RelayNode NYC #35 - January 13

RelayNode
Written By David Gogel
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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: Spencer Bonds & the Financialization of Fandom

Want to invest in an athlete’s contract? Brooklyn Nets guard Spencer Dinwiddie is converting his 3-year $34M extension contract into a digital security allowing him to collect up to $13.5M upfront. He announced that tokenized shares of his contract would be open for investment to accredited investors starting on January 13 (today), in collaboration with Paxos and Securitize. The token sale will coincide with the launch of the DREAM Fan Shares platform.

Some background: In September 2019, Dinwiddie announced his plan to launch DREAM Fan Shares (DFS), am Ethereum-based platform that aims to empower athletes, artists, and influencers to take control of their financial destiny by structuring debt securities represented by Professional Athlete Investment Tokens (PAInTs). DFS leverages guaranteed contracts and the potential for performance-based bonuses and other contingent bonuses to structure debt securities represented by PAInTs, giving accredited investors the opportunity to invest in securities tied to the financial success of athletes, artists and influencers.

Why it matters: Securitization is a process through which illiquid assets or claims are transformed into liquid financial instruments. The move is a first for the NBA, and should the Spencer Bond model prove successful, others are likely to follow suit and monetize their fans. Any athlete could transform a portion of future earnings backed by contracts into an investable token to get money upfront while investors could get exposure to an athlete’s success. In the future, issuers may use Reg A+ or Reg CF to allow non-accredited investors to participate. 

The big picture: The idea of athletes or celebrities securitizing their talents has precedent. In 1997, David Bowie broke a new frontier in financing by selling $55M in bonds backed by future royalty payments and copyrights. The “Bowie bonds” offered a 7.9% interest rate with a 10-year average life and a 15-year maturity (vs. the 10 year risk free interest rate on the date of issue was 6.3%.) The bonds were backed by royalties on a 25 album catalogue consisting of 287 songs of Bowie recordings and song copyright. EMI Music provided the credit enhancement necessary for the securitization, resulting in an A3 investment grade by Moody's Investors Service. The bonds were purchased by Prudential Insurance in a traditional private placement.

Structuring: Dinwiddie will pilot the blockchain-powered DREAM Fan Shares platform by issuing the first PAInT. He will launch his token through SD8 LLC, a company Spencer formed for this purpose. SD8 LLC is issuing US dollar-denominated debt securities represented by 90 PAInTs called "SD8" token (at $150k per token) that would enable the NBA star to collect up to $13.5M of his guaranteed three-year. Underlying the token is a 3-year bond, expected to pay out 4.95% interest monthly. Under Reg D, investment will be open to qualified accredited investors, with a minimum purchase of $150,000. 

Paxos: To facilitate the token offering, Paxos Trust Company will provide custody and escrow services, ensuring that the correct payments are distributed to registered token holders. To disburse monthly repayments to investors — while also insulating them from the volatility typically associated with payments made via cryptocurrencies — payouts will be distributed on the Paxos platform via the dollar-denominated Paxos Standard (PAX) stablecoin tokens.

Securitize: Securitize will act as the transfer agent and technology partner. As a transfer agent, Securitize will maintain the records of ownership in order to keep the SEC happy. All transactions will be signed by the transfer agent and are transparently and immutably stored on the Ethereum blockchain.

Risks: As long as Dinwiddie’s contract is not voided as a result of misconduct, he will collect funds from the NBA and pay investors back. At scale, investors will need to understand contract guarantees and the risks associated which may impact future cash flow. As the market develops, securitizations with multiple tranches are likely to add more complexity.

Yes but: The NBA originally did not approve Dinwiddie’s proposal, claiming that the tokenization platform would constitute a breach of the NBA players’ Collective Bargaining Agreement, referring to 2.13d, which says: “no player shall assign or otherwise transfer to any third party his right to receive compensation.” The 3rd year of his contract is optional which means that investors would gain more in dividends in 2021 if Dinwiddie decided to pursue a higher-paying contract elsewhere. Dinwiddie has had several discussions with the NBA’s legal team and eventually decided to remove the initial promise of potentially higher dividends in the third year. According to The Athletic, the league is still reviewing Dinwiddie’s revised proposal, which means that the platform is not guaranteed to go live. We’ll find out today!

Go deeper:

Things to read

🌐 Why Bitcoin / Macro?

  • Bitcoin’s price spiked following the U.S.’s killing of a top Iranian general, rekindling a debate among investors on whether Bitcoin acts as a macro hedge during geopolitical and economic turmoil. Rptr45 explains this is one of the first times we've seen BTC trade with a correlation to macro headlines in ~2+ years. Correlation =/ causation.

  • Ria Bhutoria, Director of Research at Fidelity, published her 2019 Bitcoin retrospective exploring developments that capture investment and use of the network to explore Bitcoin’s position today and future potential.

  • Joel John, Investor at Outlier Ventures, published a data-driven post-mortem on Bitcoin’s growth over the last decade across address growth, on-chain activity, and the mining ecosystem.

  • Recent news of U.S. officials warning Iraq that it risks losing access to its account at the New York Fed where international oil sale revenue is kept,  highlights the weaponization of the USD. Elaine Ou, a Bloomberg Columnist, has a fascinating thought piece on how to resist censorship with Bitcoin. 

  • Skew has a great tweetstorm exploring whether the BTC halving is priced-in in the options market. The options market anticipate heightened relative volatility in the month of March 2020, as opposed to Q2 2020, suggesting the BTC options market believes the halving is already priced in or the BTC options market is itself very inefficient.

💰 Funding, M&A, & Exits

  • Securrency, a provider of compliance tech for digital assets, raised a $17.65M Series A led by WisdomTree, the $44.5B ETF and ETP asset manager, with participation from Dhabi Investment Office (ADIO), Monex Group, RRE Ventures, Strawberry Creek Ventures, and Pantera Capital. 

  • TaxBit, a startup automating cryptocurrency tax calculations and reporting for individuals and businesses, raised in $5M seed funding led by Winklevoss Capital, with participation from Dragonfly Capital Partners, Collaborative Fund, TTV Capital and Valar Ventures. Funds will be used to grow its software platform and customer base.

🔓 DeFi / OpFi

  • Binance Research, in collaboration with DApp.Review, released research on the borderless state of DeFi and predictions for 2020: developments on Ethereum-based DeFi (e.g., derivatives, undercollateralized initiatives, the inclusion of ERC-20 USDT), staking to become a fundamental building block of DeFi, and Alt-DeFi to gain momentum owing to reasons such as more prominent cross-chain interoperability solutions.

  • The Aave protocol, a decentralized, open-source, and non-custodial money market protocol offering no-collateral loans, announced it has integrated with Chainlink to power the Aave oracle network. The Aave oracle network is now live on the Ethereum mainnet and currently securing 16 cryptocurrency price feeds. This represents a major milestone, as Aave is the first lending protocol to leverage off-chain pricing data for calculating lending rates using a decentralized network of price oracles.

💸 STOs / Stablecoins / Tokens

  • Devin Finzer, Co-founder and CEO of OpenSea, published an in-depth overview of non-fungible tokens: the technical anatomy of an ERC721, the history of the NFT, common misconceptions about NFTs, and the current state of the NFT market.

  • Crypto lending services might have an impact on the security of protocols. Joel Monegro, GP at Placeholder VC, explores the idea that we can manipulate the cost of governance simply by changing how much time it takes to complete a vote. He explains how to calculate the cost of participating in a protocol’s governance decision, as well as the impact that price might have on the security of individual governance processes. 

🏦 Institutionalization

  • The CME’s Bitcoin futures OI started the first four trading days with 5.4K contracts on January 7, up 69% from year-end OI. The CME is set to roll out options tied to bitcoin futures on January 13. The contracts, which settle into futures, could attract new investors to the market. It could also serve as a hedging tool for miners ahead of the halving. 

🌉 Infrastructure

  • Jesse Walden, Investor at a16z crypto, released a playbook for building crypto apps and explains why progressive decentralization offers crypto apps the most auspicious path to P/M fit, financial sustainability, community, and compliance—and how to do it.

  • Binance announced a partnership with Australian fiat-onramp solutions provider Banxa. Binance continues to expand its fiat gateways enabling the U.K.’s Faster Payments Scheme (FPS) for British pound (GBP) transfers. It has also added support for the Australian dollar (AUD) for its direct fiat-to-crypto buying facility.

🍰 Layer 1 

  • A recent academic study says Tezos (and other upcoming POS blockchains) could be threatened by "selfish mining," where miners can be incentivized to create their own blocks and receive endorsements from other bakers not connected to the main chain, creating a secondary invalid chain (where they’d earn both the block and endorsement rewards until detected). Though the attack may be unlikely due to the high costs, an ongoing Tezos election is expected to pass a network upgrade altering endorsement incentives. 

  • The Ethereum network was apparently the target of a coordinated attack, where some Parity Ethereum nodes lost sync with the network. The attack did not manage to bring down the entire network because it has a client dubbed Geth, which is immune to the attack. 

  • The Plasma Group has announced that it would cease studying Ethereum scalability as the focus has shifted from research to implementation. They’ve pledged to donate their remaining funds to Gitcoin.

⚖️ Legal

  • Amidst a legal battle between the SEC and Telegram over its $1.7B ICO, Telegram released a public notice about the TON Blockchain and Grams clarifying that the TON Wallet, an application built on the network that can store TON's native Gram tokens, will be a stand-alone service independent from Telegram Messenger, which has 200M monthly user base. What will this mean for distribution and adoption? 

  • The SEC's Office of Compliance Inspections and Examinations (OCIE) published its list of 2020 examination priorities, highlighting digital assets and transfer agents that are "developing blockchain technology." While we await the resolution of court cases on whether a token/coin is or is not a security (Kin, Telegram, etc.), it appears to be “business as usual” for the foreseeable future under Jay Clayton’s leadership through 2021.

🎥 Podcast & Video of the Week

  • Haseeb Qureshi, Managing partner at Dragonfly Capital, released a course designed to be an introduction to the many disciplines behind cryptocurrencies. The course will be divided into nine chapters, each with multiple sections. The first two chapters are available now (History and Cryptography 101).

  • In the latest Blockcrunch, Jason Choi interviews Jake Brukhman, the founder of CoinFund, on his contrarian theses: why app chains make sense despite Ethereum's moat, why DeFi isn't a sign of mainstream adoption, why apps accrue value, not protocols, and why crypto art is hugely overlooked.

  • In the latest FinTech TV, Vince Molinari and Nisa Amoils give their yearly predictions on what’s ahead for 2020.

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.

Events this week

CryptoMonday NYC Fireside Chat with Cole Kennelly Organizer of DeFi NYC (Free)

When: Monday, January 13, 2020, 6:30 PM to 9:00 PM

Where: SOSV - dlab, 255 W 36th 3rd floor · New York, ny

This CryptoMondays NYC features a Fireside Chat with Cole Kennelly, DeFi expert and the Organizer of DeFi NYC, a NYC-based community focused on fostering decentralized finance (DeFi). DeFi NYC has hosted events featuring leading organizations in the DeFi space, including MakerDAO, Uniswap, UMA, Dharma, Messari, & more. Additionally, Cole works with Staked, a provider of best-in-class staking and lending infrastructure, on business development and growth.

Core Developers Meetup (Free)

When: Tuesday, January 14, 2020, 6:00 PM to 8:00 PM

Where: Distributed Global, 16 Vestry St · New York, NY

This is a series of regular monthly meetups for core devs - current and aspiring! The event will feature talks from R&D staff, core developers, protocol designers, and cryptographers working on various projects. After that, we'll open the floor for questions and discussions about topics of interest.

Understanding Decentralized ID (Free)

When: Tuesday, January 14, 2020, 6:00 PM to 9:00 PM

Where: IBM Garage, 368 9th Ave 16th Floor · New York, NY

Get an education on what Decentralized ID is and what some of the use cases are.

How the "Tech" In FinTech Is Built - with MarketAxess (Free)

When: Tuesday, January 14, 2020, 6:30 PM to 8:30 PM

Where: MarketAxess, 55 Hudson Yards · New York, NY

NYC FinTech Women is kicking off 2020 with MarketAxess for a discussion on the intersection of cloud engineering, big data and agile product management.

[Whitepaper Wednesday] MetaCartel DAO (Free) 

When: Wednesday, January 15, 2020, 12:00 PM to 1:00 PM

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

This week, we’re kicking off 2020 with a discussion about MetaCartel Ventures, a for-profit investment DAO coupled with a legal entity. Read the paper here: https://github.com/metacartel/MCV/blob/master/Whitepaper.pdf

We'll discuss their approach to the challenge of making a DAO for investing and their tradeoffs around legal liability, governance, and social scalability.

2020 Block Talk Summit ($59)

When: Sat, January 18, 2020, 9:30 AM – 5:30 PM EST

Where: Fordham University Lincoln Center, 140 W 62nd St, MCNALLY AMPHITHEATRE, New York, NY 10023

Hosted by New Power Chain, the 2020 Block Talk Summit brings together the elite of the blockchain industry from US and China including top chain projects, exchange platforms, advisory firms, and law firms to discuss and share their valuable insights on challenges and solutions with blockchain application in various industries. This event will include keynote speeches, panel discussion, and industry talk.

Upcoming events

#TNYSCM18 – Blockchains in Supply Chain (Free)

When: Thursday, January 23, 2020, 5:30 PM to 7:30 PM

Where: TBD

As the hype around cryptocurrencies and blockchains is cooling off, a few committed entrepreneurs, innovators, technologists, and academics continue to build products to solve problems that have plagued enterprise supply chains for years. This event will feature some of those people and the products they are bringing to market.

NYC/XRP IV - Seeing 20/20!

When: Tuesday, January 28, 2020, 6:00 PM to 9:00 PM

Where: Location, TBD

The last year has been a very exciting time for both the NYC/XRP meetup and the larger global #XRPCommunity. Ripple Labs engineers and directors will be invited to share their stories and journeys as part of a fireside chat. 

TRUST-LESS 2020: Proof of Stake (PoS) Validator Summit

When: Sat Feb 1st - Sun Feb 2nd 2020

Where: Virtual

This is one of those pivotal moments in blockchain history. With ETH 2.0 & multiple PoS layer-1 blockchain protocols slated to launch early 2020, it's an opportunity for developers & students to enter the blockchain space & learn how to build one of the few viable business models that can earn money: staking-as-a-service. Attendees Will Learn:

  • What The ETH 2.0 Roadmap Looks Like  + How Staking Will Work

  • How To Stake On Different Layer-1 Blockchain Networks

  • How To Participate (As A Validator) Via Incentivized Testnets

  • How To Build Your Own Staking-As-A-Service Startup

  • Staking-As-A-Service Models: Economics, Custody, & Security

  • Frameworks For Treasury Management

  • How To Think Through Crypto-Taxes 

  • and more!

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.

David Gogel https://www.definancier.com
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