Unchained - Unconfirmed: 3 Things SushiSwap Needs to Get in Order, According to Arca - Ep.297

Starting point is 00:00:00 Hey, all, before we begin, a couple quick announcements. First, I'm doing an end of your show with crypto predictions for 2022 by you. Please make a video or at least an audio recording of your 2022 crypto prediction or predictions and email it to hello at unchainedpodcast.com by end of day, Tuesday, December 28th. Please include your name and where you're from. Unfortunately, I need to give a forewarning that if you excessively promote anything, we will not be including your prediction. If you just want me to read on air a prediction that you just send in by email,

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Starting point is 00:01:36 Hi, everyone. Welcome to Unconfirmed, the show that reveals how the marque names in crypto are reacting to the week's top headlines and can see its own scoop on what they say on the horizon. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago, and as a senior editor at Forbes, was the first mainstream media reporter to cover cryptocurrency full-time. This is the December 10th, 2021 episode of Unconfirmed. Wish you could earn crypto but don't want to spend thousands on hardware? Just download the Notalcash app on your smartphone. Visit nodal.io slash unconfirmed.

Starting point is 00:02:11 That's NODLE.io slash unconfirmed to start earning Nodalcash today. With the crypto.com app, you can buy, earn, and spend crypto in one place. Download and get $25 with the code Laura. Link in the description. Tired of your exchange taking 25% of $1.5% of your exchange, taking 25% of your staking profits, the Avato blockchain computer allows you to stake Ethereum and other crypto at home and keep 100% of the rewards. Go to aVA.do. Today's guest is Jeff Dorman, chief investment officer at ARCA. Welcome, Jeff. Hi, thanks for having me back. So this has been a

Starting point is 00:02:51 dramatic week for sushi swap, culminating in CTO Joseph DeLong's resigning from the decentralized exchange. Before we get to that moment, why don't we give listeners some background and you can just tell us how it is that you came to start even working with Sushi Swap and how you see your role there? Sure. So ARCA is a full service asset management firm dedicated exclusively to digital assets. We make investments in a variety of different strategies at ARCA that some are early stage ventures, some are more yield generating, others are more long-term, like returns in the businesses and projects that are being developed within digital assets. And we're thematic in the terms of there's certain areas of digital assets that we like better than others. And we are always pretty hands on. We really want to help the teams that we work with. And we want to be supportive of the projects that we believe in. So truthfully, sushi is not

Starting point is 00:03:50 unique or different than anything else that we've been involved in in the sense that it fits a theme in a sector that we've been bullish on for a long time, which is DeFi and specifically decentralized exchanges within Defi. It is, fits a fundamental tenant that we are big believers in, which is strong product market fit, a real KPIs and metrics, not something that's, you know, to be determined, you know, has a real strong community and has real fundamental values. You know, This is a project that has, you know, anywhere between 600 million and a billion of run rate revenue every year, depending on the day. There's a little volatility in those numbers. But 600 million to a billion dollars of revenue is certainly nothing to sneeze at.

Starting point is 00:04:37 It has a real dividend that is paid out to token holders in the form of ex-sushi. And it has, you know, billions of dollars of volume every day. So, you know, this is the kind of dream scenario for us is fit a theme, fit a fundamental evaluation framework. And then ultimately, like any project, they have certain things that are going really well and certain things that aren't. And our job is to help them with the things that aren't. So that's the perfect segue to the recent events in sushi. When and why do you think this recent trouble started? And, you know, I think I don't mean literally this week.

Starting point is 00:05:18 I mean maybe starting even a month or two ago. Sure. I mean, like most things, what is being communicated on the outside is probably the extreme compared to what's actually happening on the inside. And I know that's a strange thing to say when you're talking about decentralized projects and you're talking about, you know, fully transparent projects. But, you know, at the end of the day, there's a lot of people who are contributing to sushi to make it what it is, right? You don't get to, you know, tens and hundreds of billions of dollars of volume and billions of dollars of TVL and almost a billion dollars of revenue without having really talented, successful people that are working on that. However, decentralized autonomous organizations are still experimental. They're still new.

Starting point is 00:06:08 And they're not perfect. A lot of people like to look at decentralization versus centralization as fairly black and white. The reality is almost none of them are. Almost everything falls along the spectrum somewhere between fully centralized and fully decentralized. Fully centralized is rarely a good thing in the sense that you have single point of failure and you have one or two people in total control. I think that's largely what the entire digital asset movement is trying to get away from. Fully decentralized, on the other hand, is usually not that great either in the sense that it's really hard to get consensus. It's really hard to get things done.

Starting point is 00:06:47 Most projects, again, fall somewhere in the middle of that spectrum, usually starting somewhat centralized and moving towards decentralization over time. In fact, if you go back to, you know, SEC Commissioner Hester Pierce's three-year safe harbor that she put out, I think over a year ago at this point that still hasn't gotten any traction, that's essentially what she laid out, which is, why don't we give these projects about three years to figure out if they can move from centralized to decentralization? And it actually makes a lot of sense because you have to have some leaders in the beginning to get to a point where then you can have it more decentralized and more autonomous and quite frankly more automatic. I think with sushi, it was a little bit of an interesting genesis in the sense that they forked the code from Uniswap. And you had a lot of different people come in and out of this project to make it work. And again, at the individual level, I think everybody has really made strong contributions to make. making it work. But like anything, if you don't have a structure and you don't have appointed leaders with any real control or real autonomy, eventually things just get sloppy. And I think that's

Starting point is 00:07:57 where we are with sushi today is they need some structure. There's no reason to take sides. I'm not even sure the two sides are really that even far apart. I think it's more it just needs some structure. It needs some leadership. And that's what ARCA is hoping to be, you know, one of the calm voices in the room who can get us to a productive way to move forward. And we're not alone. You know, there's a outpouring of people on social media and in Discord and Telegram who also love the sushi project who are offering to help. But, you know, we ultimately need to do that within the constructs of what a Tao is, which means some things have to go to an external vote and some people are ultimately going to have to, you know, be given some of that authority to ultimately move this

Starting point is 00:08:38 project forward. So just to give a recap of some of the events for listeners who may not know everything, there was a core. I'm actually even not sure if he was a core developer. I don't think he was a developer at Zero X Maki, but he was kind of part of the core team at Sushi Swap. And in September, he seemed to have resigned, but there was a leaked screenshot from a Sushi Swap Telegram group

Starting point is 00:09:05 that showed that Joseph DeLong, the CTIP, who resigned this week, had asked whether or not sushi should ask him to leave. And according to the poll, their 91% of respondents voted in favor. And so people were saying, you know, he was forced out. It wasn't that he resigned. And later on, someone on Twitter named Boring Crypto, who said that they were a former non-core sushi swap developer tweeted that Zero X-Maki was kicked out and said, quote, most of the good devs have left. Seems like greed sadly has taken over from community. What's your take on that characterization of events?

Starting point is 00:09:48 Sure. We are an asset manager and we're a pretty hands-on advisor, but we don't work there. If every single problem that any employee or customer had at every single company in the world was given a platform to put it out there publicly, you'd have the same conspiracy theories in the same dichotomy of he said, she said, as you're seeing with sushi. In some ways, it's unfortunate that some of these things have come to light. In other ways, it's great that some of these things have come to light in the sense that that's the spirit of decentralization is that we want to get as much information and facts

Starting point is 00:10:23 out to the public in a transparent way as possible so that the stakeholders of sushi can ultimately vote to fix the problem. If every screenshot from every company or every organization was saved and leaked out to the media, you know, every, you know, you'd be a very busy person, right? You'd be reporting on every wrongdoing that every single company and project has ever done in history. So I think it's hard to draw too many conclusions from, from, you know, screenshots without context or conversations in isolation without context. You know, what I can say is almost everybody that we've ever come across at sushi, whether they're still there or not, has had their heart in the right place and has

Starting point is 00:11:06 been really a strong believer in what sushi is trying to build. And I think the next group of people who come in will have the same attitude. And ultimately, that's pretty powerful and pretty awesome. Again, it's, to me, as an investor, it's much harder to get product market fit and to get customers and to get a community and to get traction than it is to fix an internal structure. That's the history of distressed investing or the history of activist investing. That's basically what you look for, right? You look for good company, bad management. You outst the management and you start over with the core business still in place.

Starting point is 00:11:44 Independent of who the right people are to ultimately lead this forward, it's a fixable problem. And that's what you gravitate toward as an investor. You look for fixable problems, right? You want things that are trading at values that are way undervalied. I mean, you know, this is the cheapest thing on the planet under any fundamental valuations. It's now down to basically one-time forward sales with a 15% dividend yield in a growing industry and a growing sector. I mean, you couldn't ask for anything better as an investor.

Starting point is 00:12:14 But, you know, there's clearly problems that need to be fixed. So, you know, again, on the one hand, you'd probably wish that some of these things were just addressed internally rather than coming to let externally. On the other hand, it's great. You know, it's pushing this to a head, right? It's forcing action. It's forcing the community to now get involved in governance. I think when some of these things come to a vote and some of these recent proposals that have been written come to a vote, you're going to see record turnout and record participation.

Starting point is 00:12:41 And at the end of the day, if you treat sushi as a microcosm for what we're trying to accomplish with DAWS, it really has a chance to be a Harvard business school case study for how to do this the right way. I'd find it hard-pressed to find anybody who's really rooting against this. You know, you may see individuals attack other individuals or individuals like some of the tweets you mentioned who are, you know, saying this is falling apart or this is sad. But if you actually backed up a little bit and said, do you want sushi to succeed or not, be hard-pressed to find anybody who wants this to fall apart. I just wouldn't see the benefit of that, right? This has a chance to transcend sushi and transcend investors and community.

Starting point is 00:13:24 members of sushi and really set the gold standard for how to get internal structures working properly within a DAO. And we really haven't seen that today, right? There's been some single entity DAOs, I suppose, that have been really easy to run. Like, I guess Constitution Dow, since it's fresh in our minds, would be the interesting one, right? Constitution Dow had a single goal. It's let's raise a lot of money and let's go buy a copy of the Constitution. Now, even though they failed to actually secure the copy of the Constitution that they were going after, it was a pretty simple DAO, right? It had a singular purpose. Give me some money. We're going to go bid on this. And that was easy. But now look at it. Right now, the people token still trades. They didn't

Starting point is 00:14:04 give back all the money. And now they have to figure out, well, what the hell do we do now with this Dow that we have and we need to come up with some sort of a structure? So I think, you know, we've proven that single purpose DAOs are easy ways to attract capital and easy ways to coordinate and incentivize like-minded people to do a single action. What we haven't proven yet is how to run, you know, quasi-looking companies or quasi- businesses within, with lots of different people contributing within a Dow. And, you know, for me, more philosophically even than as an investor, I'm really rooting for success here.

Starting point is 00:14:39 I'm rooting that people can put aside their personalities, people can put aside their pride and everything else and recognize that this has a chance to be able to. win for the entire industry. Okay, so in a moment, we're going to unpack some more of the problems and look to what this means for DAOs, but first a quick word from the sponsors who make this show possible. There's a new cryptocurrency made for mobile that you can earn by downloading the Notal Cash app. It's free, easy to use, and there's no hardware to buy. The Notal Cash app allows you to earn crypto, whether you're on the go, stuck in traffic, or even while you're sleeping. Notal Cash is the crypto you earn 24-7.

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Starting point is 00:15:52 One-time investment, one-d-percent profit. Go to Avato. That's AVA.do. Back to my conversation with Jeff. So just to finish out the story, Joseph ended up saying that he took a pay cut to leave Dapper Labs to work on sushi and that he was earning $300,000 a year. doing that and said that actually, you know, this sounds like a lot of money, but of course he had taken that pay cut. He proposed that via sushi swaps governance that all the core developers, minus himself be compensated with 200,000 sushi, which was about a million dollars each from

Starting point is 00:16:33 the project's treasury with no lockups. And that would have totaled about 18 million. That proposal did not pass. And he tweeted, this was a test to show less than 1% of the issuance going to the core team is controversial. You failed, by the way. So what's your take on how Dow's can and should compensate the core developers? Sure. Well, my first take is that informal Twitter polls by people who are overly stressed out because of a bad situation is probably not necessarily indicative of failure or succeeding of a test. It was a sushi governance poll. It was a sushi government. Yeah, not on Twitter. I understand. I understand. But the genesis was there's just been a lot of rants going back and forth on Twitter between current and ex-sushi contributors.

Starting point is 00:17:21 And I think it's been more counterproductive than productive regardless of who may ultimately be right or not. What I think is important from that, though, is there's, in our opinion, there's essentially three things that need to be solved here. First is a structure, right? And ARCA actually released its own proposal for a structure, a structure that would put real business, leaders in place that could basically be voted on by the community, but ultimately once they're voted on, they can then make autonomous or they can make autonomous decisions within the organization in terms of onboarding and offboarding employees, understanding who works on what project, et cetera, right?

Starting point is 00:18:00 Not everything needs to come to a vote. There needs to be some line of delineation between what the community who isn't working their day to day is appointing and voting on. as the board of directors versus what the people in-house are actually doing on a day-to-day basis to make a project work. So whether our proposal passes or someone else's, you need to set the groundwork first. You need to set a structure that says this is ultimately how this organization is going to work. Once that is completed, then the next vote needs to be, all right, well, who should these leaders be? How do you bring certain people in to run to show you anFT platform or to run Trident to

Starting point is 00:18:42 to run the sushi decks and ultimately have different people across product lines, across marketing, who ultimately have a say in how those internal divisions work. And that could be contentious, but ultimately that's what the community and the board of directors is for, is to put people in place. Not everyone's going to agree on it. You're never going to get 100% consensus, but you're at least going to get something that is sustainable and that has market approval. But that doesn't come, you know, that's not a lifetime guarantee that.

Starting point is 00:19:12 That's not a, you know, this isn't Congress where, you know, you're going to have 30, 30-year senators because they just continue to spend the most money to lobby. Like, you know, we're going to have real KPIs and metrics that say these are the things that you're meant to accomplish. And every three months or six months, whatever that cadence is going to be, you're going to, you know, have to go through another reelection with the community and show that you've done what you said you're going to do. So if we solve for those first two, right, one is structure, two is leadership. And the third one is easy. And that's compensation committee, right? There's no doubt that every single person who works on this project should be compensated. Now, whether it's what Joseph DeLong suggested, which is, you know, $18 million across the devs or whether it's something different.

Starting point is 00:19:53 Again, these are little details that can be ironed out. But ultimately, those are the three big decisions that the community needs to make. The community needs to understand what's the structure, who are the leaders, and how should people be compensated to ensure that they are, you know, on team sushi, right? You want everybody aligned in the same way. You want everybody to be, you know, understand which way is north. Make sure they all have the same goals and the same incentives for doing what's best for sushi. And if the governance can solve for those three things, everything else should be handled internally, right? It doesn't have to be this community guided everything.

Starting point is 00:20:35 It should just be the big decisions are guided by the board of directors or the token. holders. And everything else is guided internally, subject to them meeting certain KPIs and certain metrics. And it's easier said than done. I'm not suggesting that this is an overnight turnaround. But again, you want to back a project that already has this much product market fit, success, passion, et cetera. You just got to get the right structure in there to make it ultimately run. So the proposal that you're talking about was put forward by Alex Woodward on your team and Dean Eichnman of Dialectic. And I noticed that in it, they also said, suggest that sushi create a legal entity somewhere. And, you know, obviously for a DAO, that's,

Starting point is 00:21:15 it's a little unusual. But I was curious, you know, why do you think that's necessary or helpful for a DAO to have a legal entity? I'm going to defer legal questions for the time being. But what I'll say is when we put proposals out, the idea is to get the community talking and discussing, right? The proposal that is out isn't necessarily the exact form that ends up in a vote. Ultimately, the part of the proposal is to get people with different skill sets and different backgrounds to opine and try to come up with what the best structure going forward is. So with regard to sushi, ultimately in order to do this, again, this falls on the how much centralization versus decentralization do you want to be along the spectrum. You know, the legal entity, we think, would be sort of a bridge to getting to where you need to be for the rest of decentralization. So I'm not going to go into too much detail there because I, you know, there's a lot of lawyers out there who are going to end up opining ultimately on this.

Starting point is 00:22:19 But in our opinion, that was the best way to bridge that gap from, you know, starting, bridge that gap along that spectrum. And just to clarify, Joseph DeLong himself had also suggested in a tweet that Sushi Swap moved to a model that he called a Uniswap Labs style model. And by that, you know, what I took to mean was that there be a legal entity that is then in charge of developing this decentralized protocol. So for the legal entity that you put forward in your proposal, is it the same type of idea? Similar, yes. Like I said, I think the detail were lacking intentionally around that because I think there's some discussions that need to be had with lawyers, but yes, there's a similar idea. Okay. And last quick question. So I noticed also

Starting point is 00:23:13 that Alex and Dean in their post said that a flat structure was not scalable. And as you've described here, you're suggesting kind of a more like a hierarchy that be put in place here. So how, you know, obviously that's kind of a model that's more associated with a centralized entity. So I wondered how you felt that that kind of fit with this model of a decentralized autonomous organization if there is this clear leadership structure in place? Well, again, I think you're getting back to that black and white description of centralized versus decentralized. And I think, you know, that's what we have to get away from across this entire industry, is that it can't be fully decentralized or fully centralized because it just doesn't work, right? You have to self-fall somewhere on that spectrum. So just

Starting point is 00:24:02 just because you put some team leaders in place and you have some hierarchies doesn't mean that it's still not decentralized in the sense that bigger decisions would still come to a vote to all stakeholders. So, you know, when you think of somebody who, you know, let's take a company, for example, like an Elon Musk or like a Michael Saylor, right, where they are the CEO, they make all the internal decisions. They also own all of the shares and control the board vote. There's literally nothing you can do to usurp power there, right? it is as centralized as you get and there's almost no solution other than basically the court of public pressure and then where somebody steps down, right? You can still err closer on the side of decentralization where more things come to a vote and you have a deeper, larger, more diversified board of directors who gets to vote on things more frequently, but still have some

Starting point is 00:24:55 decisions that are internal where there is a hierarchy and there is a clear, you know, top-down to get things done. You know, it's really hard to get things done in any flat organization, right? I mean, somebody has to essentially guide strategy. So, you know, this is just ARCA's idea. We have a lot of experience, both investing as well as restructuring, as well as working with companies as board directors and things like that. We think this is the best path forward, but ultimately it's not our decision either.

Starting point is 00:25:29 This is going to come to a vote in some form and the community will vote on whether or not this makes sense. So, you know, in some ways it's ironic, right? Let's say we put a proposal together that said, we want a centralized structure, but we left it up to a vote to the community to vote on that. Well, by definition is that's actually still decentralized, isn't it? In the sense that that's ultimately not our call, right? There's no one person who can make any call other than propose something that everyone gets to vote on. So this is why for us, this is so important to use as an example on how to get these structures right, right?

Starting point is 00:26:07 This is not going to stop with just sushi, independent of the success of sushi or not, the things that we learn from this, you know, not just in this proposal currently and what's happening, but, you know, you could go back six months ago, 12 months ago. The things that we're learning from sushi, which is the largest Dow in this industry, are going to be a trend setting for all DAO's in the future. So I think it's really important. I'm actually sometimes amazed when you see how you lose the forest through the trees sometimes on Twitter and everyone's attacking and everyone's, you know, has their personal agenda. But if you actually asked any of these people, hey, what's your goal for this?

Starting point is 00:26:42 They'd be like, actually, I'm fine. I like sushi. It's a good product. I'd like to see them succeed. Yet all the toxicity comes out in Twitter. And the whole point of governance is to end some of that. And, you know, I come from a distress background myself. And, you know, I've sat on numerous bankruptcies and restructuring processes.

Starting point is 00:27:01 And the first thing that happens in a bankruptcy process is you split everybody into committees. You have your equity committee, you have your creditors committee, you know, whether that's unsecured or secured. And basically what you're doing is you're getting representation across each of the different stakeholders, depending on what they're lobbying for, right? Equity holders want something, unsecured bondholders want something, secured bondholders want something, employees and unions want something. in my opinion, that's where Dow's are headed, right?

Starting point is 00:27:26 You just need, everybody needs to be represented. So maybe you end up having a, you know, a core developer committee and you have a passive investor committee and you have a, you know, heavy user committee, you know, power user committee. Ultimately, that's probably where you're headed because also, you know, what's really unique and interested about digital assets is it's just one token. We all own the same token, right? So if you measure the success of a project ultimately by the success of the token, which is debatable,

Starting point is 00:27:56 but let's say that's where we're headed, well, in theory, if everybody owns the same token and they're all incentivized in the same way to have that token go higher, but at the same time, there are little nuances that each different group might want, right? Users might want something a little bit different than developers who might want something different than passive investors. Well, then ultimately, you just need to make sure everybody has a seat at the table to be a part of those discussions. And I think we'll get there.

Starting point is 00:28:21 I think, again, this is probably the easiest turnaround story you could imagine in digital assets because it already has so much success. And we're just trying to figure out how to fix the internal happiness and structure and alignment and incentives. But hopefully it does, in fact, succeed. And it sets a really good precedent for other DAOs in the future. Yeah, well, we'll have to see because the token price is down about 50% from a month ago. It's at like roughly $6 now. So we'll see what happens because certainly this has. has been a drag on the perception of sushi in the public opinion. But anyway, this has been such a fascinating conversation. Thank you so much for coming on Unconfirmed.

Starting point is 00:29:02 You're welcome. Thanks for having me. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. Join over 10 million people using crypto.com. The easiest place to buy, earn, and spend over 150 cryptocurrencies. Spend your crypto anywhere using the crypto.com visa card. Get up to 8% cash back instantly. Plus, 100% rebates for your Netflix, Spotify, and Amazon Prime subscriptions.

Starting point is 00:29:30 Download the crypto.com app now and get $25 with the code Laura. Link in the description. Thanks for tuning into this week's news recap. The second worst sell-off this year. The total crypto markets were at roughly $2.6 trillion on Friday night. By Saturday morning, the market had crashed to a low of $2.1 trillion, marking a 19% dip in less than 24 hours. Bitcoin dropped roughly by $10,000 during this period to a low of $45,032, which amounts to a 34.5% price decrease for Bitcoin since its November 9th all-time high.

Starting point is 00:30:13 It appears a massive round of liquidations fueled the wild price action. In a blog post, Glassnote explained that high open interest in Bitcoin futures, markets could lead to an extremely volatile event. Glassstone wrote, Legacy market weakness on Friday weighed on all assets globally, holding Bitcoin's price around $53,000 and near pivotal technical support. When price failed to hold, sell pressure triggered a cascade of long liquidations. And cascade it did. Data from Coin Glass shows that over $2 billion worth of long positions were liquidated on December 3rd.

Starting point is 00:30:49 Overall, $5.4 billion in contracts from the Bitcoin futures open interest market were flushed out between Friday and Saturday. This accounts for a 24.5% decrease in the total value of the crypto markets, according to GlassNode. The analytics firm calculates that this was the second largest single-day change in futures open interest this year. The block's Frank Chaparro reported that trading executives believe large institutional selling was also a factor. Shapiro states one executive saying that a single institution sold more than $500 million in Bitcoin on Friday morning, which resulted in the aggressive liquidations. While the dip was bad news for those who got liquidated, it also left the opportunity to buy the dip as El Salvador did, scooping up 150 extra coins at a sub-50,000 dollar price.

Starting point is 00:31:43 In a turning point, Congress gives crypto a positive reception. On Wednesday, circles Jeremy Allaire, FTCS's Sam Bankman-Fried, Bitfuries Brian Brooks, Paxus' Chad Cascarilla, Stellar's Dinell Dixon, and Coinbase's Alicia Haas, appeared before members of Congress to discuss digital assets and the future of finance and House Financial Services Committee hearing. According to the block, the crypto execs and Congress, covered topics such as stable coin regulation and issuance,

Starting point is 00:32:13 the idea of a crypto-focused regulator, and the overarching theme of consistent crypto regulation across government regimes. Overall, outside of a few straight comments from Representative Brad Sherman, the crypto execs were met with apparent curiosity from most members of Congress. Web 3 can empower anyone, said Representative Anthony Gonzalez, for example. The meeting, which took nearly five hours, seemed to be a success. Bankman Free, the CEO of FDX, tweeted, I came in expecting some hostility and grandstanding,

Starting point is 00:32:46 but instead found the discussion to be by and large, productive, and helpful. However, not all is rosy with regulators. Coinbase, whose CEO Brian Armstrong has expressed unhappiness with U.S. crypto regulation and who did not attend the hearing, is launching a defy platform that will allow users to earn yields on die deposits. Customers in 70 countries will have access to yields fluctuating between 2.83 percent and 5.39%. However, the U.S. will not be one of those countries, as the SEC recently threatened to sue the exchange if it were to launch a yield product. In related regulatory news, William Burns,

Starting point is 00:33:27 director of the Central Intelligence Agency, told the Wall Street Journal this week that the CIA has multiple projects keeping track of the cryptocurrency industry. In response to a question about ransomware, Burns revealed that his predecessor had set in motion a number of different projects focused on cryptocurrency and trying to look at second and third order consequences as well, and helping with our colleagues in other parts of the U.S. government to provide solid intelligence on what we're seeing. Polygon acquires another ZK platform. Polygon, a side chain working to scale Ethereum, announced the acquisition of MIRR Protocol,

Starting point is 00:34:03 a zero-knowledge proof project, and a deal worth $400 million in Polygon's native token, Maddick. The move comes after a similar deal with Polygon, and ZK Project Hermes, which was a $250 million merger. Overall, Polygon has pledged to spend $1 billion on scaling Ethereum. What happens after a Dow hack? Bitmart and Badger Dow take two different approaches. Bitmart, a centralized exchange, lost $196 million worth of various cryptocurrencies on Saturday. Sheldon Zia, Bitmart's CEO, tweeted that the security breach was caused by a stolen private key that had two of our hot wallets compromised, which led to the loss of $100 million in Ethereum

Starting point is 00:34:46 assets and $96 million in Binance smart chain assets. According to Zia, Bitmart will use its own funds to compensate victims. To protect against a future breach, Bitmart replaced all of its deposit addresses for all tokens. The aftermath of last week's Badger Dow hack, in which the DeFi protocol lasts roughly $120 million, is a bit more complicated. the exploit was a front-end attack that allowed hackers to change user transactions made on the website to steal funds. Celsius Network, a centralized lender, was one of the addresses affected by the Badger Dow hack. We are working with Badger to recover all those funds. We are collaborating with them on the investigation. CEO Alex Mashinsky said in a live stream last week, confirming Celsius's involvement.

Starting point is 00:35:34 On Twitter, there is speculation that Celsius lasts roughly $50 million in $50 million. in the exploit. The insurance protocol used by Badger Dow Nexus Mutual will most likely not pay out funds to compensate users, as its insurance coverage does not cover front-end attacks. That being said, Celsius Network's Twitter account claims that no Celsius client and user assets were affected. The account also says that Celsius Network has traced the attacker and reported that information to Badger. OpenC is not IPOing. In an interview with Bloomberg on Monday, OpenC's newly hired CFO Brian Roberts made a comment about the NFT marketplace holding an initial public offering, or IPO. When you have a company growing as fast as this one, you'd be foolish not to think about it going public, explained Roberts.

Starting point is 00:36:24 He added, I've seen a lot of PNLs, profit and loss statements, but I've never seen a P&L like this. Community backlash on crypto Twitter was swift, as many had speculated that OpenC will be the next big air drop to be released. On Tuesday, the CTO set the record straight on Twitter, writing, There was inaccurate reporting about OpenC's plans. There is a big gap between thinking about what an IPO might eventually look like and actively planning one. We are not planning an IPO, and if we ever did, we would look to involve the community. Roberts previously worked as the CFO for Lyft, where he led the ride-sharing app to a successful IPO.

Starting point is 00:37:03 A salana bug was patched, saving $27 million an hour in the podcast. process. A bug in the Salonanan Program Library, an integral collection of open source code for Salonanomers, was patched this week after sitting unnoticed for months. According to Neodyme and auditor, the bug could have resulted in $2.6 billion in total value locked being at risk, with hundreds of millions in potential profit for hackers. In a blog post, Neodyme explained that one of its auditors initially found a seemingly innocuous bug in June. However, on December 1st, Neodyme noticed the vulnerability was still not patched. The team then calculated that the seemingly smell exploit,

Starting point is 00:37:43 which looked like a tiny rounding error, could be harvested at a rate of $7,500 a second, or $27 million an hour. Neodyme quickly contacted the at-risk Salonah projects and got the bug patched, a task that proved tougher than originally thought due to many Salana projects being closed source. Crypto Adoption Roundup

Starting point is 00:38:03 Every Day, Web 3, Crypto, blockchain technology, whatever you want to call it, seems to move another step toward the mainstream, as evidenced by five well-known companies making crypto moves this week. First, the tokenization of Reddit. On Wednesday, Reddit expanded its community points program, opening up a waitlist for subreddits who wish to mint their own token. These points, which are awarded to users for being active in the community, are currently distributed through an Ethereum testnet. Looking forward, Reddit is exploring arbitram an Ethereum layer 2 solution. Need a crypto consultant? Call Visa. Visa, the financial payments giant, unveiled a new initiative

Starting point is 00:38:44 to help clients navigate the wild world of crypto. dubbed Visa's crypto advisory practice the new arm plans to offer expertise in crypto-related activities like NFTs or CBDCs. Kickstarter disrupts itself. Kickstarter at the Web2 crowdfunding OG announced plans to build an open decentralized protocol that offers the same services as the centralized crowdfunding platform on the cello blockchain. Kickstarter's first step is to build an open-service version of its core crowdfunding functionality on which anyone, including competitors, could build. WhatsApp enters the Metaverse. A new WhatsApp pilot, the Meta-owned messaging app, allows users in the U.S. to send and receive crypto within a chat. Disclosure, I write a newsletter from

Starting point is 00:39:30 Meta's bulletin. The pilot is being powered by Novi, Meta's digital wallet, and uses Paxos Estabalcoin, USDP. This mainstream game developer is launching playable NFTs. Ubisoft, the major gaming company behind Assassin's Creed and Tom Clancy's Ghost Recon Breakpoint, unveiled plans for an in-game NFT integration through a platform called Ubisoft Quartz. The NFTs, dubbed digits, will be hosted on Tazos. To start, digits will be playable on Ubisoft's Tom Clancy's Ghost Recon Breakpoint PC game. However, the Ubisoft community was unhappy with the announcement, with its YouTube trailer about Quartz receiving a 96% dislike rating over 22,000 votes.

Starting point is 00:40:20 Time for fun bits. Mongo's coin! Brad Sherman, a California representative, was the most dissenting voice-recenting voice, regarding the crypto industry during this week's aforementioned crypto meets Congress meeting. At one point, Sherman said, The number one threat to cryptocurrency is crypto. He added, Bitcoin could be displaced by ether,

Starting point is 00:40:45 which could be displaced by Doge, although I think he pronounced Dodge, which could be displaced by hamster coin. He didn't stop there, continuing down the crypto food chain. And then there is cobra coin, said Sherman. And what could Mongo's coin do to cobra coin? due to Cobra coin.

Starting point is 00:41:02 This being crypto, the home of memes, a slew of Mongo's themed coins popped up shortly after the session on Binance Smart Chain, Polygon, and Avalanche, with decrypt reporting the BSC version jumping as high as 61,000%. All right, thanks for tuning in.

Starting point is 00:41:20 So learn more about Jeff, Arka, and recent events at Susi Shwab. Be sure to check out the links in the show notes. Unconfirmed is produced by me, Laura Shin, with all from Anthony Eune, Mark Murdoch, Daniel Ness. Thanks for listening.

Unchained - Unconfirmed: 3 Things SushiSwap Needs to Get in Order, According to Arca - Ep.297

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