Jack Be Nimble Jack Be Quick
EDITION N°3 | 9 September 2021
Another rollercoaster week of drama, exuberance and mystery; welcome to the IRL soap opera of Digital Assets. The SEC is flexing their regulatory prowess, NFT projects continue to launch with explosive effects on Ethereum gas prices… and the next chapter of The Crypto Tales unfolds with celebrity influence broadening. Welcome to the third edition of DeFi insights.
1. SEC investigates Uniswap Labs; threatens to sue Coinbase for their ‘Lend’ program
Last Thursday we discussed the SEC’s move to ‘up their game’ by hiring blockchain analytics firm AnChain.AI; contracting a US-based firm to assist them in monitoring DeFi. On Friday, news broke that they’ve launched an investigation into Uniswap Labs, the team behind decentralized crypto trading protocol [AMM] Uniswap. If the SEC bring formal charges against this DeFi protocol then arguably they could go after anyone in the ecosystem.
Separately, it emerged this week that the SEC sent Coinbase a Wells Notice [letter of intent to sue] warning them against pursuing their proposed ‘Lend’ program. Whilst this move highlights the SEC’s dedication to protecting consumers, on the one hand, it also sends a somewhat confusing message to the corporate entities involved with consumer-facing digital asset lending services. According to Brian Armstrong’s Twitter update, the SEC determined a lending feature on the Coinbase platform would constitute a security.
It will be interesting to see how both these situations progress, if only to gain clarity on the regulatory landscape for digital asset services going forward.
2. Where is da Loot?
Heard of Loot? Not many people in the digital asset space had until about a week ago. This story wouldn’t have been featured except that it’s a paradigm-shifting NFT project based on an adventure game that doesn’t yet exist [i.e. imagination required]. For a decentralized mindset the ‘ideation to launch at lightspeed’ principle is v exciting; build a novel concept harnessing network effects on-chain and ship it IMMEDIATELY with a quick ‘this may not work’ disclaimer. [For ANYONE else, this is probably a ‘Huh?!’ moment]. All that’s required is a significant following of trusting devotees and a successful track record launching viral products. See Kerman Kohli’s Loot exploration for a succinct overview.
So, why are we particularly compelled to mention Loot? Well, apart from the fact that an entire on-chain Loot ecosystem was established overnight, this is fascinating because it highlights yet another use case for blockchains. Now with Alpha Finance launching a buy wall for NFTs to create functional liquidity for this limited non-fungible market, we move one step closer to an integrated ecosystem where art and finance can intermingle. By adding additional utility layers to the top ETH value NFTs, we edge closer to the world of NFTs as DeFi collateral; the decentralized vision is taking shape. Further to that point, the Bored Ape Yacht Club lot just sold at Sotheby’s auction for $24.4m and Christie’s just announced they will be the world’s first auction house to accept bids in ETH for an upcoming sale!
It isn’t possible to keep up with all the new non-fungible token projects launching, but it’s somewhat telling that celebrities | a-plenty are continuing to join the broader conversation. The question is whether the regulatory bodies around the world will be able to match the pace of innovation and coordination of decentralized networks with suitably structured consumer-protecting legislation that can still preserve the status quo. The risk is, of course, developer teams choose to remain anonymous and projects move underground…
3. Scaling the Eth
One of the key consequences of this summer’s NFT flurry [and last summer’s DeFi acceleration] is the surge in Ethereum gas prices. It’s becoming a rare occurrence to see prices below 100 Gwei and with increasing interest in Solana and other Layer 1 blockchains promising viable scaling solutions (with higher transactions per second and affordable gas fees), Vitalik is obligated to offer realistic fixes. However, as the comments section in his ‘cross-rollup, NFT wrapper’ post illustrates, finding a suitably simple and positive UX may be further out. So for now, with EIP-1559 in place, Ethereum looks set to consolidate its position as an institution-grade settlement layer for blockchain-based finance and art; whilst smaller market participants are priced out by gas fees alone, the larger ‘whales’ and corporations can continue to trade.
And now for something else inspiring…
There are relatively few people in the world who can discuss tweaking smart contract code to generate a profitable collection of NFTs. Benyamin Ahmed, a 12-year-old from the UK, reflects coherently on his journey to making 290k GBP from his Whale NFT collection.
The biggest takeaway here: YouTube is the practical education platform for Generation Z. Another takeaway - surround yourself with people who can help you code!
… brought to you by Alkemi Network
Alkemi Network is building an on-chain liquidity network with a suite of tools and products that serve as onramps for everyone to participate in decentralized finance. See our latest Interview with DataDash.