VeradiVerdict - Stablecoins - Issue #16
|Paul Veradittakit||Dec 18, 2018|
Hi, I am Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing into blockchain companies and cryptocurrencies. I focus on early investments and want to share my thoughts and what’s going on in the industry in this weekly newsletter.
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Stablecoins are currently a hot topic. As the price volatility of crypto continues to shake the market, investors and developers look to Stablecoins for protection against losses and stability for payments and collateral in decentralized applications. Stablecoins are basically cryptocurrencies pegged to the price of another currency or commodity. The idea is to allow crypto holders to exchange their volatile holdings for a stable store of value in the form of Stablecoins. In order to maintain peg the value, Stablecoins are backed with currency(fiat-collateralized), exchange-traded commodities(commodity-collateralized), other cryptocurrencies(crypto-collateralized), or seigniorage(algorithmic/non-collateralized). As there are pros and cons to the current approaches, it is unclear which strategy will be here to stay.
Pantera has invested into Stablecoins across each of the approaches. One of our investments, Basis, had news of their shutdown late last week. I’ve known of other projects shutting down but this is the most high-profile with their brand-name investor base. Two of the main reasons why projects are shutting down these days are surrounding regulations to operate and balance sheet capital, the latter possibly stemming from bad treasury management or even just use of funds for regulations and team-building. Basis cited regulatory reasons and at least are returning most of the funds to investors. I want to commend startups that return capital when they can’t execute on their original vision.
The former Goldman Sachs partner and hedge fund manager made and lost a fortune on Bitcoin. He’s undeterred by its drop.
Great analysis by Chris looking at the divergence between fundamentals and market prices for both ETH and BTC. He does so by comparing what price drop would be rationally ‘justified’ given the correction in fundamental activity (using an interpretation of Metcalfe’s law) and the actual price drop.
Jesse’s contention is that the next logical step for blockchains bottom-up adoption after Bitcoin ’calculator era’ (low composability) and Ethereum 1.0 ’mainframe era’ (turing complete, high composability but low scalability), is a full stack architecture to blockchains themselves composable (’server era’ eg Cosmos, Substrate).
In the Tweets
Fidelity and Nasdaq are continuing to strengthen the infrastructure around Bitcoin and crypto as a whole. The two firms invested $27.5m last week in a crypto futures exchange.
Meanwhile, Europe's largest asset manager wants the "authorities" to completely ban crypto. https://t.co/1sgwZF876H
7:30 PM - 11 Dec 2018
Continuous learning is a core value at Coinbase; we regularly invite in big thinkers to share ideas. Today, @mwseibel of @ycombinator spoke to the importance of tuning out hype during cycles in tech: “There’s no use pontificating; let’s just build products people want to use.” https://t.co/OwY3GgG4A1
6:16 PM - 13 Dec 2018
@cyber_hokie Ethereum 3.0 is a set of ideas for beyond the foreseeable Ethereum 2.0 roadmap (phases 0, 1 and 2). I'd say it includes Casper CBC, super-quadratic sharding, data availability proofs, private leader election, STARKs (signature aggregation, witness compression, VDFs, state roots).
12:47 PM - 11 Dec 2018
1. Time for a brief tweetstorm on non-financial applications of blockchains. As blockchain scalability gets better and better, and UX improves and fees drop as a result, this will become a bigger and bigger part of the story.
7:59 AM - 10 Dec 2018
^^Vitalik recently posted 15 tweets about non-financial applications of blockchain tech.
Check out the full tweet storm here: https://twitter.com/VitalikButerin/status/1072158957999771648
BitMex research team looks into mining profitability in light of the recent price crash. We’ve all seen recent rumors circulating on Twitter of Chinese mining farms capitulating, so this post is helpful in that it surfaces some interesting data points beyond the decline in hash-rate and difficulty adjustments.
0x gets its own ecosystem programme, allocating $1M a year in grants ranging from $10-100K to teams building new relayers in new verticals, open-source infrastructure and tools or doing R&D.
Vertcoin (VTC) experienced 22 deep chain reorganizations, 15 of which included double spends of VTC. We estimate that these attacks could have resulted in theft of over $100,000. The largest reorg was over 300 blocks deep.
Following the leave of John F. Kelly, US President Donald Trump has chosen the pro-bitcoin Mick Mulvaney to serve as the acting White House Chief of Staff.
The U.S. Commodity Futures Trading Commission (CFTC) wants to learn more about Ethereum, its technology, and the markets that have built up around it. In a “Request for Input” (RFI) published Tuesday, the regulator explains that it is looking for public feedback on different questions about ethereum, ranging from its technology to how it’s used.
The Hong Kong Stock Exchange is reportedly “reluctant” to give their approval for Bitmain’s IPO application.
Big news this week was that Basis, the company developing the algorithmic stablecoin protocol, is shutting down blaming the SEC. They announced they will return funds to their investors.
New Products and Hot Deals
Nym Technologies wants to do it all. It’s a bit of a cypherpunk dream but they want to develop their own privacy coin as well as enabling anonymized smart contract execution, decentralized exchanges and so on.
Bloqboard, the Dharma protocol debt relayer, has launched a new feature that allows token holders to create ‘offers to lend’ directly from their Metamask wallet (until today a lender had to accept an existing offer from a borrower).
Gemini stepping up its consumer game with a new mobile app which offers all the usual trading features + the option of buying baskets (or sets) of tokens.
Settle have introduced in-chat Ethereum OTC trading with rich-messages, powered by the 0x protocol.
Another big development this week was the decision by the DDEX team to fork away the 0x protocol and carry on with their own implementation of the protocol, named Hydro.
The Opera browser for Android now features crypto wallet integration and Web 3 support. What this means is that with the newest version of Opera, you will now also gain easy access to Web 3, the exciting internet of tomorrow.
“After hearing about the trademarks for Samsung’s blockchain and cryptocurrency software, we decided to dig around a little deeper. We can confirm that the company is indeed developing one and that it may be launched with the Galaxy S10.”
Good Money is Gunnar Lovelace’s new project (he formerly founded Thrive Market and raised a ton of VC capital for that), a mobile-first neo-banking platform that promises its users a piece of the equity and 2% on deposits.
The Blockstack ICO was structured with specific milestones that would unlock funding tranches. The first one was successfully achieved, as deliberated by an advisory board, and $25M is now made accessible.
The corporate venture arm of Kakao has invested $15M in Orbs, a layer 2 scalability solution for Dapps. Interestingly the whole round was committed in crypto, mainly ETH.
Risk Labs raised a $4M seed round led by Placeholder with participation from Bain Capital Ventures, Blockchain Capital, Box Group, Coinbase Ventures, Dragonfly Capital, FinTech Collective, and Two Sigma Ventures.
Busy week for Galaxy, who participated in this $4M convertible round in BlockFi, a startup that provides dollar-denominated loans against bitcoin, ether and litecoin (a bear market proof use case). The round comes only 6 months after a $50M+ financing that Galaxy led, which presumably was meant to fund the loan book rather than operations. This round was led by Akuna Capital, with participation Morgan Creek Digital, Susquehanna Government Products and Fidelity-linked Devonshire Investors
OpenSea has acquired Atomic Bazaar — an Ethereum digital asset marketplace focused on trading mixed sets of NFT’s.
Kraken is seeking funding from its wealthy customers at a $4B valuation to build “a war chest for acquisitions in the bear market”.
Meet with Me
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