DZ Notes

All content is personal research and reflection. NFA.DYOR.

This Week's Thoughts/Learning

• What is the decision-making logic behind Hong Kong's new Web3 policy? (Excerpt)
  • Historical Context
    • 1. The current overall situation in the world is entering a new Cold War phase, lasting 10–30 years, most likely around 20 years.
    • 2. This is a Cold War of low intensity, with shades of gray.
    • 3. The main battleground of this new Cold War occurs in technological innovation and the real economy.
    • 4. Both the U.S. and China have their respective risk points.
      • The main risks for the U.S. are twofold. First, the historic weakening of the dollar and Wall Street's status has triggered financial system risks. The second risk is the employment replacement risk caused by the new technological revolution, which will inevitably lead to deep social contradictions due to the desperate gap.
      • China faces three risks. The first is that, under the circumstances of supply chain relocation and the end of the real estate bubble, the debt-driven development model that has been in place for years is unsustainable, and the process of deleveraging poses a threat to the economy, employment, and people's livelihoods. If risks are resolved through money printing, it may lead to hyperinflation. The second risk is the widening gap in technological innovation due to external blockades and constraints, leading to a risk of overall backwardness. The third is the risk of war.
    • 5. In a Cold War where both sides are not resolute enough, the intensity is limited, and each has weaknesses and risk points, both sides will inevitably be cautious, preserving large communication channels, coordination mechanisms, leeway, and negotiation space for each other.
  • Technological Revolution
    • 1. The U.S. is undergoing a new round of technological revolution. The core technologies of this round include: strong artificial intelligence, unmanned transport vehicles, robotics, new human-computer interaction technologies (such as brain-computer interfaces), quantum computing, new generation aerospace technology, satellite internet, biotechnology and genetic engineering, new energy, and new materials. Blockchain is an institutional technology and will also play an important role in this round of technological revolution, but due to its high openness and low technical diffusion threshold, it is not the focus of competition.
    • 2. If the technological revolution translates into a new industrial revolution, it can determine the outcome of competition.
    • 3. China will do its utmost to track the technological revolution. The U.S. is also clearly aware of this and has already implemented a blockade on cutting-edge technologies to ensure that key technology fields do not flow into China or be surpassed by China. Conversely, China will inevitably strive to break the blockade and achieve breakthroughs in key technologies, at least ensuring that there is no generational backwardness.
  • Monetary Finance
    • 1. Currently, the return of U.S. dollar interest rate hikes is indeed leading to a decline in its global status. The BRICS countries have proposed de-dollarization, with the direct reason being the Federal Reserve's interest rate hikes.
    • 2. Accelerating the internationalization of the renminbi at this point can indeed achieve significant results. However, the current model of promoting the internationalization of the renminbi through currency swaps will not bring much seigniorage to China in the foreseeable future.
    • 3. Another consequence of accelerating the internationalization of the renminbi is that China's dollar reserves will decrease, putting pressure on the Hong Kong dollar.
  • Main Points:
    • 1. Blockchain has four functions. The first is as the infrastructure for digital currencies and digital assets. The second is as the infrastructure for Web3, creating a next-generation internet with shared ownership. The third is as a tool for humans to control and constrain artificial intelligence in the historical phase of peaceful coexistence between humans and AI. The fourth is as the infrastructure for the distribution of important resources such as governance rights, energy, computing power, and data in a super-large-scale distributed network composed of humans, AI, and robots. Therefore, blockchain is also a key technology in the next generation of technological revolution and a battleground for competition.
    • 2. However, the competition in blockchain is mainly not about devices, technologies, processes, algorithms, etc., but about how to apply the blockchain tool to create new structures and mechanisms; it is a competition of institutional innovation, not a competition of material innovation.
    • 3. The digital asset market is difficult to develop in large countries but will find a breeding ground in the border areas of great power competition.
    • 4. In the border areas of U.S.-China competition, an active blockchain digital economy industry will emerge. Therefore, the dual-city narrative of Web3 in Singapore and Hong Kong will continue to unfold.
    • 5. Hong Kong's Web3 is transaction-oriented. The exchange services for mature mainstream digital assets, such as Bitcoin, Ethereum, USDT, etc., are more liberal, and the custody, mortgage, and trading of mature digital assets will also be relatively friendly, but financing activities such as ICOs will still be very cautious or even strict.
    • 6. Hong Kong's Web3 is still in the pilot phase and may experience reversals. If it cannot help Hong Kong achieve its expected goals after a period, or if poor regulation leads to some risks and destructive financial events, it may reverse the decision-makers' views, leading to policy reversals. Therefore, the Hong Kong government will not relax its regulatory stance, ensuring that red lines are drawn and bottom lines are maintained.
    • 7. Singapore's Web3 strategy is more robust.
    • 8. Singapore has a lower tolerance for gray digital finance. The other side of the winner's mentality is the fear of incidents. This is reflected in setting high entry barriers and strong factual regulatory intensity for related businesses.
    • 9. It is not easy for both places to produce world-class Web3 social, gaming, and other consumer-oriented projects.
    • 10. Both places will actively support the development of RWA. Recently, institutions such as BIS and Citibank have repeatedly emphasized the potential of real-world asset tokenization (RWA tokenization), believing that this direction will receive high attention in both Hong Kong and Singapore.
• Why did Arthur Hayes say to liquidate Bitcoin when TGA bottoms out?
  • Arthur Hayes stated in a blog post on February 7 that he would liquidate his Bitcoin position when the U.S. Treasury General Account (TGA) bottoms out. Some people joked that Arthur Hayes finally got it right; what is the principle behind this?
  • The latest data shows that TGA is now below $100 billion, and the U.S. tax revenue data in April was below expectations. Hayes believes that if the current fiscal situation is insufficient to support the repayment of U.S. debt interest, the market expects the U.S. to raise the debt ceiling of $31.4 trillion again in the second half of this year, and the reissuance of U.S. debt will drain the dollar liquidity in the market, which will be unfavorable for risk assets, thus negatively impacting Bitcoin.
  • A common saying among cryptocurrency market investors is to dig for the next narrative. However, the current market's fatigue towards the "crypto narrative" has made "money printing and interest rate hikes" the most important narrative driving the current crypto market.

This Week's Focus

• New LSD Protocol Agility
  • In just over ten days, it has attracted a large amount of liquid staking, reaching a peak of $510 million in TVL. With extremely high liquidity mining returns, the price of $AGI has risen from 0.2 to a maximum of 0.99.
  • As of now, the AGI-WETH pool on Agility still has an APR of 3592.87%. The single-asset staking yield for ETH is at 36.43% APR.
  • Protocol Mechanism:
    • Agility issues an over-collateralized stablecoin aUSD, which users can only mint by collateralizing aLSD or aETH. aLSD and aETH are also tokens issued by Agility, representing the LSD or ETH deposited by users in the protocol.
      • Users who deposit LSD into the Agility Protocol will receive aLSD and also receive a 100% corresponding LSD reward. Currently, Agility supports stETH, rETH, and frxETH. When users deposit ETH into the Agility Protocol, they will receive aETH, which does not have any rewards itself but can be profited from. aETH can be used to mint aUSD for trading and to participate in LSD liquidity distribution.
      • The value of aLSD and aETH is pegged at a 1:1 ratio to the value of the corresponding supply asset and can be used for LSD liquidity distribution and aUSD minting. Holders of aLSD or aETH can deposit funds into the corresponding liquidity pool and receive three types of rewards: 100% LSD yield, 30% of Vault strategy yield, and esAGI token rewards.
    • Currently, the liquidity release path for converting LSD to USD is mainly through lending on AAVE and Compound. This year, the annualized yield for USD lending on AAVE and Compound has been continuously rising, making the liquidity release cost of LSD too high. However, Agility has issued an over-collateralized stablecoin aUSD, allowing users to mint aUSD by collateralizing aLSD or aETH, so the liquidity release cost for converting LSD to aUSD is almost zero. It can be said that Agility is both a platform for LSD liquidity distribution and a trading platform for aUSD. The locked amount of Agility has also surged accordingly.
• According to @lookonchain monitoring, one address has traded over 3,000 altcoins in the past two years, potentially realizing about $2 million in profits.
  • This address purchased 25 trillion PEPE with 0.013 ETH ($25), which has now turned into $816,000, yielding a profit of 32,000 times.
  • This address bought MXS with 0.5 ETH in June 2021 and sold it for 142.5 ETH in less than 30 minutes, gaining 284 times profit. Lookonchain found that this address transferred a total of 49,922 USDC and 677 ETH for trading, and withdrew 754,841 USDC and 1,167 ETH. It currently holds 190 ETH. Therefore, its realized profit may be around $2 million (705,000 USDC and 680 ETH).

Weekly News Highlights

• Weekly Data
  • BTC Price: ¥26,679, ETH Price: ¥1,877
  • Total Cryptocurrency Market Cap: $1.32T (trillion); [BTC Total Market Cap: $535.5 billion, accounting for: 43.00%]; [ETH Total Market Cap: $226 billion]; [NFTs Total Market Cap: ~ $22.6 billion]
  • [MVRV Z-Score]: {0.56}; [MVRV]: {1.37}
  • [2-Year MA Multiplier]: {34,196—170,982}; [200-Week Moving Average]: {25,800}
  • [Total Stablecoin Supply]: Total Supply 74.9 billion [USDT 36.4 billion; USDC 31.1 billion]
• Comprehensive News
  • The U.S. Federal Deposit Insurance Corporation (FDIC) stated that currently, 136 insured banks in the U.S. are engaged in or planning to engage in activities related to Bitcoin and cryptocurrencies.
  • A research report presented by market analysis firm Bernstein at the 2023 Consensus conference indicated that the FTX bankruptcy event was a catalyst for a new bull market cycle in the cryptocurrency market. The collapse of this cryptocurrency exchange cleared the last portion of harmful cryptocurrency leverage and taught digital asset investors the importance of decentralization and self-custody wallets. The report added that the macro economy is aligning with Bitcoin, the largest cryptocurrency by market capitalization, which will be "the first crypto cycle with leading institutional investor participation."
  • CryptoQuant analyst Maartunn stated that the U.S. government may sell its held Bitcoin on May 26, August 7, October 19, and December 30, 2023, including Bitcoin seized from the dark web Silk Road. Maartunn believes the U.S. government may follow a "73-day interval" selling pattern. Previously, the U.S. government sold 9,800 Bitcoin for $215.7 million, aiming to sell about 41,500 BTC in four batches throughout 2023.
• Regulatory Dynamics/Risks and Security
  • The UAE Securities and Commodities Authority (SCA) announced that it has begun accepting license applications from companies intending to provide virtual asset services locally. All virtual asset service providers (VASP) operating in the UAE must submit applications and obtain regulatory approval, except for those licensed in the country's financial free zones.
  • The Hong Kong Stock Exchange released a research report titled "ETF and the Development of the Global Financial Market Virtual Asset Ecosystem." The HKEX believes that indirectly entering the virtual asset market through ETFs is safer, more compliant, and more controllable in terms of risk.
• Capital and Financing Dynamics
  • According to Crunchbase data, venture capital investment in Web3 startups fell by 82% year-on-year in the first quarter of this year, dropping from $9.1 billion in the first quarter of 2022 to $1.7 billion. This is the lowest level of Web3 financing since $1.1 billion in the fourth quarter of 2020.
  • Hitachi announced that its global venture capital arm, Hitachi Ventures (HV), has established a third fund to accelerate innovation in the digital field. The initial size of the fund is $300 million, focusing on strategic investments in Web3 and generative AI startups.
  • Layer 1 blockchain Berachain completed a $42 million financing round, led by Polychain Capital, with participation from OKX Ventures. Berachain is a Layer 1 blockchain built on the Cosmos SDK, compatible with EVM, and uses a Proof of Liquidity consensus mechanism for protection. The Berachain token economy introduces a three-token system for the first time, including the network gas token BERA, the ecological algorithmic stablecoin HONEY, and the non-transferable governance token BGT. Currently, the Berachain project Discord community has over 50,000 members, with more than 100 teams building new and existing protocols on the recently released development network (Devnet). The Berachain ecosystem has already committed over $250 million in total locked value and will launch a public incentive testnet in the coming weeks.
  • Playbux completed a $2 million seed round financing, led by Binance Labs. Playbux is a blockchain-based e-commerce metaverse platform that was shortlisted for Binance Labs' fourth incubation program. Its product aims to become an easily accessible Shop&Earn metaverse platform, allowing users to earn cash back from over 20,000 merchants worldwide.
  • One-stop liquidity as a service (LaaS) DeFi protocol iZUMi Finance announced the completion of a $22 million financing round. iZUMi's DEX product iZiSwap Pro has launched on the zkSync Era network and has gone live on the Web3 social platform Galxe, launching the "iZiSwap Pool Party" series of events.
  • Web3 notification platform Yoz Labs completed a $3.5 million financing round, led by Electric Capital. Yoz Labs describes itself as a Web3 platform aimed at simplifying user notifications through a "low to no-code interface," requiring only a smart contract to get started.
  • Taiwanese metaverse company XRSPACE announced the completion of a new round of financing of $25 million, led by Foxconn. The company will use the new funds for the research and development of next-generation 3D live streaming and social experiences. XRSPACE was founded in 2017 and primarily provides social metaverse experiences through its platform "XRSPACE MANOVA," aiming to change the way people connect, work, and entertain, requiring users to wear virtual reality headsets to connect through complementary applications PartyOn and GOXR.
  • Wallet-as-a-service provider Universal Ledger announced the completion of $10 million in financing, led by Hard Yaka. The Universal Ledger ecosystem will operate based on its native stablecoin, which will be backed 1:1 by the U.S. dollar. Universal Ledger aims to help users build their own crypto wallets, with its clients primarily being large financial institutions and administrative agencies.
  • NFT Investment
    • NFT aggregator Flow announced the completion of a $3 million seed round financing, led by Nima Capital, with participation from Shima Capital and others. Flow is an NFT ecosystem built for a modular future, providing robust order matching, execution engines, and LLM-based NFT analysis, and will integrate artificial intelligence, with the founding team coming from Google and Binance Labs.
    • Web3 "phygital" fashion startup Pillz announced the completion of a new round of financing, with gaming payment platform Xsolla participating. Pillz extends digital identity, enabling NFT collectibles and NFT games to become tangible, allowing users to interact with NFTs in reality, and is building its own system based on Linux. Pillz will launch and mass-produce its products, including necklaces, bracelets, keychains, and fashion and jewelry brands, expected to be released in May this year.
    • Web3 company Artifact Labs announced the acquisition of the source code of NFT platform Refinable Limited. Artifact Labs is a multi-chain NFT ecosystem established by the South China Morning Post after spinning off its blockchain-based NFT business, and the South China Morning Post remains a shareholder of Artifact Labs. This acquisition of Refinable will accelerate Artifact Labs' launch of a decentralized NFT marketplace and the development of its Web3 product roadmap.
    • The NFT project HypeSaints has now completed a million-dollar seed round financing. HypeSaints will enter its second phase in May and plans to release its second series of HypeSaints NFTs mid-year.
  • Gaming Investment
    • Web3 multiplayer online tactical battle game Battlegrounds developer CEBG Game recently announced on Twitter the completion of a $3 million private placement financing round, with participation from Youbi Capital, GSR Ventures, A&T Capital, and others.
    • Web3 karate fighting (VR) application Karate Combat completed $18 million in financing, led by Bitkraft Ventures. The new financing will be used for the launch of the Karate Combat "Up Only Gaming" application and KARATE token on Ethereum and Hedera networks on May 10.
    • VR basketball game Blacktop Hoops' studio Vinci Games completed $5.1 million in seed round financing, led by Makers Fund.
    • The fully on-chain game Depets completed a community round financing of 80 ETH, is about to issue tokens, and will airdrop to the community. Depets is a fully on-chain free-to-play game where blue-chip users like Azuki, BAYC, Cryptopunk, and Nouns can each claim an NFT pet for on-chain battle games and invite friends to participate.
• NFT
  • According to Dune data, in the past week, the daily user count and sales volume of the NFT market have both declined, reaching a new low since July 2021. The number of unique users on top NFT markets, including Blur, OpenSea, and LooksRare, has continued to decline, dropping to 7,805 on April 19. This is the lowest since July 31, 2021, when the number of unique users on OpenSea and other markets was 7,455. The number of NFT sales in the past seven days has also declined, with 16,149 sales on April 19. The last low was 12,910 sales on November 9, 2021.
    • Blur's sales volume on Thursday was 5,688, the lowest in 90 days. Blur's daily unique user count has also declined, with only 1,777 unique users on April 19, the lowest level in 90 days.
  • After launching a trading subsidy activity for purchasing Ethereum NFTs, the OKX NFT market has upgraded this activity again, increasing the subsidy amount per address from 0.03-0.05 ETH to 0.1-0.2 ETH, covering Gas fees, royalties, and platform service fees.
  • Limit Break stated that its next steps include open-sourcing the programmable royalty contract V1.1, upgrading the main services of FreeNFT, and distributing Bitcoin NFTs DigiDaigaku Chibi for free to DigiDaigaku Genesis holders.
  • Cool Cats launched a new ecological NFT series "Shadow Wolves," classified as "Super Cool" members, similar to the previously launched Cool Pets NFT series, which will also expand the dynamic gaming and competitive experience within the entire Cool Cats ecosystem, including exclusive drops, merchandise, and product releases. Users can mint Shadow Wolves by burning Cool Cats Fracture.
  • Cool Cats founder Lynqoid announced his departure from the project and will no longer work for Cool Cats but will remain on the board.
  • Pudgy Penguins launched a brand guide aimed at unifying brand UI. The guide includes brand assets, usage guidelines, and standardized brand identities. This product guide can help creators incorporate the Pudgy Penguins image into their works or showcase the Pudgy Penguins brand image externally.
  • Moonbirds will launch a reward token TALONS, which NFT holders can accumulate daily through "nesting." Holders will be able to use the tokens to bid for whitelist spots in upcoming exclusive releases, receive exclusive merchandise, and participate in IRL events and collaborative experiences.
  • Moonbirds announced that Moonbirds Mythics will start incubating in June and will receive full commercial IP, allowing holders to freely build or use Mythic IP with CC0 Moonbird.
  • Nike's Web3 platform .SWOOSH announced that the digital poster airdrop has been completed, with a total of 106,453 .SWOOSH members receiving the "Our Force 1" digital poster. .SWOOSH stated that members who did not receive the digital poster still have the opportunity to participate in the Our Force 1 journey by purchasing the OF1 box during the General Access period on May 10.
  • Animoca Brands' NFT series Mocaverse has partnered with Animoca's arcade game subsidiary GAMEE, allowing holders of this NFT series and Realm Ticket NFTs to access exclusive tournaments in games under GAMEE's Arc8.
  • Snoop Dogg has partnered with VeeFriends to launch a new NFT series based on Snoop Dogg's new song "Please Take a Step Back." The NFT drop will be divided into three phases: in the first phase, VeeCon 2022 ticket holders can burn their ticket NFTs to mint the "Please Take a Step Back" NFT; in the second phase, participants can earn rewards such as BAYC NFTs and ApeCoin by participating in competitions; in the third phase, 10 winners will win experiences at Snoop Dogg's concert.
  • Adidas' NFT project Indigo Herz announced the launch of the "Indigo Herz Pack," providing token-gated access for ALTSbyadidas holders, followed by a public sale. This limited edition series includes 2,145 pairs of Superstar shoes created in collaboration with Bored Ape Yacht Club, PUNKS Comic, and gmoneyNFT, as well as 2,195 hoodies printed with PUNKS Comic art.
  • LVMH Group held its 2023 annual shareholder meeting, where Group Chairman/CEO Bernard Arnault stated, "When we have NFTs, we will use them to sell a real shoe, a real bottle of wine."
  • Azuki #6954 was sold for 170.85 ETH.
  • BAYC | YUGA LABS | ApeCoin DAO
    • BAYC floor price dropped to 44 ETH.
    • CryptoPunks announced that as part of the Punks Restoration Project, Yuga Labs has now acquired ownership of the CryptoPunks Wrapper, and the official homepage of the CryptoPunks Wrapper has also migrated, where users can find information and resources related to CryptoPunks NFTs.
    • Huang Licheng briefly "withdrew from the NFT field" before purchasing BAYC and MAYC again.
• Exchanges and Traders
  • Coinbase stated, "Coinbase has to prepare for a long legal battle with the U.S. Securities and Exchange Commission (SEC). It also stated that the U.S. 'has the potential to become an important market for cryptocurrencies,' but currently does not provide regulatory transparency. If this situation continues, Coinbase will consider making more investments overseas, including relocating from the U.S. to elsewhere."
  • Coinbase published a print advertisement in the UK Financial Times titled "It's Time to Update the System," calling for the adoption of cryptocurrencies.
  • Kraken has obtained a virtual asset service provider (VASP) license from the Central Bank of Ireland.
• L1/L2/Sidechains/Cross-chain and Infrastructure Tools, Stablecoins, etc.
  • Layer 1 blockchain project Iron Fish has launched its mainnet. This blockchain implements zero-knowledge proofs, allowing users to conduct privacy transactions without compromising accessibility. Last November, Iron Fish completed a $27.6 million Series A financing round, led by a16z, with participation from Sequoia Capital and others.
  • The decentralized wireless network Helium has successfully completed its migration from its own Layer 1 blockchain platform to Solana. As part of the migration process, NFTs will be minted to represent each physical hotspot node running on the Helium network, ultimately minting over 991,000 Solana NFTs. Hotspot owners will claim their respective NFTs when logging into the wallet bound to that hotspot, and owners can still transfer or update hotspot locations.
• DeFi/GameFi/SocialFi/Innovation/Chain Games
  • ParaSpace announced that it will introduce platform fees starting May 1. Specifically, a 3% fee will be charged for APE staking, which will be collected when claiming rewards for auto-compounding, primarily to cover the Gas costs for auto-compounding user APE rewards. If profits are generated from APE staking fees, ParaSpace will return 50% of the profits to the Yuga ecosystem through supporting community builders, sponsoring community-driven events, giveaways, etc. For lending, a 10% platform fee will be charged on all lending interest. The new 10% platform fee (protocol revenue) will be used to pay for smart contract security maintenance, new employees, operations, and marketing.
• Metaverse/AI/DAO and Other WEB3
  • Metaverse development company LandVault announced a partnership with Super League to create a metaverse gaming platform in the Middle East. The two parties will assist consumer brands, international sports franchises, entertainment groups, and administrative agencies in entering the metaverse and provide solutions for creating, distributing, marketing, and monetizing the metaverse. LandVault also revealed that it is currently building AI creation tools and content hosting and tokenization protocols called Matera.
  • The metaverse project Rivermen announced the establishment of an operational node in Hong Kong, entering the conceptual landscape of Hong Kong.
  • AI WORLD has officially launched globally. AI WORLD focuses on the blockchain + AI application track and will initiate AI-generated image mint NFT and token airdrop activities to thank and reward the support of beta users.
  • Meta is no longer promoting the metaverse to advertisers in meetings. Instead, the company is encouraging the use of its short video product Reels while emphasizing its extensive AI tools.
• Mining
  • The 30-day average income from Bitcoin mining has risen to $27.34 million per day, the highest level since June last year. However, this is still far from the peak of $61.2 million set in November 2021.
  • Bitcoin mining difficulty faced an adjustment at block height 786240, with a slight increase of 1.7% to 48.72 T, setting a new historical high. The current average network hash rate is 355.32 EH/s.