Circle research

Weekly Crypto Recap 2/15-2/21

Know & go

  • Top story of the week: A new DAO called Moloch aimed at solving coordination problems in funding Ethereum projects went live on Ethereum mainnet during ETHDenver.
  • Three things to know: (1) The SEC did not impose penalties on an ICO (Gladius Network) that raised $12.7 million because it self-reported, offering to return funds and register as a security (2) ETH locked in Uniswap has risen 4x in the last month (3) Cambridge Associates, an institutional consultancy, published a report saying institutional investors should get involved in crypto.
  • Market snapshot: Total crypto market capitalization is around $134.7 billion at press time, up 11.9% w/w. BTC is trading at $3982 (up 10.2% w/w), ETH is at $148 (up 21.3% w/w). BVOL (the rolling 30-day annualized Bitcoin volatility as calculated by BitMEX) is 36% and has remained fairly flat over the last week.
    (As of 2/22 10:30AM ET)

Weekly market snapshot

Top Story

Moloch(DAO) rises

Moloch DAO was launched on the Ethereum mainnet during ETH Denver. Moloch is an experiment targeted at solving "tragedy of the commons" coordination problems in deploying funds towards core Ethereum development, specifically ETH 2.0. Moloch was inspired by the text "Meditations on Moloch" which portrays Moloch as the God of coordination failures. In the context of this project, Moloch refers to "the category of problems associated with collective action, where individual incentives are misaligned with globally optimal outcomes." Moloch DAO was developed by Ameen Soleimani, Arjun Bhuptani, James Young, Layne Haber, and Rahul Sethuram.

ETH 2.0 progress has been slow, led by a small group of participants with limited funding, despite the benefits 2.0 stands to provide the entire ecosystem. Moloch DAO was created in response to this problem. It uses a DAO structure to pool and lock funds in it's "Guild Bank" smart contract, streamline fund allocation, and spread costs and benefits more evenly across stakeholders. The initial goal is to speed up the process of providing grants and expand funding towards Ethereum improvements. Longer term, Moloch DAOs could apply to more general coordination problems.

People can apply to the DAO by providing a "tribute" in wETH. The contract currently has over 1K worth of wETH locked up. Existing members then vote on whether to admit the applicant. If admitted, members receive voting shares proportional to their share of the total tribute pool to vote on different Ethereum proposals. Shares are non-transferrable to prevent the buying and selling of votes.

Simon de la Rouviere says "Moloch DAO incentivizes coordination by collapsing traditionally separate parts into one process, and by creating additional incentives for defectors to defect and exit." If a member does not agree with the outcome of a vote and voted "no" or does not want to participate anymore, they have a post-vote grace period during which they can "ragequit". To ragequit means to redeem voting shares for a proportional share of funds in the Guild Bank. If all shares are liquidated, the participant is removed from future decisions of the DAO. To rejoin, the participant would have to reapply and undergo another vote by all members. The idea is that members won't re-admit applicants unless they deployed their funds for a worthy cause.

Grant seekers must apply for membership to submit proposals (which requires a 10 wETH deposit). And within a proposal, potential recipients request new shares relative to the amount of funding needed. If the proposal is approved via a member vote, the grant seeker can then redeem a certain amount of shares to receive proportionate funds. In this interview with Ryan Selkis at ETHDenver, Ameen also recommends that grant seekers hold on to at least one share to remain in the guild, so they can submit future proposals without having to reapply for membership.

Moloch DAO is an experimental concept, which its founders recognize. While participation is intended to be open, the members-based model might result in existing members cherry picking new members. Ameen believes Moloch disincentivizes such behavior because it would shrink the pool as members who disagree have the option to instantly exit, or fork and create a separate DAO with separate rules around membership, voting, and funding. Moloch has an impressive roster of founders who deliberately chose a simple design to reduce the attack surface, but security is always a risk, especially when significant funds are involved.

This is an interesting experiment that, if successful, could provide an alternative way to raise and distribute funds in open source projects and communities.

In other news

  • Cambridge Associates, an institutional consultancy, published a report saying "institutional investors should begin exploring the [crypto industry]". Source.
  • There was a leaked email from Kucoin asking token projects to pay a volume-boosting fee to avoid being delisted. Kucoin told the Block that the email could have been from rogue or fake employees. Source.
  • Crypto exchange ShapeShift announced plans to undergo a major rebrand this year. Source.
  • Uniswap, a decentralized exchange built on Ethereum, has seen 4x growth in the amount of locked ETH on the platform over the last month. Source.
  • Bitmain announced the release of its new Bitcoin mining chip that is said to be 30% more power efficient than its predecessor. Source. Coindesk also reported the mining company may have lost $500 million in Q3 last year. Bitmain since issued a statement saying these rumors are false.* Source.
  • Sparkpool received an unusual reward of 2,103 ETH for mining block 7,238,290. People say it could be the result of a user(s) attaching abnormally large transaction fees to their transactions. Sparkpool has temporarily frozen the funds to allow the sender to reach out and remedy the situation. Source.
  • Tippin', a new Chrome extension that allows users to send tips on Twitter via the Lightning Network, announced its beta release last Saturday. Source.

Crypto funding

  • Coinbase acquired Neutrino, an on-chain analysis platform. Source.
  • Japanese internet giant Recruit invested in Beam, the Mimblewimble-based privacy coin, through its Blockchain Tech Fund. Source.
  • Pantera Capital has secured $125 million for the venture firm’s third crypto fund; however, only $25 million of this current total has been raised since August. The firm still remains $50 million short of its original goal. Source.

Global regulatory roundup

  • An ICO, Gladius Network, which raised $12.7 million, self reported to the SEC in 2018, offering to return funds to investors and register as a security. As a result, the SEC did not impose a penalty on the project. Source.
  • The CFTC released it's request for comments on Ethereum. There were 30 submissions and notable call outs include Coin Center, Circle, and Craig Wright. Source.

What we’re reading

What we’re listening to

Circle in the news

  • USDC Ecosystem Spotlight: In recent days, USDC was listed on Europe based exchange, BitBay, and token swapping platforms, Kyber Network and Uniswap.
  • Dharma Labs launched its latest product, Dharma Lever, for ETHDenver last weekend. The high volume, margin lending service allows users to lend and borrow in USDC as well as ETH. Source.

Where we’ll be in February

  • FSDC Practitioner Speaker Series, 2/26, Hong Kong
  • WorldBoston Great Decisions: Cyber Conflicts and Geopolitics, 2/27, Boston

*Note: Bitmain is an investor in Circle Internet Financial, Inc.

If you have any thoughts or questions, please reach out at [email protected].

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