Unchained - Unconfirmed: Why the FTX.US/LedgerX Deal Indicates Crypto M&A Might Start Booming - Ep.269

Episode Date: September 3, 2021

Steven Ehrlich, director of research for digital assets at Forbes, discusses the FTX.US-LedgerX merger, what to expect from FTX going forward, DeFi regulation, and more. Show highlights: why the FTX.US acquisition of derivatives platform LedgerX is significant how FTX.US stacks up against other US cryptocurrency exchanges who should use crypto derivative products how regulators might handle FTX.US and crypto derivative ETFs what to expect from FTX going forward how long FTX CEO Sam Bankman-Fried spends talking to regulators every day why Steven thinks crypto mergers and acquisitions will be a trend going forward what Steven learned from his conversations with Polygon and Hermez how Fereshteh Forough, a woman living in Afghanistan, is using crypto to help teach women to build dapps, smart contracts, and use crypto   Thank you to our sponsors!   Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021   Polymarket: https://polymarket.com   Sorare: https://sorare.com       Episode Links   Steven Ehrlich https://www.forbes.com/sites/stevenehrlich/?sh=fb976542ce44 https://twitter.com/Steven_Ehrlich  https://www.forbes.com/newsletters/forbescryptoassetadvisor/?sh=55678b72dec8   FTX.US Merger https://www.forbes.com/sites/stevenehrlich/2021/08/31/us-bitcoin-exchange-backed-by-billionaire-sam-bankman-fried-moves-into-crypto-derivatives/   M&A Trend https://www.forbes.com/newsletters/forbescryptoassetadvisor/2021/08/31/exploring-voyagers-900-million-token-merger/?sh=29f4f16851b4    Interview with Sam Bankman-Fried https://www.forbes.com/sites/stevenehrlich/2021/08/30/billionaire-sam-bankman-fried-pushes-back-against-critics-of-crypto-derivatives/?sh=6428141b5cbd    Polygon-Hermez Deal https://www.coindesk.com/polygon-merges-with-hermez-network-in-250m-deal    Fereshteh Forough Coverage https://www.forbes.com/sites/stevenehrlich/2021/08/17/taliban-resurgence-could-threaten-afghan-school-teaching-women-to-code-and-build-ethereum-apps Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unconfirmed, the show that reveals how the marking names and crypto are reacting to the week's top headlines and gets the insights keep on what they see 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 Main Tree media reporter to cover cryptocurrency full-time. This is the September 3rd, 2021 episode of Unconfirmed. The Unchained newsletter has switched from a weekly news recap to a daily email. Each morning, you'll get four to five quick headlines. lines, a crypto meme or two, and a few recommended reads. Head to Unchainedpodcast.com and the signup for the newsletter is right on the homepage. Looking for NFTs that are useful and fun, try So Rare, the largest NFT-based fantasy game. You can collect, trade, and compete with officially licensed digital cards of soccer players from over 160 clubs on So Rare. That's S-O-R-A-R-E.com. Polymarket is the leading information markets platform where you can trade on the most hotline debated topics, whether it's politics, coronavirus, current events, and more, all on the blockchain.

For a limited time, sign up with referral code unconfirmed to get your first trade reimbursed up to $100. The crypto.com app pays you up to 8.5% interest on your Bitcoin. Get $25 when you download the crypto.com app with code Laura. The link is in the description. Today's guest is Stephen Erlich, editor of Forbes Crypto Asset and Blockchain Advisors. Welcome, Stephen. Thanks, Laura.

It's a pleasure to be here. As they say, in radio, a long-time listener, first-time caller. So FTX had some big news this week. Tell us what that news is and why it's significant. Right. So FTX, specifically, it's U.S.-based exchange. FTX, U.S., announced that they had acquired LedgerX, essentially a CFTC licensed company that can offer crypto derivatives,

Bitcoin and Ether contracts, futures, options, swaps, things like that. And it was a really interesting story because in some ways it kind of brings the strategy that FTX International's CEO, Sam Bank, and Fried used to so successfully, internationally, cure into the U.S. FTX U.S. started about a year ago. Its volume is relatively nominal, especially in light of Coinbase, which typically does. does a $4 billion a day in transaction volume. Trackens over a billion, even Binance U.S. arm is over a billion dollars, and FTCS.

US is only, I say only, but only around 350 million. That said, assuming that this merger goes through, which I think should happen sometime around October, assuming no roadblocks, FTCS will be able to offer crypto derivatives to U.S. clients, which is not something that any of this other major U.S.-based exchanges can do. So that gives them a distinct advantage. And typically also these types of contracts and offerings are much more profitable than spot transactions. So it is a pretty important deal for FTXUS. And so tell us a little bit about Ledger X in terms of like its history or, you know, how it came to be in this position.

Sure. So, I mean, Ledger Act started out a few years ago. I mean, they had acquired these licenses. And they really tried to break into, I guess, like the institutional derivative space and also the retail space. Crypto derivatives, though, have tended to be a bit of a slow climb, especially in the regulated institutional space. I mean, they've really taken off internationally in the unregulated space where, I mean, I think FTX does something like $500 billion a day or something, nominal value. I have to double check. that that's that but um hi everyone quick correction that Steve had me add after the show which is that he misspoke here and he meant to say 500 billion dollars monthly but ledger X really never seem to kind of rise up to the levels of like the derivatives and and and and ft Xs and and binances and so on and so forth and it could be due to a multitude of reasons but I believe at some point they just decided look we have these licenses they are valuable we're not very

finding the right type of product market fits. So this is probably a good time to find an exit. And it's hard to imagine. I would assume they've talked to a few different partners to find the best deal for them. But given FTX's playbook that they can use in the U.S., it's hard to imagine that they found a better partner than FTX U.S. to consummate a deal and hopefully grow the business. So as you mentioned, FTX is pretty tiny compared to other major U.S. crypto exchanges in terms of its trading volume. So how do you expect this acquisition to affect that competition between the crypto exchanges in the U.S.? So I think right now, FtXUS is probably going to have a relatively clear lane to do this. I mean, Cracken does have a futures offering,

but they geo-fence around the U.S. I mean, Coinbase, I don't think has any plans to offer derivatives anytime soon, although I would imagine they will at some point. I mean, Coinbase, actually recently pulled back its margin offerings. I think Cracken still does, but minimal. So FtXUS will have some clear lanes to play at. Of course, they have to compete with CME, which I think is the third or fourth largest derivatives exchanged by open interest and volume.

So they are a big player, and they do dominate the institutional space. But FtXUS can try as well. And they also have some more specifically targeted, some more offerings specifically targeted towards the retail market, which traders like, traders that could buy a contract for as little as about $500 in depending on what the prices are of that given day.

I think the more interesting question though here is kind of what does this who should trade especially when the retail sector who should trade these instruments and for what because crypto is already so volatile. Derivatives do play an important role in healthy markets. I had a long conversation with FTX CEO, Sam Bank, Renfreet about this a couple of weeks ago. And I mean, in crypto, just like any other market in the world, volume on derivative exchanges, on derivatives is much higher than spot. And they help as far as more efficient trades, price transparency, price discovery. But in crypto, it's a little bit different because the markets

are already so volatile. Then once you start offering these products and then putting leverage on top of that, which could be 5, 10, 25, 100, I mean, that can really create cascading liquidations that really don't do much to help crypto's reputation. So FtX, US, when they start offering these products, it's going to be important for them to be conscientious about who they offer these products to making sure that those people have the right level of education because these products can be used to hedge against risk and to lower volatility,

but it is a more advanced type of product. So retail traders that, this is not someone for a retail trader that just perhaps double their investment because they bought a token and now they want to press their luck. I mean, these are for traders, not for for gamblers. And one other thing that I feel is fascinating about this acquisition at this moment in time is that recently there's been a lot of noise about crypto regulation. And it seems to me at least that there's kind of like two camps emerging amongst the regulators

and there's, that's kind of in favor of stricter regulation. And then one that's, I don't know if it's, if I would say that they want looser, but they're more amenable maybe to like adopting new regulations for crypto or, you know, just kind of letting it play out a little bit, you know, instead of regulating right now when the technology is kind of less advanced. And we see both of these strains at both the SEC and the CFTC. And I just kind of wondered how you thought the different regulators might take a look at this merger in the entrance of FTX into the space here in the U.S. In particular, Gary Gensler's view, the chair of the SEC, has actually expressed openness to a derivatives focus Bitcoin ETF rather than, you know, a spot one.

So I was just curious for your take. Yeah, I mean, that is one of the million dollar questions. And if you talked to Gensler, talked to officials at CFTC, I mean, they're trying to figure out, like, where do the lines of the demarcation go? Like, where does each respective jurisdiction end? And it's hard to know. I think Gensler actually asked Congress to help decide for them because it is really difficult. The idea of the CFTC and talking about an ETF, a derivative's ETF, is actually really interesting. I spoke with Sam about this when I was interviewing him. And, I mean, his opinion is that one of the reasons that Gensler might be so keen for a derivative-focused ETF is because Gary Gensler was a former chair of the CFTC and he trusts the CME more so than perhaps other exchanges that he operates. Although some other sources that I've spoken with have said that as far as when it comes to something like crypto, a derivative-focused ETF is not necessarily the most efficient way of doing it.

I mean, perhaps it's a way to shoehorn in the first ETF that will get. But at the same time, it's much less efficient than a spot one, especially for an asset. Like Bitcoin, where custody is really not much of an issue now that we have these enterprise-grade custodians, and there's too many to name here. I mean, I think the CFDC, I would anticipate that they've already done some feelers out, so they're confident that this deal will be closed. I also expect or believe that FTXUS probably did not. They looked at how long it would take for them to get this license.

and they were counting in years, and they just figured that it would be much faster to kind of jump the line by this license or by these licenses from this exchange and sort of specialize in what each one does best. So on this particular deal, I don't anticipate it's going to be too, it's going to be too hard to get approval on,

but it doesn't answer the larger question that I think you raised to me just now. So in a moment, we'll discuss the future roadmap, I guess, for FTX as well as other crypto murders and acquisitions news. But first, a quick word from the sponsors who make this show possible. Do you love sports collectibles or fantasy sports? So Rare is blending this together to create an entirely new gaming experience powered by its community. So Rare cards are officially licensed NFTs from over 160 clubs, including Rayall Madrid,

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Download the crypto.com app now and get $25 by using the code Laura. The link is in the description. Back to my conversation with Stephen Erlich. So as you mentioned, you recently interviewed Sam Binkfenfried. what do you think we can expect to see out of FTX beyond just this week's news? I think there's going to be a lot out on the horizon. I mean, most listeners of your show, I'm sure I've heard about FTX's recent $900 million raise, the largest private fundraise in history that give me the exchange an $18 billion valuation. I mean, that's a very massive hunting license for them to go after.

I mean, the company itself is already profitable. It doesn't have a ton of overhead. aside from, I guess, like a handful of employees and a big tech stack. So I really think that Sam is and FTCS is going to try to further promote its brand, expand vertically, expand horizontally. Vertical integration is actually something that I know is very important to him. And it's funny, when I was speaking with Sam, I mean, one of the questions I asked is he's recently said he spends about five hours a day dealing with regulators.

And I kind of asked him to contextualize that a little bit. What are the types of conversations that he's having? And he kind of said they fall into a few different camps. I mean, one are regulators in countries where they already operate and they're trying to figure out how existing regulations apply to crypto. Then there's others where it's a country that doesn't have the right type of regulatory architecture and they want to engage with people in the space that know the industry well so they can have meaningful conversations.

And he really just said it's a lot of those types of, a lot of those types of discussions. And that also lends to the M&A point that I think we're going to talk about in a little bit, which is, again, now that they have this war chest, they can go out and buy companies and expand, they have to make a calculation on whether or not it's faster to build and get the licenses themselves or essentially import one, acquire it, acquire the people, the local knowledge, and go that route, especially with spot exchange, the scale is everything because margins are increasingly getting thin. So that's very important. But at the same time, FTX, and I think this is applicable for almost any other major exchange.

I mean, their ambitions are bigger than that. I mean, Coinbase wants to be the app store. I mean, other exchanges are looking to offer derivatives and become market makers and prime brokers and things like that. So I do think we're going to see a period of massive M&A in this industry as some of the real category winners and leaders come to the forefront and other companies that haven't really been able to gain that size, that scale, are going to look for exits that help reward the shareholders, their founders, their investors, and try to find the right feds.

And are there any particular areas that you feel are ripe for M&A in crypto right now or any particular trends you're seeing in that regard coming up? Yeah, so there's a couple of trends. I mean, I tend to think that we're not going to see the M&A surge instantaneously because the market is doing so well for the most part and most tokens are going up. I mean, I don't want to generalize for the entire crypto market, but for the most part, we're in a bit of a bull cycle, especially recently as it's recovered from its recent nadir. But at some point, companies are going to have to get realistic about where they are and where they stand. I mean,

most ICO projects are worthless at this point, except for the lucky few. I don't mean, lucky probably means hard work and a bit of luck in this case, but they have to be. be honest about where they are and there's going to be a matchmaking process. It's the same thing is happening in the real world where, I mean, MNA activity in 2021 in the traditional financial sector, we've seen trillions of dollars in MNA deals. And there's no sign of it stopping soon because companies are trying to figure out where they fit during this COVID post-COVID world and trying to reorganize themselves. In crypto, it's important for firms to also be, to also be self-aware. I had an interesting conversation with one of the co-founders at Hermiz earlier today.

I mean, I was asking him a little bit about the rationale behind the deal, the $250 million token lockup with Polygon. And it was really interesting, his candor, which was basically we felt like we had a really strong product. We had great tech, but we weren't necessarily seeing the adoption that we were hoping for. Then here comes Polygon, I mean, they have a huge brand name. They're expanding. I mean, they're seen as the layer two darling. And now their ambitions are growing bigger than that. And it was just a perfect match because Polygon wanted the.

tech and Hermes was not going to be able to match their their footprint, their mind share, at least in the short term. So it was a perfect kind of marriage. I think there are some questions about whether or not the SEC and other regulators are going to care about a deal like that. But, I mean, we can talk about that as if you'd like. But I thought the self-awareness was important. And that's really important for companies to be proactive and be honest about where they

stand so that they can find deals that help create value for everybody. What I don't want is that if the market starts to go down and everyone just starts grasping for life rafts and lifeboats. And we see these sloppy deals come through that destroy shareholder value or token holder value, excuse me. And that would be for the entire industry. Yeah, it's fascinating that a token merger because obviously, I mean, it was such a big deal. And, you know, it's unusual or kind of something new, I guess. and at the same time, we do know that the SEC really has its sites on DFI. So can you address that regulatory issue that you brought up?

I was curious to know what you thought the SEC might think of something like this. So it's really funny. I mean, I spoke with Sandeep at Polygon. I spoke with some folks at Hermes. I mean, they both told me that they really didn't have any conversations with the SEC. For one, they say they're not an American company, so they don't have to. I would suspect that some people at the SEC may disagree. agree with that categorization, assuming that...

Just maybe. Yeah, I mean, I guess they could probably talk to the folks at Telegram for an opinion on that. But, I mean, they are of the core belief that these are utility tokens. They're not securities. They have legal opinions to that effect. They come off to me as very honest people that don't, that aren't trying to skirt any sort of regulations or laws. They are trying to do the right thing.

These laws are, they are gray. The SEC, just for one, because that's the regulator, and you're the best, I mean, they are going very slow. I mean, really the only two tokens where we've gotten any sort of relative clear guidance are Bitcoin and Ethereum and everything else is up, up for grab. So if you're a company, for instance, like Herm is that maybe in a year, they don't have a year or two of runway left. Maybe they do. I don't know that for sure. They get this deal.

Like, what would you do? Is it better to make this deal? and hope that the SEC gives it its blessing or whatever the regulator is or say, you know what, I'm too worried about this. It's not slam dunk either way, but I don't want to take a chance. I mean, at some point, you kind of have to perhaps take a leap of faith. That said, I mean, there are some really important considerations with the deal. I mean, like on the Hermes side, they control about 90% of tokens.

So between them and their investors and groups that they know, so they did a quick telegram check to see if everybody was sort of okay with this. Now, on the Polygon side, I mean, they told me they, I mean, this is, this is out there, but I mean, they were able to finance the purchase with tokens that they own treasury. So they didn't actually have to go to like Madic holders to get a sense of what they thought about this. But if these deals become more common, I mean, there are structures for how M&A should work. I mean, there's ways of going out and clearing it with regulators and also getting shareholder approval. And I would imagine that at some point we're going to have to see those types of questions.

and answered and procedures done if it really becomes a trend, which I suspect it will be as this industry matures. And we see further gaps between the winners and the losers. All right. So we're going to totally switch gears. Can you tell us a little bit about who Faris-Sher-Fer-O is and how she and her organization were using crypto? Yeah. I'm happy to, Laura. That was an interview that really was fascinating to me as well, and a bit personal. And I'll explain what I mean by that in a second. So Frescia, she is an Afghan expat.

She's actually a former refugee herself. She's in her 30s. Her family actually had to leave Afghanistan during the 1980s with the Soviet invasion because her father was a high-ranking member of the Mujah Hadin, which is essentially the Taliban precursor, but the U.S. was covertly aligned with them to fight the Soviets back then. And long story short, she ended up studying computer science in Iran, getting a master's in in CS in Berlin, coming back to Afghanistan after the U.S. invasion, I believe in about 2010,

to become a professor of computer science there. And then ultimately, she started the coding school for girls where they learned how to code solidity, they learned how to code smart contracts to query data from blockchains. And then once they graduated, they would get money. they would do they would actually get work coding blockchain and they would be paid in crypto. I mean, it was really kind of a wonderful. These are the use cases. We like to talk a lot about making money and investing in crypto, but its intrinsic value is rooted in use cases such as this, where it creates economic value where none could exist otherwise.

And then what makes the story even more interesting is that aside from just creating this mini economy with crypto, at some point, she actually had to fund the school using crypto itself. I mean, they used to have a local bank account. They had like a JPMorgan account in the U.S. And they would wire money over. It was expensive. But that's what they had to do. They sometimes used Western Union.

It was expensive as well. But especially as in the earlier part of this year, when the Taliban started to go back on the offensive after the 2020 Doha agreement, which sort of consummated the U.S. withdrawal that just finished. some of those payments started getting wired back due to AML KYC concerns. Western Union, I believe, since I wrote the article, stopped servicing the country, which is not unsurprising because everyone's now trying to figure out what the relationship of the Taliban is going to be.

So the school actually now is funding itself entirely with crypto as well. So it really is one of the fascinating cases. But, I mean, to be honest, I mean, Frashta would probably be a great guest for your show at some point, too, if you're interested as well. But, I mean, this was a very, it's a sad story. It's a story of hope. And it's also one that was a little personal for me because I am a former intelligence analyst myself for the Department of Defense. And I spent a large portion of that time working on Afghanistan trying to help build support for the transitional government there, combat violent extremism.

And so it is, I mean, it is a sad day when this happens, although I'm not, I'm not Afghani. And obviously, it's much more personal for her than it is for me. As far as I know right now, the school is still operating, but it's remote. It has been for a while ever since the Taliban researchers came. And I think it's really too soon to tell what's actually going to happen with it. I think the Taliban is trying to put up a good front. It doesn't want to be seen as a pariah state. It wants to have relations with the rest of the world.

And I think a big part of that's going to be how it treats women and whether or not it's going to allow women to study, to be in government, to have professional career. So I'm optimistic. She told me she's willing to engage with the Taliban to talk about what she's doing. And I hope she gets that opportunity or at least is able to continue operating her school. Yeah, well, I really love that story. I do think maybe I would love to have her on my show.

So I'll have to get her details from you later. But thank you so much for sharing that. thanks so much for coming on unconfirmed. Yeah, thanks, Laura. It was a pleasure. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. Today's sponsor is Polymarket, the world's leading information markets platform where you can trade on the most pressing global questions, all on the blockchain.

Choose from a variety of markets. Will Cardano support smart contracts by October? Will the U.S. again have more than 200,000 new COVID cases per day before 2022? Will Trump run for president again? With over $130 million traded on the platform, Polymarket is the go-to place to settle the biggest debates of the day. For a limited time, sign up with referral code, Unconfirmed, to get your first trade reimbursed up to $100. Go to the description and click on the link to get started. That's polymarket.com Unconfirmed. Thanks for tuning in to this week's news recap. First headline, OpenC's August volume blows even traditional internet marketplaces out of the water.

NFT Marketplace OpenC just completed a $3 billion month, according to data from Dune Analytics, that accounts for a near 10x of its previous high from July when it hit $325 million in volume. OpenC is far and away the leading NFT marketplace. According to DeCrypt, the next largest platform is AXI Infinity's marketplace, which did $820 million in volume last month. Cryptopunks came in third, posting $667 million in volume on its Larva Lab site. It's not just doing well for an NFT marketplace. OpenC's August volume matched 16-year-old Etsy's entire second quarter volume. The popular arts and craft site did $3.04 billion in volume

in Q2, 2021. eBay's average monthly volume sets it roughly $7.3 billion. OpenC would only need a two and a half times increase in volume to catch eBay. Next headline. The SEC alleges BitConnect swindled retail traders out of $2 billion. On Wednesday, the Securities and Exchange Commission filed an action against BitConnect, its founder, and its top U.S. promoter, alleging that they defrauded retail investors out of $2 billion through an unregistered and fraudulent offering of digital assets. Specifically, the SEC's complaint targets BitConnect's lending program. The regulator claims that BitConnect tricked investors into depositing money onto the platform by falsely advertising a volatility trading bot that would generate large returns.

Instead of deploying the capital, the SEC alleges that BitConnect siphoned investor funds to personal wallets to the tune of $2 billion. Quote, we allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets, said Laura Shalov Mirabon. Associate Regional Director of the SEC's New York Regional Office, we will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space. In other regulatory news, SEC Chair Gary Gensler

continued to set his sights on crypto, giving a talk to the European Parliament's Committee on Economic and Monetary Affairs. In his speech, the two areas he cited specifically as needing attention were trading and lending platforms, quote, whether they be centralized or so-called decentralized finance platforms, and stablecoins, which he noted were involved in almost three quarters of crypto trades. Tether has petitioned the New York Supreme Court to block

Coin Desk and other publications from receiving documents revealing the composition of Tether reserves over the past few years. The stablecoin issuer claims that releasing such information would tilt the competitive playing field against Tether in favor of other stablecoins. Avanti, a digital asset bank, filed an application to become a federal reserve member bank, becoming the first crypto bank to seek federal supervision directly from the Fed itself. The move, if approved, would allow Avanti access to the Fed's payment system, and thereby quicker and cheaper order processing. Next headline.

Binance.com added to investor alert list by a Singapore regulator. The Monetary Authority of Singapore, the main financials, regulator in that country has placed Binance.com on its investor alert list. Its country-specific site, Binance.org, is a separate entity and is not on the list. Last week, Binance.org hired Richard Tang, the former chief regulatory officer of the Singapore Stock Exchange as its CEO. Finance.com, however, has come under regulatory scrutiny and pressure these last few months, with multiple jurisdictions from Europe to Asia making enforcement actions or issuing warnings about the exchange. Additionally, its U.S. entity, Binance.U.S., suffered a blow recently,

when recently hired CEO Brian Brooks, also a former regulator, left within a few months. In an interview with the information this week, finance.com CEO Changpeng Xiao, known as CZ, said, quote, regulators around the world are looking at crypto. And when they look at crypto, they do look at us first, given that we are by far the largest player in the market globally. In the interview, CZ also said Binance.us plans to go public within three years. Next headline, Jack Dorsey plans to make Bitcoin defy a reality. In July, Twitter and Square CEO, Jack Dorsey announced plans to create an open-source Bitcoin platform named TBD. Last Friday, Mike Brock, the cash app exec heading up TBD, gave an update on Twitter writing, quote,

This is the problem we're going to solve. Make it easy to fund a non-consum wallet anywhere in the world through a platform to build on and off-ramps into Bitcoin. You can think about this as a decentralized exchange for fiat. Brock views TBD as a missing piece for the crypto industry, which, as currently constituted, relies on centralized third parties like Coinvac and Cash Up to facilitate Fiat transactions. TBD plans to build its project out in the open, completely permissionless, intending to allow any non-custodial wallet to plug into its decks. For now, Brock endorses a new.

hope to keep TBD Bitcoin native. However, as Bitcoin is not a smart contract platform like Ethereum or Solana, the tech stack must improve for TBD to succeed. Brock mentioned Rootstock, a smart contract Bitcoin side chain as a possible option for building out the Bitcoin decks. However, he noted, quote, the gaps needed to build this maybe too large, which would also have us consider other chains as a bridge. Speaking of Jack Dorsey, according to Mac rumors, Twitter may soon enable users to tip creators with Bitcoin. An unreleased beta version of Twitter's code has an update that would show users how to use Bitcoin, complete with a Lightning Network tutorial and information on custodial versus non-custodial wallets. Twitter would be partnering with Strike to make this happen

if the rumor becomes reality. Next headline. The Ethereum blockchain split due to a software bug. A bug in Ethereum's most popular software client, Go-Etherium or Geth, caused, the blockchain to split last Friday, August 27th. The split can be traced back to August 18th, when the Geth team initially disclosed a vulnerability in the software. At the time, the developers did not explain the nature of the bug in an effort to prevent a hack before it was patched. On August 24th, Geth released a hot fix for the bug, describing it as, quote, a high severity security issue. By the 27th, it became clear that Geth's efforts to patch the bug fell short, as a subset of Ethereum notes failed to update their guest software. This resulted in a chain split where Ethereum started

validating two chains at the same time. Luckily, Ethereum was not truly affected. Tim Bako, an Ethereum core developer, and a previous guest on Unchained, told to decrypt, quote, the bug is serious in that it caused a chain split, but the effects on the Ethereum MayNet were negligible, given that the vast majority of clients had upgraded. Next headline. Mutant Ape Yacht Club and loot for adventurers expand NFT boundaries. Two NFT collections went especially viral this week. First, on Saturday, Yuga Labs dropped its Mutant Ape Yacht Club collection, selling 10,000 zombie-fied apes in a Dutch auction that started at 3eath.

Mutant Ape Yacht Club is essentially a sister collection to board Ape Yacht Club, the second largest NFT collection on OpenC by volume. In addition to the Dutch auction of 10,000 original mutant apes, the launch consisted of an airdrop of mutant serums to existing board ape holders, allowing them to mint mutant versions of their apes for free. The project ended up raising $96 million for Yuga Labs. At publishing time, mutant apes had the eighth highest volume traded on OpenC for all time, despite being released less than a week ago.

Number two, last Friday, Vine founder Dom Hoffman, dropped an 8,000-piece NFT collection dubbed Lute for Adventurers. The text-based N-OFT collection quickly caught on. In about a week, Lute has done over $60 million in volume and currently has a market cap of $250 million plus. Rather than a standard JPEG, the 8,000 Lute NFTs contain walls of text detailing eight specific characteristics randomly generated for scarcity. Each token was minted with a different combination of weapons, chest armor, head armor, waist armor, foot armor, hand armor, necklaces, and rings. The idea, presumably, is for Lute NFTs to act as a base layer for other games and protocols to interpret. Essentially, any play to earn or Web3 game can plug into Lute, download the characteristics,

and then spawn its interpretation of a Lute NFT in its game. On a related note, Dom will be releasing a new NFT project in the coming weeks labeled SubDrive, which is an on-chain fantasy game console. Next headline. Ethereum Layer 2 competition heats up with Lepard. launch of Arbitrum. Offchain Labs, the developer behind Ethereum Layer 2 solution Arbitrum launched on Tuesday. The company also announced a $120 million funding round at a valuation of $1.2 billion. Arbitrum is built to scale Ethereum by using optimistic roll-ups, in which transactions are

bundled outside of the main net before being posted on the Ethereum blockchain. Since launch, transactions on Arbitrum have been markedly cheaper than on Ethereum. According to the defiant, ETH transfers cost about $1 in gas fees on Arbitrum rather than $11 on Ethereum. Uniswap trades, which require more gas than basic transfers, are currently executing for $5 compared to $81 on Ethereum. Next headline, Cream Finance was involved in a $25 million hack. Defi Protocol Cream Finance fell prey to a flash loan attack this week in which the hacker escaped with $25 million in crypto.

Peck Shield, a crypto security fund. firm explained the attacker was able to make off with the money due to a re-entrancy bug, which became available when Cream integrated with the AMP token, because AMP uses the ERC, the 777 token standard, rather than the usual ERC 20 token standard. All right, time for fun bits. Cryptopunks are going Hollywood. Larva Labs, the NFT developer behind Cryptobunks, MiBits, and Autoglyphs,

signed a deal with United Talent Agency for representation across film, TV, video games, publishing, and licensing. According to UTA, Cryptopunks would be among the first crypto-native IP to enter the traditional entertainment world. Leslie Silverman, head of UTA digital assets, told the Hollywood reporter, quote,

I would say that it is one of the first opportunities for an IP that fully originated in crypto world to enter a broader entertainment space, and they earned it. They have really hit the zeitgeist in a tremendous way. All right, thanks for tuning in. To learn more about Steve, FtX,

and Forbes Crypto Asset and Blockchain Advisor, be sure to check out the links in the show notes. Unconfirmed is produced by me, Laura Shin, with help from Anthony Yun, Mark Murdoch, and Daniel Nuss. Thanks for listening.