Publications

Maven's Insights - December 2022

04 January 2023

Following the latest Ethereum All Core Developer call of November, the Ethereum developers decided during their follow-up December call that the upcoming Shanghai upgrade will prioritize withdrawals from Ethereum’s Beacon chain smart contract. Currently, ETH that has been staked into the smart contract is still locked. The call also went over the tentative planning of the upgrade after Shanghai, which is now scheduled to include ‘proto-danksharding’, an upgrade that will change how the Ethereum blockchain manages workload and which is expected to improve scalability for Layer 2 scaling solutions by a factor of 100.

Fidelity has filed three new crypto industry-specific trademark applications. The patents incorporate the creation of an NFT marketplace,  but also cover metaverse investments in a broad sense and the facilitation of NFT and virtual real estate trading. Interestingly, the patent applications also target investment services for mutual funds. Further positive acknowledgement came from BlackRock CEO Larry Fink, who stated that "the next generation for markets, the next generation for securities, will be tokenization of securities."

December saw more institutional adoption, with Metamask adding a PayPal integration to its wallet. The feature allows users to directly purchase ETH through their mobile app using PayPal. Additionally, payment giant Visa released a paper detailing how they could collaborate with the Ethereum network on automatic scheduled payments from self-custodial crypto wallets. These types of payments will become available once full ‘account abstraction’ (AA) features are enabled in Ethereum; while this hasn't been finalized yet, the Visa team built their auto-payment application using StarkNet, which natively supports AA.

This month saw Uniswap take the first thorough step in its governance process towards implementation of a fee switch. The first on-chain governance vote will take place in the coming weeks to implement a protocol fee in two liquidity pools of the DEX. The implementation of this fee switch will mean that a portion of the fees generated by the protocol can go to holders of the UNI governance token. While currently there is no regulatory clarity on this topic, the thoughtful approach (such as their collaboration with regulators) of the DAO towards the implementation could make it a pivotal moment for monetization through governance tokens.

The regulatory side of our industry also hasn’t been idle during the end of 2022. Australia announced that a new framework for regulation of crypto firms will be introduced in 2023, while the UK also announced a package of financial regulatory reforms which included the extension of tax breaks for investment managers to cover crypto assets. Finally, vocally pro-crypto US senator Pat Toomey introduced his final piece of cryptocurrency legislation, aiming to introduce a federal regulatory framework that should lead to sensible regulation of stablecoins and their transactions.   

One of the more surprising news items on the NFT front this month came through the launch of the Donald Trump NFT collection. The NFTs, minted on Polygon, quickly gained notoriety and sold out. In perhaps more significant news, Warner Music Group expanded their Web3.0 partnerships by allowing artists signed to the label to release music NFTs through the LGND Music marketplace. Reddit announced that more than 5 million of their community-based NFTs, dubbed ‘Collectible Avatars’, have been minted, quietly onboarding a significant number of users into the crypto industry. We expect 2023 to see more traditional brands onboarding large numbers of users into our industry in similar ways. Finally, Apple is planning to allow users to install iOS apps from external sources due to changes in EU regulations regarding mobile app stores. While currently Apple is able to take up to a 30% take rate on all iOS app store sales, naturally hindering the use of cryptocurrencies on Apple devices, the introduction of external sources will circumvent this tax, potentially making it easier to spend cryptocurrency in the Apple ecosystem. 

Our portfolio companies Anoma and Saga also hit some notable milestones in the last month of 2022. The first instance of the tech stack built by the team behind the privacy-oriented network Anoma, called the Namada network, successfully went through its critical initial setup in its ‘trusted setup’ ceremony. This ceremony is a requirement for the safe initiation of the cryptography that underlies the protocol, and the process saw sizeable interest from community members to participate and contribute. Saga, which aims to makes it easy for games to spin up their own app-chain in the Cosmos ecosystem, closed the second cohort of their Innovator Program, onboarding a total of 111 projects onto their technology. While sizeable, last month already saw Saga onboarding its first 100 projects.