinity treasury and ICP insiders almost immediately deposited their tokens onto exchanges after the May ICO.

  2. Arkham believes that Dfinity’s tokenomics policy did not follow industry best practices.

Arkham identified 34 addresses of “suspected insiders” that deposited billions of dollars to exchanges after the ICO, making up roughly 75% of all ICP on exchanges. Arkham suggests that such a large amount of ICP on exchanges may have kickstarted ICP’s price drop. The report notes: “If all or most of the ICP deposited by these addresses was in fact sold, this would exert massive downward pressure on the price of ICP, and would go a long way towards explaining its exceptional decrease since listing.”

It appears that Dfinity also failed to publicly acknowledge its tokenomics, like how many tokens Dfinity and project insiders were owed and how ICP tokens would be unlocked. In a world of open-source code, the lack of a tokenomics policy is a glaring omission. Arkham describes it as “contrary to industry best practices.” (here is an example of clear tokenomics feat. Uniswap)

Arkham’s research shows that ICP seed investors, who were normal supporters who donated to the project in exchange for the promise of ICP back in 2017, had trouble claiming their tokens found their ICP locked up in a murky 4-year unlocking schedule… which was posted on the day of the listing. Dfinity treasury tokens, according to a tweet from its founder, have no vesting.

Arkham ends its report without a concrete conclusion, clarifying that they could not definitively identify the addresses of suspected ICP insiders or prove that ICP’s tanking price was due to a rug pull.

Recommended Reads

  • Dragonfly Capital on ETH as an investment:

  • Here is a deep dive on China’s state-backed blockchain platform:

  • Arca’s Jeff Dorman debunks 10 bear market theses:

On The Pod…

Ethereum’s EIP-1559 Will Solve Some Problems But Big Ones Will Remain

Taylor Monahan, CEO of MyCrypto, and Tim Beiko, Ethereum Foundation core-dev facilitator, discuss the upcoming upgrade to the Ethereum network, EIP 1559. Show highlights:

  • why Tim believes EIP 1559 is necessary

  • what narrative is driving EIP 1559

  • what problems the network upgrade will solve

  • how Ethereum transactions/fees work

  • whether gas prices are correlated with ETH/USD

  • the 3 main protocol changes that EIP 1559 proposes

  • why Taylor, as the CEO of a wallet provider, is wary of EIP 1559

  • how EIP 1559 will affect Ethereum’s block size

  • what changes wallet providers are considering due to EIP 1559

  • whether ‘Black Swan’ events will be more or less likely after the network upgrade

  • how EIP 1559 will affect miners

  • whether Tim or Taylor believes that miners could fork Ethereum to stop EIP 1559

  • how EIP 1559 will change the state of miner extractable value (MEV)

  • how Taylor and Tim feel about the Ethereum as sound money narrative in light of EIP 1559

  • when EIP 1559 will go live

Book Update

My book, The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze, is now available for pre-order now.

The book, which is all about Ethereum and the 2017 ICO mania, comes out Nov. 2nd. Pre-order it today!

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