A weekly recap of the most insightful news, analysis, and capital flows in the wild west we call crypto.

Hello and welcome back to the Web3 Rewind! Per usual in this industry, lots has happened this past week. Here's what we have in store for you:

• Arkham not so Intelligent

• Grayscale adds LDO

• Axelar <> Microsoft

• Binance exodus

• ETH Q2 earnings

The Latest

Intel to earn dept.

Deanonymyzing our privacy ethos

Trivia time. Is this the logo for a cult, the Pentagon, or an edgy drawing from an elementary school kid? If you guessed none of the above, congratulations! This is the logo of famous on-chain intelligence platform, Arkham Intelligence. Widely loved by the community as a successor to the popular platform Nansen, Arkham seems to have done something that many crypto companies are particularly good at, destroying their entire brand reputation in a single day.

So where did Arkham go wrong? On Monday, they announced the world’s first on-chain intelligence exchange. The exchange allows anyone to request intelligence from the community by placing bounties for anyone to fulfill. One can request anything as long as it’s something trackable or linkable on-chain, whether that’s asking for the human behind a wallet address, helping to track the flow of funds or just doing some on-chain detective work.

All that sounds relatively fair so far. Every CT threador loves to talk about “on-chain alpha” and tracking whale wallet addresses. Every other day, I see a thread talking about some large whale wallet that bought a token early and is now up 60x. There is undeniably a huge amount of value in that. Here’s where it got a bit touchy for most of CT.

First of all, you have to place bounties in Arkham’s token, AKRM. If you think about it, a stablecoin makes much more sense as the token choice for a bounty, and this token utility seems like an opportunity for exit liquidity, if anything. But then again, that’s half of crypto tokens, so fair game to them. Second of all, the Arkham Foundation, which I would assume is a small core team of Arkham Intelligence, is the party that vets the information provided for bounties, and gives it the stamp of approval before bounty payout. This means that Arkham will be able to see all the intelligence they want.

If all that didn’t seem bad, here’s where it gets really bad. Arkham stated that “deanonymization is destiny in crypto markets.” And if you are a true crypto participant, you likely believe privacy is a fundamental human right. However, Arkham has chosen to make this their first thesis about crypto and the role intelligence plays in it. It seems like Arkham truly believes in that theory, considering that users could reverse engineer email addresses from referral links generated.

There’s a fine moral boundary this marketplace is treading. You could argue that if someone has the intel, then sharing it for a profit in a decentralized marketplace isn’t the worst thing to happen. And I highly doubt people will have ill intentions and hunt down people in real life just to find a wallet address. But from a first principles perspective, trying to deanonymize crypto just feels wrong. — JC

Crypto charting

Here's a deeper look into the economics and mechanics of web3 and crypto courtesy of charts by Pyth Data Association. To see more Pyth research click here.

Inflation Deceleration Spurs Equity Market Rally Amid Warren's Call for Rate Hike Halt. $QQQ $EURUSD

The US witnessed a deceleration in inflation, with the YoY CPI dropping to 3%. This positive development sparked a rally in the equity markets, particularly evident in the Nasdaq's remarkable surge of 124 basis points throughout the day. Concurrently, there was a decline in U.S. interest rate yields as traders scaled back their expectations of additional rate hikes by the Federal Reserve (FED). EURUSD rallied to trade above 1.1100 and DXY dropped. US Senator Elizabeth Warren joined the chorus in urging the FED to bring a halt to its rate hike cycle.

Quick Bits

Grayscale adds LDO

• Everyone is aware of Grayscale and GBTC. Many fewer people are aware that Grayscale has a DeFi fund. Granted, its AUM is much smaller, standing at a teeny $3M compared to GBTC’s $19.1B.

• Last week, Grayscale added popular LST governance token, LDO, to the DeFi index fund. LDO is now the fund’s second-largest holding. Index funds are a huge part of the equity market, and I think the same thing will apply to crypto 10 years down the road.

Axelar <> Microsoft

• Here’s a partnership I would’ve not expected to see. Axelar and Microsoft announced a deal where Axelar’s blockchain data integration and interoperability solutions will be available to Microsoft customers.

• All this will be enabled by the Azure marketplace, which is primarily used by enterprise clients. Of course, in true 2023 fashion, the announcement also includes exploring innovative AI and hybrid blockchain initiatives.

Binance Exodus

• Remember when Brett Harrison of FTX.US and Sam Trabucco of Alameda left before FTX imploded? I do. Commonly cited reasons include wanting to spend time on a boat or more time with family.

• A similar thing is happening at Binance, with its chief strategy officer, general counsel, and senior vice president of compliance all leaving the firm in a week. It’s time to pray that history doesn’t repeat itself.

And last but not least

Ethereum Q2 Financials

It may not look like it, but Ethereum has had a fantastic Q2. Despite the above graph showing that the transaction count has stayed pretty constant for much of 2023, the financials tell a different story. If you look at the PnL of blockspace, measured by transaction fees - ETH issuance, that figure has more than doubled from $191M in Q1 to $499M in Q2. Similarly, if you look at cash flow to stakers, which includes other factors such as priority fees and validator MEV payments, cash flows have increased from $567M to $980M QoQ. Priority fees increased from $73M in Q1 to $134M, likely driven by the memecoin mania surrounding PEPE. Base fee burn also increased significantly from $385M in Q1 to $714M, signifying that Ethereum’s new monetary policy through EIP-1559 is becoming more successful by the quarter.

On another front, ETH staking rate increased from ~15% at the end of Q1 to 19.6% at the end of Q2, showing no signs of slowing down as we head into Q3. This signifies that Ethereum is becoming more secure by the day. Even though transaction activity on Ethereum itself was pretty muted, average daily transactions across the entire Ethereum ecosystem, including rollups and sidechains, increased from 2 million in Q1 to 3 million in Q2.

If ETH were a publicly listed equity, you would have waited two extra months for these conclusions and financial data. That’s one of the beauties of having a publicly accessible, permissionless blockchain. Everyone has insight into how it is performing and how profitable it is in real-time. You never need to wait for quarterly earnings for ETH. — JC

Out of the Ether: Special NFT Edition

Have you read the definitive history of Ethereum? No? Well then get your special edition of Out of the Ether while you can. There are only 1,000 that were printed and each copy is an NFT that can be registered on the Lukso blockchain’s Universal Profile protocol.