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RelayNode NYC #49 - April 20 - Why won't you build me up (build me up)

David Gogel

Welcome to RelayNode NYC Area edition! The NYC blockchain ecosystem is growing. 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 (virtual) events, and local jobs.

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RelayNode NYC is curated by:  

David Gogel

Founder @GogelX/Definancier, Advisor @Paperchain.io, fmr Associate @Techstars' Blockchain Accelerator, Co-president @Wharton FinTech, Corp Dev @LinkedIn @AIG

Market Stats (as of Sunday, April 19, 11:59 PM EST)

1 Big Thing: IT’S TIME TO BUILD

According to Marc Andreessen in his “IT’S TIME TO BUILD” thought piece,

“Every Western institution was unprepared for the coronavirus pandemic, despite many prior warnings. This monumental failure of institutional effectiveness will reverberate for the rest of the decade, but it’s not too early to ask why, and what we need to do about it. Many of us would like to pin the cause on one political party or another, on one government or another. But the harsh reality is that it all failed — no Western country, or state, or city was prepared — and despite hard work and often extraordinary sacrifice by many people within these institutions. So the problem runs deeper than your favorite political opponent or your home nation.

Part of the problem is clearly foresight, a failure of imagination. But the other part of the problem is what we didn’t *do* in advance, and what we’re failing to do now. And that is a failure of action, and specifically our widespread inability to *build*.

…I think building is how we reboot the American dream. The things we build in huge quantities, like computers and TVs, drop rapidly in price. The things we don't, like housing, schools, and hospitals, skyrocket in price. What's the American dream? The opportunity to have a home of your own, and a family you can provide for. We need to break the rapidly escalating price curves for housing, education, and healthcare, to make sure that every American can realize the dream, and the only way to do that is to build.”

Faster and cheaper capital are key inputs for building. Why not start by improving America’s financial system with a more transparent and real-time payments systems? While the mass distribution of payments has become a standard feature of the government’s response to downturns, poor governance and an obsolescent financial system slowed down the distribution of stimulus to individuals and businesses. Not to mention the bloated costs along the way.

I am encouraged by the breadth and depth of developer activity in decentralized finance, which despite its continued security and scalability challenges, demonstrates a huge potential to accelerate global payments at a fraction of the cost. If you want to learn more (for free) about the future of finance, sign up for Dystopia Labs’ upcoming DeFi Virtual summit.

What To Read

🌐 Macro / Why Bitcoin?

  • The Great Lockdown: according to the IMF, “the Great Lockdown is the worst economic downturn since the Great Depression, and far worse than the Global Financial Crisis [of 2008]. The COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protection measures are severely impacting economic activity. As a result of the pandemic, the global economy is projected to contract sharply by –3% in 2020.”

  • BTC: an Uncorrelated Financial Asset or A Safe Haven Asset? Nate Maddrey from Coin Metrics investigates BTC’s changing correlations. “Historically, Bitcoin has not been very highly correlated with stocks or gold. Although correlations recently reached all-time highs, it is unlikely that Bitcoin and S&P 500 correlations will remain elevated in the long-term without major changes in the fundamentals of one or both markets. But there is some evidence that the correlation between Bitcoin and gold may be starting to increase.”

  • Record Institutional Inflows: in its strongest quarter ever, Grayscale, a cryptocurrency asset manager with more than $2.2B in AUM, released its Q1 2020 Digital Asset Investment Report announcing record inflows of $503.7M into its investment products. Grayscale Bitcoin Trust continued to lead investment demand with inflows of $388.9M, the largest capital raise in a single quarter. Demand for Grayscale Ethereum Trust grew nearly 2.5x from 4Q19 to 1Q20. Institutional investors accounted for 88% of investments.

💰 Funding, M&A, & Exits

  • dForce, a financial platform building a unified network for open finance protocols including Lendf.Me, a money market protocol supporting stablecoins, ETH, and wrapped versions of Bitcoin, raised a $1.5M Seed round led by Multicoin Capital with participation from Huobi Capital and Chinese Merchant Bank. dForce’s plan is to hyper-localize in China to serve as the one-stop-shop for DeFi users. Prior to a $25M hack over the weekend, dForce was the seventh-largest DeFi protocol in terms of total value locked.

  • Crypto Finance AG, a Swiss holding company operating three subsidiaries including Crypto Fund AG, Crypto Broker AG and Crypto Storage AG, raised a $14.5M Series B round co-led by Swiss investor Rainer-Marc Frey, Beijing-based private equity firm Lingfeng Capital and joined by Hong Kong’s QBN Capital. Funds will be used to obtain a broker-dealer license from FINMA.

  • Atomic Loans, a protocol enabling a two-sided marketplace for Bitcoin-backed lending, raised a $2.45M Seed round led by Initialized Capital, with participation from ConsenSys, Morgan Creek Digital, and Bison Trails’ Joe Lallouz and Aaron Henshaw. Funds will be used to allow for more flexible lending options for borrowers and grow the team.

  • Portis, an Israeli startup providing a Web3 wallet SDK for developers of crypto apps to easily integrate wallet functionality into their product, was acquired by ShapeShift, a self-custody and zero-commission trading platform. Financial terms were not disclosed.

  • Lumina, an institutional investor platform for managing crypto portfolios and tracking tax obligations, was acquired by BitGo, a crypto custodian. BitGo unveiled the first product integrations: BitGo Portfolio and BitGo Tax. Financial terms were not disclosed (Lumina raised $4M in a Seed round in 2018.)

  • Fig, a video game publisher and securities crowdfunding platform for games, was acquired by Republic, an equity crowdfunding platform for startups. "Joining Republic means more investors, more ambitious games, greater exposure, and the opportunity for higher returns." Financial terms were not disclosed.

🔓 DeFi / OpFi

  • $25M DeFi Hack Highlights Need for Better Security Standards: Over the weekend, Lendf.Me, the lending protocol in the dForce network backed by Multicoin Capital, was attacked and ~$25M in assets were drained from the smart contract. Mindao Yang, Founder of dForce, released a summary of the attack. Hackers used a vulnerability within the ERC777 standard of imBTC to execute a reentrancy attack. The callback mechanism of ERC777 (imBTC) enabled the hacker to supply and withdraw imBTC repeatedly before the balance was updated. More analysis on the hack can be viewed in PeckShield’s report.

  • Decentralizing Governance: Compound, the DeFi protocol for lending and borrowing ERC-20 tokens with $94M in Total Value Locked, announced it has transferred protocol administration (from supported assets, to system parameters) to a community governance model run by COMP token holders. One more example of protocols gradually decentralizing their governance models.

  • 0x and Gnosis announced new DEXs:

    • 0x announced the beta launch of Matcha, the first in-house exchange built on top of the protocol. Matcha leverages 0x API for liquidity aggregation in order to provide a single point of access. Matcha is expected to go live in Q2 2020. For early access, join the waitlist at matcha.xyz.

    • Gnosis announced the launch of Gnosis Protocol, a fully permissionless DEX that enables a new mechanism called ring trades to maximize liquidity while minimizing slippage. Gnosis Protocol has already processed $2+M in trading volume during its private beta.

  • Ethereum’s DeFi Competitive Moat: Kyle Samani, GP at Multicoin Capital, explores Ethereum’s extensibility, as it pertains to DeFi protocols. He argues it is materially stronger than that of any individual DeFi protocol. The primary source of Ethereum’s defensibility is not capital, or liquidity, but the composability and interoperability of these protocols as a whole.

💸 STOs / Stablecoins / Tokens / DAOs

  • Tokenization vs. Offering Process: Vertalo, tZERO, Prime Trust, and Advantage Blockchain announced a partnership to tokenize $300M in real estate. The portfolio belongs to Pennsylvania-based Real Estate Capital Management. To start, Vertalo and Advantage will tokenize $90M real estate on Tezos, with custody provided by Prime Trust, and with assets trading on tZERO's ATS.

  • Market-Protocol Fit: Laura Lotti, Sam Hart, Toby Shorin from the Other Internet explore market-protocol fit. “While product-market fit is concerned with building an agile team to find and fill market demand, market-protocol fit begins with a broad distribution of tokens, followed by permissionless narrative formation and product innovation which activates them in useful ways.”

  • China’s Central Bank Digital Currency Testing: Matthew Graham, CEO of Sino Global Capital, released screenshots from a test of a DC/EP wallet application from the Agricultural Bank of China (ABC), one of China’s state-owned banking giants. ABC released an interface for whitelisted users to test the CBDC.

🌉 Infrastructure

  • Increasing Spot Liquidity: TradeStation Crypto, a crypto brokerage services for self-directed online pro traders, announced its integration with ErisX to let customers access the exchange's spot market liquidity.

  • Exchange Supporting Governance: Coinbase Custody announced new tools to make it easier for its clients to vote their tokens on more DeFi protocols, starting with Compound.

🍰Layer 1

  • Smart Contract Platform Competition & Cooperation: Binance released a white paper detailing the Binance Smart Chain (BSC) that would work as a smart contract layer running parallel to its existing Binance Chain, and incorporate a matching engine capable of fast trade executions and a new consensus mechanism designed to combine fast confirmation times with strong on-chain governance. The Ethereum Virtual Machine-compatible programmability and native cross-chain communication enhances functionality for developers. 

  • Preparing for Eth 2.0 Mainnet: Preston Van Loon, Co-Founder at Prysmatic Labs, announced the launch of the Topaz Testnet, in an important step towards the Ethereum 2.0 mainnet launch later this year.

🍰🍰Layer 2

  • Bitcoin L2 Progress: Mohamed Fouda, Partner at Volt Capital, released a report on the state of L2 Bitcoin ecosystem and the investability of BTC off-chain solutions. “In the past two years have witnessed a lot of experimentation and building in the Bitcoin off-chain scalability domain. Investments in LN, particularly in LN infrastructure and user services, has been growing significantly and is likely to continue growing over the next few years… The sidechain narrative has largely moved into the direction of interoperability.” 

⚖️Legal

  • Libra 2.0: According to a revised Libra whitepaper, the Libra Association is changing its original vision of a digital currency backed by a basket of national currencies. Libra will now support several stablecoins each representing a different national currency, the majority of which will be backed by individual fiat currencies. It will also build a Libra coin that is a “digital composite” of some of those coins, which will be available for cross-border transactions. The new changes are an effort to woo reluctant regulators and alleviate concerns that Libra may interfere with monetary sovereignty and monetary policy.

  • Regulating Global Stablecoins: The Financial Stability Board, the financial regulator of the G20, issued ten recommendations for a common, international approach to regulating stablecoins. The group recommended that stablecoins follow existing financial rules commensurate with the risks they generate, including operational resilience and safeguards to prohibit money-laundering and terrorist financing.

🎧 Podcast of the Week

Upcoming Virtual Events / Conferences

🎓Highlighted Industry Jobs (non-exhaustive list for NY)

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

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.

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