BitGo: Crypto Water Cooler — Sep 11
GM. It’s Wednesday, September 11.?
Newsmakers
Ethereum Revenue Falls 99%. Is This Part of the Plan?
?Ethereum has hit a rough patch lately, experiencing lackluster ETF performance; new criticisms of its foundation; a kerfuffle over Vitalik Buterin’s remarks about DeFi sustainability ; and a 22% price drop in August. And then there’s this: revenue is down 99% over the past six months from a peak of $36MM in daily revenue in March to a low of just $199K per day in August.
?It’s a dizzying fall from Q1 2024 when Ethereum generated $369MM in profit on $825MM in revenue for a 45% net income margin. As tough as the current optics may be, though, the drop is tied to the long term plan for Ethereum to become the “crossroads” of DeFi.
?The plan started with The Merge in 2022 and continued with the Dencun upgrade in March. Dencun addressed high transaction fees on the network by introducing blobs, which enabled Ethereum L2s to process transactions without relying upon data storage on the Ethereum mainnet. As planned, Dencun slashed transaction costs dramatically and unleashed growth for Ethereum Layer-2s.
?]So far, though, not much of this value is accruing back to the mainnet. For example, Base recently surpassed 1MM daily active users and, while it generated $2.5MM of revenue in August, it only paid about $11K to settle transactions. Unchained Crypto found that, for every $1 spent to “leverage the security of Ethereum’s base layer,” Base retained $226.40 in fees, Optimism retained $321.31, and Arbitrum $28.62.?
?The dynamic has called ETH’s business model into question. Anatoly Yakovenko, co-founder of Ethereum competitor Solana, called L2s “parasitic .” Bitcoin investor Fred Krueger opined that ETH’s $275B valuation is unsustainable with revenues of under $200K per day.
?However, key Ethereum developer Dankrad Feist doesn’t seem worried. In a Reddit AMA, Feist explained that “The highest-value transactions will happen on Ethereum L1, while rollups will grow the pie . . . The relationship will be symbiotic: Ethereum provides rollups with cheap data availability . . . and in return they make Ethereum L1 the natural crossroads for all financial activity for the really valuable transactions.”?
?Read more →The Defiant
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Custody, Compliance Failures Led to Settlements for Crypto Firms
?The past couple of weeks have seen three different crypto firms—Robinhood Markets, Galois Capital, and Uniswap—settle court actions with three different governmental agencies in the U.S. However, there are common threads: custody and a failure to adhere to laws and/or the company’s stated policies.
?At $3.9MM, Robinhood Markets’ settlement is the largest. The California Department of Justice accused Robinhood of preventing crypto withdrawals from 2018-2022, thereby violating the state’s commodities laws. They stated that Robinhood allowed investors to buy crypto; didn’t deliver those assets to them; and required them to sell to Robinhood (rather than withdrawing assets) in order to leave the platform.
?Robinhood also told users that they had custody of customers’ crypto, but that was only sometimes the case. Besides the fine, Robinhood must clarify and follow its policies going forward, allowing investors to withdraw assets to their own wallets.
?Crypto hedge fund Galois Capital reached a $225,000 settlement agreement with the U.S. SEC over charges that it didn’t comply with Custody Rule provisions. Instead of safeguarding assets with a qualified custodian, they kept some assets on unregulated crypto platforms, including FTX. The firm lost half of customer assets entrusted to it in the FTX crash. The SEC said Galois also misled investors about its redemption policy, allowing some customers to redeem funds earlier than others. Galois shut down in February 2023.
?Uniswap Labs settled for $175,000 with the CFTC over charges that they offered commodities transactions illegally without registering with the CFTC as a designated contract market though their interface and smart contracts allowed third parties to provide products with leveraged or margined returns against BTC or ETH.? These are considered to be “commodities in interstate commerce.” Uniswap had also received a Wells notice from the SEC in April alleging it is operating as an unlicensed securities broker and exchange. Enforcement action on that has not yet been taken.
?All three of the firms settled their suits without admitting wrongdoing.
?Read more →Cointelegraph
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Don’t Say DAO: Cardano’s Hard Fork Aims to Decentralize Governance?
Cardano, the twenty-eighth largest blockchain, triggered part one of its Chang hard fork on September 1. When the second part happens later this year, Cardano will become the first major blockchain to transition to governance by token holders.
?Just don’t call it a DAO. The network has criticized DAOs for being controlled by the few stakeholders holding the most tokens—a claim that is supported by recent in-depth reporting in Cointelegraph Magazine. In an effort to create a truly decentralized model, the current governing bodies, Input Output Global—founder Charles Hoskinson’s engineering firm—EMURGO (Cardano’s commercial arm), and the Cardano Foundation will cede control of the blockchain to a tricameral body consisting of a constitutional committee, stake pool operators (SPOs), and delegate representatives (DReps), all elected by token holders.?
?DReps can “register and generate a certificate, request ADA delegations, and vote on governance proposals.” SPOs serve as spokespersons, voting on governance actions based on their delegated ADAs, approving or rejecting proposals with the constitutional committee having full veto power. The ADA cryptocurrency will become a governance token, which may help to prevent it from being classified as a security.
?The $13B chain hopes to attract users who want to participate in a purer DeFi experience. However, participation in DAOs is typically low, and token holders who don’t fully understand the new system may be surprised at how their levels of participation differ from the current setup.?
The switch comes at a time Cardano is facing another more existential problem: only one user has been able to interact with certain protocols at a time—such as the chain’s decentralized exchange liquidity pools. When multiple users try to swap the same tokens simultaneously, transactions fail.?
?Read more →DL News
News In Brief
领英推荐
Business of Crypto
Regulation and Security
DeFi and Web3?
Midweek Market Pulse
Total Market Cap: $2.00T – 7-day change as of Tuesday 9/10/24 12 PM EST: -1.0%
Crypto and equity markets alike were roiled by a weaker-than-expected jobs report last week. Crypto ended just about where it started the week, declining 1.0% to $2.0T.?
Bitcoin (BTC, -1.8%) pared its losses after its worst week of the year , which some saw as an exaggerated reaction to the employment data. More macroeconomic data will be released this week, including August’s U.S. Consumer Price Index on Wednesday, followed by Producer Price Index numbers on Thursday. These readings may inform actions at next week’s September 18th FOMC meeting where the Fed is widely expected to cut interest rates. The question is by how much. CME’s FedWatch Tool forecasts a 67% likelihood of a 25 basis point cut and a 33% chance of a “jumbo” cut of 50 basis points.?
?Ethereum (ETH, -4.8%) continued to languish based on many of the factors discussed in the feature above.?Major alt coins like Solana (SOL, +3.9%),Toncoin (TON, +9.2%), Tron (TRX, +1.2%), Cardano (ADA, +6.6%), and Avalanche (AVAX, +10.2%) all outperformed the top two digital assets after outlagging them in recent weeks.?
?Sui (SUI, +16.3%) outperformed the broader market with a strong week. The launch of its native stablecoin , AUSD, is a significant catalyst as it will provide more liquidity to the network and bolster borrowing and lending across DeFi applications. Sui’s total value locked (TVL) has also grown significantly in recent weeks, swelling from $342.8MM on August 4 to $671.6MM on September 9.?
The Last Word
Blob Storage
: Blob stands for “binary large object,” a mass of data in binary form that does not conform to a file format
/ On Ethereum blobs are packets of data designed for Layer-2s as an alternative to storage on the mainnet.
About BitGo
BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.
Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.
Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.
BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.
Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 700 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.
For more information, please visit www.bitgo.com .
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