+ in which blockchain do 16 addresses hold 55% of tokens?
This week was a pretty bullish one, including some of the BTC price action near the end of the week. Additionally, a16z Crypto announced its second fund, of $515 million, tBTC launched, and the DeFi space continued to be a source of both fascination and consternation. Plus, Telegram postponed the launch of the TON blockchain till next year and extended an offer to investors: the ability to loan Telegram money for higher returns next year.
On the podcasts, we do a deep dive with Matt Luongo into the newly launched tBTC, a trustless version of Bitcoin that can be used in DeFi, and talk to Mike McGlone, senior commodity strategist for Bloomberg Intelligence who believes Bitcoin is cementing its status as digital gold — but finds Ethereum to be “another one of the 5,000 cryptos out there.”
This Week’s Crypto News…
Telegram has postponed the launch of its TON blockchain to April of 2021 and offered to return $1.2 billion to investors after a judge ruled that Telegram could not launch its blockchain or issue Gram tokens until its case with the SEC was resolved. Last fall, the agency charged Telegram, which had a $1.7 billion ICO in early 2018, with holding an unregistered securities offering. CoinDesk reports that the company is now offering to return up to 72% of each investor’s stake, but has also given its investors the option of lending their investment to Telegram until a year from now. It quotes the letter as saying, “As a token of gratitude for your trust in TON, we are also offering you an alternative option to receive 110% of your original investment by April 30, 2021, which is 53% higher than the Termination Amount.” Read the full CoinDesk article for some juicy details indicating the decision to postpone the launch was made at the 11th hour.
After its first fund of $300 million, a16z crypto has announced a second fund — of $515 million. Partners Chris Dixon and Katie Haun wrote up a blog post about the areas within crypto that they’re excited about, including next generation payments, modern store of value, decentralized finance, new ways for creators to monetize and Web 3.
Adam Cochran, partner at MetaCartel Ventures, wrote up a 109-tweet tweetstorm on his analysis of the top 10,000 holders in Ethereum. Not counting smart contracts, such as the Wrapped Ether smart contract, he found that the top 10,000 addresses represented 56.7% of all ETH, which he says is basically the same as Bitcoin’s top 10,000 holders, who hold 57.44% of the supply. In comparison, 16 XRP addresses own 55% of XRP, 300 Litecoin addresses own 54% of LTC, and 1,031 addresses own 51% of TRX. He writes, “This means when it comes to equity of distribution, Ethereum and Bitcoin are in a league of their own. No other coin comes within an order of magnitude of their distribution.”
He also makes an estimate of what the yield would be under a proof-of-stake system in Ethereum, finding that early adopters might obtain something like 12-20% yield. I really urge you to read the whole thread, which is available also on Substack and Medium, although, oddly, I personally found the tweet storm to be the most readable.
The token sale for UMA protocol on Uniswap caused a bit of controversy. Delphi Digital did a great analysis titled, “UMA is listing on Uniswap in 4 hours. We can already tell you what will happen.” I am just going to urge you to read this because I can’t really do it justice here, however, long story short — because they were only listing 2%, and because of Uniswap’s constant product model, the writer, analyst Yan Liberman, was able to predict that the UMA token price could not go below its starting point. He wrote, QUOTE, “the 2 million starting in the pool establishes the floor price and the constant product aspect ensures that even if prices increase considerably, a massive sell-off would still end with prices never going below that starting point.”
On Crypto Twitter, the way this played out didn’t garner accolades, however. As Ric Burton, who is active in DeFi, said, “The fully diluted valuation ripped through $120,000,000+ for a promising team with a protocol that is still in development.” Or, as Adam Cochran of MetaCartel Ventures put it, “Manipulative as hell.” Su Zhu of Three Arrows Capital called it “arguably [scammier] than actual ICOs.” Playing defense was cofounder Hart Lambur, who tweeted, “My view: initial price discovery is really hard. This wasn’t a perfect attempt and, in hindsight, @ricburton is right—we should have upped the communication. But this was a genuine attempt at permissionless price discovery. Other options aren’t great.” Chris Burniske of Placeholder, which has invested in UMA, also tweeted, “@UMAprotocol has decided to publicly release $UMA starting at the same network valuation that seed investors paid,” and followed up with, “The other options would have been to cater to centralized exchanges or seek further illiquid and bespoke private market valuations. … UMA opted for a novel, low-cost & permissionless price-discovery process.” UMA cofounder Allison Lu solicited community feedback and said, “I felt that it made more logical sense to have this convo after the token had a price and feel awful that it came off as anything else.”
If, after the bZx and dForce attacks, you didn’t get the memo that the security in DeFi is questionable, a kerfuffle last weekend about on-chain options protocol Hegic is a good reminder. On Saturday, April 25, Hegic tweeted an alert saying, “A typo has been found in the code. Because of that, liquidity in expired options contracts can’t be unlocked for new options. Please EXERCISE ALL OF YOUR ACTIVE OPTIONS CONTRACTS NOW. Everyone will be 100% REFUNDED with the amount of premium that you paid for options.” This prompted a number of responses similar to this one by Hudson Jameson of the Ethereum Foundation, who replied, “It’s a bug, not a ‘typo’. You’re downplaying the severity of the bug.” In a series of tweets, Trail of Bits CEO Dan Guido tweeted, “In 3 days earlier this month, we identified 10 critical flaws in @HegicOptions that could harm users. We noted a lack of tests, a lack of documentation, and that the time afforded to review their code was insufficient. Bottom line: we told them to hold off deploying.”
As Maria Paula Fernandez summed up, “To those late to the party, a summary we can all get: ToB basically told Hegic to NOT GO OUT because they were too wasted AND wearing a tube top, and Hegic went out, had a wardrobe malfunction and ruined everything – and said ToB didn’t mention that tube tops and drinks dont [sic] mix.”
Richard Chen, partner at 1confirmation, wrote up a great post arguing that total value locked isn’t the best metric by which to judge DeFi popularity because that figure can be driven by fluctuations in the price of ETH, and also because DeFi is dominated by whales. So he looked at total number of users for DeFi across a number of projects, including Kyber, which had more than 62,000 unique trader addresses, Uniswap, which has almost 52,000 unity liquidity provider and trader addresses, Compound, which had nearly 28,000, unique lender and borrower addresses, and others. He finds that the total number of unique addresses across all projects is a bit over 150,000 users and says, “At the current growth rate (0.56% daily), we’d expect to see one million DeFi users by March 2021 and ten million by May 2022.”
Well, this is not exactly a fun bit, but it seemed worth mentioning and yet was random enough that it didn’t really go in the regular headlines. A number of Crypto Twitter people, such as Anthony Sassano, Neeraj Agrawal, Linda Xie, Nic Carter, Mike Dudas and Jeff Garzik believe that their notifications and impressions have been down on Twitter over the last few days. I don’t tweet all that much, but I think perhaps this maybe is happening to me too. Unclear why, but if you like following crypto people on Twitter, maybe set up a dedicated stream for them for now.