July witnessed pivotal moments in the cryptocurrency sector with the launch of the first Ethereum spot ETF in the U.S., the final distribution of Mt.Gox's assets, and significant governance changes in major DeFi platforms like Aave and MakerDAO. These developments highlight the evolving maturity and complexity of the crypto market, influencing regulatory perceptions, restoring investor confidence, and reshaping decentralized finance governance.
This month marked a significant milestone in the cryptocurrency ecosystem as the first ever Ethereum spot ETF went live in the United States. The ETFs began trading on July 23, 2024, with major participants like Bitwise, Grayscale, BlackRock, and VanEck, ProShares and Ark21Shares participating. The initial inflows were quite positive and being noted across various funds, with Bitwise attracting nearly $230 million within its first few days of trading. The approval of the Ethereum ETF by the SEC signals a significant development for other cryptocurrencies to also be considered for similar investment vehicles. This decision implicitly means that Ethereum is recognized as a commodity rather than a security, which could lead to a broader regulatory shift in how we classify digital assets.
Another significant shift for crypto can be seen in US politics as digital currencies have now become an integral part of campaigning for both sides. Trump has taken a pro-crypto stance in the current election campaign, even giving a speech at the yearly Bitcoin conference in Nashville. In this speech Trump highlighted support for Bitcoin, clear crypto regulatory guidance, and support for self-custody. As a counter, the Democrats have also started to move away from the anti-crypto stance, as Kamala Harris replaces Biden and resets relations with crypto companies. Furthermore, the SEC also amended its complaints against Binance, dropping the allegations that tokens such as Solana, Polygon, and Cardano are securities. This development reduces regulatory uncertainty and eases political pressure on crypto. However, the SEC continues their broader case against Binance claiming that their native tokens BNB and BUSD are securities.
On another positive note, Circle has become the first global stablecoin issuer to comply with the European regulatory framework MiCA. This allows Circle to legally issue USDC and EURC within Europe due to their Electronic Money Institution (EMI) license. A further development is the infamous Mt.Gox to finalize creditor payouts. The exchange holds 142.000 Bitcoins worth over $9 billion, all to be distributed back to original investors. This long-awaited distribution follows years of legal proceedings after the exchange's collapse in 2014, marking a significant step towards resolving one of the largest cryptocurrency scandals in history.
Crowdstrike, a global cyber security leader, experienced a significant outage due to a faulty update in its Falcon sensor for Windows. The update in July caused a logic error leading to system crashes and blue screens on about 8.5 million devices worldwide. The entire world was on a halt, which ended up being a perfect showcase of where crypto solutions can work best, as those systems remained live. However, the crypto ecosystem does still experience large hacks from time to time. In July WazirX, an Indian crypto exchange, was hacked resulting in the loss of $230 million from one of their multisig wallets. Additionally, LiFi protocol suffered an exploit of their smart contract, resulting in the theft of $11.6 million from its users.
Aave, the leading decentralized lending platform, has proposed a governance vote to turn on the fee switch. This means if the vote passes, a portion of Aave’s net profits will be distributed to holders of the AAVE token. The champion of this proposal is Marc Zeller, one of the founders of AAVE, with the aim to incentivize long-term holding of the governance token. The platform currently estimates $60 million annual net profits that can be distributed. If this vote passes and the fee switch is implemented, it can signal other DeFi platforms like Frax Finance to align themselves with similar profit-sharing mechanisms as well. This proposal is part of a larger strategy to enhance the attractiveness of staking within the Aave ecosystem. As a result, the Lido V3 market on Aave surpassed $200 million in market size after just 48 hours. $4.63 billion of the stETH supply on AAVE was about 30% of the total Lido V3 market. This fee switch proposal passed largely due to Humpy, a well-capitalized anonymous DeFi user and activist investor, who had exploited Compound's governance system by using a large amount of tokens (via a flash loan) to pass a proposal that gave him near-total control over the protocol. Humpy achieved the same effect with the fee-switch proposal for MakerDAO.
Blackbird, a Web3 restaurant app, has introduced Blackbird Pay, which is a blockchain-based payments platform aimed at facilitating transactions in the hospitality industry. On Blackbird's Flynet blockchain, Blackbird Pay reduces transaction costs to about 2% per transaction and cuts settlement times, improving the margins of restaurants. Another Web3 development is the launch of the Proton Wallet, a self-custodial Bitcoin wallet designed to integrate with their already existing ProtonMail service, which is an encrypted email service. Proton Wallet enables users to send and receive Bitcoin using only an email address, where transactions are as simple as sending an email. The wallet has end-to-end encryption and only allows the user to access their Bitcoin.
At the end of the ETHCC, Maven 11 co-hosted the third Modular Summit in Brussels together with Celestia. The event featured everything modular and was again a great success this year. The three-day event featured innovation and discussion panels, as well as a location to share and generate new ideas. Furthermore, portfolio company Movement Labs has partnered with Polygon’s AggLayer, launching a public testnet with $160 million in committed TVL. This integration aims to enhance the scalability of Movement, bridging Move VM-based layer-2 chains with the EVM ecosystem. The partnership also enables developers to deploy Solidity contracts on Move-based chains without code modification. Lastly, portfolio company Jokerace just announced their fundraise of $3 million which we led. JokeRace offers a unique platform for organizing contests, hackathons, and grants, leveraging data-driven voting to replace traditional governance models. JokeRace aims to address web3 governance challenges by facilitating a transparent and efficient mechanism for community engagement and decision-making.
