Solana's Comeback Story

Crypto tax showdown I Fake XRP ETF filing | OKX L2 | Uniswap wallet for Android

Author

Decential Media
November 17, 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:

  • Crypto tax rules nearing

  • Solana’s strength

  • Fake XRP filing

  • OKX L2

  • Uniswap Android wallet

Just a note to our readers that we won’t be publishing The Web3 Rewind next week. We’ll be back on Dec. 1 and to everyone in the U.S. have a wonderful Thanksgiving break.

Hey Everyone! We have a new email newsletter called The Beat that can be delivered straight to your inbox with all the latest about where music meets web3. You can subscribe here.

The Latest

Down to the wire on crypto tax changes

The comment period on the new set of IRS proposals that affect crypto has now closed, with the Blockchain Association sending in a 31-page response earlier this week. The agency received 120,000 comment letters on the issue, which is nuts. The problems with the proposed rules still exist however, and we’ve written several times about the stakes. I’ll briefly summarize those in a minute but first I want to raise a separate question. Why does the IRS treat cryptocurrency as property? This seemingly mundane designation means gains and losses on any transaction using Bitcoin or Ether or whatever must be marked to the value of the coin on the day of the transaction. The IRS should change the crypto designation to that of a currency and make life simpler for everyone.

The thorns in the rosebush of the taxman’s proposal relate in most cases to what entity is on the other side of a defi trade. If it’s a decentralized exchange and you’re trading with a smart contract how exactly are you to report “the sender’s name, address, and Social Security number to the government,” as we wrote in 2021. Another one is how a broker is defined. Again, if the definition is broadened to include any defi project that facilitates the transfer of digital assets, are we expecting that bit of code to file customer information with the government? Wrapped up in all of this is a frightening attempt to obliterate customer privacy protections. If the government can link a blockchain address to an individual it knows every transaction that person has ever made on-chain. To make it even simpler for everyone, the agency must begin with upholding privacy standards and ditch the rest of its misguided approach to digital money. – Matthew Leising, editor in chief, Decential Media

Don’t call it a comeback dept.

Solana strength

I cannot emphasize how ridiculously strong Solana has been. Despite the wider market retracing violently ever so often, Solana has continued to push on. In the past month, Solana is up 160% and showing no signs of stopping. Here’s the kicker: all while the price has been relentlessly going up, FTX has been selling large amounts of Solana. And by large, I mean likely over $120M, which is pretty significant given the low liquidity conditions in bear markets, if you still believe we are in one. Perhaps Galaxy selling Solana is bullish, as it means that the overhang from the FTX liquidations is diminishing by the day.

In other news, Solana USDC and USDT transfer volume is going vertical, reaching a yearly high. The previous high in June was just under $2B in daily transfer volume, with that number looking closer to $5B these days. Another staggering metric is the volume/liquidity ratio on Solana. For example, a SOL/USDT pool on Solana saw $40M in volume on $1M in liquidity. Want something even more extreme? Take this SOL/USDC pool on Lifinity, which has a capital efficiency of 206x.

Other things happening in the Solana ecosystem? The premier DEX aggregator, Jupiter, recently announced its airdrop. While it’s still in the planning phases, the protocol will distribute 40% of the token supply over four different phases. In addition, they just launched a new perps DEX and a leveraged SOL staking stablecoin. There are other large airdrops on the roadmap for Solana, most notably, Pyth, the second-largest oracle behind Chainlink.

DePIN is another area where Solana is getting a large amount of adoption and traction. For example, last week, Helium announced that you can purchase a Helium Mobile Hotspot from anywhere in the US. It isn’t too farfetched to imagine a future where everyone gets access to $5/month mobile plans. Render is another DePIN project that recently migrated to Solana, and trip.dev, Uber on the blockchain, has also been making the rounds.

It wouldn’t be crypto if I didn’t talk about memecoins. Solana’s memecoin of choice? BONK. It’s currently up over 10x in the past month, and it seems like there’s a vibrant community backing it. Of course, it has a logo that has a dog in it. Either way, the Solana ecosystem is thriving, from DeFi, to consumer apps, to gaming projects such as Star Atlas. Even the Ethereum maxis on Twitter are seeing a little bit of value in Solana. That’s generally what happens when prices go up. — Joseph Cooper, Decential Media

Quick Bits

Fake XRP ETF filing

  • On Monday, someone made a false business registration for a BlackRock XRP trust. That sent the token XRP rocketing higher. However, it was later confirmed that the filing was false.

  • The Delaware Department of State has referred the matter to the Department of Justice. Was what the user did illegal? We’re not sure. Does it count as market manipulation? We’re also not sure. However, one thing you can count on lately is crypto media outlets and Twitter crypto news accounts always jumping the gun on fake news.

OKX L2

  • Following the footsteps of Coinbase and Base, OKX, one of the larger CEX winners of the bear market, has also decided to launch its own L2. Named X1, the L2 will be built using Polygon’s CDK, in comparison to Base, which was built using the OP stack from Optimism.

  • Next on the to-do list, the exchange will have to figure out how to convert some of its 50M+ users into X1 users, something that Coinbase has yet to figure out.

Uniswap wallet for Android

  • After releasing its wallet on iOS, Uniswap has done the same for Android. Users can access and view balances in six new languages, follow traders, swap across eight chains and more.

  • Uniswap joins other DeFi protocols that have launched dedicated mobile apps, and this could be a strong trend going forward, especially with the amount of mobile penetration in developing economies, where crypto stands to make the most change.

And last but not least

Coinbase verifications

Last week, Coinbase released verifications. Users can now attest to account and country credentials on-chain, all verified by Coinbase. That means that 110M+ verified users can now verify these credentials on-chain. What’s the point of that, you ask? For starters, dApps can confidently exclude US users from their airdrops. Thank you Gary Gensler. In the not too distant future, we could see dApps requiring wallets eligible for an airdrop to “attest” to the fact that they do not reside in the US or are owned by a US citizen. Of course, there are other use cases, such as adding sybil-resistance functionality, which crypto still hasn’t solved yet. However, it is highly unlikely that a dApp will ever use Coinbase Verifications anytime soon, as Coinbase’s verified users are not representative of crypto’s entire on-chain user population. Only limiting yourself to wallets that have been Coinbase verified would likely significantly limit your user base.

Another potential issue is privacy. Right now, when you attest using Coinbase verifications, you are publicly declaring that a.) you are a Coinbase user, and b.) what country you reside in/are a citizen of. All of that data is now public and permanent on the blockchain. That’s hardly attractive for anyone who wants to retain a semblance of anonymity. A much better solution would be to use zero-knowledge proofs to hide all the information that a user is attesting to but still make it verifiable in a trustless manner. Another obvious issue that comes to mind is data laws, such as GDPR. I’m sure there’s a clause out there that when a customer requests their user data be deleted, the company has to provide some channel for doing so and must do so in a specified amount of time. How do you “remove” data from a blockchain? Currently, that isn’t very possible given the fact that’s the whole point of blockchains. You know, the whole decentralized ledger thing. Regulators are probably pulling their hair out thinking through this right now. — JC

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