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RelayNode NYC #28 - November 18

David Gogel

Welcome to RelayNode NYC Area edition! The NYC blockchain ecosystem is growing rapidly. Our goal is to harness its energy and innovation for the benefit of New Yorkers and provide a weekly curated list of interesting content, upcoming events, and local jobs.

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RelayNode NYC is curated by:

David Gogel Advisor & Finance Lead @ Paperchain fmr Associate @ Techstars' Blockchain Accelerator, Co-president @ Wharton FinTech, Corp dev @LinkedIn @AIG

Hsin-Ju Chuang Founder @Dystopia Labs. Former-Head of Growth @Stellar/Lightyear, Solana. Ex-Director at Tezos (TQ)

1 Big Thing: Compound Interest…

Continuing down the crypto credit rabbit hole, let’s take a deeper dive into Compound, an open-source, autonomous, extensible decentralized finance protocol on Ethereum that establishes money markets with algorithmically set interest rates. Compound recently announced it raised a $25M Series A led by a16z crypto, with participation from Bain Capital Ventures, Polychain Capital, Paradigm, among others. Its protocol now has $105M in total loan supply.

Why it matters: Negative-yielding debt topped $17T this year, more than 25% of all global sovereign debt and ~20% of global GDP. The spectrum of negative-yielding debt has expanded not only from shorter duration to longer duration government bonds but also down the risk spectrum from core Euro area government bonds to bonds issued by Peripheral countries. The world faces a short supply of positive-yielding savings and investment opportunities.

How it works: Compound’s money markets use a variable interest rate model where rates fluctuate relative to the supply and demand within each money market. If there are more lenders than there are borrowers, interest rates decrease. If there are more borrowers than there are lenders, interest rates increase. Unlike other peer to peer model (e.g., Dharma), Compound does not require users to negotiate maturity dates, interest rates, or collateralization requirements with counterparties — they are free to borrow and lend as long as they accept the protocol’s offered terms. Compound’s greatest advantage is that they can offer borrowers and lenders instant liquidity — they don’t have to wait for a loan to mature before getting access to their capital. This makes it particularly good for short-term borrowing and lending use cases. Pooled money markets are a different but complementary to Dai creation via MakerDAO. Max Bronstein, formerly at Dharma and currently Institutional Sales & Coverage at Coinbase, has a great post on DeFi interest lending rates.

The big picture: Money markets are integral to the financial system and are among the largest financial markets in the world. These markets anchor the term structure of interest rates, which serve as channels for the execution and transmission of monetary policy and as trading venues for short-term instruments. Money markets are also central to the allocation of capital, the efficient distribution of liquidity, and the hedging of short-term risks. The markets also play a role in the credit evaluation process and in the the large-value payments systems.

The opportunity: Compound is hoping to scale through partnerships with companies such as exchanges, brokers and custodians to expand their business lines into lending. Instead of developing a lending unit from scratch, these firms can use and improve on Compound's protocol to suit their own needs.

The risks: According to Kyle Samani, GP at Multicoin Capital, “rather than hosting internal money markets, it’s in the best interest of the exchanges to leverage open finance protocols so they can aggregate external liquidity to offer better rates for their clients. However, it’s less clear if exchanges will provide liquidity to existing protocols like Compound, or whether they’ll fork Compound and bootstrap competitive networks with their own liquidity pools. Given how much larger the exchanges are than standalone liquidity pools like Compound, I suspect the exchanges will fork Compound and create their own pools so they can exercise more control, and create more value for holders of their respective tokens (e.g. by funneling profits from the money market to holders of their respective exchange tokens instead of a third party like Compound equity holders).”

The bottom line: While Compound does not have a viable business model (yet), it has a deeper war chest to negotiate partnerships with exchanges, brokers, and custodians, capturing value through their use of Compound’s protocol. In the near term, I expect to see further integration between Coinbase and Compound.

Things to Read

🌐 Macro / why Bitcoin?

  • Meltem Demirors, CSO at CoinShares, presented at Consensus Invest and released an epic 2019 Crypto Trends Report. She explores forces that have shaped our world and provides an assessment of the current and future state of crypto. Note slide 40 which makes the case that the pursuit of “decentralization” has been performance theatre. Also note slides 114-118, anticipating “a more robust M&A market could materialize but significant industry consolidation will likely come first to clean up market fragmentation.”

  • Phil Bonello, Former Head of Research at Ikigai, released a fascinating investment thesis and framework on “the sovereign individual.” He explores 3 big changes (globalization as an equalizing force, digital money as a foundation for global financial services, and encryption enabling dissident tech) and the source of user demand through the lens of human motivations.

  • The rise of dissident tech: An anonymous organization, the Unknown Fund, announced plans to “invest in and donate” $75M worth of Bitcoin to startups that “directly or indirectly support the idea of anonymity. Preference will be given to the following niches: protection of personal data, tools for anonymity, cryptocurrency and blockchain.”

  • The Deribit team explores the counter-intuitive result that while market efficiency has substantially increased, trading volumes denominated in BTC have actually declined and volatility has remained consistently high. The crypto market is fragmented and volatile but shares similarities to the market structure of fiat trading.

💰 Funding & Exits

  • Compound, a decentralized finance lending protocol, raised a $25M Series A led by a16z crypto, with participation from Bain Capital Ventures, Polychain Capital, Paradigm, among others. Its protocol now has over $105M in total loan supply. Funds will be used to make the service more available to ordinary people by integrating with popular exchanges, custodians and wallets.

  • Messari, a crypto research company promoting transparency and smarter decision-making, raised a $4M Series A led by Uncork Capital, with participation from Coinbase Ventures, Blockchain Capital, among others. Funds will be used to expand headcount and invest in the tooling necessary to further automate data ingestion processes and broaden the feature set of the Messari Pro beta research product.

  • Bitski, a developer platform for developers to easily put crypto wallets in applications, raised a $1.8M Seed round (total $3.5M in funding) from investors including Galaxy Digital, Winklevoss Capital, Kindred Ventures, Coinbase, among others.

  • Sky Mavis, the parent company of Axie Infinity, a digital pet universe and one of the highest grossing blockchain games, raised $1.5M in funding led by Animoca Brands, Hashed, Consensys and 500 startups. Funds will be used to accelerate the development of the Axie Infinity universe.

  • Canaan Inc., a Hangzhou-based crypto-mining firm, filed to list on the Nasdaq and plans to raise $100M in an offering of 10M ADSs priced between $9-$11. At the midpoint of the proposed range, Canaan would command a fully diluted market value of $1.6B and an enterprise value of $1.4B. It originally filed for a $400M offering in October, and had planned to raise as much as $1.5B in 2018. According to its F-1, Canaan posted net revenue of $394.1M in 2018 and net income of $8.3M.

🔓 DeFi / OpFi

  • MKR holders made history, ratifying the collection of system parameters needed to activate Multi-Collateral Dai (MCD), and paving the way for its release on Monday, November 18 (today!!). Multi-Collateral Dai has 66,472.51 of the 52,000 MKR needed to approve implementation. The top supporter is one whale who contributed 22.49%. The MCD is one of the most important transitions in the DeFi space thus far and a successful transition will be a strong testament to the resilience and flexibility of the system. Keep on eye on the new Dai Stability Rate (DSR).

  • Shakeup in the DeFi Pulse rankings as Synthetix, a decentralized platform on Ethereum for the creation of on-chain synthetic assets that track the value of real-world assets, overtakes Compound for #2 with $106.4M locked. Recent factors that may have contributed to this shift include a cut in the Maker stability fee, Compound users refinancing to Maker, and the surge in the price of the Synthetix Network Token. Synthetix and Compound have different use cases but are competing for a currently limited pool of DeFi assets. Race is on to see which protocol will lock in the most assets.

  • Camila Rouso, Founder at the Defiant, features Vance from Framework Ventures who has a great post on balance sheet as a lending model for DeFi. “The difference between the platforms’ token economics will lead MakerDAO to become a digital central bank and Synthetix to become a decentralized BitMex.”

  • At ETHWaterloo, the UMA team released a proposal for a poop.exchange: to create an ERC-20 token that tracks the frequency of poop sightings as reported by San Francisco's SF311. The holders of the token "profit" the more poop reported; the "issuer" wins if poop goes down. Such a system could be used to align the incentives of local government: the city of SF could issue "shit coins" to credibly commit to fixing the homelessness problem (and earn a profit if they succeed); residents of the city of SF could buy shitcoins as an "emotional hedge"—they make money if the problem gets worse. All poop jokes aside, the proposal highlights how financial engineers are thinking about using synthetic tokens and economic incentives to change behavior.

  • Zubin Koticha announced a new DeFi primitive called option tokens (oTokens), and the Convexity Protocol, a protocol for fungible ERC20 options in DeFi. These oTokens serve as effective insurance and hedging instruments, and oracles of risk & volatility.

💸 STOs / Stablecoins / Tokens

  • BnkToTheFuture, the Cayman-based equity investment platform, acquired an undisclosed stake in BMI Capital, a U.S. broker dealer, allowing the lending platform to offer security tokens in the US. The move aims to allow the firm to offer STOs in the United States (having already launched two security tokens - Bitfinex and Lottery.com).

  • Smith & Crown released an excellent report on the Paxos Gold stablecoin, examining how the realities of holding gold in vaulted storage (rather than making interest off fiat collateral) upend the economics of existing stablecoins. PAXG’s fee structure undermines its economic attractiveness relative to traditional vehicles for gold exposure and could pose challenges for PAXG operating needs.

🌉 Infrastructure

  • Pay or Libra: Facebook introduced Facebook Pay, a new payments system that works across Facebook, Messenger, Instagram and WhatsApp, supporting shopping, peer-to-peer payments, and more. In a bid to avoid regulatory scrutiny, the company stated that Facebook Pay is “built on existing financial infrastructure and partnerships.” Facebook also indicated that Facebook Pay will be separate from Calibra and the Libra network. Note that Facebook will use transaction data to fuel its ads engine.

  • More Big Tech moving into finance: Google announced plans to launch consumer checking accounts in partnership with Citigroup and a Stanford University credit union. The service will work Google Pay but accounts will bear financial institution branding, and the banks will handle compliance, infrastructure. Earlier this year, Apple and Goldman Sachs partnered to launch a credit card, offering cash back on purchases of Apple devices and an app to track spending. Uber in partnership with Green Dot, a small bank, started offering bank accounts to drivers. By working with financial institutions, tech companies aim to avoid regulatory scrutiny and increased capital requirements. User privacy concerns could still invite scrutiny. By the way, where is Amazon?

  • Brave, a next-generation browser with 9M active users offering 3-6x faster browsing and ends surveillance capitalism with a private ads and payment platform that benefits users, advertisers, and publishers, came out of beta and launched Brave 1.0. Major disruption ahead in the $330B ad-tech industry.

  • Tim Copeland from Decrypt has a long deep dive on Binance, explaining how the exchange escaped China, rode the Bitcoin bull, made half a billion dollars in one year and plans to revolutionize money. Must read.

🏦 Institutionalization

  • U.S. regulated crypto derivatives exchanges are expanding their offerings. The CME Group announced its plans to launch options on its bitcoin futures contracts on Jan. 13, 2020. Bakkt announced it has made the Bakkt Warehouse custodial service available to all institutions. Bakkt is also hoping to launch cash-settled Bitcoin futures in Singapore before the end of the year.

  • Amun AG, a Swiss fintech startup, launched an exchange-traded product (ETP) tied to Tezos under the XTYZ ticker on the SIX stock exchange. The ETP automatically reinvests staking rewards into the holder’s ETP shares. Amun AG now has a total of nine cryptocurrency ETP products listed on the SIX exchange

🍰 Layer 1

⚖️ Legal

  • The Fed’s Nov 2019 Financial Stability Report highlights stablecoins as a new medium of exchange, but if poorly designed and unregulated, could negatively affect financial stability. Indeed, “the possibility for a stablecoin payment network to quickly achieve global scale introduces important challenges and risks related to financial stability, monetary policy, safeguards against money laundering and terrorist financing, and consumer and investor protection.”

  • Interest in LAOs (For-Profit, Limited Liability Autonomous Organizations) has been growing. The LAO team has a great deep dive on why LAOs are useful and provide an overview of the types of LAOs that likely will be created over the upcoming months and years as the invasion spreads.

  • Wyoming introduced regulations that could open a path for crypto startups who do not want to go through the process of obtaining a BitLicense. Caitlin Long, a member of the Wyoming Blockchain Task Force, explains that Wyoming’s SPDI, which is a state-chartered bank, is a passport into 42 US states without the need for additional state license. In the other states, such as NY, startups may need to open a branch. Your move NYS DFS.

🎥 Podcast & Video of the Week

  • DeFi and staking are classified as two different animals. Yet, both facilitate a protocol-level interaction with a smart contract that pays a yield over time. Tim Ogilvie and the team at Staked are playing in both arenas, helping customers put their idle crypto to use. On this episode of Wyre Talks, Tim shares his team’s mission around creating an easy-to-generate yield button and offering an overview of Staked.

  • In the latest Digital Asset Report from the NYSE, Nisa Amoils interviews Rayhaneh Sharif-Askary, Director, Sales and Development at Grayscale Investments at Consensus: Invest NYC.

Highlighted Industry Jobs (non-exhaustive list for NYC / remote):

If you would like to highlight jobs or internships in future editions, please email links here.

Also check out Indeed’s latest report on crypto / blockchain jobs and trends for 2019. The number of employment ads in shares per million rose by 26% last year, while job searches within blockchain and crypto dropped 53% over the same period.

Events this week:

⚡Continued: Klatch: Let's Build a Peer to Peer Meetup App w/ Libp2p ⚡(Free)

When: Monday, November 18, 2019, 6:30 PM to 9:00 PM

Where: WeWork Dumbo Heights, 81 Prospect St · Brooklyn

🎤 6:30pm - 7:00pm: Beginner Q&A + Bring up a cool piece of tech

🎤 7:00pm - 9:00pm: Klatch: a peer to peer meetup app

Klatch continued: We will mock up the user stories for a meetup clone, Klatch. The twist will be to build a peer to peer meetup clone where the users are the servers and the users with Libp2p. Think Bittorrent meets Meetup.

[Whitepaper Wednesday] Algorand (Free)

When: Wednesday, November 20, 2019, 12:00 PM to 1:00 PM

Where: Rent24, 25W 39th Street 14 Fl · New York

This week, we're reading about Algorand, a cryptocurrency network focused on scalability. Read the paper here: https://people.csail.mit.edu/nickolai/papers/gilad-algorand-eprint.pdf. We'll discuss their approach, its tradeoffs, and how their network achieves consensus.

Deep-Dive Into Off-Chain Protocols: IC3 Meetup Hosted by Chainlink (Free)

When: Thu, November 21, 2019, 6:30 PM – 9:30 PM EST

Where: rent24 Coworking NYC, 25 West 39th Street, New York, NY 10018

A technical deep-dive into off-chain protocols with keynote presentation by Sergey Nazarov, the CEO of Chainlink, the leading blockchain middleware company, used by enterprises (SWIFT, Google, Oracle) and smart contract teams (Web3 Foundation, OpenZeppelin, OpenLaw, Hedera Hashgraph, Zilliqa, and many others). Working with leading banks, insurance companies, and large technology firms on the creation of “externally connected smart contracts”, gives him a unique perspective on what is required to bring smart contracts forward for enterprise adoption.

Stellar Blockchain Meetup ft. FIC Network and Sam Conner's Meridian Recap (Free)

When: Thursday, November 21, 2019, 6:00 PM to 8:00 PM

Where: 10 Crosby St · New York, NY

Presentation 1: Fixed Income Tokenization and Trading on the Stellar Blockchain w/ FIC Network. Featuring a discussion on technology, product, and infrastructure challenges and opportunities as well as a platform demo highlighting FIC's seamless user experience to tokenize, issue, and trade corporate bonds. Presenter: Arturs Invanovs, founder and CEO

Arturs is the founder and CEO of FIC Network, a blockchain-based platform for the issuance

Presentation 2: Stellar Meridian Recap; Presenter: Sam Conner

Sam Conner, @SamConnerone as he's known on twitter, is a 15 year entrepreneur currently heading three companies. Sam's experience in business, politics, and finance allows him to understand first-hand the barriers the current economic systems bring and believes that the principles of Stellar-openness, diversity, equitability, and transparency are the keys to unlocking economic equality.

Columbia Business School: Evolution of The Global Blockchain Crypto-Economy ($25-$50)

When: Fri, November 22, 2019, 12:45 PM – 6:15 PM EST

Where: Uris Hall. Room 301, 3022 Broadway, New York, NY 10027

This conference will address the business, technical, social and legal/regulatory aspects of the emerging 'crypto-economy.' We have assembled high-level speakers to address the business, technical, investment, societal impact, and regulatory aspects of this rapidly expanding ecosystem.

Upcoming events

Monero NYC -Crypto Thanksgiving Pot Luck- v0.15 Update (Free)

When: Wed, November 27th, 2019 - 6:00pm - 8:00pm

Where: xCubicle, 48 Wall St. 5th Floor · New York, NY

This might be the last Monero meetup for 2019 as I'm not sure if we will have one in December. As usual, we'll be discussing the recent updates and news occurring in the Monero community!

Topics:

- Monero v0.15 Upgrade Overview

- Random X Mining

- Other related crypto news events.

BitDevs: Socratic Seminar 99 (Free)

When: Tuesday, December 3, 2019, 7:00 PM to 9:00 PM
Where: NYU Stern, 44 West 4th Street · New York, NY

A final list of discussion topics will be posted the day before the event. Please see our link aggregator below for a list of potential discussion topics. Feel free to make topic suggestions in the comment section below. https://www.zotero.org/groups/691739/devsny/items/collectionKey/Y3TUNS7T

WWCode CONNECT NYC 2019 ($74.5 - $99.5)

When: Thu, December 5, 2019, 8:00 AM – 5:00 PM EST

Where: Microsoft REACTOR, 11 Times Square, New York, NY 10036

Women Who Code’s signature developer conference is coming to New York City! CONNECT NYC brings together influential technology leaders to share their expertise centered around the latest trends, technical tools, platforms, languages, and industry applications. 300+ innovators and developers will explore a cross-section of technologies, including tracks for deeper dives into Blockchain, AI/ML, and Mobile. Join us for innovative talks, in-depth panels, and technical workshops designed to help you advance your skills, connect with your community and inspire women to excel in technology.

Google Cloud for Startups: Blockchain Forum (Free)
When: Friday, December 6th from 1:00 to 5:30pm

Where: Google NYC - 111 8th Ave, New York, NY 10011

Google Cloud for Startups is hosting their second annual Blockchain Forum on Friday, December 6th from 1:00 to 5:30pm at Google NYC. Please RSVP in the link above if you’d like to attend. This half-day event will give attendees the opportunity to hear from leaders within the industry and to learn how blockchain companies are building on Google Cloud Platform. We'll finish off the day (and week!) with a closing reception.

Notable Conferences

Nothing written in RelayNode NYC is legal or investment advice and should not be taken as such. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.