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The past year in Web3 + All the Web3 news you missed this week
I started this substack newsletter in February of 2022 and 60 posts later I’m amazed how crazy this year has turned out to be. The year started at the tail end of a wild bull run and has ended with handcuffs and a feeling of resetting. Even through the difficult times of the past year, I’ve seen a different level of excitement from industry veterans about the rebuilding period ahead. The excitement comes from a sense that the distractions of the past year are behind us. The bad actors have been removed and the serious builders will be able to get to work during this rebuilding period.
As I make startup investments, I’ve noticed a similar trend in the types of founders I’ve met and the products being built. In May-Sept this year, people were still pitching far fetched get rich quickish ideas with no meaningful long term vision. Almost none of those ideas have been funded and many of those founders have gone back to where they came from. Now I see much more infrastructure based startups that solve some of the valid criticisms of scalable blockchain/crypto infrastructure. And very few are trying to squeeze some kind of token concept where it doesn’t make sense as a way to lure in short-term focused investors.
I’m not even going to try and predict what happens in 2023, but the future remains bright as we forge ahead.
Newsletter note: This is going to be my last news letter for the year, see you at the start of 2023!
Here’s the Web3 news from the past week
Last week, Yuga Labs got hit with a class action lawsuit that also named a wide range of celebrities who had endorsed the company’s NFTs, including Justin Bieber, Diplo, Paris Hilton, Madonna, Snoop Dogg, and Jimmy Fallon. The charges include “violations of unfair competition laws, aiding and abetting, and civil conspiracy, among others,” reports The Verge.
The Different Types of NFTs: A Simple Guide (CoinDesk)
It’s never a bad time to brush up on the ever-changing NFT landscape. Here’s a helpful rundown of eight popular kinds of tokens, from profile picture NFTs and sports collectible NFTs to play-to-earn gaming NFTs and utility NFTs.
Nansen data shows that Polygon is experiencing a period of high user adoption compared to other NFT marketplaces, reaching an all-time high this month. (Polygon’s collaboration with Reddit has been particularly successful, with four of its top 10 collections linked to the platform.) But Nansen notes that high adoption has been accompanied by low trading volume, indicating that “most activity are free mints/low value purchasing.”
In September, the Commodity Futures Trading Commission (CFTC) served Ooki DAO with a lawsuit via a help chat box and a website forum. The names of two Ooki DAO token holders have since come to light, and a judge has now ordered the CFTC to serve them as well, for “the best practicable notice.”
The ‘Military Metaverse’ Calls It Quits (Gizmodo)
Improbable, a UK-based company, is shutting down a US subsidiary that was creating a “military metaverse,” the exact details of which were fairly hazy. That doesn’t mean the company is getting out of national security software, though. “The umbrella company Improbable still apparently wants to use its ‘metaverse’ tech for the defense sector by creating ‘synthetic environments of huge scale and complexity’ and ‘real life simulations,’” reports Gizmodo, citing comments from a company spokesperson.
FTX founder Sam Bankman-Fried was arrested in the Bahamas on Monday, which is, per CNBC, “the first concrete move by regulators to hold individuals accountable for the multibillion-dollar implosion of FTX last month.” As of a Tuesday court appearance, SBF had been denied release on bail and was planning to fight extradition to the US.
Nansen data shows that investors pulled roughly $3 billion out of Binance on Tuesday, following the publication of a Reuters report on a criminal investigation into the exchange. “Some of the at least half dozen federal prosecutors involved in the case believe the evidence already gathered justifies moving aggressively against the exchange and filing criminal charges against individual executives including founder Changpeng Zhao,” reported Reuters, citing two sources.
Despite the criminal investigation into Binance, the analytics firm CryptoQuant argued this week that the exchange is not going the same way as FTX. Binance is not seeing out-of-control withdrawals, and, per CoinDesk, “CryptoQuant points out that Binance differs from FTX-Alameda in how ‘clean’ the reserves are, or, to put it another way, how they're not reliant on the exchange’s proprietary token, BNB.”
The CFOs are out of their depth. A survey of Web3 CFOs found that 99% of respondents had no formal onboarding process when making the switch from traditional finance to the crypto sector — forcing them to teach themselves the ins and outs of their new industry — and that keeping up with changes in crypto technology is an ongoing challenge.
Last Friday, Axios reported that Sam Bankman-Fried had been secretly funding the crypto news website The Block for more than a year. The revelation adds to growing distrust of crypto journalism and highlights the sourcing challenges facing well-meaning reporters, argues Christopher Robbins for CoinDesk. “While many of us searched in earnest for good sources to share information on a very new and sometimes arcane phenomenon, we have had to sort through the people talking about their own book and looking for free advertising space to pitch their product,” writes Robbins.
The Senate Banking Committee held a hearing on Wednesday to discuss the meltdown of FTX, which yielded a variety of opinions for and against the crypto industry. “Many senators reiterated views on crypto they had held seemingly without considering the events leading up to the collapse of FTX and the arrest of Sam Bankman-Fried,” reports Cointelegraph.
On Wednesday, Senators Elizabeth Warren and Roger Marshall introduced a bipartisan bill called the Digital Asset Anti-Money Laundering Act, which would prevent financial institutions from using certain anonymizing technology and attempt to close money laundering loopholes. The bill did not impress the think tank Coin Center, which called it “the most direct attack on the personal freedom and privacy of cryptocurrency users and developers we’ve yet seen.”
FSB to lay out global standards for crypto regulation (Cointelegraph)
The Financial Stability Board, an international organization, will be making recommendations for crypto regulation, the goal of which is to hold crypto players “to the same standards as banks” if they’re acting like banks. These standards are expected to drop in 2023.
In case you missed it - this was the most opened article from last week’s news roundup
It seems like everyone is waiting for this rollercoaster of a year to just be over - but just because the calendar year ends, doesn’t mean the final dominoes have fallen. The closest and most obvious ripples might have already been revealed, but there are still 3rd, 4th, 5th level effects that companies are privately working through. For example, I’ve heard from startups that had a good portion of their corporate funds on FTX that are now wiped out.
Meanwhile, SBF continues to jump on various twitter spaces in an attempt to convince the world that he did nothing wrong- here’s the latest from the Coffeezilla YouTube channel.
Hi, I’m Andrew Chang - I created the Web3 Roundup to share what I’m learning in this space. I’ve spent my career at the forefront of the technology industry in areas such as crypto/blockchain (Former COO @ Paxos, co-founding partner of Liberty City Ventures), video and adtech. I learn by meeting with founders, investors and other thought leaders and approach Web3 with the same enthusiasm – and skepticism – I had about crypto/blockchain technologies 10 years ago.
You can connect with me on LinkedIn