Where Does Binance Go From Here?

The crypto audience I Pudgy Penguins Cyber Monday | Magic Eden wallet | Blast L2

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Decential Media
December 01, 2023

Decential Media
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:

  • CZ + Binance

  • CCTP on Noble

  • Pudgy Penguins Walmart Cyber Monday deal

  • Magic Eden wallet

  • Blast L2

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The Latest

Who’s the real crypto audience?

When I first looked at this man, I told myself: “I’m going to have a great photography from this sir!”. And so I did. I got close to him and I started taking pictures of a wall with some cool shadows, and in the mean time he spoke to me. We start talking and then I asked for permission for taking pictures of him. Here’s one of the photos.

image: Unsplash

We were off last week at Decential Media to get a break and to celebrate Thanksgiving in the U.S., so I thought a note about what I’m thankful for would be a good topic. But that rather bored me and in my current mood I think a note about what worries me is more in order. It’s not easy running a crypto media business, just as it’s hard to run any type of media business. The advertising model is brutal no matter the size of the company, as seen when Coindesk fired 45 percent of its editorial staff in August or The Block laid off one-third of its newsroom in March. Coindesk is a Loeb-winning outfit and should’ve been considered for a Pulitzer for its FTX coverage (that’s assuming the Pulitzer committee isn’t an I-95 corridor circle-jerk and yet here we are). But thinking more about this is where my fear arose.

It's becoming harder for me to see the money-grabbing get-rich-quick scammer pump-and-dump crowd in crypto as a minority. Maybe too earnestly, I’ve thought since about 2015 that the world-changing ethic running through blockchain constituted the real audience I wanted to reach. The idea of putting people first in Decential’s journalism is part and parcel of this same idea. It seems, however, that people don’t sell.

It seems that way at least as this crypto winter continues. It also puts this down market in perspective when you think that even with so many hucksters and tourists now blown out of the space, there is still a dominant demand for alpha on the newest alt coin, defi yield farm or promised future airdrop. I am well aware that there are many brilliant projects building cool stuff right now, we write about them every week. But that doesn’t shake the conviction that the loudest voices in crypto only care about getting rich. And here’s something I’m thankful for – having a forum in which to vent these fears. (On the other hand, if you’ve been following along, there’s not too many people who are going to read this so ha.)

Writing this editorial every week is a blessing and we’ll keep going at Decential as everyone else is still going. It just might be with a bit less optimism than in the past. – Matthew Leising, editor in chief, Decential Media

Best-case scenario dept.

CZ + Binance

One news headline dominated crypto the past week: Binance reaching a resolution with US regulators, including the DoJ, CFTC, OFAC, and FCEN. Binance has agreed to settle and plead guilty to several charges, including conducting an unlicensed money-transmitting business, violating the Emergency Economic Powers Act, and violations related to the Bank Secrecy Act. In addition, Binance pleaded guilty to failing to maintain an effective anti-money laundering program. As part of the deal, CZ has stepped down from Binance, even though he is allowed to retain majority ownership of the exchange, and is now replaced by Richard Teng. The exchange was fined a staggering $4.3B.

All things considered, Binance walking away with a $4.3B fine is the best possible outcome. A few possible scenarios could have played out before this announcement. The first is that Binance gets a slap on the wrist and is forced to tighten up the ship. The second is that this case extends forever, and crypto is forever in a state of limbo. The third is that Binance is shut down. The second case would have left the crypto markets uncertain with the overhang. the third case would be a black swan scenario for crypto, considering Binance accounts for the majority of liquidity and volume. The first, which is what we got, is the most bullish outcome out of all of these. I wouldn’t be too surprised if Binance made close to $100B in the previous bull market, so having to pay only a fine of $4.3B is a minor inconvenience at worst.

Another clear winner of this entire sags is CZ. Considering that he probably hasn’t had a day off in the past six years since Binance started in July 2017, this was his way out. Think about it. If CZ had suddenly decided to retire one day, the world would think something was wrong, perhaps that Binance was insolvent, and funds would start pulling out of Binance and kickstart a doom loop. This DoJ action gives him a perfect excuse to step down while still retaining majority ownership in Binance. This was the perfect way for him to graciously exit his role.

Who else is a likely winner for this ordeal? Coinbase. For eons, Coinbase has been the turtle in the race, moving ever so slowly in the bull market, likely costing them a large amount of growth. However, recent expansions, especially with its international exchange that offers perpetual futures, put it in a good place to gobble market share from Binance slowly. There is certainly a gap to fill outside the US with the countless countries that decided to give Binance the boot. The question is, who will fill it? — Joseph Cooper, Decential Media

Quick Bits

CCTP on Noble

  • CCTP, Circle’s Cross-Chain Transfer Protocol, is now live on Noble. After launching on Ethereum, Avalanche, Base, Optimism, and more, users will now be able to bridge USDC across various EVM and non-EVM ecosystems.

  • If you believe that USDC will be the most adopted stablecoin in the future, allowing users to bridge USDC anywhere easily will be a huge unlock for it to be used across various dApps, payment protocols, blockchains, and more.

Pudgy Penguins Walmart influencer box

  • Pudgy Penguins, one of the more successful NFT collections, has released an exclusive influencer box, made available through Walmart as part of a Cyber Monday deal. We recently talked to their founder in an interview.

  • The Pudgy Penguins brand has crossed 1M followers on Instagram, and its plush toys continue to be sold across 2,000 stores in the United States. So far, they seem to be doing an excellent job monetizing NFT native IP.

Magic Eden wallet

  • Magic Eden, an NFT marketplace, has released its wallet. The wallet supports Bitcoin, Ethereum, Solana, and Polygon. The NFT marketplace has been losing market share on its supported chains, so this could be a vital pivot in product strategy.

  • They follow multiple other dApps that have launched a wallet, such as Uniswap and 1inch. Expect to see this trend continue as protocols compete for user attention and interface dominance.

And last but not least

Blast L2

Blast is an L2 developed by Pacman, the founder behind Blur. Unlike other L2s, Blast does something a little different with assets deposited into the bridge contract from Ethereum. Rather than letting those assets sit idly, Blast deposits them into various protocols to generate yield (editor: in tradfi this is called rehypothecation). For example, ETH is deposited into Lido for stETH, and stablecoins are deposited into MakerDAO’s DSR for sDAI. From there, the yield is passed onto users who had initially deposited the assets. Upon launch, the project was scrutinized relentlessly by much of CT, and for good reason. Some pages called users “Pre-rich” because their wallets didn’t have points yet. The first page on the navigation bar was for an airdrop. There’s a point leaderboard, where users can earn more points for referrals, and a spin page where you can spin a lottery wheel. This has all the makings of a textbook MLM scheme, except it’s solely to incentivize depositors for the L2. The questionable marketing tactics aren’t the only problem. The bridge contract, where all user funds are currently held, is controlled by a 3/5 multi-sig, and four of those wallets were funded by one address. No one has an idea who the multisig signers are. Not great. Oh, did I forget to mention that user funds are locked until February for good measure? 

Despite all that, degens have flocked to the L2, depositing $536M into the bridge contract, making it the third largest L2 if you go by the amount locked into the canonical bridge. What does that mean? Well, for starters, it means that degens are still desperate to farm airdrops, especially from companies backed by Paradigm, one of the top crypto VCs. Not knowing the airdrop amount, security risks, and having your funds locked up for a quarter are not enough to deter airdrop farmers. Importantly, this puts Blast’s TVL ahead of Coinbase’s L2, Base, evidently showing the power of sometimes questionable incentive mechanisms in crypto. On the other hand, we’ve seen the adoption of stETH continue to increase throughout 2023 as users prefer a version of ETH that gives them a 3.5% yield vs one that gives them no yield. If there’s a yield-generating version of a token, there’s very little reason for a user not to want that over the non-yield generating version. I expect that trend to continue as the yield-generating version of assets such as ETH and stablecoins continue to proliferate. There are a few other interesting questions we could ask here. For example, what does Paradigm tell their LPs when they realize that they are investing in another startup that one of their current portfolio companies’ founders is running? Or for example, what happens to depositors if everyone wants to simultaneously withdraw from Blast? Is there sufficient liquidity for a mass redemption event? Either way, Blast is a fun experiment and it should be thrilling to watch how this one goes down. Hopefully not in tears. — JC

Have you read the definitive history of Ethereum? No? Well then get your copy of Out of the Ether while you can.