A handful of the most interesting and current stories in the blockchain/web3 world not published on Decential this past week in case you missed them

Hello and welcome back to the Web3 Rewind! Per usual with the industry, lots has happened this past week so without further adieu, let’s dive into this week’s news.

We’ve been writing a lot lately at Decential about household name brands moving into the metaverse (see here and here and here). If you’ve been paying attention to virtual worlds like Decentraland or The Sandbox or Crytpovoxels this won’t come as a surprise (and if you’re not paying attention what are you waiting for? They’re fun and weird and still a bit clunky but the vision is there and only getting better.)

Ok, sorry. My point is that it seems to me that brands are way ahead of almost every other part of the broader crypto industry in terms of hitching their cart to the horse. Or, of injecting their already formed business practices into the metaverse rather than adapting to a new paradigm. They’ve quickly figured out that it was a mistake to try to sell access by way of tokens to a digital community. No, dummy, it needs to be free. And then we can get all sorts of information from you and home in on what’s come to be called super fans. Sound familiar?

It's a race for content. It’s about return on investment. Community building cannot be avoided, but as a term rather than an ethos. Channels are being launched, which I assume is the larval stage of a vertical. Am I being overly cynical? Maybe but not to go all Walter and “I did not watch my buddies die face down in the muck” on you, but seeing a bland spreading of web2 tactics across the cryptosphere depresses me. I hope we’re not simply replicating this world on a blockchain, that would be a real shame and lost opportunity. All right, that’s enough, grampa. I’m going off for a week in the woods with my boys. It’s good to get your head out of the space and see the bigger picture. Stay safe and see you soon. – Matthew Leising, editor in chief, Decential Media

Damned if you do dept.

A Tale of Two Exchanges

U.S. regulators seem to be taking a page out of the Fed's playbook when it comes to the crypto industry, with recent "hikes" that have ensnared two of the largest digital asset exchanges in the world. In the span of a week both Binance and Coinbase have run afoul of the Commodity Futures Trading Commission and the Securities and Exchange Commission, respectively.

Binance, the world's largest crypto exchange, was sued by the CFTC for allegedly offering unregistered crypto derivatives products. The point that comes to mind is the CFTC, which traditionally has been slower than other organizations to bring legal action (looking at you SEC), has targeted Binance not only as a company but is also charging its CEO Changpeng Zhao (CZ). A case CZ and his lawyers may want to revisit is from 2021, when the CFTC successfully sued Bitmex and its founders, including Arthur Hayes, for offering cryptocurrency derivatives, for $100 million. CZ and other leaders at the firm were accused of purposefully misleading customers, partners like Paxos and regulators. As a reminder - last month, Paxos received a Wells Notice from the SEC alleging that Binance's stablecoin BUSD is a security and more enforcement action may take place as a result. The various cults of personality around crypto have been under fire recently, and the hard fall from grace as seen in the cases of SBF and Do Kwon should serve as a firm reminder of the price one pays for notoriety... or infamy.

Binance (read CZ) can be described as flying fast and loose with regulation, but Coinbase, the other unfortunate star in this week's regulatory soap opera, has made painstaking efforts to adhere to the law and comply with regulators. Despite this, Coinbase received its own Wells Notice last week with accusations of violating federal securities laws. Coinbase said it met with the SEC more than 30 times over nine months to try to hash out a way for a crypto exchange to register with the agency, and yet here we are. One has to wonder why the SEC is now unwilling to have an additional dialogue with Coinbase to ease their qualms. Armstrong has long been a proponent of better, clearer regulation and asked time and time again to work with regulators to establish guidelines. What was the purpose of even trying to do things the right way with the SEC in the first place, if they only were going to come back and sue Coinbase in the end? It also calls into question the efficacy of the months-long process Coinbase went through leading to its initial share sale in 2021 when the SEC had a chance to question every aspect of its business.

So while it appears that both Binance and Coinbase are next on the menu for regulators, the resounding question continues to be, will the industry ever receive the regulation that it so desperately needs? It doesn't seem to matter whether Binance outright falsified information or Coinbase did everything right, both are still in the sites of regulators. The industry deserves more out of its regulators if the shared goal is to in fact prevent more crypto builders from fleeing the US. — Parker Dresdow, Decential Media

Quick Bits

Gucci Apes Deeper into Crypto 🦧

• Gucci has never been known for taking a backseat and with the metaverse is no exception. The famed luxury brand has continued its partnership with Bored Ape Yacht Club (BAYC) to further cement its web3 presence after it started accepting ApeCoin last summer. They've also used Yuga Lab's deep knowledge of the space to design custom web3 apparel for 10KTF.

• This partnership will offer a wider range of products across web3 and is a step toward the idea of a universal brand (one that you can wear IRL and virtually). Business of Fashion quoted Robert Triefus, chief executive of Gucci Vault and Metaverse Ventures as saying, “This will give us an active role in Otherside and 10KTF’s continuing narrative, unfolding in multiple forms.” 👀

GameFi Continues to be Hot 🔥

• You know it and I know it - GameFi is not a bad sector to invest in and numbers back it up. According to DappRadar, the gaming sector accounted for nearly 50 percent of on-chain activity in 2022. The Wax blockchain's Play-and-Earn model game Alien Worlds continued to be the most played game, with 353,758 unique active wallets (UAW) as of 2022. Second was Hive blockchain's collectible trading card game Splinter Lands with roughly 234,000 UAW.

•  Animoca Brands and Shima Capital are the two most-active investors in the space, with 57 and 28 investments, respectively. Incentives to play and the drive to earn will continue to be the main catalysts for the sector as the community-based RPG and Virtual World dominate the market.

Investments in Crypto Revamping 📈

• When TradFi show cracks, crypto reacts. CoinShares reporting indicates, "Digital asset investment products saw inflows totaling $160 million, the largest since July 2022. A marked turnaround following 6 weeks of outflows that totaled $408 million." The driver appears to be a diminished faith in traditional markets and confusion around the outlook for monetary policy.

• Bitcoin received most of the inflows, with $128 million over the last week. This is a great show of confidence in the "digital gold." The report also said that Ethereum suffered outflows of $5.2 million last week, its third consecutive week of outflows. This is likely a defensive move by investors connected to the impending Shanghai Upgrade, as stakers will finally have the ability to withdraw ETH, leading many to predict a significant drop in price.

 Hacked Again 😒

• On-chain hacks including bridge attacks have continued to plague the crypto industry. The latest victim was Euler Finance, which saw "$135.8 million stETH, $33.8 million USDC, $18.5 million WBTC, and $8.7 million DAI" exploited from the protocol. Since the initial attack on March 25th, around 70 percent ($138 million) has been returned.

• While it's become vogue in certain circles to hack an exchange, steal people's hard-earned crypto and then ransom it back in the name of personal development - the trend is troubling. Further deduction using Etherscan shows that last year's Ronin hack may be connected to Euler. More importantly, these hacks take a toll on the psyche of investors, as breaches of even decentralized protocols are not only becoming tiresome, but calling into question how long the "fledgling" stage will last.

And last but not least

L2 season continues?

After DeFi summer and the subsequent bull run that lead to a flurry of Layer 1 (L1) blockchains garnering massive token valuations, it's time for Ethereum Layer 2 (L2) scaling solutions to take the spotlight. With Arbitrum's $ARB airdrop, zkSync Era mainnet, zkEVM mainnet, and Base from Coinbase just in the past month, it seems that VC dollars are chasing the push toward more robust Ethereum Virtual Machine-native infrastructure. The search is on to fund anyone building scalability solutions in the Ethereum ecosystem. VCs and other early-stage investors realize the benefit of having first dibs and smooth-sailing their way through token vesting schedules. Nearly half, or 44 percent, of Arbitrum's ARB circulation is intended for investors and developers; similarly 36 percent of Optimism's OP tokens were allocated to investors and other "core contributors" (according to Coindesk reporting). These figures represent a heavy concentration outside of circulation and trading volume.

When taking a look at Arbitrum's airdrop, a fair amount of "selling the news" took place as qualifying addresses sought to offload the "free money." Interestingly enough in the case of Arbitrum and Optimism, which also have pushed similar community initiatives, both have seen transaction volumes diminish potentially indicating the flight of "tourist" interest in the projects following these highly anticipated airdrop events.

When looking at the numbers, it's interesting to note how L1s and L2s have grown in relation to one another, as hot L2s are seeing their market cap to total value locked gain in comparison to popular L1s. The L2s Arbitrum, Optimism and Polygon have a combined $4.2 billion in TVL, while the L1s Solana and Avalanche are at $1.1 billion. That's a good gauge of activity between the two categories.

So how long will the L2 dominance last? Will we see another non-EVM ecosystem take the spotlight? How about the sidelined cross-chain narrative maintaining excitement in the Cosmos ecosystem? We won't pretend to have the answers - but we will zoom out and take this moment in the 'L2 season' to express gratitude for the Ethereum ecosystem's continued pursuit of open finance and permissionless systems. — PD

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.