EC Blockchain

Maybe FTX was the real poster child for 2021’s startup excess • ZebethMedia

By zebethcontrolPosted on November 17, 2022Posted in due diligence, EC Blockchain, EC Cryptocurrency, EC Newsletter, EC venture capital, FTX, Startups, The Exchange, Venture, venture capitalNo Comments

If someone offers you a seat on a rocket, you don’t ask which seat. So goes one of Silicon Valley’s favorite platitudes, one that you can trace back (at a minimum) to former Google CEO Eric Schmidt and former Facebook COO Sheryl Sandberg. The idea is that if you are given a shot at working on something new and big, you just say yes and sort out where you fit in the organization later. The chestnut can apply in other circumstances. For example, if I was building a Very Cool Company that was perhaps set to break out and become the Next Big Thing, you might be more concerned about getting some of your capital into the business (a seat on my business rocket ship) than precisely how the business is run (asking which seat you are buying). The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. Making a big bet on the future without knowing all the details can, per the Sandberg example, work out well. It can also … not. As with many business cliches, the rocket-seat philosophy is frequently over-applied. Instead of being reasonable advice to be bold in the face of uncertainty, it can also be used to make witless choices appear reasonable.

FTX exposure hits market makers and funds • ZebethMedia

By zebethcontrolPosted on November 16, 2022Posted in Crypto, EC Blockchain, EC Cryptocurrency, enigma, FTX, hedge funds, WintermuteNo Comments

The collapse of FTX is swiftly draining money from the crypto economy: Information reviewed by ZebethMedia indicates that market makers and funds that lost money on the exchange, until recently one of the largest cryptocurrency exchanges in the world, are more numerous than previously anticipated — and some might be in conversations with creditors soon. Dozens of market makers and fund managers in an invite-only Telegram chat responded to a poll titled “my/my firms [sic] current exposure to FTX.” ZebethMedia reviewed the results from the 147-member chat, dubbed “FTX creditors private.” Among the 70 respondents, 66% said they lost $25 million or less, 7% indicated that they lost between $25 million and $50 million, 6% lost $50 to $100 million, and 1% reported FTX-related losses of between $100 million and $500 million. The remaining 20% declined to provide a sketch of their potential losses, according to private documents reviewed by ZebethMedia. Who is in the cohort? “Anyone who was a big player was on FTX,” a source close to the matter said. “You couldn’t have a credible market-making business if you weren’t on that platform.” There are a few members of the chat who have spoken publicly, but the majority of the firms in the group have not gone public with their losses, the source said. “There’s a lot of funds out there who haven’t reported what they lost. There’s going to be a lot of contagion.” If the FTX collapse is anything like what happened with crypto exchange Mt. Gox (which was hacked and then filed for bankruptcy), what will result will be a long, drawn-out court case in which depositors try to recoup their losses. But some members of the chat are also exploring opportunities to sell claims of their FTX accounts. Individuals in the chat asked others if they’ve been able to sell their accounts over the counter, according to messages seen by ZebethMedia. Enigma Securities is looking to buy claims of individual or company accounts, according to group members. Enigma is a Financial Conduct Authority-registered crypto asset facilitator for liquidity, banking relations and custody solutions. “Enigma is looking to buy claims >10m via a Dutch auction as soon as this week. I can make an intro if anyone is interested,” one group member wrote on Tuesday.

There’s still juice in the NFT market despite very real downturn • ZebethMedia

By zebethcontrolPosted on November 15, 2022Posted in coinbase, Crypto, EC Blockchain, EC Cryptocurrency, EC Newsletter, NFTs, OpenSea, The ExchangeNo Comments

But from Coinbase to Reddit, OpenSea is no longer the only fish in the sea Alex Wilhelm Anna Heim 8 hours Eight months ago, this column asked if we were entering an NFT downturn. The answer, it turns out, was a giant yes. That NFT hype is behind us is something we could tell without even looking at any data. But we do love data, and backing up our hunches, so we’re going to take a closer look at some of the very same charts we examined earlier this year. The universe of non-fungible tokens is fragmented by definition since they can be minted and sold by anyone across a number of blockchains and marketplaces. But there’s actually a reasonably good proxy to evaluate how the market is doing: trading volume on OpenSea, one of the main NFT marketplaces, and a startup that was valued at more than $10 billion earlier this year. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. We need to add a caveat here: OpenSea was perhaps more central to the NFT market when we started using it as a reference than it is today. In the meantime, new players have emerged, and not all of them share OpenSea’s Ethereum-based roots. For instance, there’s Joepegs, an NFT marketplace on the Avalanche blockchain that recently raised a $5 million seed round from the Avalanche Foundation and FTX Ventures (whose funds they “transferred out of FTX prior to recent bankruptcy events,” the Joepegs team said in a statement.) More importantly, Coinbase finally launched its long-anticipated NFT marketplace. But it was off to a lackluster start, and data from analytics platform Dune shows that trading volume on CoinbaseNFT is only a small fraction of OpenSea’s tally (or LooksRare’s, for that matter) over the same period.

Can proof-of-reserves prevent future crypto exchange collapses? • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in Binance, Chainlink, Crypto, crypto ecosystem, crypto exchanges, EC Blockchain, EC Cryptocurrency, FTXNo Comments

A number of crypto exchanges are rushing to publish proof-of-reserves in a seeming attempt to reassure investors their funds are safe as fellow exchange FTX melts down. Proof-of-reserves (PoR) are independent audits by third parties that aim to provide transparency and evidence that a custodian holds the assets it claims to own on behalf of its clients. Auditors then aggregate balances into something called a Merkle tree, which entails all client balances. FTX exploded this week following a CoinDesk report that showed a June 30 balance sheet of its affiliate trading firm, Alameda Research, was largely made up of FTX’s native token, FTT. This all could have been avoided with PoR, Sergey Nazarov, co-founder of Chainlink, said to ZebethMedia. “There was a balance sheet issue and it became known to many depositors all at once,” Nazarov said. “And because it was a surprise, there was a bank run that led to insolvency.” But imagine if depositors knew what FTX and Alameda Research’s balance sheets were from the beginning.

Framework Ventures co-founder says DeFi gives hope following FTX collapse • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in Crypto, crypto markets, EC Blockchain, EC Cryptocurrency, FTX, investing, VCs, Venture CapitalistsNo Comments

FTX’s downfall will heighten the need for regulation but also pique long-term interest from venture capitalists looking to invest in decentralized finance (DeFi), according to Michael Anderson, co-founder of Framework Ventures. “It just seems obvious that DeFi is the only way that we can continue to do these types of financial services operations in the crypto ecosystem,” Anderson said to ZebethMedia. “It gives us hope and strengthens our resolve that the things we’re pushing for are the right things to be working on.” In April, Framework Ventures launched its third fund at $400 million, with about half of it earmarked for web3 gaming. Anywhere from half to 70% of pitches the firm gets are gaming-related companies, Anderson said. But the recent situation with FTX has the firm “doubling and tripling down on everything we believe in,” which includes DeFi and regulation of centralized finance (CeFi). And while some firms like Multicoin have seemingly lost capital stored on FTX’s crypto exchange, Vance Spencer, co-founder of Framework Ventures, said the firm had no exposure. “Regulation is not something we should be against or preventing,” Anderson said. “Sensible regulation makes sense and now that [former FTX CEO Sam Bankman-Fried] has been removed from the table, we can move forward and get more vocal about centralized finance versus DeFi and the pros and cons of each.”

Some crypto VCs see decentralization as the future following FTX collapse • ZebethMedia

By zebethcontrolPosted on November 9, 2022Posted in Binance, blockchain, Crypto, EC Blockchain, EC Cryptocurrency, EC venture capital, FTX, Venture, venture capitalNo Comments

As the crypto market digests the past few days of chaos, venture capitalists see the moment as a warning, but also an opportunity for the growth of decentralization and maturation of the larger blockchain space. “As venture investors, we take a long-term view on the industry; despite the current market turmoil, we are actively assessing and investing in the right opportunities,” Marc Weinstein, founding partner of Mechanism Capital, said to ZebethMedia. “The premise of DeFi has, if anything, been strengthened by the collapse of centralized entities from opaque counterparty relationships.” Decentralized finance (DeFi) is often associated with trusting blockchain technology to execute services through smart contracts, while centralized finance (CeFi) usually refers to more traditional business models and involves having people manage funds and manually execute services. “Market sentiment is shaken, but committed VCs with experience from several crypto market cycles will continue to invest.” Marc Weinstein, founding partner of Mechanism Capital Historically, the venture market doesn’t get “too offended” by what transpires in secondary markets, David Gan, general partner at OP Crypto, said to ZebethMedia. Regardless, he said, the seeming death of FTX is saddening for everyone, “not just in the VC space, but across the board.” When there are massive crashes and burns, it speaks to what we’ve been seeing over the past decade: It’s the Wild West out there, Samantha Lewis, principal at Mercury, said to ZebethMedia. “When summarizing it all, I see it a continuation of the phase that started when winter hit and we saw Luna and all these crazy companies crash and burn like BlockFi, Celsius and now we have FTX,” Lewis said. “As an early-stage venture investor, it’s telling me the hype is now for sure gone. But that ushers in the maturation of the space that a lot of us have been craving for a really long time.”

Will the FTX debacle scupper crypto venture dealmaking? • ZebethMedia

By zebethcontrolPosted on November 9, 2022Posted in Binance, blockchain, Crypto, EC Blockchain, EC Cryptocurrency, EC Newsletter, EC venture capital, FTX, The Exchange, Venture, venture capitalNo Comments

The dramatic fall of FTX is taking with it more than just the paper wealth of one of crypto’s most colorful players. Given the amount of invested capital that may be incinerated in the crypto exchange’s anticipated sale to rival Binance, it’s hard not to wonder where venture goes next in web3. FTX is no longer set to generate massive investor return when it goes public; instead, backers of the exchange are concerned that their investment could go to zero in the Binance transaction. The potential sale of FTX to the larger exchange may save the brand — there’s a lot we still don’t know about its health sans rescue — but it is not clear if any of the capital pools that helped power its rise will get their money back. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. The scale of the potential losses is staggering. FTX’s mid-2021 funding round was something that it described at the time as the “largest raise in crypto exchange history,” for example. The $900 million round valued the company at around $18 billion. The boast about the round now sounds more like a threat, at least from a venture returns perspective. “Over 60 investors participated in the $900M Series B,” FTX wrote at the time, noting that “Paradigm, Sequoia Capital, Thoma Bravo, SoftBank, Ribbit Capital, Insight Partners, Third Point, Lightspeed Venture Partners, Altimeter, BOND, NEA, Coinbase Ventures, Willoughby Capital, 40North, Senator Investment Group, Sino Global Capital, Multicoin, the Paul Tudor Jones family, Izzy Englander, Alan Howard, VanEck, Hudson River Trading, and Circle” put capital into the round.

Binance’s plan to acquire FTX is ‘real-life Game of Thrones’ as crypto winter winds blow • ZebethMedia

By zebethcontrolPosted on November 8, 2022Posted in Binance, Crypto, crypto ecosystem, crypto exchanges, cryptocurrency, EC Blockchain, EC Cryptocurrency, FTXNo Comments

Binance, the world’s largest crypto exchange by volume, has signed a letter of intent to buy its closest competitor, FTX, making huge waves in the crypto community after the putative billionaire CEOs of the exchanges engaged in a multi-day public dispute on Twitter. “It’s like real-life ‘Game of Thrones,’” Alex Taub, founder and CEO of DAO-focused platform Upstream, said to ZebethMedia in a message. Today’s acquisition news was bigger than the HBO show’s dramatic “Red Wedding” massacre scene. FTX was quick to spin the potential sale of its business as a win. “A *huge* thank you to [Changpeng “CZ” Zhao], Binance, and all of our supporters,” FTX founder and CEO Sam Bankman-Fried said in a tweet on Tuesday regarding the deal. “This is a user-centric development that benefits the entire industry. CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.” But it’s a slam-dunk outcome for Binance after a heated spat. Investors, founders, and operators throughout the crypto community noted that the deal makes Binance appear strong amid a bear market for the sector while raising questions about FTX’s solvency and financial performance. “It’s crypto winter now, and it’s time when the market checks everyone for weakness,” Serhii Zhdanov, CEO of cryptocurrency exchange EXMO, said to ZebethMedia. “Exchanges as main players bear the main damage because of low liquidity, while their main income is from trading fees. It’s enough to check the change [in] trading volumes for the last year to understand how tough the situation is. “Naturally, it’s time of mergers and acquisitions,” Zhdanov said. “We might see more such stories in the near future.”

Here’s the rundown on the Binance and FTX fiasco • ZebethMedia

By zebethcontrolPosted on November 7, 2022Posted in Binance, Crypto, crypto markets, cryptocurrency, EC Blockchain, EC Cryptocurrency, FTX, marketsNo Comments

The largest crypto exchange by volume (Binance) and the third largest crypto exchange by volume (FTX) faced off in recent days after Binance CEO Changpeng “CZ” Zhao tweeted that his exchange would slowly withdraw billions of its holdings in FTX’s native token, FTT, “due to recent revelations that have came to light.” But first, let’s take a few steps back. Concerns surrounding FTX’s liquidity grew following a Thursday report from CoinDesk about the balance sheet of Alameda Research, a crypto trading firm once run by FTX CEO Sam Bankman-Fried. Alameda holds $14.6 billion in assets with $8 billion in liabilities as of June 30, CoinDesk reported. The report showed Alameda’s largest asset was about $3.66 billion of “unlocked FTT” and $2.16 billion of “FTT collateral.” (FTT is the token behind FTX.) This means the $5.82 billion in total FTT that Alameda owns is equal to 193% of the total known FTT market cap, which is about $3 billion, according to CoinMarketCap data. Image Credits: CryptoQuant (opens in a new window) “The issue is that Alameda cannot sell even small amounts of their FTT holdings without heavily impacting the price,” Marcus Sotiriou, an analyst at the publicly listed digital asset broker GlobalBlock, said in a note. “Data from CryptoQuant […] tells us that there are only around 200-300 active addresses trading the FTT token, which is very small in comparison to many other large caps. Hence, large sell orders would crash the FTT price, due to being illiquid.”

What’s going on with NFT royalties? • ZebethMedia

By zebethcontrolPosted on November 2, 2022Posted in Creators, Crypto, EC Blockchain, EC Cryptocurrency, looksrare, NFTs, raribleNo Comments

In recent months, conversations around NFT creator royalties shifted as some platforms abandoned royalties for other alternatives. Not everyone is happy about it. “Every platform had royalties about a year ago,” Alex Salnikov, chief strategy officer and co-founder of NFT marketplace Rarible, said to ZebethMedia. Then half a year passed and some marketplaces stopped implementing them, he added. Creator royalties were originally introduced across the NFT community as a way to pay artists for their work in both primary and secondary sales. In general, the content creator royalty is 2.5% to 10% of an item’s purchase price. Most royalties average about 5%, Salnikov said. A lot of creators’ initial income comes from primary sales, but over time, secondary sales can build out their income through royalties, Alex Fleseriu, CEO of fine-art-focused Solana NFT marketplace Exchange.ART, told ZebethMedia. “It holds up their success and it’s very important for them to make a living.” “Let’s pick one of these ways and get all of the NFT marketplaces behind it. We’re cursing the market by fighting over market share.” Rarible co-founder Alex Salnikov Royalties and rewarding creators are the foundations for building long-term value, Shiti Manghani, COO of web3 gaming and development studio Find Satoshi Lab, said to ZebethMedia. “The creators and artists will work with platforms that value their work, stop their exploitation and consequently empower them to create their best work.” Find Satoshi Lab launched a multichain NFT marketplace on Tuesday that enforces royalties. “Web3 was born in many ways to solve for the challenges faced by creators with centralized institutions that did not allow for fair rewards to be awarded,” Manghani said. “[We] would like to stay true to that ethos.” Separately, Exchange.ART on Wednesday launched its “Royalties Protection Standard,” which enforces creator royalties on secondary sales of NFTs on its platform. This means that new NFT collections on its marketplace can utilize the standard to ensure artists that their work won’t be traded on marketplaces without their consent. “We’ve seen royalties come under a lot of pressure lately,” Fleseriu said. “We’ve seen marketplaces, protocols, basically allow buyers and sellers to circumvent those royalties, which intensifies this predatory nature of the NFT ecosystem overall, especially in the [profile picture] market.”