May 19, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits✍️✍️✍️

• Ethereum’s main testnet is set to go through the merge in early June.
• Do Kwon’s Terra revival plan went live for governance vote.
• Government officials said they want crypto exchanges to separate customer and corporate funds.
• A South Korean law firm said it is suing Do Kwon.
• SEC chair Gary Gensler said he needs more resources to regulate crypto.
• Lens Protocol, a decentralized social media platform, went live on Polygon.

Today in Crypto Adoption…

• Meta (formerly Facebook, for which, disclosure, I write a Bulletin newsletter) filed trademark applications for ‘Meta Pay’, indicating plans to launch a payment platform with crypto support.
• Binance is in talks to become regulated in Germany.
• Getty Images signed a deal with Candy Digital to launch and sell NFTs.
• LimeWire’s Algorand marketplace announced a deal with Universal Music Group to let its artists release NFTs.

The $$$ Corner…

• a16z announced a $600 million fund to invest in the gaming industry.
• FreshCut, a gaming platform, raised $15 million.
• Blockchain gaming startup N3twork Studios Inc. raised $46 million.
• Hackathon organizer Dorahacks raised $20 million.

What Do You Meme?

What’s Poppin’?

Major VCs Deny Having LUNA/UST Exposure

After the Terra collapse last week, there were worries about potential ripple effects on venture capital firms and other major DeFi treasuries. However, many big players have been saying that they had very little to even zero exposure to LUNA or UST.

Pantera Capital, one of the main VC firms that backed Terra, claims to have exited 80% of its position before the catastrophe. Joey Krug, co-chief investment officer at Pantera Capital, told The Block yesterday: “the market has been fairly frothy over the last year and thus we’d exited the majority of our position before any of this happened. Roughly 80% over the last year, fairly gradually over time.”

According to a letter published by Galaxy Digital CEO Mike Novogratz on Wednesday, another early investor in Terraform Labs, the firm does not hold algorithmic stablecoins in its treasury. “With our diversified business lines, Galaxy remains in a strong capital and liquidity position. We are well-positioned for long-term growth,” he noted. The release of the letter was Novogratz’s first comment after being silent for 10 days on Twitter. Novogratz, who has a tattoo of LUNA on his arm, said: “my tattoo will be a constant reminder that venture investing requires humility.”

Pantera and Galaxy are just two examples. As reported by Decrypt, crypto firms like Multicoin, Dragonfly, Framework and OnJuno also claimed to have no exposure to Terra. Some believe that these firms should have had more empathy with the losses suffered by millions of retail investors, as was put by Min Teo, advisor at ConsenSysMesh. “Why are crypto VCs flexing that they and their portfolio have zero exposure to luna/ust/anchor? Firstly you are 99% lying. Second you seem to have zero empathy for what was a very difficult day for our community and industry,” she said on Twitter.

Haseeb Qureshi, managing partner at Dragonfly Capital and host of The Chopping Block, expressed skepticism on this week’s pod regarding everyone’s apparent lack of UST holdings: “Everyone I talked to says they are ok. Somebody must be lying.”

Agreeing with Haseeb’s skepticism, Kevin Zhou, CEO of Galois Capital and TCB guest, added: “there is no way that’s true, but what would be even more harrowing is that if it was true it would mean that the insiders dumped on retail and got out unscratched.”

Recommended Reads

1. Cole South on why he sold his BTC for ETH.
2. 0xHamZ on DeFi’s original sin.
3. TokenBrice on the inalterability of DeFi protocols.

On The Pod…

Why Terra Collapsed and Whether an Algo Stablecoin Can Ever Succeed

Nic Carter, general partner at Castle Island Venture, Eric Wall, former Chief Investment Officer of Arcane Assets, and Erik Voorhees, founder of ShapeShift, discuss what happened with the TerraUSD (UST) and LUNA fiasco, Do Kwon’s responsibility, the impact on the crypto ecosystem, and much more. Show highlights:

• how Erik used to feel that algo stablecoins were impossible and why he changed his mind
• why Eric considers that the demand for UST was tied to a sh*tcoin
• why Nic didn’t think LUNA would work
• how a stablecoin could theoretically be decentralized
• whether Nic, Eric, and Erik think this was a deliberate attack
• why they think whether or not there was a deliberate attack is not even relevant
• how the de-peg started with a liquidity issue on Curve
• why Nic thinks that Terra’s biggest mistake was the 19.5% APY on Anchor
• whether pursuing a decentralized stablecoin is a worthy goal
• what aspects of UST were decentralized, according to Erik
• whether algo stablecoins are dead or whether in the future, death spirals of algo stablecoins can be avoided
• why Erik believes that everything in the crypto space is an experiment, even BTC
• what it says that the VCs behind Terra knew were so reputable
• why Do Kwon’s arrogance and inexperience might have caused this chaos
• whether Terra can be rebuilt
• whether this collapse imposes risks on other blockchains and other assets
• why the Luna Foundation Guard’s purchase of Bitcoin might have made the UST collapse even worse
• what Erik thinks about the global financial system and the US dollar
• how this event could trigger more regulation in the crypto space and why it might hurt the entire ecosystem
• how regulators might use the Terra case to impose CBDCs.

Book Update

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