RelayNode NYC #59 - Crypto Capital Assets / DeFi Growth Hacking
Welcome to RelayNode NYC Area edition! The NYC blockchain ecosystem is growing. My goal is to harness its energy and provide a weekly curated list of personal thoughts, interesting content, upcoming events, and local jobs.
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Apologies for being off-cycle the last few weeks but I celebrated my *30th* birthday quarantine edition, helped my girlfriend move for business school, returned to NYC, and recharged. I will resume regular programming. Luckily it was an uneventful July in crypto land (sigh).
RelayNode NYC is curated by:
David Gogel: Founder @GogelX/Definancier, Advisor/Operator/Investor, Advisor @Paperchain.io, Wharton MBA/BS/BA, fmr Associate @Techstars' Blockchain Accelerator, Co-president @Wharton FinTech, Corp Dev @LinkedIn @AIG
Follow me on: Twitter | LinkedIn | Definancier | 🙏 Please DM any feedback 🙏
Market Stats
2Q earnings season is here: despite a surge in COVID cases that threaten to stall the economic recovery, investors pushed equities higher in the hope of a V-shaped recovery. Last week, the Dow, S&P 500 gained 2.3% and 1.3%, respectively, while the NASDAQ lost -1.1%. A rally in tech shares which pushed the NASDAQ to a new all-time high reversed following California's decision to close indoor spaces and Netflix's earnings volatility. Meanwhile, banks released better-than-expected 2Q earnings but increasing loan-loss reserves are sending a sharp warning on the economy. A majority of PPP loan recipients run out of funding in early August, bankruptcy filings are accelerating, and the program yielding $600 a week in federal unemployment benefits is about to expire. Investors remain cautious. Gold, traditionally a safe haven, trades above $1,800, a 9-year high.
The total market cap of crypto-assets sits at ~$272B, down -1% WoW. The price of bitcoin continues to trade in the $9K-$9.5 range, continuing a weeks-long consolidation. 10-day RV is at a 2+ year low, while IV has significantly decreased. Futures are trading with a premium (September +1.2%, December +1.9%.) While overall trading volumes have declined since March, Bitcoin's correlation with traditional markets has weakened. Meanwhile, altcoins trading ($DOGE, $LINK) has skyrocketed and investors are focused on yield harvesting and DeFi tokens.
1 Big Thing: Value Accrual & Yield Hacking
There are 2 emerging trends to follow. DeFi protocols are using innovative token economic designs and distribution models to:
Offer a way for token value accrual derived from platform trading fees
Use native tokens and liquidity mining/provisioning mechanisms to distribute tokens to users, bootstrap activity, and incentivize governance participation
This activity has resulted in surging trading volumes on DEXs:
Total Value Locked in DeFi reached a new ATH, sitting at $2.86B.
Value Accrual
Many DeFi tokens provide economic and governance rights while providing income through value extraction at the protocol level. These tokens can be described as crypto capital assets and valued using traditional valuation methods. More analysis to come.
Yield Farming
In return for the capital provided to Automated Market Makers, users receive trading fees in the form of a yield. Jack Purdy from Messari explains there's ~$25M (likely undervalued) of tokens distributed monthly through farming. While the Yield Farming craze shares similarities with the ICO bubble, Governance tokens are issued by post-production protocols, built on Ethereum. Although 100+% APRs are unsustainable and net rate spreads are likely to contract, the pace of experimentation and speculative excitement is expected to continue.
Since COMP’s success at decentralizing governance, many protocols are moving in the same direction. Balancer, Curve, MCDEX, Synthetix, Kyber Network, mStable, and bZx, among others, launched tokens or announced plans to do so.
Ethereum’s total gas used has reached a new ATH and gas fees remain elevated, highlighting that Yield Farming is a whale game. The delayed transition to ETH 2.0 presents an opportunity for scalable competitors to possibly gain market share. DeFi yield wars will be followed by a resurgence of Platform Wars.
Go Deeper
Taylor Monahan on DeFi: Sharing the Risks, Rewards, and Responsibility
Maple Leaf Capital: An outsider’s basic framework on ETH + #DeFi value chain
What To Read
🌐 MACRO / WHY BITCOIN?
🌐 Big Cycle of the United States and the Dollar: Ray Dalio, Co-CIO & Co-Chairman of Bridgewater, explores the US Empire and its path along the archetypical big cycle of dominant powers through World War II.
🌐 Debunking Common Bitcoin Myths: Yassine Elmandjra, Analyst at Ark Invest, discusses the most common objections to bitcoin, hoping to stir conversation and debate in the institutional investment community.
🌐 Grayscale's Billion Dollar 1H20: Grayscale released its Digital Asset Investment Report for 2Q20, which was a record-breaking quarter. Grayscale raised $905.8M into its investment products, nearly double the previous quarterly high of $503.7M in 1Q20, bringing total capital raised for 1H20 to $1.4B.
💰 FUNDING, M&A, EXITS
Seed
💰 Opyn, a decentralized crypto derivatives platform providing risk management for DeFi using options, raised a $2.1M seed led by Dragonfly Capital (investment thesis here), with participation from 1kx, Version One Ventures, CoinFund, DTC Capital, Uncorrelated Ventures and A.Capital.
💰 Evertas, a cryptoasset insurance company offering risk audits, underwriting, investigations, and claims handling, raised a $2.8M seed led by Morgan Creek Digital with participation from Plug and Play, Kailash Ventures, among others.
💰CrossTower, a crypto trading platform founded by former AlphaPoint executives, raised a $6M seed round led by Gerard Lopez, founder and CEO of several ventures and an early investor in Skype. CrossTower’s official May launch was well-timed with this year’s historic institutional inflows into crypto markets.
💰 W3BCLOUD, a JV between Advanced Micro Devices and ConsenSys, raised $20.5M in convertible notes from Advanced Micro Devices and ConsenSys, along with several family offices. Funds will be used to operate Ethereum blockchain data centers.
💰 DerivaDEX, decentralized derivatives exchange offering 25x leverage on Bitcoin / Ether perpetual swaps settled in Tether, raised $2.7M from Polychain Capital, Dragonfly Capital, Electric Capital, Coinbase Ventures, CMS Holdings, Three Arrows Capital, among others. The platform is set to launch in late July.
💰 Sorare, a fantasy soccer platform leveraging Ethereum for in-game tradeable assets, raised a $4M Seed led by e.ventures, with participation from Partech, Fabric Ventures, Semantic Ventures, Cygni Capital, among others. Funds will be used to double the size of the team and sign top football leagues. MLS fans are now able to collect and trade digital cards representing league players.
Token Sales
💰 The Avalanche Foundation, the organization behind the proof-of-stack AVA blockchain, raised $12M from investors in a private sale of its AVAX token, co-led by Galaxy Digital, Bitmain, Initialized Capital, NGC Ventures and Dragonfly. The firm later postponed its pubic sale by 1 week due to record-breaking demand and a DDOS attack. AVA mainnet is scheduled to launch this summer.
💰 DeFi Money Market, an Ethereum-based yield farm offering interest rates backed by “real-world, income-generating assets,” raised $6.5M via the sale of its DMG token on DEXs. Draper Goren Holm announced its investments in 2 seed-stage startups that are integrating DMM’s technology into their products.
💰 Aave, an Ethereum-based lending protocol, raised $3M from Framework Ventures and Three Arrows Capital through the sale of its LEND token sale. The funds purchased ~30M LEND at $0.10 apiece, which together are now worth ~$7M. Separately, ParaFi Capital also holds ~$4.5M worth of LEND, which they accumulated through market purchase and a token sale with the Aave team.
💰 The Graph, a startup helping dApps query blockchain data, raised $5M via a SAFT from Coinbase Ventures, Framework Ventures, ParaFi Capital, and DCG. The company announced it has processed over 1B monthly queries in June.
Series A
💰 Wintermute, an algorithmic market maker that provides liquidity to 500+ spot trading pairs, raised a $2.8M Series A from Lightspeed Venture Partners. Funds will be used to expand its business into OTC trading and crypto derivatives.
💰 Sparrow, a crypto options trading platform settled via smart contracts, raised $3.5M in a Series A led by HDR Group, with participation from Signum Capital, Du Capital, and FinLab EOS VC. Funds will be used to accelerate development.
💰 Paradigm, a platform offering automated tools to execute options and futures trades, raised a strategic investment from Dragonfly Capital, Coinshares, New York Digital Investment Group, DCG, OKGroup, ByBit, and Alameda. Funds will be used to expand the list of exchanges/assets and its suite of products in Asia. Financial terms were not disclosed.
💰 Curv, a crypto-security firm developing custodial wallets designed for institutions, raised a $23M Series A from CommerzVentures, Coinbase Ventures, and DCG. Funds will be used to increase its international footprint, product innovations, human capital, and tech developments.
💰 METACO, a crypto infrastructure provider of custody, trading, and tokenization solutions, raised a $17M Series A led by Giesecke+Devrient, with participation from Standard Chartered Bank's SC Ventures, Zurcher Kantonalbank and Investiere. Funds will be used to serve central banks.
Growth
💰 B2C2, a crypto market maker, raised $30M from SBI Holdings. The deal comes as the firm expands into crypto prime brokerage services including automated financing and execution.
💰 Chainalysis, a crypto analytics company focused on compliance and regulatory monitoring, raised $13M in a Series B extension from Ribbit and Sound Ventures. The company will advance its work with governments to monitor transactions and criminal activity.
💰 SYNQA, the parent company of the L2 scaling solution OMG network, raised a $80M Series C led by SC10X with participation from Toyota Financial Services Corporation, Sumitomo Mitsui Banking Corporation, SMBC Venture Capital. Funds will be used to enhance enterprise solutions and digital payment products.
💰 Celsius Network, a crypto interest and lending platform with $6.2B in loans and $630M in assets, raised $10M from Tether, the stablecoin company, at a $120M pre-money valuation, bringing the post-money valuation to $150M.
💰 Digital Assets, an enterprise blockchain company, announced that VMware participated in an extension to its Series C round. Funds will be used to grow the DAML blockchain platform. Financial terms were not disclosed.
Public Markets
💰 Ebang, a China-based bitcoin mining hardware manufacturer, IPOd on NASDAQ with an underwhelming initial performance. The firm offered 19.3M shares priced at $5.23 despite net losses of $11.8M and $41.1M, in 2018 and 2019, respectively. Shares are trading at $4.91, down -6.1% from the listing price.
💰 Hut8, a Toronto-listed bitcoin mining company, raised $8.3M from selling a 6% equity stake. Funds will be invested in new equipment. The company will be able to increase mining capacity by more than a fifth to 1,150 petahash.
💰 Coinbase is reportedly preparing to list on the U.S. stock market sometime in early 2021. The firm is exploring a direct listing. The company was valued at $8B at its last funding round in 2018. According to Lex Solkin from Consensys, Coinbase is worth $15B assuming a 20x revenue multiple.
Acquisitions
💰 Swipe, a provider of Visa crypto debit cards, was acquired by Binance. Swipe has offices in the UK and Estonia and has a presence across 31 countries within the EEA. Financial terms were not disclosed.
DEFI / CEFI / OPFI
🔓 Platform differentiation in DeFi lending: Matt McGee explains that the main form of competition in DeFi lending exists in terms of interest rates and liquidity. In the short run, this creates a system driven by misaligned incentives. In the long run, pricing competition will become a race to the bottom.
🔓 Changing Governance: The Compound community voted to change the rules governing COMP token distributions. COMP tokens were initially distributed proportionally to the interest accrued in a given market. Now Compound distributes $COMP proportionally across the markets that lend more dollars.
🔓 Aave announces Credit Delegation, enabling uncollateralized lending: Aave, an Ethereum-based lending protocol, announced native Credit Delegation. Aave depositors can now “delegate” their credit lines to another person, and enter into a legal agreement via OpenLaw before lending them money.
🔓 Synthetix Acrux release: Synthetix, a decentralized derivatives protocol, released upgrades to its protocol, including Binary options.
🔓 Augur v2 Launch: Augur, an Ethereum-based predictions market protocol, announced that the mainnet launch of Augur V2 will take place on July 28th.
🔓 Balancer governance token launch and exploit: Balancer Labs, a non-custodial portfolio manager and liquidity provider, launched its BAL token. An incident occurred which allowed an attacker to drain $500,000-worth of tokens from 2 pools that contained tokens with transfer fees.
🔓 KNC surges with the launch of Katalyst: Kyber Network, an on-chain liquidity protocol that aggregates liquidity and enables decentralized token swaps, launched a protocol upgrade, converting the native KNC into a governance token. KNC holders can stake tokens on KyberDAO and govern the protocol by voting on proposals while earning ETH rewards from exchange fees.
🔓 bZx’s Initial Decentralized Exchange Token Offering: bZx, a decentralizing lending protocol, updated the token economics of BZRX, its governance token, with a fee-sharing mechanism using Balancer pools and a distribution program through Uniswap. The team seeded the pool with $500K, and in the same block, a bot purchased 650 ETH worth increasing the price by 12x. Roman Storm, a blockchain security auditor, explains the hack.
🔓 mStable launches MTA yield farming but delays offering: mStable, a stablecoin aggregator, announced it will use its token, MTA, to incentivize liquidity. The protocol seeded the mUSD/USDC Balancer pool but delayed the offering to improve distribution. The MTA offering will be hosted on Mesa, a Gnosis-based DEX to prioritize fair pricing over instant settlement.
🔓 DeFi Risk Management: Opyn launched put options on COMP. UMA announced the launch of synthetic COMP token (yCOMP), which enables traders to permissionlessly short COMP. Meanwhile, active insurance cover on NexusMutual has grown to $8.5M, increasing 240% since April.
🔓 What PoS and DeFi can learn from mortgage-backed securities: Tarun Chitra and Alex Evans explore the risks of crypto leverage by focusing on leveraged DeFi protocols and network-provided leverage on Proof of Stake coins. Many leveraged crypto products resemble the villains of the 2008 financial crisis.
💱 STABLECOINS & CBDCs
💱 Stablecoin blacklists: The CENTRE Consortium blacklisted a USDC address in response to law enforcement, freezing $100K of the stablecoin. The event highlights the centralized nature of most fiat-backed stablecoins.
💱 Circle supporting USDC on Algorand: Circle and the Algorand Foundation entered into a wide-ranging collaboration to bring fiat-backed stablecoin capability to Algorand, powered by USDC.
💱 Central banks as a catalyst for innovation: The BIS explores why central banks are positioned to trigger innovative changes in payment infrastructure.
🎟️ TOKENS
🎟️ Tokenised ownership is the best coordination tool since equity: Julien Thevenard from Fabric Ventures explains that leveraging tokens to distribute ownership allows platforms and networks to scale faster than ever before.
🎟️ Expanding access to private markets: Republic, a crowdfunding platform, announced the launch of The Republic Note, a profit-sharing token that allows holders to share in Republic Core’s profits. The Note will launch on Algorand.
🎟️ Exchange tokens: Multicoin released a report exploring the current operations of Huobi, detail the history of its products and operations, its tight-knit relationship with the government, and its trading volume.
🌉 INFRASTRUCTURE
🌉 SEC approves first blockchain-based fund: Arca, an LA-based investment firm, launched the Arca US Treasury Fund, an SEC-registered closed-end fund investing in U.S. T-bills and notes, and whose digital shares move on Ethereum.
🌉 Paypal meets Crypto: In a letter to the European Commission, PayPal said it is “monitoring the evolution of the crypto-asset space” and has taken “unilateral and tangible steps to further develop its capabilities in this area.”
🍰 LAYER 1
🍰 Dfinity opens to third part developers: Dfinity, a decentralized cloud computing protocol, announced the launch of Tungsten, a release of its “Internet Computer” now open to third-party developers.
🍰 SKALE Network launches mainnet: SKALE, an Eth-compatible scaling solution, launched its mainnet highlighting an elastic blockchain network.
⚖️ LEGAL
⚖️ Twittergate: 50+ high-profile individual and corporate Twitter accounts (including Joe Biden, Barack Obama, Coinbase, Binance Apple, and Uber) were compromised by hackers who gained access to internal systems to fraudulently solicit bitcoin. Elliptic released a report tracing some of the stolen funds. The hack is likely to increase pressure on social media companies, which already face scrutiny over content moderation, disinformation, and foreign interference.
⚖️ Abra hit with $300K in penalties: The SEC and the CFTC charged Abra with unlawfully selling security-based swaps and agreed on a settlement.
🎥 PODCASTS / VIDEOS OF THE WEEK
📅 Upcoming Events
If you would like to highlight events in future editions, please submit here.
July 21-23: Singapore Blockchain Week (Virtual)
July 21: Personal Token Virtual Summit (Virtual)
July 28: Responsible Data Summit (Virtual)
August 6: Global DeFi Summit (Virtual)
August 22-23: Dystopia Labs / Blockstack: FuturePROOF (Virtual)
🎓 Highlighted Industry Jobs (non-exhaustive list for NY)
If you would like to highlight jobs or internships in future editions, please submit links here.
Multicoin Capital - Analyst (new)
Chainalysis - Product Marketing Manager (new)
Paxful - Chief Operating Officer (new)
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.
