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:

• BRC-20 and some Bitcoin miner alpha

• Coinbase and their blowout Q1

• Setting precedents for MEV bribe refunds with Lido

• Lido upgrading to V2, ETH withdrawal FUD (round 2)

The Latest

Nobody said this was going to be easy. How many parts of your life qualify for that catechism? This should have always been the message when it comes to crypto and I apologize if someone led you astray, they were trying to sell you something before rugging you.

Nowhere in the web3 world is this lack of ease more pertinent now than in how musicians are trying to go on-chain. It’s shocking how badly they’re treated by the industry and the touring behemoths. Did you know a band that sells hundreds of thousands of tickets on a nationwide tour has no access to the fans who bought tickets? Oh no, there’s a middleman for that, don’t worry, because if a band gets direct access to its fans it could market directly to them and then Live Nation gets really nervous. Another orgy of rent seekers is taking place within the ownership and rights of published music. It’s lawyered to the hilt and possibly makes the U.S. tax code look elegant (see below).

For these and other reasons I think the music industry is one of the most in need of severe disruption. Do people still say it’s early in crypto? If it is, music + web3 is just past its Big Bang stage. The ideas are out there but it’s still hard to point to anything concrete. Non-fungible tokens have a lot to offer, yet there’s a palpable distaste for that term and technology within the music world, and rightly so. Scammers and rug pullers hurt everyone by the trust they steal, but the great thing about musicians is they are filled with hope. How can they not be and be successful? That’s a big theme right now – web3 savvy bands and labels are staying upbeat in the face of a very steep hill to climb and hoping to keep it weird for the time being.

The hard work is there. They might as well have fun while building an alternative in the shadow of a $64 billion industry. — Matthew Leising, editor in chief, Decential Media

Memecoins dept.

Bitcoin discovers tokens 😛

Have you heard that Bitcoin transaction fees are up 35x over the last 30 days? In fact, Bitcoin miners' transaction fee revenue has outstripped Bitcoin issuance for the first time. The last time I talked about Bitcoin activity going crazy, it was about ordinals. This time, BRC-20 tokens are all the rage.

Crypto has historically been great at naming conventions. That is exactly why BRC-20 tokens have nothing to do with ERC-20 tokens 🫠. (It's also nonsensical as ERC stands for Ethereum Request for Comments and is how smart contracts are written). BRC-20 tokens are Bitcoin's attempt at a token standard and must be minted via a priority gas auction. In that process a minter inscribes a certain amount of the token onto a satoshi. If you ever want to transfer that token, you can only transfer the exact quantity you minted, and you have to create a new 'transfer' NFT. If you want to sell it in different amounts than what you originally minted, you must create new NFTs. Doesn't seem as fungible as ERC-20 to me...

The most popular BRC-20 marketplace, Unisat, has a fantastic (I really mean inefficient) mechanism where you must mint 20 inscriptions before gaining access. At one point, this resulted in over 450K unconfirmed transactions in the Bitcoin mempool, almost doubling the previous ATH of 250K set in December 2017.

Memecoins aside, here's a piece of alpha for you loyal readers. If current transaction fees stay elevated alongside transaction activity, it could lead to a blowout quarter for Bitcoin miners. And there are quite a few of them publicly listed, such as Marathon Digital and Riot Platforms.

This was not what Satoshi Nakamoto had in mind when he first dreamt of a peer-to-peer electronic cash system. The use cases he envisioned included protecting sellers from fraud using irreversible transactions and protecting buyers using routine escrow mechanisms. Instead, he's likely rolling in his grave every time a BRC-20 token named PEPE is inscribed onto a satoshi. — 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.

Meme Season - $DOGE $SHIB

The past week was all about meme coins! While the market focused on $PEPE and its fall over the weekend, the original meme coins $DOGE and $SHIB were not immune. Both peaked on Friday and have been in a downtrend since with the wider meme-coin space.

While meme coins had a volatile and overall down week, meme stocks had a great week with 10% increase in $AMC and $GME.

Coinbase ($COIN) has decided to double up on their fight against the SEC by hitting back at an SEC proposal which would have affected custody rules for registered investment advisors (RIAs). The market seemed to back them with the stock price rallying more than 20% over the week. The Pyth network lists about 250 symbols across equities, FX, and metals apart from crypto.

Quick Bits

Coinbase Earnings, A Positive Surprise

• After a rough 2022 for much of crypto, we finally got some good news on the earnings front. Last Thursday, Coinbase reported an EPS of $0.45 vs the expected EPS of -$0.86. It looks like Wall Street analysts got it really wrong. Shocker. The earnings beat was driven by increases in transaction revenue and interest income, with a significant decrease in operational expenses due to two rounds of headcount reductions.

• On the earnings call, regulation was a hot topic. Coinbase's response? They're 100% committed to the US. Furthermore, if the regulatory hammer comes down, staking represented 3% of net revenue, BTC and ETH make up the majority of trade volume, and 20% of business is international. Safe to say, Coinbase isn't too worried.

Lido Exploiter MEV Bribe Refunds

• Last month, Sushi was exploited due to an upgrade to the protocol using Uniswap's V3 code. ~1800 WETH was stolen during the exploit, with the exploiter paying an 800 ETH bribe to the proposer. As it turned out, that was Lido's lucky day, with the DAO treasury receiving 5% of that bribe.

• Sushi is now trying to ask for that ~39.8 ETH back. Whatever Lido DAO decides, it will set a precedent as to whether liquid staking protocol's DAOs, or even validators, are on the hook for exploited funds paid to them as part of an MEV bribe. The closest comparison in Tradfi is if a bank helped someone launder money and received fees for doing so, but no one really agreed to it, and it was all automated by the bank's systems. Are they still on the hook to return the fees?

Blockworks Raise

• Media firm Blockworks raised a $12M round at a $135M valuation. The round was led by Dan Tapiero's 10T Holdings, with participation from Framework Ventures and angel investor Santiago Santos.

• The round is an opportunistic move given the headwinds other media organizations faced in the wake of FTX's collapse. The funds will be used to accelerate its research offering, Blockworks Research, a platform focused on providing institutional-grade research, governance, and data.

And last but not least

Lido V2 - Ethereum Withdrawal FUD Round 2

Lido is set to vote on its V2 upgrade this Friday. If the vote is successful, Lido V2 will be live after the vote enactment on May 15th. This opens the door for stETH withdrawals, alongside other upgrades to the staking router architecture.

As with the Shapella upgrade, we'll likely see some FUD on the timeline again about a huge amount of sell pressure. The total amount of ETH staked is ~19.5M, of which Lido has a 31.8% market share with 6.15M ETH staked. That represents ~$11b at current prices. If recent entry queue and exit queue statistics mean anything, I think we'll be just fine this time too. — 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.