Tech Brew Ride Home - Mon. 12/27 – Gibraltar To Become The Rock Of Crypto?

Episode Date: December 27, 2021

Gibraltar wants to add crypto to its stock exchange. The complicated truth about how successful Alexa has been as a product for Amazon. It was a big year for decentralized exchanges, but an even bigger one for centralized ones. And the story behind that SOS token drop that happened on Christmas Day.  Sponsors: RadPowerBikes.com DTCNewsletter.co Links: ‘Blockchain Rock’: Gibraltar moves to become world’s first cryptocurrency hub (The Guardian) Amazon’s Alexa Stalled With Users as Interest Faded, Documents Show (Bloomberg) Decentralized exchanges saw over $1 trillion in trading volume this year (The Block) Centralized crypto exchanges saw over $14 trillion in trading volume this year (The Block) Everything You Need to Know About OpenDAO’s SOS Token Airdrop for OpenSea Users (Decrypt) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Monday, December 27th, 2021. I'm Brian McCullough today. Gibraltar wants to add crypto to its stock exchange.

The complicated truth about how successful Alexa has actually been as a product for Amazon. It was a big year for decentralized exchanges, but an even bigger one for centralized ones. And the story behind that SOS token drop that happened on Christmas Day. Here's what you miss today in the world of tech. Gibraltar's regulators are considering a plan to add cryptocurrency, to its stock exchange, risking reputational damage and even diplomatic sanctions if it follows through. If you're unaware, Gibraltar is a British overseas territory that has some considerable degree of autonomy as these things go. So in the grand tradition of tiny nations or even islands being unique

jurisdictional entities for monetary or tax purposes, quoting the Guardian, it is a bold move for a territory of just 33,000 people where the financial sector, which accounts for roughly a third of Gibraltar's 2.4 billion-pound economy is overseen by a regulator-staffed by 82 employees. If all goes to plan, the enclave could become a global cryptocurrency hub. If the controls set by the small team of regulators fail, it risks reputational damage and ultimately diplomatic sanctions that could threaten its economy. While countries, including China and the UK, have either banned or openly warned against investments in crypto assets, Gibraltar has bucked the trend. Having committed to formally regulate the country,

cryptocurrencies in an attempt to future-proof the territory's status as a financial hub. It comes as Gibraltar struggles to shake off a reputation as a global tax haven, with the government having sued a Spanish newspaper in an attempt to restore its global standing. Albert Isola, Gibraltar's minister for digital financial services and public utilities, says that while Gibraltar was a tax haven 20 years ago, the territory has now overhauled its tax and information sharing policies. The introduction of crypto regulation is having a similar effect, rooting out bad actors and providing assurance to investors, he says.

Gibraltar's regulator has so far approved 14 cryptocurrency and blockchain firms for its licensing scheme, attracting the attention of X-Sirious Minerals Chairman Richard Polden, who chose Gibraltar for Valerum's crypto exchange project. Valerium, he says, is trying to harness a cryptocurrency sector that is worth roughly $3.5 trillion or $2.6 trillion, pounds, roughly the combined value of all companies listed on the London Stock Exchange. Polden is the chairman of Valerian, which is based in Gibraltar, and focuses on providing technology for linking mainstream conventional currencies, such as the pound and the dollar with crypto assets. Other countries will be watching closely. Neil Williams, London-based deputy head of complex crime at Reed's

solicitors, says, if it's a success, you'd certainly think that other jurisdictions would look to follow because it's an ever-increasing valuable commodity, end quote. However, experts have warned that Gibraltar could face sanctions by countries such as the U.S. if its regulators end up giving legal approval to crypto firms that even inadvertently give a pass to money launderers, black market criminals or kleptocrats, who prefer the anonymity of crypto assets. It comes amid concern at major global financial regulators, including the Bank of England, over the rapid development of crypto assets and the potential consequences for consumer and investor protection, market integrity, money laundering, and the financing of terror groups.

It could enable or facilitate money laundering, sanctions of Asian terrorist financing, so everyone's wary of that as well, says Charlie Steele, a partner at Forensic Accounting Firm and Consultancy Forensic Risk Alliance and a former U.S. Justice Department official. Regulators worldwide, almost all of them really, are approaching it from a position of deep skepticism, so it's a little outside that strain of thinking for a country to welcome them in to buy a stock exchange, end quote. We've got some data on something that I've always sort of wondered about. Do you have an Alexa device of some shape or form in your house? I feel like a lot of us do. They've sold millions of them. But here's another question. When was the last time you actually used it? Well, Bloomberg has gotten its hands on some internal documents to show that Amazon is

struggling to retain Alexa device users. In some years, 15 to 25 percent of new Alexa device users were no longer active on their devices after just one week, quote, The documents which covered 2018 to 2021 detail Amazon's continued ambitions for Alexa, including plans to add more cameras and sensors that would allow devices to recognize different voices or determine which rooms users are in during each interaction.

They also reveal the roadblocks the company sees to realizing these goals. Last year, Amazon's internal analysis of the smart speaker market determined it had, quote, past its growth phase and estimated it would expand only 1.2% annually for the next several years. Amazon views one of the main barriers to Alexa's continued growth as concerns about privacy, sparked by revelations that Amazon workers review snippets of audio to help improve its software, along with some high-profile blunders, such as an incident in which a person's device sent recordings of conversations to a contact after misinterpreting a series of phrases

as commands. The other hurdle is an even more basic challenge. People simply don't find Alexa that useful. Amazon's goal with Alexa was to pull users into a deeper relationship with the company's services, allowing it to profit in various ways. Sales have been significant. Last year, Amazon determined that 25% of U.S. households have at least one Alexa device. Among Amazon Prime households, it's 27%. But most Alexa users in many years have used voice-powered devices only to play music, or set the timer when they cook, or turn on the lights. Amazon employees noted in a planning document for 2019 that new Alexa users discover half of the features they will ever use within three hours of activating the device. Amazon has also been using Alexa itself to nudge consumers

to use the system in new ways. In recent years, the devices have begun suggesting new requests that people could make in the process of fulfilling whatever function they actually did request. Anoyed customers have struggled to turn off that feature. Amazon employees more than 10,000 people to work on Alexa, and the documents projected its fixed costs to be 4.2.2.2. billion in 2021. For such a costly division, Alexa's prospects for generating revenue are unclear. In 2018, Amazon projected it would lose $5 per device in 2021 and said it hoped to improve that to a $2 per unit profit in 2008. The company says its goal is to make money when people use Alexa to access other Amazon services, end quote. Quoting Dare, Obasanjo, you aren't a successful software company until you have a hardware business that consumes a lot of capital

and whose economics are upside down compared to your software business. It's basically a right of passage at this point. I wonder when they'll cut bait, end quote. Here's some more interesting data. Two data points over the weekend involving crypto. Have you ever heard of Dex's decentralized exchanges? It's where all the defy magic has been happening lately. And according to some new research, Dex's had a big year reporting more than $1 trillion in

2021 trading volumes as of December 23rd, up 858% from $15 billion in volume in 2020. Monthly volume peaked in May at $162.8 billion, and leading the pack of the Dex's is Uniswap with over 75% of the Dex market share. But don't cry for the centralized exchanges. That last bit of data was from the block, and this is from the block as well. Centralized crypto exchanges reported over $14 trillion in 2021 trading volume, and that was up 689% year over year. Binance is the leader here in centralized exchanges, facilitating 67% of the total volume or over $9.5 trillion. Quote, all these numbers are from the block's legitimate index, which takes volume data from the largest exchanges that are known to be reporting volumes more accurately, end quote.

Finally today, there was some big crypto news over the weekend, an organization called Open Dow, airdropped SOS tokens for users of OpenC's NFT marketplace. The token, again called SOS, is unaffiliated with OpenC, but it is up more than 10x in just two days after the air drop. So basically, if you were a user of OpenC at all and you were willing to accept this into your wallet, you basically got free crypto, basically free money, even though OpenC didn't give it to you. So what? Quoting decrypt. On Christmas Eve, anyone who had ever spent money on OpenC could claim a free Ethereum token called SOS. And the amount of SOS they'd get was determined by how much money they had spent on NFTs on OpenC. By Sunday, about 240,000 people had claimed the token, and it had skyrocketed by more than 1,000% in value. The tokens were not dropped by the popular NFT marketplace itself, but by Open Dow, an independent, decentralized autonomous organization that pledges to use some of the tokens it earmarked for itself to compensate OpenC users for scams and to support the burgeoning NFT industry.

Although the crypto space is saturated with airdrops and meme tokens, the drop for SOS blew up. up. On Christmas Day, it was the largest gainer on coin market cap, with its price rising faster than even the sketchiest shit coin. By Boxing Day, the token had risen to a market capitalization of $321 million. Its Discord has about 50,000 members and 100,000 people are following Open Dow on Twitter. SOS's market cap hasn't been a vertical green line. The token has since fallen to a market cap of just $266 million, as of this writing, a 17% decrease from its all-time high. The number of SOS tokens you can claim depends on how much you've used OpenC, the most popular marketplace for non-fungible tokens. The more you've traded on the platform, the more SOS tokens you can

claim. To claim SOS, head to OpenDAL's site, connect your cryptocurrency wallet, and hit initiate claim. OpenDal supports Metamask, Coinbase wallet, and wallet connect. Within days of its creation, major exchanges such as OKX, Hobiglobil, and gait.io listed the token. You can trade it on decentralized exchanges like Uniswap or become a liquidity provider to earn a cut of transaction fees on an automatic market maker protocol. A pseudanonymous developer called 9x9 by 9 by 9 created Open Dow. The coder, who's also building a Dow called 721 Dow, says he didn't get paid for creating Open Dow, but he didn't need to. According to EtherScan, 9x9x9x9's ETH account holds over $800,000 of SOS tokens, and the developer also holds $10 million worth of of AVE interest-bearing tokens. Open Dow's site claims that there will be 100 trillion total

SOS tokens. Half were designated toward the airdrop. Another 20% will be issued as staking incentives and another 10% will incentivize liquidity providers. Two votes proposed by the project's pseudonymous creator 9x9x9 by 9x have determined how the protocol will dish out these incentives. The staking incentives will be distributed over the course of a year and token holders decided that it will take two years to deplete the Dow of incentives for liquidity providers. A final 20% will go to the Open Dow Protocol. The Open Dow Protocol will compensate victims of open-C scams, support NFT communities and artists, and provide money to developers. It is likely that these decisions will be made through snapshot, the same voting site that determined the rewards for

stakers and LPs. But there isn't a project roadmap yet. Why? One of the Dow's suit anonymous contributors 9x9 by 9 by 9 said on Discord, because it is a Dow. We're undergoing setup for the Dow, getting candidates for multisig, and it is not a company with a roadmap. Decisions are decided by all SOS holders, end quote. Now, there is some controversy around all of this. Some folks think there are red flags around the whole way that the Dow was set up to begin with, and other folks are worried about the potential for rugpools and scams. Of course, other folks are pointing out that this doesn't exactly reward the community because OpenC whales would get a disproportionate share of the tokens, i.e. the top 100 holders of SOS coin currently owns 74% of the supply.

Read the linked piece in the show notes if you want all the details on the controversies, but what I find fascinating is, remember, this is something that was done to reward the community of OpenC, but OpenC didn't do it. Quoting again, In many ways, the popularity of SOS is a response to requests for OpenC itself to launch a token. Popular crypto projects like Uniswop, Compound, and Ave have distributed governance tokens to people who use their platform, and many traders are restless for OpenC to do the same. OpenC is a company, though, not a protocol, and has no cause to decentralize in the same way that protocols like Uniswap and Compound do. That said, OpenC's community clearly wants an OpenC token.

the company's newly appointed CFO Brian Roberts met with backlash earlier this month when he hinted at plans for an IPO. Selling equity on the stock market would distribute ownership over OpenC to wealthy shareholders rather than community members. OpenC has since said its intentions were misreported, end quote. So remember that whole brouhaha just last week between Jack Dorsey and other crypto folks about incentives behind crypto and whatnot? I cannot believe that debate had an immediate illustration just like this. I don't want to rehash that debate because, again, I don't come down on any side of it. But let me quote from a tweet thread from Christmas Day by Alexis O'Hanian, quote, are you all realizing the implications of this SOSirdrop? Okay, before all the VC think pieces start, these airdrops like ends before it, flip the script on how

everyone will value their time and spending online, you're finally rewarded for using. It's bringing incentives that I love as a founder and investor to the community that makes it all work. Because everything is in a public database, it allows anyone to show up and reward behavior stored there. Yes, there will be lots of spam, but the projects that emerge with great teams can win big by incentivizing, not preying upon their community. I've built and breathed community for 16 plus years, and I'm here right now like mind-blown emoji. Now, anyone can show up to a massively successful project and draft on their community, and if you offer something more interesting or rewarding, etc., leapfrog your way into a very

motivated minimum viable community overnight, end quote. So that's the bullish case on all of this. The, shall we call it, concerned take comes once again from Dare Obisancho, quote, you don't even have to have a successful software project to attach a FOMO-driven token to it. Just pick an existing project, in this case, OpenC, reward their early adopters, keep tokens for yourself, and then watch the price rise. It's also interesting to see the community be so upset with OpenC because they aren't willing

to create a token and reward early adopters but instead may just do an IPO. These communities are increasingly indistinguishable from Redditors on R-Sash-Wall-Street Betts, aping into things like GameStop and AMC, end quote. Just finished 14 hours of driving back from Michigan. Shout out to Mobile, which is the only major gas brand that lets you pay for your gas inside the company's app using Apple Pay. No need to get out of the car even. No need to swipe your credit card, which since I've had my credit card compromised three times

in the last five years and every single time, it was because I used it at a gas pump. I appreciate that. I know this is a tad late this episode, so that's all I have for you today. Talk to you tomorrow.