Newsletter: SEC Crackdown & Decentralization

This week we cover the SEC vs Crypto (hell of a week), a16z Crypto Metaverse Report, Nir Kabessa on AMM, LV Physical-Backed NFTs, Forefront new media marketplace plus Market Trends (Metaverse), mainstream news and Signal TL;DR. It’s a packeeddd week.

Good morning and welcome to edition 144th of the FF Newsletter.

This week we cover the SEC vs Crypto (hell of a week), a16z Crypto Metaverse Report, Nir Kabessa on AMM, LV Physical-Backed NFTs, Forefront new media marketplace plus Market Trends (Metaverse), mainstream news and Signal TL;DR.

It’s a packeeddd week. Let's get to it.

Week’s Highlight

The US government has officially waged war on the crypto industry.

Binance and Coinbase were both sued by the SEC this week for running unregistered securities exchanges. Several tokens, including MATIC, SOL, and Cardano, were explicitly named securities by the SEC. Bitcoin and Ethereum were not mentioned, although Ethereum is still facing regulatory uncertainty from the SEC.

Regardless of the facts of the situation, the crackdown certainly seems disingenuous. Coinbase announced that they have met with the SEC over 20 times in the last year seeking a collaborative rulemaking approach, with no progress. Binance lawyers reported that SEC Chair Gary Gensler supposedly offered to serve as an advisor to Binance in 2019.

Gensler has chosen to rule by enforcement rather than in collaboration with industry workers and experts, an approach that is viewed universally poorly across the industry.

Still, the fear is at an all time high. Robinhood delisted all tokens mentioned by the SEC in their suits against crypto exchanges. Meanwhile, the CFTC won its case over Ooki DAO on default judgment after the group failed to respond, leading to widespread anxiety across the DAO ecosystem.

The FUD is slowing down innovation in the US, leading companies like Crypto.com to shut down their institutional practice, a16z to open offices in the UK, and more. Still, truly decentralized protocols and projects should be able to push forward regardless of the regulatory environment.

Take Note: Things are getting hot in the US, but there's still much, much more to come. Coinbase will likely be leading the battle, and companies will need to stay smart and support however possible and necessary.

What's Poppin'

Introducing Spotlight: an Onchain, Curated Media Marketplace. We believe creators should be supported and great work should be 𝑐𝑜𝑙𝑙𝑒𝑐𝑡𝑒𝑑. Spotlight cuts through the noise, highlighting work that the Forefront community deems impactful. Every two weeks, a new Spotlight Capsule will drop with a handful of notable media NFTs: essays, podcasts, songs, zines, onchain experiments, etc. We're supporting collections on Ethereum & Optimism, with more chains coming soon. Forefront Members will be able to participate in bi-weekly community curation on Discord through an emoji vote. Our goal is to make Spotlight the home for some of the best work onchain. If it's on Spotlight, it's worth collecting.

Onchain Hypercultures: The Context-Fermentation Window. The essay discusses the potential of "onchain" as the next iteration of the internet, offering a chance to turn cultural diversities into a more fruitful world. It emphasizes the importance of context in the online realm and how blockchains provide new possibilities for sharing and locating data. The concept of hypercultures is introduced, referring to crypto cultures that can grow freely and forever once they have entered the collective mind. The essay highlights the power of onchain visual art and cites the example of Nouns, a successful onchain project. It concludes by stating that we are in the early days of exploring the potential of hypercultures and anyone can realistically be part of the next one.

Ingredients of a Metaverse. The a16z crypto team published a report highlighting what they believe to be the seven ingredients of the metaverse: decentralization, property rights, self-sovereign identity, composability, open source software, community ownership, and social immersion. Achieving a "true" metaverse --- one that's open versus closed --- requires these seven essential ingredients. They argue that these are necessary to meet the minimum requirement to be called a metaverse. Their goal is to clear the fog of misinformation about what is and isn't a true metaverse for builders and would-be participants, and to provide a framework for evaluating early metaverse attempts.

The Death of Money as a Medium of Exchange. Friend of Forefront and Yup founder Nir uses this essay to explore the transformative potential of a hyper-liquid automated market maker (AMM) world, where the traditional concept of a single currency as the primary medium of exchange could become obsolete. He discusses the functions of money, with a focus on reevaluating the medium of exchange role. AMMs act as a medium of liquid barter, enabling users to exchange any pair of tokens without the need for a common currency. This shift has implications for the future of money, including the potential diminishment of money as a medium of exchange, increased importance of money as a store of value, and diversification of money as a unit of account. The essay concludes that a hyper-liquid world empowers individuals to personalize their means of payment and reshape the financial landscape according to their preferences.

Ingredients to metaverse. The a16z crypto team published a report highlighting what they believe to be the seven ingredients of the metaverse: decentralization, property rights, self-sovereign identity, composability, open source software, community ownership, and social immersion. Achieving a "true" metaverse --- one that's open versus closed --- requires these seven essential ingredients. They argue that these are necessary to meet the minimum requirement to be called a metaverse. Their goal is to clear the fog of misinformation about what is and isn't a true metaverse for builders and would-be participants, and to provide a framework for evaluating early metaverse attempts.

Governing in Nonlinear Time. This essay from Nathan Schneider explores the concept of nonlinear time in the governance of DAOs. It discusses how DAOs have been using metaphors like "seasons," "epochs," and "cycles" to demarcate their operations and governance, challenging the linear progression of time traditionally associated with capitalism. Schneider argues that the renaming of time units invites a rethinking of how we govern with time and suggests that the concept of "exit to community" should be expanded to include multiple exits and changes in governance structure. The article explores historical examples of nonlinear governance, such as the Roman Republic's concept of a dictator and seasonal variations in Paleolithic societies, to inspire new approaches to time in online governance. It discusses decision-based and algorithm-based approaches to implementing nonlinear time transitions and acknowledges the potential challenges posed by linear time preferences in capitalist systems. Embracing nonlinear time in governance may require challenging capital accumulation and forms of domination, ultimately fostering autonomy and self-governance within DAOs and other communities.

The Three Transitions. New Vitalik essay dropped. This one runs through the three transitions that Ethereum needs to go through to go mainstream. The first is L2s: L2s bring low fees, high speeds, and scalability to Ethereum. Next, without users moving to smart contract wallets, users are going to feel safer with their funds on a centralized exchange, a slap in the face to decentralization. Finally, without privacy-preserving transfers of funds, identity, reputation, & social recovery, users won't adopt Ethereum, or crypto in general. The three transitions are actively being worked on today, at various stages, and are critical to the future of the ecosystem.

Now for mainstream headlines...

First, French luxury fashion house Louis Vuitton is gearing up to release a new physical-linked NFT collection called Via Treasure Trunks at a $42k price tag, paving the way for exclusive members-only products and experiences.

Next, a16z is expanding to the UK in an effort to embrace a more favorable jurisdiction for their crypto practice.

Finally, the PoolTogether case was dismissed, with the plaintiff unable to prove harm done by the protocol.

Signal TL;DR

Media as a Vehicle for Digital Objects

In the attention economy, media is important for driving attention and value to digital objects. It frames and presents these objects, convincing viewers of their worth. Emotional and monetary values are key forms of value associated with digital objects. The design of release experiences often lacks context, but media experiences like live streams can effectively build emotional and monetary value. Different digital objects require unique presentations that leverage the internet and blockchain for engaging experiences.

Why AI Needs Web 3: A Thesis

The article argues that AI can benefit from Web 3.0 technologies, as they can address challenges like data privacy and trust. Integrating AI with decentralized systems can create a more transparent and efficient AI ecosystem. The thesis proposes that Web 3.0 can provide a better infrastructure for AI development and deployment.

▹ Deep Dives - Rollups for Dummies
▹ Research - Toward Equitable Ownership
▹ NFT - Sudoswap V2
▹ Proposal - FWB Fellowships v2
▹ Drop - Several People Are Typing
▹ Listen - Monetizing Web3 Social
▹ Raise - Lens $15m Seed
▹ Web2 - Instagram's Twitter Competitor
▹ Tooling - Swapper by 0xsplits

◎ Check out Signal  for daily top web3 social headlines

Market Trends

Did someone say metaverse? Despite the bad rep the term has garnered over the last few years, some real development is happening. Most notably, Apple announced their Vision Pro, a new VR/AR headset with tons of power and a steep price tag. Apple may have avoided using the term metaverse in any of their announcements, but that didn't stop Mark Zuckerburg from drawing comparisons between Meta's own work and Apple's entry. To Mark, the Vision Pro is validation that the metaverse is the next big computing paradigm.

Their is a fundamental difference in stated values between the two companies, though. Apple is clearly going the "closed metaverse" route, in typical Apple fashion. They're building powerful, integrated products that share a closed ecosystem that Apple controls. Meanwhile, Zuck has made it clear that Meta wants to contribute to a more "open" metaverse. What that means remains to be seen, but we can hope that it is truly open in the crypto-native sense of the word.

Our bet at Forefront is that internet-native communities are more inclined to build open metaverses built around shared culture and cc0 production, with a technically decentralized approach. There will be many metaverses, each using a shared set of open, interoperable (to varying degrees) tools.

Regardless of your thesis, it's clear that the metaverse is coming, and it's coming fast. Some would argue we've already arrived.

For the Culture

—

Looking for a way to support Forefront? We’re opening up the FF Newsletter to sponsors interested in sharing their company, project, or community with +10,000 of web3’s most curious minds. If you are interested in becoming a sponsor, check out our Sponsorship Page.

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.