ETH Futures ETFs Are A Go

Can Michael Lewis get crypto right? I Arbitrum incentives | Pudgy Penguins | Open-source code

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Decential Media
October 06, 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:

  • ETH futures ETF

  • Arbitrum incentives

  • Pudgy Penguins

  • Coinbase regulatory wins

  • Open-source code

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The Latest

Can Michael Lewis get crypto right?

Can the universe really be this kind? All in one week I can take shots at Sam Bankman-Fried, Michael Lewis’s new book and his disastrous Flash Boys? Oh, did I say take shots? I meant to say level reasoned criticism.

This starts with Flash Boys and the stir it caused when published in 2014. I was part of the market structure team at Bloomberg News at the time and suffice it to say we knew how markets worked, unlike Lewis. His contention that high-frequency traders were front running stock markets, that the NYSE was rigged, weren’t proven by any means in his book because that view represents a fundamental misunderstanding of modern electronic trading. Lewis also refused to speak to us about the book and its inaccuracies, save for a brief conversation with the wonderful Sam Mamudi where Lewis called my colleague “Slippery Sam” before hanging up on him.

Lewis is back with a new book about the collapse of FTX and SBF’s downfall. Fresh questions about Lewis’s reportorial accuracy have already been asked by Virtu, one of the most successful HFT firms in existence. It didn’t lose $10 million when FTX failed, the firm said this week. In fact Virtu said it lost nothing due to SBF’s “old-fashioned embezzlement,” as the bankruptcy manager John Jay Ray III put it. Should we then believe Jump Trading lost $206 million in the FTX debacle, as Lewis stated? (Jump Crypto is an investor in Decential Media.)

The more that comes out about SBF, his family (see Sue the Parents in the 9.22 newsletter) and associates, as the trial began this week in New York City and as previously reported, it seems clear to me that a few foxes got inside the incredibly opulent chicken coop as the mother of all crypto bull markets raged on. The complete disregard for customer welfare alleged against him makes me sick. Accurate depictions of what SBF did are needed and just because a writer who decides his story before reporting it out is in on this one doesn’t mean we need to pay attention. Let’s look to the court record, to depositions and what witnesses say while under oath. That may be the only way to absolve the wider crypto industry’s acceptance and embrace of SBF before his house of cards was revealed. There’s a lot of stink to be washed off on all sides here. -– Matthew Leising, editor in chief, Decential Media

The donating dept.

ETH futures ETFs go live

It feels like the news around ETFs has been non-stop for the past three months, whether it be spot ETF filings, SEC decisions, or constant chatter on the timeline about when a spot ETF will lead to a bull market. However, action is stronger than words. On Monday, VanEck, alongside ProShares and Bitwise Asset Management, launched various ETH futures ETFs.

While these three firms launched their futures-based ETFs, others opted to pull out of the process. For example, Volatility Shares chose to ditch its ETH futures ETF plans due to losing its “first-mover advantage.” Roundhill Investments likely felt the same as they withdrew their application.

A sign of the times, VanEck’s ETH futures ETF only did $2M in trading volume on its first day. In addition, one day after inception, it has only managed to gather $8.27M in total net assets, a drop in the bucket compared to the $883M in total net assets of BITO, ProShares’ Bitcoin Strategy ETF.

One exciting component of all this ETH futures ETF activity is VanEck’s announcement to donate 10% of ETF profits to Protocol Guild for at least ten years. The Protocol Guild is a group of 152 Ethereum core protocol contributors who devote their time to upgrading Ethereum through research and development. In short, it’s a grassroots funding mechanism for those who help maintain Ethereum.

Historically, DeFi protocols, such as Uniswap and Lido, and blockchain networks, such as Arbitrum and Optimism, have donated to the Protocol Guild. VanEck’s move makes it one of the first TradFi entities to donate and could set a precedent for other ETF issuers to follow suit.

I attempted to think of a TradFi comparison, and I couldn’t. (Editor: maybe the partial self-funding of the SEC by stock and bond trading fees?) The closest thing would be a single stock ETF issuer donating its ETF profits to the company of which the underlying stock was issued from. But that doesn’t feel quite right. Open, permissionless and decentralized blockchains are very different from closed, permissioned and centralized companies, and there’s something very special about this unique interaction between a centralized TradFi company and a decentralized blockchain. — Joseph Cooper, Decential Media

Quick Bits

Arbitrum incentives

  • Arbitrum recently passed a governance vote to utilize 50M ARB as short-term incentives for protocols within the ecosystem. Following that, 105 different protocols requested a total of 126M ARB. Lately, Arbitrum has been losing to Optimism and Base, so this could be a much needed boost.

  • Evidently, there isn’t enough ARB to go around, and ARB holders will have to painstakingly go through 105 applications and vote on how they think the ARB incentives should be allocated. The allocation and voting system seems a little broken as no one has time for that.

Pudgy penguins are hot, just like Antarctica

  • Last week, it was announced that Pudgy Penguins will soon be available in 2,000 Walmart stores. Since 2021, the IP brand has achieved a remarkable $400M in digital collectibles sales.

  • As a result of this announcement, the Pudgy Penguin’s collection has seen an astounding increase in trading volume, with one-week volume rising 241% week on week.

Coinbase wins Singapore Major Payment Institution License

  • On Monday, it was announced that Coinbase obtained a Major Payment Institution License from the Monetary Authority of Singapore. This comes hot on the heels of an approval to offer perpetual futures to various groups of non-US customers.

  • With this license, Coinbase can offer digital payment token services to individuals and institutions. Coinbase is clearly winning the CEX regulatory battle, especially on the international playing field.

And last but not least

Open source code?

Last week, Circle launched Circle Research, an experimental department to accelerate and amplify technical innovation within crypto through open-source research. Its first contribution was Perimeter Protocol, a new standard for building on-chain credit markets. Through Perimeter Protocol, developers should be able to freely build unique credit applications. Supported features include the ability to delegate loan management and monitoring, integration with permission standards, and the flexibility to accommodate different types of credit instruments.

I’m not a software guy, so I haven’t personally verified this myself, but apparently, Circle Research forked a large amount of code from Maple Finance, one of the more prominent institutional on-chain credit protocols, when creating Perimeter Protocol. Here’s the kicker. Circle invested in Maple Finance through its venture arm. The community didn’t react too kindly to this, partly because I don’t think Circle Research gave a lot of attribution for the code they used. However, from a philosophical perspective, should people even be butthurt that open-source code is being used? Open source code is meant to be stored publicly and shared publicly. Anyone should be able to use the code without any community backlash. Is it a bit of an asshole move to use the code without saying thanks? Yea. Is there anything wrong with it? I don’t think so.

This has been one of crypto’s more important debates throughout the years. DeFi is built on open-source protocols that offer users full transparency. But simultaneously, this has led to fork after fork of successful protocols. Where does it stop? Well, one way to stop it is by slapping a business source license on your code, like Uniswap does with every new protocol iteration. This restricts developers from using your code for some time, in Uniswap’s case for four years. However, adopting a business source license also leads to a lot of backlash from the crypto community, where anons on CT rage about how everything should be open source and how else we would build a transparent and composable financial system? It’s a hard middle ground to find. I’m all for open-source transparency, but simultaneously, these protocols are businesses. The last thing I want to deal with as a founder is allowing a competitor to fork my code and conduct a vampire attack. However, as protocols build brand moats and gain wider mass adoption, more open-source standards will be adopted over time. — JC

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