Hi!

Welcome to Web3 Bits, where I share a few of the most interesting web3 bits for you to consumer over the weekend (a bit delayed this time).

That's right! This is how the bear market feels like.

Apathy.

We're 100% off the lows in BTC & ETH, and yet during a few chats with friends about crypto, it seems that nothing feels....exciting?

At times like this it's good to remember that the innovations that crypto brings are already here:

1. Lowering the friction of human coordination is probably the greatest force in human history. Information technology from the invention of writing, through double entry bookkeeping all the way through the internet have brought us to where we are today. They lower the cost of trust and coordination between humans, enabling more common building. This is a key value that crypto brings to the table: it lowers the trust barrier.
2. Whether you live in the east or the west, the governmental trend is clear: state control over as much as possible. Regulation has never been more pervasive and all encompassing and CBDCs will bring this to money. Bitcoin & Ethereum are arguably one of the last and only solutions to self sovereign money, which is something human society has had since inception.
3. Related to #2, as countries find themselves in a debt pit, the need for funding government expenditures via debt and currency "printing" is getting greater. I don't believe that the EU or USA will 'default'. No. Instead, they will devalue their currencies. In such a reality only a fixed supply asset with built in demand will serve as a currency devaluation hedge.

So next time you're asked 'what does crypto actually do?!' Here's your answer. Yes, some of this could be done without crypto. But a lot of what we do today could be done without the internet. That doesn't mean we should. Crypto is a step forward in human coordination - a worthy goal.

A lot has been happening under the surface though and then all of a sudden - a regulatory explosion. I'll start with tokenomics related and then go deep into regulation.

Interesting things

• A new lending design is reaching testnet: Thorchain lending, which is a unique and one of its kind lending design is about to hit a limited main net test. It worth looking into, as the loans have no time limit, no liquidation threshold, and can be taken out in native BTC or ETH. Here is a good explanation and here is the documentation. Worth a read and an in depth understanding.
• Vitalik on Re-staking & re-hypothecation: Lots of discussion around restaking on Ethereum via EigenLayer, which when it comes to market will definitely remove the 'utility' from many tokens (and rightly so) as projects won't have to pay for their own security and will be able to leverage Eth for this.
  As a pushback on the concept of re-hypothecation Vitalik wrote a blogpost about the risks of overloading Ethereum security and consensus. You can read it here or listen to it here.
• An analysis of Bitcoin historical price movements.
• Web3 and social networks: Do they or don't they make sense? Li Jin with a take in the Varient blog. I've written a lot about this, especially on bootstrapping and how tokens mess up incentives.

Regulation!

• The SEC came after Binance: in an incredibly well researched lawsuit, with what appears to be an immense amount of internal information, the SEC alleges that Binance (Binance US, Binance global & CZ) co-mingled funds and sold unregistered securities (naming a large amount of tokens including: SOL, ADA, ALGO, MATIC, ATOM, AXS, SAND, MANA). This case has real legs.Crpyot market bill hit the market: On Friday, just as I was about to hit send on this newsletter, the House Financial Services Committee presented their Digital Asset Market Structure Discussion Draft. It's 162 pages and counting - a comprehensive crypto market bill. Bear with me as a I read and analyze.
• Regulation as seen through stablecoins: The regulatory framework globally has been evolving. Arguably, stablecoins are the easiest crypto value prop to understand and fit into an existing regulatory framework. They also happen to be the 'killer app' for a lot of crypto use cases (see points 1 & 2 above). Unfortunately, the largest jurisdiction, the US, is still locked. There have been two recent hearings on Stablecoins held by the House Financial committee. While I've been pleasantly surprised with the level of understanding by the representatives, the partisan lines have been drawn and are being barricaded. I recommend watching both (hearing 1, hearing 2) and I'll be sharing a more in depth breakdown next week.

Resources

• Etherscan launched a new advanced filter. Very useful.
• Co:Create, a loyalty web3 platform, put out a good breakdown of loyalty programs. It's a useful framework to analyze what a loyalty point is and how it can be useful.