September 23, 2022

The biggest crypto news and ideas of the day

Supported by

Hello and welcome to The Node. I'm Daniel Kuhn, here to take you through the latest in crypto news and why it matters. In today's newsletter: Celsius Network might be planning to turn its debt into crypto 'IOU' tokens, Tornado Cash code is back on GitHub, and Cardano's Vasil Upgrade marks an important milestone in the blockchain's evolution.

If you were forwarded this newsletter and want to subscribe, sign up here. And click here to unsubscribe.

– D.K.

Today's must-reads

Top Shelf

Celsius Network Might Be Planning to Turn Its Debt Into Crypto 'IOU' Tokens: Bankrupt crypto lender Celsius Network appears to be considering a plan to turn its debt into crypto "IOU" ("I Owe You") tokens. Customers could then either redeem the wrapped "IOU tokens" (though a timeline for these redemptions remains unclear), trade them on the open market or hold them to speculate on Celsius' potential recovery in the long term.

Separately, holders of preferred equity in Celsius Network want to make sure they're at the table in talks on clawing back their investments and have first dibs on proceeds from the sale of certain assets, saying they are worried the bankruptcy process is overly focused on retail customers.
Meanwhile, Washington state joins Celsius bankruptcy case as an interested party, continuing a trend of state-level regulators moving faster than the fed on regulating crypto.

Crypto-Mixing Service Tornado Cash Code Is Back on GitHub: Code repositories for the Ethereum-based mixer Tornado Cash were relisted on GitHub on Thursday. The move by GitHub comes as Ethereum developers have called for platforms that host the mixer service to not ban Tornado Cash code.

Last month, the US Treasury Department's Office of Foreign Assets (OFAC) banned Americans from using Tornado Cash. Within hours of the OFAC announcement, GitHub removed Tornado Cash from their sites in order to comply with the new US regulation.

Cardano's Vasil Upgrade Marks an Important Milestone in the Blockchain's Evolution: The Cardano blockchain started its Vasil hard fork upgrade at 21:44 UTC on Sept. 22, which is expected to finalize in five days, on Sept. 27. Vasil's rather technical set of changes improve the ledger's programmability and its throughput potential.

Push to Enhance CFTC's Crypto Watchdog Role Gets a Boost in US Congress: The House joined the Senate's effort to install the Commodity Futures Trading Commission (CFTC) as a leading agency to oversee digital assets trading and to exercise new authority over crypto spot markets as a House of Representatives lawmaker introduced a bill supporting a parallel effort in the Senate.

Although it is not clear whether the bill will have enough time to get passed in the Senate, having matching bills in both chambers could streamline the process and get to the president's desk more quickly if they win support in the Senate and House.

UK Introduces Law to Seize, Freeze and Recover Crypto: The U.K. introduced a bill to make it easier for law enforcement agencies to seize, freeze and recover crypto assets when used for criminal activities such as money laundering, drugs and cybercrime. Earlier this month, the Treasury updated guidance so that crypto exchanges and wallet providers reported suspected sanction breaches, following the example of other nations.

– Xinyi Luo

With Nexo Pro, you can do spot, margin, and futures trading, now with a 50% discount on fees. On the platform, beginners and experienced users get access to 3,000+ order books from a single interface. This guarantees you the most favorable price from over 10 liquidity providers with instant execution and near-zero price slippage.

There are 400+ crypto pairs available for which you can set up market, limit, stop loss, take profit, and TWAP orders. An API that can be used for automated trading strategies is also available.

With Nexo Pro live, you can now seamlessly transition from earning and borrowing against your crypto to trading it, and vice-versa.

Get started on Nexo Pro today, and profit more by getting the best possible prices on all your trades.

Putting the news into perspective

The Takeaway

The Most Important Bear Market in Crypto History

I spent Thursday at Messari's Mainnet conference, which was certainly bustling but, it must be said, slightly subdued compared with CoinDesk's Consensus festival in June. That's not to knock Messari – if Consensus didn't exist, Mainnet might be the best all-around crypto conference. The difference is mainly a matter of timing: Consensus caught the trailing edge of a frenetic bull market, and now we're definitively in the season of the bear.

Every bear cycle in crypto is greeted with a degree of relief by founders, engineers and other insiders, because they're freed from the hamster wheel of chasing deposits, users and mainstream attention, and instead able to focus on building for the long term, both technologically and strategically.

Mainnet offered a few glimpses of where projects are focusing their off-season energy this time around. One major theme is the financial and engineering push for more capital efficiency in decentralized finance (DeFi) and other on-chain services – that is, finding ways to safely get more leverage or liquidity out of less collateral. That could be a huge competitive differentiator in the future - though the competition is also certain to produce some overreach and blowups.

Another goal (however obvious) is building much more user-friendly front-ends for crypto applications. There are also major unanswered security questions, highlighted by yet another round of huge hacks this week. That's a particularly ideal bear-market project: Without the pressure to move fast, you can take more care to build things that aren't easy to break.

Of course, you have to fund that kind of development, and both revenues and retail speculation have substantially shrunk. The good news is that venture investment is definitely continuing. One founder who completed a recent raise told me, though, that in the bear market bigger bets are going to fewer entities. In essence, VCs are still going long crypto and blockchain. They're just a lot more selective than a year ago.

(Getty Images/iStockphoto)

That's all well and good, but it's not enough. Thanks to the combination of macroeconomic pressures like inflation and the broad losses suffered by retail speculators, the big challenge for this bear market – and an unknown that I find myself considering for the first time in my decade covering crypto – is making sure there even is another bull market.

Extreme cyclicality has been a hallmark of the crypto industry since its inception. That's certainly not unique – we found out this year that the broader tech market can still experience painful drawdowns, three decades after AOL sent out its first CD-ROM. But the cycles in crypto can be particularly sharp and painful because not only is this still largely a speculative technology, it's one that retail investors can dabble in with few restrictions or safeguards.

That's why the current bear market may be the most important in crypto's history. In the unprecedented bull market from 2020 to 2022, a critical mass of retail investors was enticed by the past returns of the asset class. Exchanges, non-fungible token (NFT) producers and others focused on retail were more than happy to court them with Super Bowl commercials and major media appearances. And then, by and large, retail got severely burned, by the bursting of a transitory bubble (BTC and ETH) or, far worse, by the collapse of deeply flawed and even fraudulent projects.

I moderated a panel at Mainnet about the strategic balance between catering to big-money whales, day-trading degens and "newbs," aka normal human beings. The trap for many crypto projects is that while the big, easy returns come from whales and degens, those users are also hyper-agile "rotator capital," willing and able to pull up stakes and move their entire net worth to a new system for a few extra basis points of APR.

More importantly, degens and whales are speculators and liquidity providers, not "users" proper. To eventually reduce market cyclicality, crypto projects need to find actual use cases where they can beat existing services. For now, the obvious cases are still pretty limited: cross-border payments (mostly meaningful for BTC), NFTs (mostly meaningful for ETH) and, to a lesser extent, gaming – where there is a huge market, but the actual advantages of crypto are a bit less clear.

There will be a lot more real end-user services and products to add to that list. Some won't come along until the technology has advanced further, whether in terms of throughput or user interface. But the industry needs them yesterday. One final clear advantage of a bear market is that, with speculators in retreat, it's much easier to find and test the demand for real products that offer real benefits. That's the task that lies before blockchain entrepreneurs right now.

Finally, a couple of blind items for those who stuck with me to the end. Word on the street is that the Walton family (as in Walmart) have a nascent interest in decentralized autonomous organizations (DAO). And a layer 2 blockchain company is just weeks away from announcing a fundraise of staggering proportions. Bet on it.

– David Z. Morris

The Tron Grand Hackathon 2022 Is Back for Season 3*

Hosted by Tron DAO and BitTorrent Chain, the Tron Grand Hackathon 2022 is back again, this time with a prize pool of $1.2 million. The competition brings another exciting opportunity for yet-to-be-discovered talents to show their skills and help accelerate the future of Web3 through unique crypto project proposals.

Whether you're a developer, entrepreneur, designer or blockchain enthusiast, the Tron Grand Hackathon is the perfect opportunity for you to grow the ecosystem and get your ideas seen by crypto experts, KOLs and the community.

Continue reading here

*This is sponsored content from Tron.

What others are writing

Off-Chain Signals

How BlockFi Went From Tech Unicorn to Crypto Burnout (Blockworks)
The Crypto Winter's Latest Casualty Is Data Center Firm Compute North (Bloomberg - paywalled)
Pentagon launches effort to assess crypto's threat to national security (The Washington Post - paywalled)
Don't believe the 'maximalists': bitcoin can't be separated from crypto (FT - paywalled)

The Investing in Digital Enterprises and Assets Summit reveals the most scalable and fastest-growing market opportunities in blockchain, digital assets, Web3 and the metaverse for traditional asset managers and institutional investors. Learn directly from the founders and developers pioneering breakthrough innovations that will drive large-scale adoption. Use code TN_20 for 20% off the General Pass. Register now.

Don't miss out on this powerful and entertaining weekly podcast that celebrates women supporting women, investing in women and bridging the gender gap in wealth through Web3. Each week brings a new and exciting guest sharing insights on topics like starting an NFT project, creating belonging and inclusivity in digital spaces, building prosperous Web3 projects, investing in cryptocurrencies and building wealth. Listen now!

The Chaser...