Backstage Pass: Toaster oven elephant
Erebor approved // Circle gets Interop // One neat trick // Lawsuits // Congressional alpha
11 years ago this week:
Bitcoin was $351.
The eleventh biggest token was namecoin.
The 111th was tagcoin.
Losing is fun
The dwarf fortress bank has conditional approval for deposit insurance.
Erebor, the financial institution backed by the guy who strapped two iPads to his face for a billion dollars, the guy who fronted the capital to turn having friends into a status casino for a billion dollars, and the guy who yolo’ed an unobtrusive global police state for a billion dollars, looks good-to-go.
What is Erebor, actually? Based on everything that Palmer Luckey (the first of the three guys I listed elliptically above) has said about it, it looks to be Silicon Valley Bank II: Back on the Chain Gang.
Banks are conservative things in general. They like to make loans into known business models. Which is, generally, fine. People keep making money all over the world opening businesses that other people have opened up before them. Normal people call it entrepreneurship. In crypto? That’s geographic arb.
But I digress.
Pitch deck
The point is that Silicon Valley Bank came along because the tech world was popping and it said “we will bank your weird mobile app economy” and it worked. Until it didn’t. SVB got caught on the backfoot in the very weird COVID era and it went under in 2023.
Two other banks took a somewhat similar approach, Signature and Silvergate, also went down at around the same time, though the circumstances of their respective falls are sus. They had big lines in with the dollar side of crypto exchanges and such.
Those were heady days! Balaji started making bets about bitcoin hitting $1 million. GameStop came back. Recession watch was on and on and on. And people began having actual conversations with computers. Woah.
Geolocation: Middle Earth
Erebor will step into the role of that bank walking around San Francisco, shaking founders’ hands, that real good way, with one hand on the elbow. Making sustained eye contact. Saying: “I get you.” (Excuse me I’m having a moment.)
All that! But now with stablecoins.
In fact, this has probably been the most effulgent week or so that will ever be in the history of asset-backed digital token lawyering. On Friday, the Office of the Comptroller of the Currency approved five banks largely understood to be future stablecoin operators. Now we’ve got the fantasy epic bank for the startup crowd.
To be honest, though, I’d rather Luckey had gone with The Iron Bank as nomenclature. You know, if he’d asked me. He didn’t. But if he had I would have pointed out: That one’s got elephants.
All your devs are belong to us
Everybody loves decentralization until someone else gets paid.
(Sorry. Not taking the populist angle on this one.)
Circle did an acquihire of Interop Labs, the dev team that built Axelar, and its token holders are REKT.
Axelar connects blockchains. Its AXL secures it like ETH secures Ethereum. It has a use. That’s the use. The use is not equity in the company that invented the token.
Does everyone remember when you were all mad at Gary Gensler because he wanted to say that all tokens are securities? This is why he was saying that.
The fact that you’re not getting paid right now is evidence that he was wrong. Decentralization comes with trade-offs.
Docusigned-to-whenever
Axelar went live before AXL, so token holders didn’t even front risk that it wouldn’t be built.
The risk you take for the right to participate in decentralized networks is that key leaders of the ecosystem you bet on might leave.
In fact, do you know which network had a founder who left suddenly? Bitcoin.
No one got rugged here. If you have a kid that ends up being an IHOP manager for the rest of his life rather than a plastic surgeon, you weren’t rugged by offspring. You were just a parent in small-town Ohio with unrealistic expectations.
Stablecoin heuristic
I like heuristics, quick ways of making assessments using a human brain.
For example, stablecoins on a chain versus that chain’s market cap. It seems to me that you want the chain to be worth a fair amount more than the stablecoins its playing host to, right? Makes sense?
So, Ethereum is worth a little more than twice its hoard of stablecoins. Solana and Avalanche are worth about 5X their stablecoins. I’m not sure what the right number is, but these seem like good numbers. Safe numbers.
OK.
But here’s two more numbers to throw at you.
Tron, of Justin Sun fame, of His Excellency fame, of guy with the banana who sank CoinDesk because it was mean fame, is home to stablecoins worth three times the total value of the Tron blockchain.
That’s crazy. That’s like building a 100-foot tall statue of solid gold and protecting it with a chainlink fence.
Then there is Cardano. If Cardano were a dollar bill, the stablecoins on it wouldn’t amount to a single penny laying on top. You’d have to cut the penny into four pieces and then just put one of the pieces on that dollar.
Meanwhile, Cardano’s founder on X: “You do understand what I do for a living? I literally make decentralized central banks and rebuilt Wall Street on a blockchain.”
Bro, I’m not sure you’ve built a check casher on a blockchain.
Be slightly normal
Technology adoption usually looks boring. Early on, you get the weirdos and true believers. If the tech is real, it disappears into everything else. People stop talking about it as “technology” and start talking about what they can do.
That’s where I think we’re heading: the success condition is not “more crypto natives,” it’s “more normal people.”
Figment Capital’s Dougie DeLuca writes that “Crypto is Dead” (long live crypto!)
Meanwhile, Hong Kong crypto exchange HashKey had its IPO this week and the results were disappointing. Shares fell after they hit the market.
HashKey said its mission is to make digital assets “massively accessible.” Cool, cool, but this looks like the wall at one of those off-track-betting parlors.
kyla scanlon just wrote that everyone’s gambling and nobody’s happy. Well this week a casino was bummed out too, in the end.
Uncle Atkins fights the good fight
This week Stani Kulechov, founder of Aave (originally EthLend), the largest money market in the DeFi ecosystem, bar none, announced it has been wrestling with the SEC for 4 years now on behalf of the protocol.
But it’s over now.
What you may not realize about the SEC is that — for a regulator whose whole thing is making the material facts of a particular investment transparent, it really really hates when the lens flips round.
As soon as you get hit by the SEC it lets you know that if you tell anyone about the investigation it’s getting out the thumbscrews. Then, if a company decides to settle, that company has to agree to never say anything about the process. That’s official policy.
That’s like walking into your doctor’s office and the first thing he says is, “The healthcare system sucks, amirite?”
Or going to see an accountant and he tells you, “I’ll take this, but if the IRS calls, that’s on you.”
What’s it tell you if the transparency cops don’t want anyone checking their work?
On the other hand
Decrypt and Blockworks alum, Kate Irwin, dropped an internal memo yesterday about the winding down of Shima Capital, an early stage fund that raised $200 million in 2021. An SEC complaint noted that the fund’s founder had overstated his prior performance as an investor as he solicited funds for this new vehicle.
🌶️ The spicy part, though, is the email Irwin obtained says he’s been in talks with the SEC and the DOJ. That’s like extremely 🙀.
See, this is the SEC doing the correct job. Fact-checking investor decks. This is good work. I like transparency. It sucks to waste your time partnering with someone who has overstated their qualifications.
You know what? There should be an SEC for online dating. You should have to go into an SEC office and let them go through your profile like:
“This photo?”
[they look up at you, down again, back up — make you stand and turn around]
[shakes head]
“That one goes.”
That’s a good use of taxpayer dollars, right? I bet Trump would back the idea.
31 paragraphs
The New York Times did what the New York Times does these days: found a story that could possibly indicate corrupt behavior in the government, put “Trump” in the headline and hit [PRINT].
That headline: “The SEC was tough on crypto. It pulled back after Trump took office.”
It takes you 31 paragraphs to get to the main issue in 95% of the cases covered in the story: the arcane and highly technical question of which digital asset transactions are and aren’t securities.
That’s like when you had a D on your report so you came home and you tried to spend as much time telling your mom about all the A’s you got first.
Actually it’s not the same, because you knew why you got that D. I’m confident that the four reporters who worked on this story didn’t actually understand this issue.
The report does tell you about the case against Ripple (just did a pod about this, by the way), but it doesn’t tell you that the court in that case disagreed with the SEC about just that arcane legal issue.
31 paragraphs!
I mean I get it you guys. When you get that college finals essay question about that one book you didn’t read that semester, you try to frontload it with everything you did study from the class to cover. Sometimes it even worked.
Minor aside: On Monday, I dropped a bit of a screed on X about the state of crypto media. In it, I accused the Financial Times and the Guardian of pubbing their two-minute hates about crypto on the reg. Consider the NYT retconned in.
Ski Mask Dog
👆 That header? Not even a joke. At least, it’s not my joke.
OK, so in Dec. 2023, someone put a photo of a dog with a hat on into a Solana smart contract and that was worth $4 billion. Dogwifhat (WIF).
Makes sense right? If you need more background, Birb Bernanke has a great breakdown, but I think you get it basically, right?
OK, so then the following Spring, someone put a ski mask on another dog, plugged that into Coinbase’s Base blockchain, but that was only worth $300 million or so. Not really sure what went wrong. Anyway, that was ski mask dog (SKI).
Wrong dog?
Wrong ski mask?
Could have been anything really, but I would have thought this one was a sure bet too.
So this is all totally normal, right? I get it you’re like, Brady, we’re here for this to be a little jovial — we didn’t come here for business school! I know, I know, just hold on.
The one part of this story that gets a little weird is the fact that last year it came out that Rep. Mike Collins, a Georgia Republican, likes to buy SKI. “I liked the coins,” he told Decrypt.
Not only did he buy them. He’s kept buying them. All year. His disclosures show him placing SKI bids as recently as September.
I just don’t understand what this elected member of Congress is doing here. Everybody knows that Solana is the most used network.
Anyway, Collins is under ethics investigation.
At last
The year is ending kinda weird. Blockchainers got everything they wanted and number didn’t go up.
No one saw that coming. Like that time I spent all evening coming up with a way to ask a girl out in high school and then I saw her walking down the hallway. It’s like Mike Tyson says: “Everybody has a plan until they see a pretty face.”
We are all a little perplexed. But don’t worry, you guys.
It’s gonna be okay.
Cobie will tell us all what we need to do. Cobie will know.
I probably will do a Christmas edition of this thing, but we’ll see. And watch for a new podcast on Sunday.
Also, aliens are real, and I’m pretty sure they are here right now. Who said that? What?!