| What you need to know today in crypto and beyond August 10, 2021 Sponsored by Welcome to The Node. If you were forwarded this newsletter and would like to receive it, sign up here. Questions? Feedback? We'd love to hear from you! Simply reply to this email. –Daniel Kuhn Today's must-reads Top Shelf SENATE SITUATION: A final attempt to soften the crypto tax provision in the bipartisan U.S. infrastructure bill was shut down by a lone senator, in a major blow to the domestic digital asset industry. A compromise amendment from Senators Lummis and Toomey received support from Democrats, Republicans and the Treasury Department, but was ultimately blocked by an unrelated call to increase military spending. The bill is now moving back to the House.
BITCOIN DEV GRANTS: The Human Rights Foundation’s Bitcoin Development Fund, alongside Compass Mining, selected a new grant recipient: Jon Atack. The $80,000, one-time donation supports Atack’s contributions to Bitcoin Core and is part of a larger set of donations from the HRF to improve the Bitcoin network.
DEFI HACKS: DeFi-related attacks made up roughly 75% of major hack volume this year, according to blockchain analytics company CipherTrace. DeFi’s portion in attack volume is up 2.7 times from 2020, though crypto crime overall is declining over recent years, from $4.5 billion in 2019 to $1.9 billion in 2020 and $681 million in the first seven months of 2021. On Tuesday, DeFi platform Poly Network was the most recent addition to the 75% figure as hackers drained roughly $600 million in crypto from the protocol.
NFTS ARE BACK: NFT marketplace OpenSea made a surprise finish atop the Ethereum leaderboard for gas consumption yesterday, finishing ahead of DeFi exchange Uniswap, which typically holds the spot. With NFTs’ resurgence in popularity, OpenSea is projected to pass $1 billion in trade volume this month with 300,000 unique users.
ETH OFF CEX: The proportion of ether (ETH) held on centralized exchanges dropped to 9.4% of the total supply, the lowest in three years. Eddie Wang, senior researcher at OKLink, attributes the outflow to DeFi and the popular practice of wrapping ether. Wrapped ether (WETH) now makes up 5.7% of the total supply.
–Eleanor Pahl & Eli Tan
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The old saying was, crypto may not be interested in politics but politics is interested in crypto. Now, crypto is interested in politics, too.
Over the past few weeks, the blockchain industry has mobilized against a heavy-handed attempt at increased regulation. It was a show of force against a crypto tax provision in the Biden administration’s $1 trillion infrastructure package, a provision that fundamentally misunderstands and endangers the domestic cryptocurrency market. These efforts will likely have been in vain, in the short term, as the political machine bulldozes over attempts to amend the bill.
The experience seems like a turning point for crypto as a serious political force in Washington, D.C. Some of the industry’s most visible and/or respected voices – like Ryan Selkis, Meltem Demirors and Barry Silbert – are signaling their new political awareness and willingness to spend big supporting politicians who understand this emergent industry.
“Electoralism is going to become a fact of life for crypto now that it has become popular, even mainstream,” Paul Dylan-Ennis, an assistant professor in the College of Business at University College Dublin, said over Telegram. “We will see more and more serious political organizations” from now on.
There are calls to donate to the coffers of Washington insiders like Rep. Cynthia Lummis (R-Wyo.), likely the first U.S. senator to own bitcoin, and Sen. Ron Wyden (D-Ore.), a longtime advocate for financial and digital privacy. The rumblings of new crypto PACs (political action committees) or parties. And a new meme, “I’m a single interest voter” for crypto.
It’s more than just political signaling on Twitter: As the Washington Post reports, cryptocurrency firms are on track to spend more than $5 million on lobbying this year, twice the total from just last year. Organizations like the Blockchain Association and Coin Center have seen donations pour in.
The irony is radicalization in crypto once meant dropping out of the political process. By design, crypto empowers individuals over hegemonic corporations and states – it cuts out the middleman and bureaucrat. That’s why there was some resistance to even calling senators from some corners of the blockchain industry – any engagement with the State is anathema.
But if banks and big tech firms are willing to spend to protect their interests, then so should crypto.
“It's already risky and tricky enough to run validator nodes on emerging crypto networks without Uncle Sam getting involved and making up a whole new set of rules to try to follow,” Lauren G., a noted Ethereum coder, said. She would contribute to a crypto PAC when it comes time to vote, “especially if they take illiquid NFTs.”
Going forward, it’s entirely possible that politicians will run for office with an explicit crypto mandate. With 13% of Americans trading crypto in the last year and many more aligned with its values of freedom and self-reliance, the Crypto Vote is likely to become a political force that professional pols can't ignore.
“Crypto is bipartisan – and perhaps the only thing out there that is bringing Americans together at a grassroots level rather than pulling them apart,” Balaji Srinivasan, angel investor and essayist, said in a private message.
Still, crypto won't be captured completely by the state and the lobbying process. It might sound trite to say code doesn’t care about Washington, D.C., but in this case it’s true.
“I'm already considering other countries to operate in and, frankly, wouldn't mind leaving the U.S. with the direction all of this is going,” Lauren said. “Competition and innovation will always transcend national boundaries.”
–D.K.
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