Welcome to our November issue,
stating that it has been a wild few weeks since our last issue would be a complete understatement. Given these circumstances, this issue will have a slightly different format with a longer than usual intro and bullet point type updates - let us know what you think of it. But now, let’s jump in:
The elephant in the room - FTX, SBF, and Alameda Research
News broke that FTX might be in trouble right after Breakpoint while our team was attending the Staking Summit on November 8th. What started out as a seemingly innocent dispute between two of cryptos’ most prominent figures, CZ from Binance and SBF from FTX, developed to be a story of unprecedented fraud that matches the likes of Enron.
Since I’m quite certain that most of you have followed the event closely, I will spare you the trouble of going over everything again. For those brave enough to do so anyways, Delphi Digital comprised this excellent Twitter Thread covering most of what is known (so far) regarding the fraudulent behavior of Sam Bankman-Fried and his companions at FTX & Alameda Research. If you want to catch up via video, ColdFusion as well as CoinBureau got you covered with these excellent videos: video one, video two, and video three.
Times are really grim right now with the once highly acclaimed BlockFi recently filing for Chapter 11 and industry heavyweights such as the Digital Currency Group finding themselves amidst rumors of not making it through this bear market - we will just have to see how this plays out.
Without wanting to sound naive or fanatic and even though the industry looks worse than maybe ever from the outside, we are still as bullish as before:
First of all, it was - again - centralized parties that failed and abused their customers’ trust. Once again making it painfully obvious that a hyperconnected, increasingly digital global economy is in desperate need of more resilient systems that cannot be hijacked by human greed and a centralization of power. DeFi and the protocols underpinning it functioned just fine despite insane volatility and fear in the wake of the collapse of FTX. Ironically, we’d like to quote the analysts from JP Morgan here:
"[…] while the news of the collapse of FTX is empowering crypto skeptics, we would point out that all of the recent collapses in the crypto ecosystem have been from centralized players and not from decentralized protocols,” (source)
Second, regulation. It is clear that the space needs proper regulation - by all means, this has been obvious for a while now. The events of the recent weeks will hopefully lead to a more nuanced approach to regulation free from nepotism and behind-closed-door lobbying, looking at you Mr. Gensler. Quoting yet another (in)famous TradFi player, Bill Ackman: “[…] crypto is here to stay and with proper oversight and regulation, it has the potential to greatly benefit society and grow the global economy.’ Well, we couldn’t agree more.
Last but not least, irresponsible VC spending and toxic tokenomics have been washed out or exposed respectively. Ultimately, this leads to more focused capital allocation and less distraction. Less excess funding leaves less room for quick exits and increases the need to build out more sustainable infrastructure for web3 projects with genuine utility. The 1990s have seen a similar development: while the run-up to the bubble funded the building of the Telcom infrastructure, most of the internets’ posterchild success stories saw the light of day only after the bubble burst while leveraging said infrastructure.
In an excellent podcast episode by Blockworks with Avichal Garg & Haseeb Qureshi, the recent events were dubbed “cryptos’ 2001 moment”:
It will take a while to recover from this. However, with the number of people impacted or interested in this now being significantly higher than it was in previous bears (e.g. 2014 or 2017), it is unlikely that the space will fade into oblivion. If the drive to build persists and applications with real-world use cases proliferate (e.g. payments, a more inclusive & accessible financial system, enabling creators to monetize their communities without the need for rent-seeking middlemen, etc.) the space will come out of this stronger than before. Similar to the internet in the early 2000s. What’s more, compare to 2017, many verticals that were only being dreamed about do actually exist today: DeFi; interoperability (e.g. IBC on Cosmos); stablecoins, PoS ETH, etc. Now it’s time to use these building blocks, compose them, and bring real-world utility to the masses, ultimately going up the S-curve. Again, similar to the internet in the early 2000s.
Furthermore, and probably most important, we have more developers within the space than in any cycle before.
While not stating that all of this is a guarantee for success, it is an indicator of increasing adoption and diffusion of blockchain technology - even though ‘we are not quite there yet’ as Haseeb emphasized at the end of the episode.
One thing to end this extraordinarily long intro with:
While we feel terribly sorry for anyone affected by this, one great outcome is that ‘self-custody’ is becoming more popular than ever as demonstrated e.g. by more Google search queries for the said term in November than ever before. This trend is also exemplified by Ledger & Trezor, two popular hardware wallet producers, recording their strongest sales numbers during the FTX aftermath. We highly advise everyone to take full advantage of what web3 has to offer by leveraging the benefits of self-custody, i.e. taking full control (and responsibility!) of your digital assets. The popular saying, ‘not your keys, not your crypto’ is now more accurate than ever before. If you need assistance along the way, always feel free to reach out to us!
Binge-watching: The Staking Summit by Staking Rewards
Despite the bad news that broke that day, we still had a blast at the Staking Summit on November 8th. You can watch a recording of the whole summit here. Our CTO, Florian Liss, took part in a panel on Validator Pricing Strategies (recording), while our COO, Julius Schmidt, shared the stage with Allison Mangiero from the Proof-of-Stake Alliance (POSA) to talk about Crypto Regulation in the US and Europe (watch at 5:20:20).
Polkadot Munich MeetUp
On October 24th, Robert from our team took the stage at the Polkadot München Meetup to give a brief, beginner-friendly introduction to Staking Facilities and staking on Polkadot. The next MeetUp is already planned and scheduled for December 5th, you can sign up for free here. Thanks for having us and putting together such a nice event!
Here’s the recording of Roberts’ presentation:
Staking Facilities joins Edens’ Relay Network
We’re excited to announce that we joined the Eden Network for our Lido nodes after successfully testing their relay solutions. What is a relay solution you might ask? Well, excellent question:
We auction off our block space to block builders and to avoid spam, we use a relay solution, which, in laymen’s terms is similar to an API. The relay is used for the auction and the best-paid block is then forwarded, or relayed to us. Think of Eden as a sort of mediator or broker, which facilitates the interaction between a block proposer (Staking Facilities) and block builders, which constantly scan the network for the most lucrative transactions.
Solana
Solana & SBF - it is no secret that SBF was big on Solana and while he definitely helped turbocharge the ecosystem, him being gone is not as bad (maybe even good?) as many proclaim on Twitter. To fight the FUD with some facts & figures, the Solana Foundation published this blog post.
Just before Breakpoint, on November 2., Hetzner, a popular cloud, and hosting provider, enforced its’ anti-crypto policy and shut down every crypto business using their services. While this has been in the works for some time, it still resulted in almost 20% of Solana validators being affected by this and in turn going offline. However, the Solana network continued to operate without any downtime or difficulties - a clear sign that recent network upgrades are paying off. Furthermore, the incident once again proved how valuable it is to run your own.
On the same day, Meta announced support for NFTs running on Solana as well as the Phantom wallet for the Instagram app.
A few days later, Google Cloud announced that they are running a validator on Solana and that they will bring their ‘Blockchain Node Engine’ product to the network as soon as next year. Furthermore, they are indexing Solana data and will bring it to Bigquery next year, so that developers have better access to historical data.
One of our highlights was the presentations & demos on Firedancer, an independent client for the Solana network currently being built by Jump. Seeing that a trading company is incentivized to share their knowledge like that and building an open source client is a great example of how socio-economic incentives are well aligned in this space. Jump is incentivized to make the entire network faster and more scalable so they can execute more orders faster on a reliable network.
Listing all the announcements made during breakpoint would go beyond the scope of this newsletter. Good thing that every talk and panel was recorded so that you can binge-watch through it all - you can check them out here.
Ethereum
Withdrawals were successfully tested on testnet and during the last ETH core devs call, March 2023 was set as a goal for the Shanghai Upgrade, which will enable withdrawals on mainnet and move the Ethereum network one step closer to scaling.
Phantom plans to go multi-chain with support for Ethereum and Polygon. Just like ourselves, Phantom is an advocate of the multichain future thesis. With dApps (MagicEden to also run on Polygon) as well as wallets (such as Phantom) going multichain, our thesis is being proven to be correct once more. Another indicator of this is NEON to launch in December, which brings EVM Compatability to Solana, ultimately reinforcing the multichain narrative as well.
The Phantom news broke just days after Metamask, the most popular wallet, announced that they are tracking IP addresses for anyone using the wallet with its’ default RPC provider, Infura (source). Here’s a great Twitter thread in case you want to get around this.
There are now more than 100.000 unique stakers using the Lido liquid staking solution and Coinbase recently announced that they are adding support for LDO, Lidos’ governance token.
Polkadot
At the beginning of November, the Web3 Foundation announced that their three-year-long cooperation with the SEC finally paid off: DOT, the native token powering the Polkadot ecosystem, is to be considered software and not a security.
As referendum 244 successfully passed on November 21st, the new governance model is now live on Kusama, ultimately pushing the decentralization of the decision-making process of the network to the next level by e.g. removing the role of the council.
Here’s a great Twitter Thread listing a bunch of useful tools for Polkadot and Kusama - missing any? Let us know!
The Graph
The Graph announced Beta support for custom Solana indexing with substreams. It is available with a hosted substreams endpoint from StreamingFast so that developers can start building and testing this new indexing paradigm.
The Graph mainnet will turn two years old on December 15th - man do they grow up fast!
Cosmos
Proposal 82 was rejected with ~37% vetoing the proposal, ~48% in favor, and ~13% abstaining. The general sentiment among the vetoers was that the Cosmos 2.0 whitepaper was lacking in details and risk analysis. Most of the community agreed that further deliberation is needed before moving forward.
Stride
You can now claim your Stride airdrop - check out this blog post for eligibility.
Chainlink
We’ve been running nodes for the Chainlink oracle network ever since the beginning of 2020, therefore, we are excited that Chainlink Staking v0.1 is expected to launch on December 6th. To help increase the crypto economic security of the Network and support its sustainable, long-term growth, we will be participating in Staking v0.1. You can learn more about staking on Chainlink here.