Unchained - Why Are NFTs the One Bright Spot in the Crypto Markets? - Ep.309

Starting point is 00:00:00 Hi, all, as you know, my book The Cryptopians comes out February 22nd. I wanted to share a blurb that Jeff John Roberts, the executive editor of DeCrypt, and author of Kings of Crypto, wrote about it. Jeff said, The most authoritative account yet of Ethereum. Laurishin is deeply sourced in the crypto world, and this is reflected on every page. The Cryptopians also casts new light on Vitalik Boutarin, showing the human side of Ethereum's founding genius as never before. If that intrigues you, then pre-order the Cryptopians. Idealism, greed, lies, and the making of the first big cryptocurrency craze today at Bitley

Starting point is 00:00:43 slash Cryptopians. That's B-I-T-L-L-Y-S-C-R-Y-P-T-O-P-I-A-N-S. And again, the book comes out February 22nd, and you can pre-order it at Bitley slash Cryptopians. Hi everyone. Welcome to Unchained. You're a no hype resource for all things crypto. 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 January 14th, 2022 episode of Unchained. Tired of your exchange taking 25% of your staking profits? The Avato blockchain computer allows you to stake Ethereum and Unchained. other crypto at home and keep 100% of the rewards. Go to ava.do. With the crypto.com app,

Starting point is 00:01:38 you can buy, earn, and spend crypto in one place. Download and get $25 with the code Laura, link in the description. Today's guest is Offtav Hossein, aka DC investor, and he is a crypto investor, project advisor, and NFT collector. Welcome, Offtab. Hey, Laura, thanks for having me on. I'm really excited to be here. The crypto markets were down quite a bit earlier this week with the total market stepping below $1.9 trillion a few times. And also in the last seven days, Bitcoin traded below $40,000 briefly, and ETH even dropped below $3,000. And yet the NFT market was booming. So for listeners, we are recording on Thursday, January 13th, and already OpenC's monthly volume has exceeded the monthly volumes for November and all of October as well. And I also noticed that

Starting point is 00:02:38 monthly active traders have also surpassed the number from August, the number from September, the number from October, the number from November. So, Octab, what is your sense of what's going on here? Well, I think there's a few things, Laura. And first of all, you know, for those who have been in crypto for a while, I think a lot of people are aware of the more cyclical nature of how things work. And certainly as it relates to the fungible tokens, and when I say that, I'm talking about Bitcoin, ether, and some of these other fungible project tokens, when those get traded truly as speculative assets in significant volumes at times. And so you see a lot of activity around those assets. And when prices start to go down, you do at times see reflexive panic. And that works

Starting point is 00:03:22 the other way as well. When prices are going up, you see that reflexive fomo, right? Because people can easily get in and out of those token positions. So if I wanted to sell even like a million dollars or $10 million or more of ether or Bitcoin, I could do that instantly in an exchange transaction. And it could be done within a second, whether it's on-chain or an off-chain exchange. With NFTs, the dynamic is different, right? So even if you want to sell your NFTs, you can't necessarily find an immediate buyer. You actually have to, in most cases, find a buyer who wants to buy your specific NFT, and then they provide you the liquidity for that. So I think that's, that's just the fundamental market liquidity dynamic. But I think also at play here is the fact that

Starting point is 00:04:07 a lot of people have bought NFTs now, you know, we've been through several waves of speculation in NFTs. And by the way, that's ever continuing. But we also have seen a lot of those flippers kind of burn out. So every time, the way that I think about it is every time a flipper buys an NFT and sells it, the probability of it going into a longer-term collector's hands actually increases, right? And so those longer-term collectors are fairly price-insensitive. They're not necessarily tracking the floor prices. And even if they are, they don't have much intention of selling anytime soon. So I think for those reasons, you kind of see NFT prices potentially holding up better, even though these fungible tokens, you know, when people really need liquidity, they're going to

Starting point is 00:04:48 sell those fungible tokens first just because they can. I also had another theory, which is, and I have no idea really if this, you know, is kind of a big enough trend that it would be noticed in the markets. But I have a feeling a lot of people gave NFTs as holiday gifts. And so I wondered also if some of the trading was simply people who received NFTs just like selling them or kind of getting into it and like buying more. Or you know what I mean? Like there was maybe a new wave. of people that were sort of like onboarded during that holiday time. I don't know what you think of that.

Starting point is 00:05:28 Well, anecdotally, I think there's definitely some of that in terms of there have been a lot of new participants coming into NFTs. And by the way, this has been an arc that has been pretty much continual since this time last year. The past year has just been explosive for the growth of NFTs since last January. And obviously there was activity before them, but the past year has been marked. And I don't think we're really seeing that slow down a tremendous amount. I mean, of course, there are issues around transaction fees and just using layer one blockchains that make it difficult for some users.

Starting point is 00:05:57 But the interest in NFTs just continues to increase, quite frankly. And you see this a lot with like celebrities now putting, you know, you see that Paris Hilton and Shaq doing dot Eith after their name. And that's just bringing a lot of eyeballs to the NFT space and Web3 as a whole. So I do think we're seeing new buyers enter the space. And that is that I think is an interesting dynamic because could we see a crypto like bear market? whether that's a short bear or a long bear, while NFTs continue to go up in value, I think the answer is possibly, as long as there's sufficient what I'll call like replacement demand from outside of the crypto space for people to buy NFTs.

Starting point is 00:06:34 Now, a lot of the higher value NFT activity has been crypto people who got wealthy off of their crypto assets buying NFTs. But I do think, you know, you have people like Shaq Paris and other celebrities coming in. It's not entirely out of the question that prices might continue to. go up even in a prevailing crypto bear, at least for a time. Yeah, literally right before we started recording, I saw Jimmy Fallon tweeted GM, and his profile pick is of a board ape. I don't know if that's a new profile pick or if he's had that for a while. And I know I've said this on the show before. It still reminds me, again, of a tweet that

Starting point is 00:07:13 my mind is just so spot on, which is Fred Ersom of Coinbase tweeted. If like when the NFT thing started taking off, he tweeted, it turns out a lot more people are interested in culture than in finance. And so I think you're right that even if the crypto markets just, you know, for fungible tokens go down simply because you're right, there's probably a greater population of people that are kind of interest in NFT type things than would be interested in money type things. That market alone could, yeah, cause the NFT market to continue to rise and sort of be uncorrelated with the fungible token market. So regardless of whatever kind of the anecdotal trends are,

Starting point is 00:07:54 there is one phenomenon that probably also was responsible for the high volumes on OpenC, which was that OpenC saw a decentralized competitor named Lux Rare launch via a vampire attack on the marketplace. What opportunity do you think it was that the Lux Rare team saw there? And how well do you think OpenC will be able to fend off this competitor that's essentially rewarding users? Sure. Well, OpenC, and I'll start by saying OpenC has done tremendous amount for the NFT space. And really, they are the predominant marketplace by a very large margin and have been for a while. Now, from my point of view, as someone who's involved in the NFT space, I think we need to see decentralization there. And decentralization isn't just in how the apps are run, but it's having

Starting point is 00:08:39 more than one app absorb some of that marketplace volume. And so I think that the Luxurya team saw an opportunity with OpenC, you know, OpenC really only has market share to lose because they're practically at 100% now. And so if they can get any piece of that, that's a win for them. But two, OpenC, at least so far with the Articulate strategy, hasn't necessarily wanted to go down the community ownership route. And as some of your listeners may have heard that recently OpenC has done another round of raise that I think valued them at like 13 or 15 billion dollars. 13.3 billion. 13.3 billion, which is significant, I mean, for any, for any company, but certainly one in the Web 3

Starting point is 00:09:21 NFT space. And so that's a huge amount of money, but they have not really wanted to go down the token ownership route. And I'm not necessarily saying that they should. I don't think that's always the end-all be-all. However, for a lot of participants in the NFT space today, a lot of people are used to dealing in tokens, used to using these Layer 1 blockchains directly. And they feel like they should be able to participate in some of that upside. And that's kind of been an ethos of some of the most successful Web3 apps that I've seen. And certainly the ones on Ethereum, the idea of giving ownership to some of your users is a very powerful motivator. And it's, I mean, we've seen this recently with the Ethereum name service, ENS domains. They recently released their

Starting point is 00:10:07 governance token. And that just kind of catalyzed the next wave of growth for them, because all of their passionate users became that much more excited about the platform. And three weeks later, you've got Shaq and Paris Hilton changing their name to .E. I mean, like, it's hard to understate the power of those kinds of effects. So when I saw what Lux Rare did, and you mentioned that they did a vampire attack, in this case, with that vampire, that vampire attack took the form of them giving a retroactive air drop of their tokens to open-see users. And because all the open-see activity is on chain, they're able to see exactly how much

Starting point is 00:10:41 previous users had spent on OpenC. And they gave users a proportional amounts of tokens based on how much activity they did in OpenC. So the premise is they gave more tokens to the people who bought and sold more NFTs. And by receiving those tokens, users could of course sell them immediately on uniswap or some decentralized exchange, but they also had the option to stake them, to earn a portion of the transaction fees that are ongoing in that marketplace. And so I actually claimed my AirDrop and I chose to stake it just because I wanted to support them and see what happens.

Starting point is 00:11:17 And also part of that, so I'm earning a portion of the transaction fees and I'm also earning staking rewards in the looks token. And so I think the looks team just saw this opportunity of, hey, can we create something that gives value back to users? And that's what they're doing and we're seeing it absorb some volume already. All right. So in a moment, we're going to talk a little bit more about what the kind of ripple effects will be of this looks rare vampire attack. but first a quick word from the sponsors who make this show possible. The ScoreBet app here with trusted stats and real-time sports news. Yeah, hey, who should I take in the Boston game?

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Starting point is 00:13:19 latest version through auto updates. One-time investment, 100% profit. Go to Avato. That's ava.do. Back to my conversation with Offtub. Oh, so, you know, I was mistaken. I thought that part of it was causing higher transaction volumes on OpenC at the moment, but this is a retroactive vampire attack. It's retroactive and yeah, it probably didn't drive the activity that we've seen on OpenC, but yeah, it's based on previous activity that have been done on OpenC. Okay. So, I mean, these figures are pretty amazing on Wednesday, according to Dune Analytics, looks rare had more than half a billion dollars in daily volume while OpenC had less than $200 million. And some people, though, are saying that the Luxrear volume is likely wash trading just to yield farm.

Starting point is 00:14:11 And so I wondered, first of all, if you thought that was true. And if so, do you think Luxware could have stain power? Or will it just be that those traders simply go elsewhere when the rewards dry up? It could be both. And I think let's start with the wash trading question because there is definitely some wash trading. And for users who might not be familiar, that's where someone is buying an NFT that they're putting up for sale themselves. However, that is not like a free transaction here because I think it's, I think it's every transaction on looks rare has a 2% fee. And that is going directly to the

Starting point is 00:14:44 looks token stakers. Okay. So if you're doing wash trading, you're paying that 2% penalty. And at that point, you're hoping that your looks reward is offsetting that. I think, you know, and I hope that I hope the looks rear team kind of pivoted a little bit to adjust to that. So we don't have a ton of it. But I don't think we could say that all of this volume is being driven by wash trading. There's certainly some legitimate activity going on. The other question is around, well, what happens as these rewards start to decline or if people become less interested in those rewards? I think that's a to be determined. And I think we've seen other vampire attacks, so to speak, within the Web 3 in Ethereum space. We saw it with Sushi Swap and Uniswap previously. And the way that vampire attack worked was different.

Starting point is 00:15:29 You actually had to move over your liquidity tokens in order. to get the sushi staking rewards. But sushi also had that staking mechanism. I think users are really, I think that's it, I think that was a great model that the looks rare team chose, first of all, because it gives people a reason to hold the token. It gives them potential benefit in that upside on a continual basis. So will people stop caring about it?

Starting point is 00:15:51 I don't know. I mean, I think it's possible that people just keep, keep all of their looks rare and just keep staking it because they're also getting paid in the ether rewards from the transaction fees, It's not just in that looks token. And I think that's an important differentiator. They are actually earning a portion of the transaction fees that users are paying in ether. And so we've seen this kind of flywheel effect where when you reward users, they start to talk about your platform more.

Starting point is 00:16:15 They start to use it more. And I think Looks Rare is kind of at that moment where we'll see if it's able to have that kind of staying power. And so for you, a user who now uses Lux Rare as well as OpenC, what would you, where would you prefer to list? a future NFT that you were to sell? Well, looks rare has lower fees. So if I'm going to choose one just on that basis, I'm going to lean towards looks rare for that reason. And that's irrespective of the looks rewards, number one.

Starting point is 00:16:46 Number two, though, Laura, I think that, you know, my view looking at the space, let's say like over the next year, is we're going to see more marketplace fragmentation. Because the idea that all NFTs need to be listed on the same platform, a single platform, is kind of, like Web 2 thinking, the idea of like centralizing creates this economy of scale, that's not really necessary in Web 3 and certainly not for non-fundable assets. You actually do get some of that benefit for fungible assets because you get more order book depth. But with NFTs, every asset is

Starting point is 00:17:17 unique and you don't really have that. So my point of view is that you're just going to see more and more of this activity kind of, you know, fragment out into multiple marketplaces. And we're going to see more aggregator solutions come into the fold, which actually look across all of these marketplaces, look across Looks Rare, look across OpenC, look across these small marketplaces. And we have already seen the Genie X, Y, Z team is kind of a leader on this. I think that's kind of the future. So I don't view it as, well, looks rare to feed OpenC. It's can looks rare take some of that liquidity and fragment it?

Starting point is 00:17:51 And can we see six other marketplaces come online and do the same thing? And how do you think this vampire attack will affect the pressure on open sea? to issue a token and or decentralized at least some part of its business? It's an interesting question because if we use the uniswap sushi swap situation as an example, I think most people would agree that the sushi swap vampire attack compelled uniswap to issue its own token. Will OpenC do the same thing? I'm not really sure. I think that like, you know, there are implications to issuing a token for a corporation like OpenC

Starting point is 00:18:28 that there are legal considerations. I don't think we talk about that enough because I do think that there are a lot of teams that operate in good faith who don't want to issue tokens because they don't want to face like SEC action and things like that because the SEC hasn't exactly been friendly

Starting point is 00:18:42 to these kinds of models. And open C to my knowledge is subject to U.S. laws. And so they can't just, they might feel like they can't issue a token. I do think it's going to force them to think really critically about it, though. And can they issue a token? What kind of functionality could it

Starting point is 00:18:58 have number one. But number two, I'm hoping, you know, competition is a good thing, Lauren. I think that to the extent that OpenC has another competitor that's pushing things that has lower fees, it's going to be something that makes all of the users of these marketplaces better off. That's my hope. Yeah, I think I agree with you about kind of regulatory issues for OpenC. And, you know, even though I think this was an unpopular idea with the community, I do feel like an IPO would make more sense, at least with the way that the company has been structured. So let's also now talk about one of the more highly traded projects in NFTs recently, which is me bits.

Starting point is 00:19:43 Well, actually that and Lute both are two of the highest volume traded NFT projects. And both of them do not charge creator royalties. And I wondered what that said to you about a kind of like attitudes toward royalties, on secondary sales for creators. Yeah, and I think royalties are a complex question. And quite frankly, we're really only a couple of years into thinking about these models and what they mean long term.

Starting point is 00:20:10 But I do think that projects without royalties have some benefits. And I'm not saying all projects should not have royalties, but some projects like Cryptopunks, like Mebits, and Lou, yeah, I think Lute also doesn't have a royalty. What that allows for is more organic trading volume, right? So like it actually becomes, it makes these assets easier to trade if you're a speculator especially, right? The idea of finding assets that don't have these loyalty fees,

Starting point is 00:20:39 which are essentially are a tax for what you're what you're trading on, they become a drag on your earnings effectively if you're a trader, right? And so I'm not surprised to see periods of volume increase on these assets that have no royalties, especially when you talk about that speculation. game. I think, though, royalties are a really powerful motivator and incentive for creators in the space. And especially for individual artists, I'm a huge proponent of royalties. On these big projects that we've seen, I'm a little bit more, I kind of wonder if they really need the royalties because they already raised a ton of money in ether, you know, half the time. So why do they also need the royalty on top of that? But for individual artists, they're often selling the pieces at a

Starting point is 00:21:22 quote, loss or at a level where they're not at the full market value, if you will, and they're making residual income off of those royalties. And that allows them to keep creating. So I think that's really powerful. I think another point that, you know, listeners should understand is even though these royalties are, you know, technically coded into these contracts, they are avoidable if you really don't want to pay them. But most good faith collectors that I've seen of like individual artist works actually

Starting point is 00:21:51 want to pay the royalties to the artist because they want to support, even if they're selling the piece, they want to support that artist so they can keep creating. I think it's just a really, that's part of what makes this so different from previous models, in my opinion. Yeah, it's so funny because when you were talking and you called the royalty attacks, I did a show, or I didn't do the show, but I released a show on my channel called The Chopping Block and in it for early stage crypto investors talk about all things crypto. But one of them, Haseeb Qureshi of Dragonfly Capital, was talking about some drama with Pudgy Penguins,

Starting point is 00:22:30 and he was calling the royalties a tax. And I saw one of the people during the live stream said, why are you calling an attacks instead of royalties? And so I really like that distinction that you made between royalties paid to these big projects versus individual artists. And that also maybe explains why I happen to notice for the royal drop that is going to be issued by NAS. I mean, it was supposed to happen this week, but they have technical issues. So they're bumping it a week.

Starting point is 00:23:00 I noticed the royalties on that are 50%, which to my mind seemed very high. But you're right that, I mean, NAS is like a super, super famous musician. And this is royalties on the streams. And the prices are really low. for what he's initially selling them at. So now it all makes a lot more sense and probably explains why he feels he could charge a high amount and probably why those collectors will feel that he's owed that money.

Starting point is 00:23:33 So anyway. Yeah. And I think the royalties, the other thing that they also do is create an incentive for the artist to bring value back to those NFTs somehow, whatever that is, because the artist then gets to participate. in that upside.

Starting point is 00:23:47 And the traditional art markets, when an artist sells a painting, that's it. You know, like that whatever they got from that up front is all they're going to get. And they don't really have much incentive to keep them culturally relevant. So I think we're still in really early days around these models. But I think we just have to see what happens. And I do want to clarify on these bigger projects where they do take royalties. I'm not categorically against that. But what I like to see is how those funds are being driven back to enhance the community.

Starting point is 00:24:16 in a meaningful way, not just going into the pockets of the creators. I like to see those funds go into like a Dow or something like that so that they can add value back to the people who continue to participate in those communities. Yeah. Yeah. So for listeners who are interested in some stories right now that are looking at doing that, I would urge you to check out that chopping block episode where they discuss the pudgy

Starting point is 00:24:41 penguins issue. Can't even say it. Okay. So, Optub, where can people learn more about you and your work? So the best way to follow me is actually on Twitter, and I'm on there at I am DC Investor. And I tweet about a variety of different topics. I'm engaged with a lot of project teams in the Web3 space. And yeah, feel free to give me a follow or drop by and say hi.

Starting point is 00:25:06 Great. Well, thanks so much for coming on Unchained. Thank you, Laura. Don't forget. Next up is the weekly news recap. Local news. News is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder

Starting point is 00:25:30 to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us, because local news is big news. Choose news, not noise. CBC News. for tuning in to this week's news recap. Thanks, FOMC.

Starting point is 00:25:55 Crypto is tanking because of you, probably. On Sunday afternoon, the total crypto market dipped to lows not seen since September 2021. Bitcoin led the way, dropping below $40,000 for the first time in roughly three and a half months. Overall, the crypto industry's market cap hit a weekly low of $1.86 trillion on Sunday, before bouncing up to above $2 trillion for the rest of the week. According to data from Coin Glass, the market drop saw over $300 million worth of positions

Starting point is 00:26:27 liquidated on the 9th, which is the third time this has occurred in 2022. The dip coincides with big-time money flowing out of digital asset investment products. Coin shares notes that digital asset investment products experienced the largest outflow of money on record for the week ending January 7th. Bitcoin and Ethereum-based products were hit especially hard, losing $107 million and $39 million respectively. The coin shares data shows four consecutive weeks of outflows, which has not happened since September.

Starting point is 00:27:03 The firm points to last week's Federal Open Market Committee meeting as the catalyst for the market drop, which hinted at inflation risks and the possibility of interest rate increases and take that Haseeb Qureshi, partner at Dragonfly Capital, agreed with on the chopping block. Bitcoin developers are now protected by Jack Dorsey. Block CEO and avid bickoiner Jack Dorsey announced plans via email to set up the Bitcoin Legal Defense Fund, a non-profit organization aiming to protect Bitcoin developers from legal pressures. Dorsey wrote,

Starting point is 00:27:39 The Bitcoin Legal Defense Fund is a nonprofit entity that aims to minimize legal head that discourage software developers from actively developing Bitcoin and related products, such as the Lightning Network, Bitcoin Privacy Protocols, and the like. According to Dorsey, the fund's first goal is to coordinate and organize defense for Bitcoin developers in a lawsuit coming from Tulip Trading Limited, a company associated with Craig Wright, who claims to be Satoshi Nakamoto and was a leader in the Bitcoin Cash and Bitcoin Satoshi's Vision Forks. Dorsey makes it clear that the board, which includes himself, chain code lapses Alex Morcos,

Starting point is 00:28:19 and Martin White, an academic at the University of Sussex, is not seeking additional money for operations, but may in the future. Cash app is rolling out Lightning Network integrations. Cash App, the block-owned payments platform, has begun integrating Lightning Network into its iOS mobile app. Lightning Network is a Bitcoin scaling solution that allows users to transact cheaply and efficiently, without settling each transaction on chain. Lightning has grown from holding just over 1,000 BTC to 3,344 VTC in the last year,

Starting point is 00:28:54 which means roughly $150 million in Bitcoin is locked in the Lightning Network. While that growth is impressive, Cash App may bring an even further stampede of Bitcoin to the Layer 2 solution, as data shows that Cash app ranks as the 14th most popular app in Apple's U.S. App Store. Furthermore, in a recent report, the company noted that over 40 million users transact on his

Starting point is 00:29:19 platform each month. Lightning Network should also receive a boost in activity from Strike, a lightning-based company led by Jack Mallors. Strike announced that its Lightning Network-enabled app is extending its reach to Argentina. Expanding a Bitcoin-slash-lightning payments operation into a country with a 50% annual inflation rate and 45 million people seems like a decent product market fit, commented Lynn Alden, an economist on Twitter. In related news, the Wall Street Journal published a piece on how citizens of Turkey are turning to Bitcoin and Tether in lieu of the Turkish lira. Notably, Ezra Alpe, the chief marketing officer at the Turkish crypto exchange, Bitlow,

Starting point is 00:30:03 told the Wall Street Journal, the Turkish Lira's volatility and rising inflation seen in recent months has led our investors to see cryptocurrency as a profitable investment in the term and as a hedge against inflation in the short term. The Wall Street Journal notes that the lira is down 40% against the U.S.S. dollars since September, which has led to crypto trading volumes in the lira jumping to $1.8 billion per day, despite the country banning cryptocurrencies last year. Paradigm and Citadel Securities make an odd couple. Citadel Securities made headlines on Monday by taking $1.15 billion in capital from two venture firms. paradigm and Sequoia. The deal values the market maker at approximately $22 billion.

Starting point is 00:30:50 Citadel Securities is massive. According to its website, the firm handles 27% of equities trading volume on the U.S. stock market each day and executes 37% of U.S. listed retail volume. Because Robin Hood makes a lot of money from Citadel in exchange for data on its user's trades, when Robin Hood halted purchases of GameStop stock in early 2021, rumors swirled that Robin Hood was acquiescing to a request from Citadel. However, the actual reason was because Robin Hood did not have enough collateral for the compliance demands from the GameStop mania. The move to take money from Paradigm, which backs quite a few crypto powerhouses,

Starting point is 00:31:31 like Compound, Cosmos, Sky Mavis, and Uniswap, is an interesting move by Citadel Securities, because, back in September, founder Ken Griffin said the company did not trade in crypto due to regulatory uncertainty. However, based on comments from Paradigm co-founder Matt Huang in the press release, it sounds like Citadel will be moving into crypto. We look forward to partnering with the Citadel securities team as they extend their technology and expertise to even more markets and asset classes, including crypto, wrote Huang. Coinbase enters the derivatives game. On Wednesday,

Starting point is 00:32:08 a crypto exchange Coinbase announced the acquisition of FairX, a U.S.-based CFTC-regulated derivatives exchange. The purchase could soon allow Coinbase to offer regulated derivatives products to their U.S. customers. The press release noted, the development of a transparent derivatives market is a critical inflection point for any asset class, and we believe it will unlock further participation in the crypto economy for retail and institutional investors alike. Other crypto exchanges have made similar acquisitions. FtXUS acquired Ledger X in August, which is also a CFTC regulated derivatives exchange.

Starting point is 00:32:49 Crypto.com, disclosure, a sponsor of my podcasts, is also in the derivatives game after purchasing Nadex in December. Data from Coin Market Cap shows that Binance did $53.4 trillion in derivatives trading volume in the 24 hours Eastern time spanning Wednesday. Spot volume during the same stretch on Binance was only $17.3 million. Gary Gensler avoids answering whether ETH is the security. On Monday, during a CNBC interview, Securities and Exchange Commission chair, Gary Gensler, was asked whether Ethereum is the security or not. Gensler responded carefully, saying, we don't get involved in these types of public forums talking about any one project, one possible circumstance, or give legal advice over the airways that way.

Starting point is 00:33:38 However, he then added, in a somewhat ominous tone for eth holders, that if you're raising money from the public and the public is an anticipation of profit, based upon that promoter, sponsor, that group's efforts. That's within the securities laws. In 2018, Bill Hinman, the SEC Director of Corporation Finance said in a speech, putting aside the fundraising that accompanied the creation of ether, based on my understanding of the present state of ether, the Ethereum network, and its decentralized structure, current offers and sales of ether are not securities transactions. However, this is not quite the same as an official position by the SEC. Visa and consensus want to bring CBDCs, to TradFi. Visa is partnering with Ethereum Infrastructure firm Consensus to help traditional financial

Starting point is 00:34:29 companies integrate central bank digital currencies. Explained Visa's head of CBDC, Catherine Gou, in a press release, if successful, CBDC could expand access to financial services and make government disbursements more efficient, targeted, and secure. That's an attractive proposition for policymakers. The partnership could see Visa issue CBDC linked payment cards, using Consensus' quorum blockchain. In related news, PayPal confirmed reports that it is exploring a US dollar-backed stablecoin solution of its own. We are exploring a stablecoin.

Starting point is 00:35:05 If and when we seek to move forward, we will, of course, work closely with relevant regulators. PayPal's Jose Fernandez-Depante told Bloomberg. Ethereum's largest L2 went down for 10 hours. Arbitrum, the largest Ethereum Layer 2 solution by total value. locked when down for nearly 10 hours on Sunday. Offchain Labs, the developer behind Arbitrum, says a hardware issue that led to Sequencer downtime was the outage's root cause. A sequencer is a node with special ordering powers that allow transactions on the chain to be finalized more quickly. For now, off-chain has control over the lone Arbitrum sequencer. The team says it is looking

Starting point is 00:35:48 into decentralizing sequencer control in light of this event. According to Arbit Homes' Twitter account, no funds were lost due to network downtime. Pull Together sued by a former Elizabeth Warren presidential campaign staffer. Joseph Kent, a software engineer and former tech lead for Elizabeth Warren's 2020 presidential campaign, has filed a lawsuit in New York federal courts against pool together, a defy lottery protocol. Kent says he deposited $10 into pool together in October and argues that pull together does not qualify to give out lottery tickets under U.S. law. Notably, anyone who purchases an illegal lottery ticket under New York law is allowed to bring a class action lawsuit on behalf of themselves and other ticket holders, which could lead to

Starting point is 00:36:36 $244 million in damages, according to the Wall Street Journal. In essence, the Sue questions whether pool together is autonomous and self-governed. However, in the journal, Pull Together lawyer Kevin Bruegel claimed that Pull Together simply owns the front end with information on how to use the protocol and that the operations are governed by the original code which pull token holders now control. As the article states, quote, according to legal experts, Mr. Kent's lawsuit could be among the first to squarely address the question of who is legal. accountable when a defy application known as a protocol is at odds with the law or causes actionable

Starting point is 00:37:19 harm to a user. Time for fun bits. Crypto land is a meme. Do you want to be part of the world's first physical crypto island? asks a male narrator to begin an 18-minute 35-second video promoting crypto land. After watching the full video, which is a cross between a metaverse hellscape and a cheesy infomercial, I personally would say the answer is no. The idea is bold and familiar if you have kept up with NFTs and Dow's recently. Cryptoland is attempting to purchase an island in Fiji through the sale of NFTs. After that, the details get sketchy. For one, it appears the island's acreage is smaller than the amount offered in the NFT sale.

Starting point is 00:38:03 More humorously, basic questions such as, how would the island get plumbing, were not particularly well covered. All right, thanks so much for joining us today. To learn more about Offtub and the recent NFT news discussed in today's show, check the show notes for this episode. Unchained is produced by me, Laura Shin, with all from Anthony Yun, Daniel Nuss, Mark Murdoch, Shashog, and CLK transcription. Thanks for listening.

Unchained - Why Are NFTs the One Bright Spot in the Crypto Markets? - Ep.309

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