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| The biggest crypto news and ideas of the day Oct. 11, 2021 If you were forwarded this newsletter and would like to receive it, sign up here. Sponsored by Welcome to The Node.
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Today’s must-reads Top Shelf CHINA AND KOREA: One month following the comprehensive crypto crackdown in China, the nation’s judiciary is reportedly investigating how the new laws should be applied. According to the Beijing-based magazine Caijing, the Chinese government needs the bench to interpret their strict rules, which ban most interactions with crypto, and spin up a penal code. Further east, South Korea’s opposition People Power Party is preparing a proposal to delay the implementation of the country’s crypto tax legislation, set to go into effect in 2022, as well as adjust the level at which taxes MINING REBOUND: Luxor Technologies, a mining firm, has issued a report showing that bitcoin’s hashrate – a measure of energy contributed towards securing the network – is recovering steadily following China’s July ban on crypto mining. Along those lines, Powerbridge Technologies is launching BTC and ETH mining operations in Hong Kong with a plan to deploy 2,600 high-performance mining rigs. COLD HARD CASH: ConsenSys is reportedly in talks about a funding round that would value the Brooklyn, New York-based Ethereum incubator at $3 billion. The company is looking to raise $250 million less than a year after tapping JPMorgan Chase, Mastercard and UBS, among others, for $65 million in funding. Separately, blockchain snoops Elliptic have closed a $60 million Series C funding round led by Evolution Equity Partners. Paradigm, the cryptocurrency venture capital firm led by Coinbase co-founder Fred Ehrsam, is looking to raise up to $1.5 billion fund for startup investments. HEDGE’S HEDGE: A JPMorgan analyst has found “tentative signs” that investors are rotating from gold into bitcoin. An Oct. 6 research note pointed to “the failure of gold to respond in recent weeks to heightened concerns over inflation” as a possible driver of the return to bitcoin.
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As heard on CoinDesk TV... Sound Bites ““The easier it is for investors to get in and support the industry, the better it is for bitcoin.”
–Volt Equity CEO Tad Park, on CoinDesk TV’s “First Mover.”
What others are writing... Off-Chain Signals FTX overcharges trader $1M to recover lost crypto, edits T&Cs to justify it (Protos) TOKEN ISSUES: OpenSea delists DAO Turtles project citing financialization concerns; FTX says its upcoming marketplace will avoid NFTs that offer royalties; Bored Ape Yacht Club targets Q1 2022 for a “compliant” governance token (The Block, The Block, The Block) Can Crypto Go Green? NYTimes asks Another Hollywood talent agency, CAA, signed pseudonymous NFT buyer “0xb1” to help monetize their collection (including NFTs from the Bored Ape Yacht Club, Mutant Ape Yacht Club, Cool Cats and Spunks by Spongenuity) through licensing and brand partnerships (Hollywood Reporter) Web 3 ‘Being Held Together by Duct Tape’: NFT Artist Pplpleasr (Decrypt) El Salvador’s president said Saturday that the country will use profits from its Bitcoin holdings to build a "pet hospital” (Decrypt) Grayscale Investments CEO Michael Sonnenshein said Wednesday that he expects all of the fund group’s products to one day become ETFs if regulation allows for the conversions (Blockworks)
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Putting the news in perspective The Takeaway Please Don’t Do This: 'Fantasy' Equity Last Wednesday, the good people over at TechCrunch ran a story about a company called Visionrare, which is essentially trying to gamify the process of investing in startups.
It’s a play on the “fantasy betting” concept that’s already popular in the world of sports and culture. Fantasy football brackets let fans make predictions without actually putting any money down, and fantasy stock markets let investors hone their skills in a simulated environment, where the stakes aren’t quite so high. There’s a similar system for betting on the outcome of The Bachelor.
Visionrare is trying to do the same thing with investments in startups: log onto the site, “invest” in a real company and see how it performs over time. If your company lands a big funding round in real life, your in-game portfolio appreciates in value.
The Ender’s Game twist here is that for about 24 hours, Visionrare was asking users to stock their portfolios with actual money.
“VisionShares are NFTs (Non-Fungible Tokens) that live on the blockchain,” reads a section on the company’s FAQ page. “This way, players have real ownership over their fantasy equity, and there is a provable scarcity of the virtual equity of each company.”
The “investments” weren’t real, in the sense that putting money into a company via Visionrare didn’t actually get you any equity, but buying a VisionShare would get you an NFT on the Ethereum blockchain. Hence, “real ownership over… fantasy equity.”
Visionrare’s open beta launched on Wednesday and shut down less than a day later, thanks to a swift backlash in the wake of TechCrunch’s piece.
In addition to being a ouroboric nightmare, Visionrare is also a good reminder of the dangers of financialization.
For better or worse, crypto is great at assigning discrete monetary value to things we’re used to understanding as free. NFTs can put a price on media files, and tokens for crypto-backed social clubs and DAOs can turn online communities into investment collectives. On a fully crypto-backed internet, photos, videos, memes, likes and avatars are all ultimately investment opportunities.
Visionrare seemed to underestimate the power of that idea. There’s a market for NFTs because crypto’s nouveau riche don’t know what to do with their money, and parking it in NFTs lets them keep their chips in the casino. There’s also an understanding that buying the token doesn’t get you anything but the token. It works, for now, because NFTs operate like digital certificates of ownership. But it’s also fundamentally incompatible with equity in a traditional company. NFTs and token equity models work for DAOs, or decentralized autonomous organizations, because they’re essentially on-chain, unregulated versions of traditional companies. Without that anchor in the “real” world, there’s more leeway for digital assets to represent actual ownership.
Marrying “off-chain” and “on-chain” assets can also pose significant regulatory risks. The SEC has a history of going after crypto assets that bear a resemblance to traditional equities, and Visionrare’s decision to allow trades from the U.S. was a little like playing with fire.
“Since our launch we have learned thanks to people who reached out to us that we might have been too optimistic when it comes to the legal aspects of what we were doing, especially when dealing with regulators,” wrote Visionrare’s CEO, Jacob Claerhout, in the company’s Discord server.
There’s a sense, in tech, that people will just give you money if you go around saying words like “DAO” and “NFT.” Blockchain technology is good for certain things – logistics, recordkeeping, certain kinds of investing – but the reality is that some things don’t need crypto.
To its credit, Visionrare has said it’s giving back all the money users spent on its NFTs. And the community remains surprisingly upbeat, thanks in large part to the ethos of company leadership: Claerhout and his co-founder, Boris Gordts, are 20-something strivers with ambitions that seem to click with other young people in the crypto space. Their earnest, attentive vibe seems to have put users at ease.
“We're growing, building and learning in public,” Claerhout told me in a DM.
The company plans to return this Friday, with a new “free-to-play model” and new NFTs. Claerhout declined to elaborate on how exactly these NFTs – which are inherently speculative assets with the ability to spawn secondary markets – would be dissociated from the financial aspect. But he said they’d operate more like “badge[s] of honor showcasing valuable contributions” than equities.
In a blog post this morning, the Visionrare team made an unconvincing attempt to affirm that its 24-hour experiment was somehow in line with U.S. securities laws, describing it as “according to us, compliant.”
“[We are] honored to have fuelled a global debate on how to democratize startup investment through crypto,” continues the post.
However it pans out, it helps that Visionrare is taking the media coverage in stride.
–Will Gottsegen
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