SF Newsletter January Issue
Silver linings, Warren Buffet, farewells, Berlin and much, much more.
Welcome to our first issue of 2023,
first of all, we hope you had a good start to the new year and wish you all the best for whatever lies ahead of you in 2023 and beyond.
Buckle up, this is going to be yet another heck of a ride.
We ended the last year with quite a bang after months of taking a good beating as an industry. Last year sucked and was a bad year for crypto.
Well, so it seems. At least at first.
There are actually two stories one can tell about 2022 and I’d love to quote Austin Federa from the Validated Podcasts’ inaugural episode with Ryan Selkis as it puts them in perspective:
“[There’s] a paradoxical silver lining in the tumult of 2022”
If you look at your portfolio, you probably get pretty grim comparing it to where you found it last year this time around. If you skim through most mainstream media headlines, you find stories of fraud, hacks, and speculative bubbles - with some declaring crypto dead for good (again). Mostly a story about crypto prices, which does not make for a good bedtime story.
If you look at metrics beyond the price, you find a different story though.
Millions of new users joining the space (example), web2 giants beefing up their support for web3 (e.g. Google; Amazon), increasing developer interest (example), continued venture investments (example), increasing on-chain activity across the board, washing out of bad players (you know), regulatory attention and slow but steady frameworks (e.g. MiCA in the EU, White House statement) and last but definitely not least, major technological developments such as The Merge, The Graph migrations, Solana Outage fixes & updates, Polkadot Staking Improvements, and many, many more.
Altogether this is a story about value not price.
As there are more puzzle pieces in place than in any bear market before — think stablecoins, DeFi, NFTs, onramps, cross-chain communication, etc. — the value of the overall industry is increasingly being unlocked. While not always represented in price, it is most definitely represented by the metrics mentioned above. After all, blockchain technology is far more than a speculative asset.
It’s tech to build new systems for collaboration and organization. Tech to allow novel approaches to property rights management, coordination, value creation, value capture, as well as incentive alignment.
Admittedly, this doesn’t sound like a good bedtime story either - kind of dropped the ball here, sorry.
But it hints at what the great Warren Buffet is often quoted with:
“In the short-run, the stock market is a voting machine. Yet, in the long-run, it is a weighing machine.”
Crypto as an industry is increasingly adding weight by demonstrating real-world utility. At the same time, it still finds itself hit by short-term emotional thinking solely revolving around its’ prices and characterization as an investable asset.
Going into 2023, ask yourself what story you want to follow and emphasize.
The best investment you can make
Is education.
Not the first time you heard that one, isn’t it? Well, no matter how worn out the saying is, it remains true - especially for crypto.
We launched our blog to provide anyone, especially people who are getting started on their journey down the proverbial crypto-rabbit-hole, with a go-to resource free from too much hype and speculation.
Recently we restructured our blog to guide visitors a bit better and make it more nuanced. More precisely, we introduced three sections to the blog, with the ‘From Zero to Hero’ section constituting a first shelter for anyone at the very beginning of their blockchain journey.
We’ll continuously add new pieces to the blog and work on its’ structure to improve our it’s experience and help visitors to get the most out of it. It would be of tremendous help, if you could share your thoughts, feedback, and wishes with us - just get back via a reply to this issue. We’d highly appreciate it!
Time to say goodbye
In the wake of our internal restructuring and strategic realignment, we had to make a couple of tough calls and decided to shut down our Skale as well as Vega validation infrastructure.
We’ve always enjoyed working closely with both communities and especially the core dev teams - they are doing an outstanding job of onboarding and helping node operators. We wish both ecosystems all the best and will watch their progress closely from the sidelines.
In case you delegated $SKL and/or $VEGA to us, please adjust your delegation to a new validator. In the Tweets linked above, you find more information regarding this. In case you need further assistance, please reach out to us via our Telegram group.
Company quick takes
Congratulations to Obol Labs for raising their Series A. The funds will be used to continue their work on distributed validator technology (DVT) in order to increase the resiliency at the consensus layer & hence increase a network's decentralization, security, and ultimately, value.
Next week, we’ll be off for our first company retreat this year. Our team will come together in person to reflect on the past few months and prepare ourselves for what’s ahead - stay tuned!
If you want to meet up with us IRL, come by the Solana Built Station in Berlin (Feb 6th - March 15th). We’ll be cohosting a small meetup there on Friday, February 24th. If you are a builder looking to create within the Solana ecosystem, sign up here. Big up to Superteam Germany for taking the lead and collaborating with the Solana Foundation to host the Build Station.
Ethereum
Fuzz about Shanghai Upgrade. Ethereum core developers successfully launched ‘devnet 2’ to allow teams building out clients (the software that validators run to maintain the chain) to dabble around with withdrawing staked ETH - a highly anticipated feat that will be rolled out with the Shanghai Upgrade. The upgrade is expected to go live towards the end of Q1.
Ever since the Beacon Chain launched in 2020, ETH holders were able to stake their ETH - however, these staked ETH (+ earned staking rewards) cannot be withdrawn and are hence illiquid. While liquid staking solutions such as Lido circumvent this, the ETH staking community is eager for Shanghai to remove this illiquidity and ultimately open the floodgates for more people looking to stake their ETH.
Initially, Shanghai was intended to be more feature rich and e.g. introduce a form of sharding that would have scaled Ethereum in its wake. While not off the table completely, such features will be implemented through later upgrades.
There is a fraction of ETH core devs voiced concerns that Shanghai might leave the network with ‘technical debt’ - without going into too much technical detail: the withdraw functionality would rely on an encoding method that is currently being used, but which will be swapped some time going forward with the Cancun Upgrade (tba.) - ultimately, this might mean that a ‘new’ withdraw functionality might need to be written.
It is to be seen how the core devs decide to move forward - most recent developments suggest that Shanghai in fact might take place in March. As always, things remain exciting.
Maximum Extractable Value (MEV) is a very hot topic right now (get up to speed on MEV here). While it can result in the network being more performant, compliant, and productive, esp. for stakers, it can also result in censorship or economic exclusivity as the number of fees paid for a transaction results in higher likeliness of it being included in a block. More on this here. The topic has quite a bit of attention from builders within the space. Solutions relaying MEV-optimized blocks to validators (we reported on this in our November issue), work hard to carefully balance the amount of censorship going on within the network - note that censorship is not by all means a bad thing. It could result in more compliance and hence adoption. The important thing is to strike a good balance between censored & uncensored blocks so that while MEV-optimized blocks make it on chain faster, it does not mean non-MEV-optimized blocks/transactions do not make it on chain at all. It’s fair to say that we are on track to finding said balance.
For the Gamers among our dear readers: ‘No Mans’s Sky’ to reinvent money - interesting read by VICE Magazine!
Solana
Build in Berlin. Word around the block is that Solana is hosting a global, online hackathon soon with the Berlin Build Station constituting a precursor for the DACH community. Make sure to swing by if you’re in town between Feb 6th and March 15th and sign up here.
Going mobile. 2023 is the year in which crypto takes a first serious shot at going mobile. In preparation for the launch of Solanas’ Saga Smartphone, submissions for Solanas’ mobile dApp store are now open.
Developer adoption. According to Electric Capitals’ annual developer report, Solana is home to the fastest-growing developer ecosystem. As a subscriber to the muti-chain-future-thesis, it’s super exciting for us to see many of our portfolio projects showing strong signs of developer adoption (see bottom of Report). If you want to learn more about the report, listen to this podcast episode by Laura Shin with Maria Shen, one of the report’s authors.
Validated. Speaking of podcasts, Solana recently rebranded its’ ‘No Sharding’ podcast to ‘Validated’ in order to open up beyond the Solana ecosystem. The show’s trailer episode got us quite excited and strikes a tone that we highly support + the episode with Ryan Selkis is a must-listen.
State of Solana. If you want to switch your media intake from audio to written content, Messaris’ ‘State of Solana Q4 2022’ makes for a great read. Obviously, the FTX elephant in the room gets quite a bit of coverage but also deals with all the FUD floating around due to SBFs/FTXs’ involvement with the Solana ecosystem. Furthermore, the report covers upcoming launches such as Saga, Firedancer, or Neon EVM.
Substrate: Polkadaot, Kusama, Hydra
2022 Roundup. If you are still coping with 2022 despite our prep-talk intro, check out the 2022 Polkadot Roundup - it will lift your spirits even if you’re not a DOT holder and give you quite a good though obviously biased birdseye view on the Substrate ecosystem. Furthermore, the piece ends with a look ahead based on the vision shared by Polkadot co-founders Dr. Gavin and Robert Habermeier back in September.
Software, not a security. In our November issue, we reported on Polkadot cooperating with the SEC for DOT to be considered software, not a security. This Twitter thread shares some more insights into how DOT ‘morphed into software’.
Global Hackathon. The Polkadot Hackathon Global Series: Europe Edition (still with me?) just kicked off on January 25th and will last until February 17th. Three weeks of building, learning, and networking will cumulate at an event in Paris. The five tracks cover UI/UX, smart contract programming with ink! (Rust-based language), web3 tooling, DeFi, and NFTs — across the board, folks: developers are coming!
Anyone looking to get started with learning how to develop on Polkadot, make sure to keep a close eye on the Polkadot Academy.
Parachain Paranoia.Welcome to the neighborhood, Aleph Zero. Congratulations on winning parachain auction #38. The privacy-focused public blockchain will soon join the other 34 parachains that are currently live as well as the winners of the past auctions. Things are moving fast in parachain world and 2022 has been a big year for its’ growth - here’s a look back.
Snakes on a … Omnipool? Big, big start to the new year for Hydra DX, cudos to the team and overall community for launching the HydraDX Omnipool on Jan. 6th. One heck of a milestone right at the beginning of 2023. Krakens’ listing of $HDX was another good reason to celebrate shortly after. The pool’s liquidity at the time of writing sits at $1.4M and currently supports DOT, WETH, WBTC, DAI, and - you guessed it - HDX.
The Graph
Best Practices. The Graph foundation launched a new blog series dubbed ‘Subgraph Best Practices’, which, well you guessed it, demos battle-tested practices by experienced subgraph developers - the first issue was just published and addresses how one can improve the Indexing Performance of subgraphs.
Four more chains. Four more chains. After announcing support for Solana in November of last year, news recently broke that four more networks are being onboarded to The Graphs decentralized network via the MIP program: Arbitrum, Avalanche, Celo, and Optimism.
Tendermint: Cosmos & Stride
Exploring on-chain data. The latest Staking Rewards ‘exploring on-chain data’ series took a closer look at the state of staking and validators on Cosmos. While we highly encourage you to read the whole thing, but here are a few gems:
the network saw a 10% increase in staked ATOM during 2022 after having hit an all-time high of 209M ATOM being staked in October
the Cosmos staking market cap outperformed the Cosmos market cap. This is contrary to other PoS networks and signals confidence from ATOM holders
with a current staking ratio of ~62%, the staking APR is higher than usual as the network nudges token holders to stake through higher rewards in case the staking ratio falls below 67%
Epicenter. The popular decentralized exchange dYdX has announced its plans to become a standalone Cosmos-based blockchain with their V4 in the midst of 2022. Our friends from the Epicenter Podcast recently had Antonio Juliano from dYdX over for a conversational raincheck. The episode is a great listen as it covers the need for DEXs, DeFi vs. CeFi, scaling, and much more.
Game of Chains, an incentivized testnet for Interchain Security (IS), recently concluded. 98 validator teams participated and battle-tested IS across three different ‘dummy’ chains and two chains (Hero & Neutron), which are expected to launch on the Cosmos Hub soon. Congratulations to the winners, CryptoCrew.
What’s ahead? Stride laid out their plans for the first six months of 2023 in this Twitter thread.
Network quick takes
Besides a crazy price rally, the Aptos network also witnessed substantial tech as well as non-tech developments in its’ ecosystem such as the wallet adaptor or the Aptos World Tour, which is kicking off in February to spread the word in the analog world. The wallet adapter makes for a better dev experience by simplifying the integration between wallets & dApps.
If you have some time at hand, you might want to read Chainlink founder Sergey Nazarovs’ take on what’s ahead for 2023. After staking successfully going live late last year, the network continues its path to push the boundaries of web3. The initial, artificial staking pool allotment of 22.5M was quickly filled and we are thrilled about its’ developments.
We’re also thrilled that our oracle services are performing quite well and want to thank the team from fellow node operators, DexTrac for their flowers: