June 30, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits✍️✍️✍️

• Crypto hedge fund Three Arrows Capital was ordered to liquidate.
• Genesis Trading may lose hundreds of millions of dollars due to exposure to Three Arrows Capital.
• OpenSea, the NFT Marketplace on Ethereum, suffered a data breach.
• Coinbase is providing geo-location data to the Immigrations and Customs Enforcement.
• Morgan Creek’s bid details for BlockFi get revealed after a leaked call.
• FTX is trying to acquire BlockFi outright.
• The European Union agreed on anti-money laundering rules for crypto transactions.
• MicroStrategy purchased $10 million more worth of BTC.
• Lido community doesn’t seem to be in favor of the self-limitation proposal.
• Polkadot announced a new version of its governance system to decentralize the decision-making process.
• Compound Labs unveiled Compound III with the intent of building a multi-chain lending protocol.

Today in Crypto Adoption…

• Crypto exchange Bybit will offer options contract settlement with USDC.

The $$$ Corner…

• Reciprocal Ventures, a VC firm, launched a $70 million fund to invest in web3.

What Do You Meme?

What’s Poppin’?

Grayscale Sues the SEC After The Rejection of a Spot Bitcoin ETF

By Juan Aranovich

Yesterday night, the SEC announced the rejection of Grayscale’s application for converting its Grayscale Bitcoin Trust (GBTC) into a spot-based Bitcoin ETF. GBTC currently has a market capitalization of $9.2 billion and is sitting at a ~30% discount to Bitcoin.

The SEC’s rejection came despite all the efforts that was put in by Grayscale, the largest digital currency asset manager in the world, and it is in line with the SEC’s decision to reject Bitwise’s application for a spot Bitcoin ETF.

There were a few reasons behind the SEC’s rejection. Among them, is that the application failed to address market manipulation in the Bitcoin spot markets, the role of Tether, and the lack of surveillance and regulated exchanges.

“We are deeply disappointed by and do not agree with its decision,” said Grayscale in a letter published minutes after the SEC announcement.

After the news came out, Greyscale immediately announced that it was suing the SEC. “It is the SEC’s arbitrary and capricious actions and discriminatory treatment of issuers that necessitates elevating this matter to the courts in the best interest of GBTC and our investors.”

Grayscale’s argument is that the SEC is “failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”

Arbitrum Odyssey Had to Be Paused

By Juan Aranovich

The team behind Arbitrum, an optimistic rollup layer 2 scaling solution on Ethereum, decided to pause what was supposed to be a two-month-long initiative, Arbitrum Odyssey, after the first week of the event. It was meant to grow the blockchain and was launched last week, though it had been announced in April this year.

Arbitrum Odyssey is a collaboration with NFT artists Ratwell and Sugoi, and Project Galaxy, to invite users to explore different parts of the Arbitrum ecosystem. During the time of the event, users would explore different applications and projects within the Arbitrum ecosystem and would receive as many as 17 NFTs for completing all the steps required.

However, yesterday, Arbitrum tweeted, “Because of the heavy load being put on the chain causing higher than normal gas fees, we’ve decided it is best to pause the Odyssey.”

It looks like the Odyssey was very successful, but it caused a huge spike in the blockchain gas fees, which rose even higher than the Ethereum mainnet for a few hours yesterday. The team commented that this action is only temporary. The Odyssey will be resumed once Arbitrum has implemented Nitro, a new protocol update to increase the blockchain computational capacity.

Although this problem might call into question how much and whether a layer 2 rollup can scale, there was good feedback from the community on social media. “Good move,” said Harry, who was one of the many supporters of the decision.

In the light of the event, Adam Cochran, venture partner at Cinneamhain Ventures, explained how Layer 2s work and was optimistic about Arbitrum’s capacity in the future. “L2s aren’t a cure-all, and for Arbitrum their Nitro implementation is already in test net and it seems like they should have waited for it to be live before running Odyssey,” he said.

It wasn’t the greatest month for Ethereum Layer2s. On top of this conflict on Arbitrum, a few weeks ago there was quite a controversy around the Optimism RPC not being able to handle the load during the token airdrop, and last week dYdX decided to leave StarkWare to launch its own application-specific blockchain on the Cosmos ecosystem.

Recommended Reads

1) Forbes’ daily cover featuring SBF:

2) The Wall Street Journal on how Celsius was built:

3) Ryan Berckmans on the importance of a web3 phone:

On The Pod…

Shaun Maguire and Michelle Bailhe, partners at Sequoia, discuss their long term view and thesis about crypto, what do they look for to invest in a crypto project, the takeaways from the blowup of Terra, the insolvency of crypto companies, and much more. Show highlights:

• what is Sequoia’s long term view and thesis about the crypto industry
• how different our lives will look 20 years from now due to blockchain technology
• how Sequoia had to adapt to invest in this new asset class and what are the similarities and differences with investing in traditional startups
• when a product or service on the internet should be offered in a decentralized or centralized way
• how Sequoia decides whether to invest in the entity behind a project or in the tokens
• whether having venture capitalists involved at all goes against the ethos of decentralization
• why Shaun believes that Ethereum proved that decentralization can be achieved even when you start being centralized
• whether people underestimate the value that VCs can add to a project
• why Shaun believes that Solana is moving towards decentralization
• Sequoia’s thesis about privacy in crypto and the potential of zero-knowledge proofs
• how Michelle sees the macroeconomic environment impacting crypto and whether this cycle is different from the previous ones
• the importance of product market fit in crypto projects
• what crypto projects should be focusing on and the business model they should be pursuing
• the main takeaways of the Terra collapse and how it was a major setback for algo stablecoins
• how crypto founders should always do the right thing even though there is no clear regulation
• whether SBF is the Berkshire Hathaway of crypto today
• the lessons to be learned from the potential insolvency of some crypto lenders and investment firms
• how demand for blockspace will keep increasing and whether a single blockchain could supply all that space
• the future of the metaverse and how it can be defined
• Michelle’s mental model for crypto and the phases for achieving worldwide adoption

Book Update

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