August 11, 2021 | Issue #181

MUST READS

Coinbase Earnings

Coinbase (COIN) announced Q2 earnings at market close yesterday, posting a profit of slightly over $1.6 billion, nearly double what the company posted in Q1. Coinbase also announced revenue of $2.03 billion, which exceeded analyst predictions of $1.88 billion.

Today the stock opened up nearly 6% on the news.

Other Highlights:

A spike in user activity
Retail Monthly Transacting Users (MTUs) grew to 8.8 million, up 44% from Q1, and its total base of verified users had climbed to 68 million.
Revenue diversification
The company brought in over $100 million in subscriptions & services. Other revenue sources included $31.7 million custodial fees, $39 million in "blockchain revenue", and $16.9 million from Earn campaigns.
Volatility powered its Q2 earnings
The company cautioned that it will be unlikely to replicate Q2's performance next quarter.
Ethereum outperforms
Trading volume in ether (ETH) outstripped bitcoin (BTC) for the first time on the platform, with ETH accounting for 26% of volume versus 24% for BTC. Pretty incredible knowing that ETH is still being sucked off exchanges at a faster rate than BTC.
Hedge funds like Coinbase
Coinbase said that 10 out of the top 100 hedge funds by AUM are customers of the exchange.

Circle Wants To Become A Bank

Circle – the fintech company behind stablecoin US dollar coin (USDC) – dropped an S-4 last week that reveals its ambitions to become a US national bank.

The company which is set to go public via SPAC in Q4 2021, said that it "intends to become a full-reserve national commercial bank, operating under the supervision and risk management requirements of the Federal Reserve, US Treasury, and OCC, and the FDIC."

Stablecoins 101:
Stablecoins like USDC have long been an important part of the crypto economy, allowing traders to move into and out of positions without having to revert to fiat currency.

In the process, they are also taking on growing importance in the conventional banking system, allowing for a cheap and efficient way to carry out large money transfers. Stablecoin issuers like Circle, which developed USDC in partnership with Coinbase, profit from the interest they earn on reserves.

Why It Matters:
Full-reserve banking, built on digital currency technology, is the beginning of a new era. The shift to full-reserve banking would significantly reduce the risks around its business, including its reliance on third-party payment systems, and strengthen its stablecoin USDC, which currently has more than $27.5 billion in circulation.

Related: Stablecoin Regulatory Strategies; Tether Is Backed by Nearly 50% Commercial Paper Says New Report

Tax-Free Investing in Crypto

Wish you could invest in crypto tax-free? If you have an IRA or 401(k), here's your chance.

If you're like most people, your IRA or 401(k) is a place where money is blindly stashed away. The tax benefits are undeniable, so year after year, you invest in the usual mix of stocks and mutual funds. But what if you could invest that money in crypto?

>> Welcome To A Crypto IRA

DEEP DIVE

PolyNetwork Suffers Record-Breaking $600 Million Hack

Yesterday, in what is the largest DeFi hack of all time, PolyNetwork was exploited for more than $600 million. That's more than the famous Mt. Gox attack... hell, that's even more than the GDP of some small countries.

We won't get into the deep, technical analysis of what happened, but if you are interested you can learn more here and here.

Shortly after the hack, PolyNetwork nicely asked the hacker to return the stolen funds. Now, although that seems ridiculous, let's not forget that this is crypto – anything can happen.

As of today, the hacker has started returning the stolen crypto assets, less than a day after their ID information was reportedly obtained by blockchain security firm Slowmist. They have now sent back $256 million in tokens out of the haul.

In other, "only in crypto" news, a person going by hanashiro.eth contacted the hacker to tell them not to use USDT as they had been blacklisted. The hacker then sent hanashiro.eth 13.37 ETH as a thank you.

So the question arises, did the hacker mean to run off with the stolen funds, or did they begin to make mistakes and decide to give up? All we know is that the hacker sent a message stating that, "The hacker is ready to surrender" before beginning to return some funds.

This story is ongoing, so expect to see more fireworks, but if you'd like to see an interview with the hacker go here, and if you would like to see exactly how the communication went down between the hacker and the PolyNetwork team go here.

Again, only in crypto...

"IT'S ALREADY A LEGEND TO WIN SO MUCH FORTUNE. IT WILL BE AN ETERNAL LEGEND TO SAVE THE WORLD." - White Hacker

Ethereum Gets The Mother Of All Updates

Ethereum’s London hard fork upgrade, one of the biggest changes to the world’s most active blockchain, went officially live last week. Here’s what you need to know:

What Was The Point?
First and foremost, the upgrade which includes EIP-1559 is meant to make gas fees (essentially, the cost of processing transactions on the Ethereum network) more predictable and the user experience less complex. Learn more about the headaches with high and unpredictable gas prices here.

How Does It Work?
Rather than have users bidding against each other, racing to be included in the next Ethereum block, they will now be able to have a better estimate of what gas price will get their transaction confirmed. It does this by implementing a base gas fee that gets permanently burned during each transaction.

Why So Anticipated?
Because the upgrade sets a base transaction fee that gets burned by the protocol, many folks were saying that ETH would now be deflationary. This is extremely bullish as there would be fewer tokens on the market, which could push the price of ETH up.

So What Transpired?
In the first few hours after the London hard fork came into effect, ETH was only truly deflationary for a roughly 40-minute period starting at 5:00 pm EST, according to Dune Analytics (view live dashboard here).

Regardless, and despite the short-lived deflationary state, it appears that EIP-1559 has been well-perceived from users, investors, and DeFiers alike – ether (ETH) prices have gained ~20% since the forks' first block.

Bottom Line:
Ethereum needed to work on the gas fee problem and EIP-1559 was certainly a step in the right direction. In the meantime, it still may be a while before we can grasp the long-term impact EIP-1559 has on ETHs price.

How YGG Is Changing Gaming

A few weeks ago we covered the meteoric rise of Axie Infinity (here's a refresher). This week, Joel John and Siddharth Jain, of Decentralized take a look at an interesting economic model arising in the ecosystem: Yield Guild Games (YGG).

REGULATORY FRONT

Infrastructure Bill Says No To Crypto Changes

Welp. Last week's crypto drama has come to an end... and the results aren't pretty.

Senator Pat Toomey presented an amendment to exempt certain network operators from IRS reporting requirements before the Senate, as it was working to pass the infrastructure package.

The compromised amendment was VERY close to being passed, however, 87-year-old Alabama Senator Richard Shelby (who was born when the first digital calculator designed by IBM was 51 feet long, 8 feet high, and weighed nearly 5 tons) didn't get his own amendment for $50b in defense spending, so he decided to go against all others. Because he didn't change his mind, that's was it – the compromised amendment died.

There's still hope though, the bill will now go to the House.