Newsletter: *exhale* What. A. Weekend.

Welcome to issue 131: This week we cover the latest SVB <> Crypto Crisis, Jarrod Dicker fresh take on the next phase for "the Blockchain" Mainstream, Seed Club's Josh Cornelius on DAOS as Consumer Products, Meta Working on a decentralized App, Audius experimenting with NFT Gating and mainstream news and more...

Welcome to edition 131:

▹ SVB <> Crypto Crisis
▹ Josh Cornelius on DAOS as Consumer Products
▹ Jarrod Dicker w/ "the Blockchain" Mainstream
▹ Hats protocol on DAO Governance <> structure
▹ Meta Working on a decentralized App
▹ Mainstream news and more...

---This edition is brought to you by Otterspace

Week’s Highlight

exhale What. A. Weekend.

Over the last 72 hours, the crypto ecosystem and the broader tech ecosystem alike faced an existential crisis. Silicon Valley Bank, one of the 20 largest banks in the US and the bank for over 40% of venture-backed startups, faced a bank run after fears that treasury bonds they were holding were underwater due to rising interest rates. California regulators intervened, shutting the bank down and placing it in receivership under the Federal Deposit Insurance Corporation.

This was a nightmare scenario for many startups who, as a result of the bank's failure, were unable to access any funds for payroll, payments, etc. There was very little information on when -- if at all -- they would receive access to the funds again.

Crypto is all about being "bankless," so this shouldn't have been an issue for crypto projects, right?

Wrong.

Circle, the company behind USDC, confirmed that $3.3B of their cash reserves were stuck in the failed Silicon Valley Bank. Panic ensued, and the bank stablecoin -- which should be pegged to $1 -- fell to $0.88 at its lowest on Saturday. Again, companies (and DAOs) were scrambling to derisk, with some fears that Circle would face a bank run of its own on Monday.

Long story short, the FDIC announced on Sunday that while the bank had not been acquired and its investors/owners would not be made whole, all of the bank's depositors would be able to access 100% of their funds this week, even above the $250k FDIC insured limit.

Take Note There were a lot of lessons learned this week. Every project has now learned the importance of risk management over their treasuries, USDC's reliance on the traditional banking system, and the fragility of banks in volatile economic environments. The industry made it out alive this weekend, but we'll need to do better to avoid another crisis like this one.

What's Poppin'

DAOs Are Consumer Products. The Seed Club team has a strong belief that DAOs should be viewed as consumer products. The original DAO was a decentralized venture fund. They then gained popularity as means for governing DeFi protocols, and recently we've seen their explosion into countless consumer and cultural verticals. The future of DAOs might not be the ownership and governance of everything, but rather an opportunity to more meaningfully participate in consumer experiences. In other words: people want to be entertained, find a sense of belonging and shared purpose, socialize, or status signal. The next inflection point will likely come from collectively moving off of Discord and building native ownership experiences. This is a fantastic piece highlighting an exciting outlook on DAOs for this year and beyond.

Structure Without Capture. This essay from the Hats Protocol team explores the idea of "operational delegation," giving people and small groups revocable authority so they can act on behalf of the organization and get things done efficiently. In DAOs, due to the lack of clear hierarchy, many of the things that need to get done either go unclaimed or undelegated, or they are claimed by the wrong person, or they are claimed by someone who doesn't actually follow through. This is the tragedy of the responsibility commons, and it's a huge reason why DAOs today are largely unable to get things done at the same level of efficiency as traditional organizations. The team proposes "structure legos": roles created to fulfill a specific purpose, while being resistant to capture and collectively governed by the group.

Making "The Blockchain" the Next Place you Need to Be. Jarrod Dicker is back with the first Dark Star piece in a while, this one discussing how we take "the blockchain" mainstream. For crypto to cross this chasm, he says, the blockchain will need to become the place you "need to be" for a particular activity or function. It will need to become an information-place where everybody has to be. What can you do there that you cannot do anywhere else? He would argue that the simple answer is buying and selling. The blockchain is the only place where you can buy, sell and collect information objects. Just look at OpenSea, Coinbase and Uniswap -- people are buying, selling and collecting digital goods en masse in a way that was previously impossible. This framing is really important to understanding what the blockchain should be used for and what this next evolution of the internet will truly look like.

A New Crypto Mixer Promises to Be Tornado Cash Without the Crime. Alleging that Tornado Cash had been used to launder $7 billion in digital currency---including half a billion dollars tied to Lazarus, a hacking group sponsored by North Korea---the US Treasury's Office of Foreign Assets Control ruled the service illegal and said any service that "indiscriminately facilitates anonymous transactions" represents a "threat to US national security." However, one of the early architects of Tornado Cash, Ameen Soleimani, has announced Privacy Pools, which he says will still allow users to make private, largely untraceable transactions while discouraging money laundering and other illegal activities. Privacy Pool will use a cryptography technology called a "zero-knowledge proof," by which users are able to demonstrate that their crypto withdrawals are unconnected to deposits made by known criminal wallets. This is a great step towards blockchain privacy within the existing regulatory environment.

The Future Of Medicine Is Tokens. This piece from Zee Prime Capital explores the DeSci movement and the future of medical research. In short, the team believes that DeSci will accelerate research and funding of long-tail of therapeutics, upend the existing incentive systems between government and academia, financialize and provide broader access to an otherwise fairly closed asset class, and produce real-world outcomes that people are ready to pay for. DeSci is the wedge between (hyper)financilization and pharma. Capital is cyclical, risk-taking, and adaptive, for it's always profit-oriented. Traditional medical R&D, as the team describes, is slow, bureaucratic, marginal, and optimized for peer reviews. Combining the two will likely lead to idiosyncratic outcomes.

Coinbase Announces Wallet as a Service. The biggest tangible barrier to entry for crypto adoption is wallets. Wallets are hard, confusing, and not a great UX for folks who just want to mint an NFT or play a game. This week, Coinbase announced Wallet-as-a-Service, a scalable and secure set of wallet infrastructure APIs, enabling companies to create and deploy fully customizable onchain wallets. Users can create, access and restore their wallets with authentication as simple as a username and password without needing to worry about seed phrases. This is a massive step forward for adoption, and we're excited to see how Coinbase's new APIs are used across the ecosystem to help onboard the next billion users onto the blockchain.

Latest on Mainstream...

In mainstream news... Meta, the parent company of Facebook, is working on a decentralized text-based app, according to a report by TechCrunch on Friday. The app will be a standalone product for sharing text updates, according to the report, which cited a Meta spokesperson. This sounds like... a Twitter alternative? Will be very interesting to see how this plays out.

Finally, at a Senate Agriculture Committee hearing on Wednesday, U.S. Commodity Futures Trading Commission Chair Rostin Behnam asserted that Ether and stablecoins should be treated as commodities, a different view from that of Securities and Exchange Commission Chair Gary Gensler. Of course, regulators fail to be on the same page, leading to even more regulatory uncertainty across the landscape.

Signal Bites

▹ Read - Governance and DAOs
▹ FF Library - Leadership in DAOs
▹ Opinion - Community-as-a-Service
▹ Fresh Take - Role of Crypto <> Bank Failures
▹ Cool - Gitcoin x Metalabel Release
▹ Drop - Zine By Boys Club
▹ Watch - Summer of Protocols
▹ Tooling - Subscribe to Mint
▹ Deep Dives - Yuga Labs Value Accrual
▹ Interesting - Audius NFT Gating

◎ Check out Signal  for daily top web3 social headlines

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The information in this newsletter is not intended to constitute legal, financial or investment advice and should not be construed or relied upon as such. Any opinions reflected are the opinion of the author(s) of the newsletter only and not necessarily of Forefront. Please DYOR.