Solana Presales Get Out of Control

Ether is a currency I Dencun fee reductions | Starbucks shuts NFT program | Grab Singapore <> Crypto payments

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Decential Media
March 22, 2024

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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:

  • Ether is a a currency

  • Solana presale mania

  • Dencun fee reductions

  • Starbucks shuts down Odyssey NFT program

  • Grab Singapore crypto payments

  • Does everything need to be an L2?

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The Latest

Ether is a currency

Ethereum 4K 3D-rendered illustration. Found more like this in 10 different crypto currencies in our DrawKit collection.

photos: Unsplash

If an asset can be used like a security, does that make it a security? That question may become clearer after it was reported by CoinDesk and Fortune this week that the U.S. Securities and Exchange Commission has issued subpoenas to companies – and maybe the Ethereum Foundation as well – that have dealt with the foundation, which maintains the Ethereum blockchain.

While not many details are known at this point, the SEC inquiries may be related to Ethereum’s switch to a proof-of-stake consensus mechanism in 2022. Ether is pledged – or staked – by people who want to operate a validator on the network in the proof-of-stake model. They earn interest on their Ether collateral, now around 3.5 percent. This to me implies the SEC may reconsider its stance on whether Ether is a security.

See, the agency is really confused on this point. An SEC official said in 2018 that Ether is not a security, then the agency approved several exchange-traded funds based on Ether futures – implying that the SEC views Ether as a commodity (which the current head of the Commodity Futures Trading Commission believes.) But of course, SEC Chairman Gary Gensler has refused to say that Ether isn’t a security under Congressional questioning. So who knows?

But let’s try a thought experiment. I earn interest on the dollars in my bank account. Does that make the U.S. dollar a security? No, of course not. Ether is the foundation of the Ethereum blockchain, its native currency that’s required to perform any transaction on the network. I view it no differently than how the U.S. dollar is the currency underpinning much of the global economy. Ether is the currency underpinning the entire Ethereum ecosystem.

I’ve said before how I don’t view Ether as a security and the new SEC inquiries don’t change my mind. The market shrugged the news off as well. Ether rose 10 percent yesterday as the stories broke. Let me, though, refine my stance – Ether isn’t a security, and I don’t think it’s a commodity either. I think it’s a currency. Maybe this is simply too simple and I’m missing something; what I do know is that Congressional committees and regulatory agencies want to have as much breadth to police markets as they can get, so there’s a land-grab element between the SEC, CFTC and the Congressional committees that oversee them here that can’t be denied.

I hope either Congress gets involved to write new rules and definitions for this emergent technology or the courts make clear that the SEC is overstepping its authority as they have done in several recent cases. – Matthew Leising, editor in chief, Decential Media 

Head scratching dept.

Solana presale mania

What happens when the creator of the pepe meme announces a presale on Solana? Well, Solana degens send a wallet address $2M in 24 hours, and then a token launches, and it proceeds to go from millions to $2B in market cap in two days, in one of the craziest sequences of events I have ever witnessed in crypto.

Let’s take a step back. What is a presale? A presale is when users send funds to a wallet address with the promise that they get a certain % of a token’s supply. For those who think it looks familiar, it isn’t that different from the traditional ICOs we had back in the day. Most of the time, there is a minimum amount that users have to send, and sometimes there is a maximum account that users can send (such that one user doesn’t send a large amount of money and receives a disproportionate amount of the token’s supply). From there, 50% of the supply is normally distributed to those who bought into the presale, with the remaining 50% of the token supply being paired with the funds raised during the presale and added as liquidity.

As a result of this presale, the memecoin BOME, which stands for book of memes was created. As everyone aped into the memecoin, the token’s market cap quickly rose from a cute $4M to $2B in two days. Yep, you’re reading that right. During the peak, the token did $1B in daily on-chain volume. These are, quite frankly, unprecedented numbers. Even after topping and seeing a 60% drawdown, the token still has $60M in liquidity, which is more than basically every token on Solana. As a point of comparison, even SOL/USDC pairs on Solana only have a few million in liquidity.

Little did we know that BOME would kickstart a truly mind-boggling wave of presales, which have resulted in Solana users sending $122M to various influencers, community members, and KOLs in 27 presales. The largest presale amounted to $30M, which was raised in, checks notes, 30 minutes. You can’t tell me retail, or at least retail degeneracy, isn’t back when users have sent a staggering $122M in the hope of receiving tokens that will literally do nothing.

All this culminated in SLERF, with users sending a wallet address $10M. With the funds raised, all the individual behind it had to do was launch the token! Simple right? Well, not exactly. In an unfortunate sequence of events, the individual burned both the LP tokens, and the tokens set aside for the airdrop. In addition, he revoked the mint authority to prove to users that he no longer could mint tokens. That basically means that $10M has just disappeared into thin air, or more accurately, is locked forever in a liquidity pool, and that users never get any tokens or their funds back. I’m not sure if there are any key takeaways here other than the fact that sending money to random strangers on the Internet has made some people millions of dollars, and resulted in others losing all their money. — JC

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Quick Bits

Dencun upgrade fee reduction

  • The Dencun upgrade went successfully without a hitch last week for Ethereum. It’s always nice to take a moment to appreciate what an engineering feat this is, akin to switching the wheels on an airplane while it is in flight.

  • The upgrade achieved what it aimed to do, making transaction fees much cheaper for L2 users. Across the board, we saw a 60-90% reduction in L2 transaction fees, with most L2s now enjoying sub-cent transaction fees vs the ~$0.40 transaction fees that it used to deal with.

Starbucks closes Odyssey NFT program

  • After over a year, Starbucks has closed its NFT program. What started as a huge event for crypto, with one of its first large consumer company partnerships, has come to an end.

  • The NFTs that users have earned will be transformed to NFT platform Nifty Gateway, where they can continue to be bought and sold. I think it was a fun experiment and expect to see many more NFT based loyalty/points/reward programs in the future for crypto.

Grab Singapore crypto-onramp

  • Grab (the Uber of South-East Asia) users can now use crypto to top up their digital wallets. Supported currencies include BTC, ETH, USDC, USDT, and XSGD. The whole process is pretty simple and abstracted away, as Triple-A helps users convert their crypto into dollars.

  • Rather than having to send funds to a CEX, offramping to a bank account, and then sending that to another bank account, such payment options open the doors for increased crypto utility in the real world.

And last but not least

Zerion and Swell L2s

You get an L2, you get an L2, everybody gets an L2! This week’s list of protocols and companies building an L2 includes Zerion, a crypto wallet, and Swell, an LRT platform. We’re assuming you’re familiar with what an L2 is, but for those who need a quick primer, an L2 is a blockchain built on top of another blockchain that uses off-chain execution to enhance the speed of the chain and reduce transaction fees. So why are so many protocols launching L2s? The first and most obvious reason is so that users get cheaper transaction fees and faster transactions, and these are especially important given the high cost of using Ethereum today. This difference in performance became even larger with the latest Dencun upgrade. So the natural question is, if these L2s are so good, why would you not launch your protocol on an established L2 such as Arbitrum or Optimism that has all the users or liquidity? The answer, like many things in crypto, is money. First of all, by launching your own L2, you can capture something called sequencer fees. It’s similar to how instead of your users paying gas to Ethereum when using your dApp, they pay the gas to you because they are using your L2! So immediately, an increased amount of value is captured by the protocol. Following that, every protocol that has decided to launch its L2, and subsequently a token, has seen its token go live at sky-high (billions of dollars) valuations. Thus for both investors and the team, there really isn’t a reason you wouldn’t want this outcome. The last less cynical reason is sovereignty. This sovereignty means you get much more control over what happens to your dApp rather than leaving its fate to the underlying blockchain your dApp is built on. Furthermore, this sovereignty allows you to build your own ecosystem and “own it”, something which you can’t do if you are building on someone’s blockchain.

This brings us to our L2 stars of the week. Zerion is a crypto wallet for DeFi and NFTs. How will their L2 differentiate? The answer is zero gas fees. Yep, not low gas fees, zero. Zeerion claims that subsidizing the fees will represent a cost to the business that will decline over time as transaction fee improvements are made. The wallet hopes this cost will be offset by increased awareness of its wallet, which should theoretically bring in new wallet users who could end up paying fees when using other products, such as in-app swaps or signing up for its premium services. Given that wallets are a key point of interaction for all crypto users, it makes sense that one wallet is trying to build its own “ecosystem” around its wallet.

The other contender of the week is Swell, an liquidity-staking protocol. Just like how Blast was the first L2 that offered native ETH staking yield, it was only natural that someone would build an L2 with native LRT restaking yield. Swell has jumped the gun and is aiming to get a head start. They aim for an ecosystem built around its LRTs, but the L2 offers additional features such as decentralized sequencing, decentralized verifications, and faster finality by leveraging EigenLayer’s restaking mechanism. There are many reasons why launching your own L2 doesn’t make sense for many protocols, but nonetheless, it’ll be fun to see these experiments play out and see what sticks around. Expect hundreds upon hundreds more L2s to launch in the coming year.— JC

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