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- Azuki Drama | Future of NFTs
Azuki Drama | Future of NFTs
Shared surveillance agreements | Superstate | FDV is a meme
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:
Azuki’s NFT drama
Shared Surveillance Agreements
Superstate
Project Mariana
FDV is a meme
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The Latest
The past week it’s been hard for me to not have freedom on my mind. First, I was in Ontario at the cottage that’s been in family for generations for Canada Day, then flew back to Southern California for the 4th of July. Fireworks ensued.
It was a nice bit of time away, a recharge and a reminder of what we’ve advocated previously in the Web3 Rewind about touching grass. I was still working, however, and a series of stories we published in June for Pride Month gave me a new perspective on freedom and what this weird crypto thing has promised all along.
These are the stories we’re trying to focus on here at Decential – of people building a new world that’s ostensibly better than the current version. So it’s not just the architects of Ethereum protocol upgrades and the people building decentralized apps – it’s the ability for someone who’s trans to feel in their own skin immediately in avatar form in Decentraland or The Sandbox. It’s designing non-fungible token art that depicts people with disabilities, or someone in a wheelchair or just simply gets the skin and hair color correct. It’s tapping into decentralized money rails so that performers in the adult industry can own their creations and be secure in knowing no one can yank their payment system out from underneath them.
These eye-opening stories are in line with some other projects we’ve recently highlighted, in what we called a Crypto for Good examination. Glo Dollar, a stablecoin project that’s hoping to help end extreme poverty, Ecosapiens, an NFT creator helping to reduce carbon emissions, and Huma Finance, which is using smart contracts to provide small loans to businesses or individuals whom the banking sector would ignore.
There are so many more virtuous uses for blockchain and decentralized finance, and in a time of year when we think on our freedoms, it’s worth remembering that for all that crypto is wild and misunderstood, it also has a very large heart on its sleeve. — Matthew Leising, editor in chief, Decential Media
Azuki’s mess up dept.
Where do PFPs + NFTs go from here?
Corporate wants you to find the difference between these two pictures. Jokes on you, they are exactly the same. If you know anything about NFTs, the fact that they are non-fungible is pretty important, especially for profile picture (PFP) NFTs. Non-fungible means something is unique, so if you suddenly have two identical things, they become fungible. And when an NFT becomes fungible, it becomes worthless pretty fast.
This is precisely what happened last week with Azuki, a famed NFT collection that was one of the hottest PFPs during the NFT bull market. Azuki and its founder ZAGABOND launched a new Elementals collection with twenty thousand new NFTs. Ten thousand of these were airdropped to existing Azuki owners and participants who joined a packed IRL party in Las Vegas. The other ten thousand were offered for sale, with Azuki holders getting first dibs in a ten-minute presale window, followed by Beanza holders in a ten-minute presale window. Azuki managed to raise 20,000 ETH, or roughly $38M, through this collection.
To say Azuki holders and Elemental minters are disappointed and mad is a bit of an understatement. Given that Elementals look nearly identical to the original Azuki collection and that some Elementals are straight copies of each other and thus not unique, community members have been calling this an outright scam. Unique NFTs suddenly became not so unique. In fact, as part of Azuki DAO, OG Azuki holders have gone as far as proposing to hire a lawyer to retrieve the 20,000 ETH and allocate it to the DAO. As a result of this drama and a complete lack of confidence in the Azuki team, the Azuki floor has dropped dramatically from 16 ETH to 7 ETH in a matter of days.
It’s so bad that the contagion has spread to all NFT collections. Over the past few days, we’ve seen 1,244 liquidations on NFT loans as all blue chip NFT collections took a nosedive. Compare this to an average of 10-15 NFT loans liquidated a day on average over the past year and you can see how badly this event has affected the overall NFT market. At one point, the number of underwater Azuki loans on Blur went from 0 to 140. One way of “exiting” your NFT is taking out a loan against it and letting yourself get liquidated. Considering that some of these NFT lending platforms offer absurd loan-to-values of up to 97%, it’s probably a good deal if you never want to see your NFT again.
So where do NFTs go from here? For starters, PFP NFTs will likely be dead for a while as people realize that they have 0 value because they’re a picture of a monkey (but then again, I never was truly able to appreciate art) or that NFT prices still depend on the founding team not screwing up the execution of the entire project. Another interesting thought experiment is, if Twitter didn't exist and crypto participants didn’t have a common platform to show off their PFPs, would NFTs still be as valuable? For better or for worse, PFPs have dominated the NFT narrative for quite some time. Hopefully, that starts to change with a million other use cases that are uniquely enabled by NFTs, including but not limited to privacy-preserving identification solutions, tokenizing assets and putting them on the blockchain to remove the middleman, and providing global permissionless liquidity for illiquid assets. Here’s to devs using NFTs to make the system better. — Joseph Cooper, Decential Media
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.
Coinbase Rallies as SEC Concerns Prompt Resubmission of Bitcoin ETF Applications
The SEC has expressed concerns regarding the initial filings for Bitcoin ETFs, particularly regarding the lack of disclosure of the crypto trading platforms with which the exchanges planned to establish surveillance sharing agreements. This collaboration is crucial in detecting potential manipulation and fraud in Bitcoin's price. Following this, prominent companies such as BlackRock, CBOE, Fidelity, WisdomTree, VanEck and others have resubmitted their applications, explicitly naming Coinbase as their chosen partner for the surveillance sharing agreement. While it remains uncertain whether this development will lead to the SEC's approval of the ETF application, the endorsement of Coinbase has already resulted in an 11% increase in its stock price over the course of the week.
BlackRock CEO: Bitcoin's Potential as Digital Gold and International Asset
Larry Fink, the CEO of BlackRock, the world's largest asset manager with over $9 trillion in assets under management, recently appeared on Fox Business to express his view that Bitcoin serves as a digital equivalent of gold and holds the potential to function as an international asset. Fink highlighted its ability to serve as a hedge against inflation, domestic challenges within a nation or currency devaluation. Moreover, he suggested that Bitcoin embodies optimism for a brighter future, citing how individuals invest in BlackRock funds with similar aspirations. Following Fink's remarks, Bitcoin experienced a price surge, surpassing $31,000 after holding the $30,000 level.
Quick Bits
Coinbase Shared Surveillance Agreements
Last Friday, the U.S. SEC told all the spot Bitcoin ETF filers that their filings were inadequate, in that they had to name a crypto exchange that allows them to have a shared surveillance agreement.
Much to no one’s surprise, everyone, including Fidelity, ARK, WisdomTree, VanEck, and BlackRock, all refiled, naming Coinbase as the exchange. This puts the SEC in an awkward spot, considering they are currently suing Coinbase for allegedly operating an unregistered securities exchange.
Superstate
Another day, another protocol is trying to bring Treasury yields on-chain. This time it’s Superstate. In an active filing with the SEC, they are launching a fund holding short-term government bonds.
RWAs are hot right now. As much as we love the decentralized part of DeFi, a large part will likely be bringing off-chain assets on-chain. And unfortunately, that often requires a centralized custodian, but there are still considerable benefits to bringing these assets on-chain.
Project Mariana
No, the project name has nothing to do with marinara, the pasta sauce. Project Mariana is a collaboration between the central banks of France, Singapore, and Switzerland to bring wholesale CBDC’s on-chain.
In this exciting project, they utilized Curve V2’s AMM mechanism. This isn’t the first time a TradFi project has utilized a novel DeFi mechanism, and it certainly won’t be the last.
And last but not least
FDV is a meme
For anyone who has been in crypto for a while, a graph like this shouldn’t surprise you. If you’re new here, what you are looking at is a predatory token unlock/emission schedule. A token’s fully diluted value (FDV) takes the current price and multiplies it by the total supply of the token, regardless of whether it’s still vesting or hasn’t been emitted yet. In comparison, a token’s market cap takes the current price and only multiplies it by the circulating supply, similar to the free float of a stock. I bring this up because BitDAO, the DAO governed by BIT holders, recently voted on a “supply optimization” proposal.
For context, BitDAO is going through a 1:1 token swap between the BIT token and its new token, MNT. In the proposal, the DAO voted not to convert three billion BIT tokens held in the treasury and send them to a burn address. Those three billion tokens are currently worth $1.5B, with the BIT token having an FDV of ~$5B. So all else being equal, if the FDV of the BIT token instantly decreases from $5B to $3.5B, should the BIT token appreciate by 42.8% to make the FDV go back to $5B? By now, you should realize how silly this is and how easily it can change on a whim. So is FDV a meme? Well, you still have to take it into account. If a token has a market cap of $300M, but an FDV of $3B, it’s hardly a steal. But what if the protocol guarantees that the free float will always stay 10% of the total supply? The point is every token has its nuances. You must understand what’s affecting the token schedule while keeping track of things such as these governance votes that completely change the supply dynamics. Not an easy job at all. — 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.