Fallout From China' Crypto Crackdown

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PLUS: FTX moves to the Bahamas, Binance shuts down in Singapore and more |



The biggest crypto news and ideas of the day
Sept. 27, 2021
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Today' must-reads
Top Shelf

BITCOIN OVER BANKS? Almost a third of Salvadorans, or about 2 million
people,
are actively using the state-issued Chivo bitcoin wallet, according to
President Nayib Bukele. If the figure is accurate, more people are using
cryptocurrency than any particular bank in El Salvador less than a month after
BTC became legal tender there.

SWIFT FALLOUT: Authorities in China' Inner Mongolia province seized
10,100 crypto mining
rigs
from a government-operated tech park, according to local media. This comes
days after top government officials renewed a crackdown on crypto trading and
mining. Separately, Huobi Global announced Sunday it would stop serving
existing users in
China
by the end of the year.

GOING GREEN: Singapore startup Cyberdyne Tech Exchange sold its first
tranche of carbon neutrality
tokens
backed by Chinese carbon credits, according to a Monday press release. These
carbon neutrality tokens (CNT) correspond to 5,000 metric tons of carbon
credits generated by a wind project in Zhangjiakou. Separately, sustainable
bitcoin mining company CleanSpark has moved its entire
hashrate
to Foundry Digital' North American mining pool. (The USA Pool of Foundry is a
subsidiary of CoinDesk parent Digital Currency Group.)

EXCHANGING PLACES? Derivatives exchange FTX has officially moved its
headquarters from Hong Kong to the
Bahamas,
amid increasing regulatory scrutiny worldwide. Binance, under fire from
financial watchdogs, is restricting
use
in Singapore. Valar Ventures, Third Prime and Castle Island led a $15 million
raise
into Africa-focused exchange Yellow Card. Finally, decentralized exchanges
(DEXs) are seeing growing volumes in the aftermath of China' crypto crackdown
– with value accruing to their
tokens.

ON CARDANO: Emurgo, the commercial and venture arm of Cardano, is
investing $100
million
to boost DeFi, NFTs and blockchain education efforts for the world' fourth-largest blockchain. Meanwhile, Cardano founder Charles Hoskinson has donated
$20 million to Carnegie
Mellon
University to establish the Hoskinson Center for Formal Mathematics. Lastly,
Dish Network is looking to use Cardano to provide digital
identity
services in a new partnership with Input Output, Cardano' parent company.
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Overheard on CoinDesk TV...
Sound Bites

"Bitcoin wasn't born to succeed because China is around […] it is truly
decentralized and not dependent on a specific market or segment."
–Ballet founder and CEO Bobby Lee, on CoinDesk TV' "First
Mover."
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What others are writing...
Off-Chain Signals

* Crypto, justice and geopolitics set to collide at landmark trial of Virgil Griffith (Ethan Lou/Financial Post)
* Bitfinex just spent $23.7 million in fees to make a single Ethereum transaction (Tim Copeland/The Block)
* The Block' Wolfie Zhou covers more China fallout: Ethereum mining pool SparkPool shut down all services; traders ditch USDT on yuan-denominated OTCs
* Bitcoin miners go nuclear looking for clean energy (Scott Chipolina/Decrypt)
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Putting the news in perspective
The Takeaway

What Do DAOs Actually Do?
Crypto, like any speculative asset, is driven by hype: Elon Musk tweets and
the market responds; China cracks down and investors run for cover. Big ideas
become bite-sized initialisms – think ICOs and NFTs.
The latest three-letter code word favored by crypto utopians is "DAO," short
for "decentralized autonomous organization." A DAO is essentially a corporate
governance structure built around crypto – an exclusive club, where the price
of admission is paid in tokens. Holding a certain amount of tokens or NFTs
makes you a member of the club, which usually gives you access to a paywalled
channel in a Discord server.
DAOs are also meant to incentivize engagement. Because DAO tokens can trade on
exchanges, they can have real-world monetary value. (One prominent "social
DAO," Friends With Benefits, has a
token
worth about $110; 75 tokens are required for admission.) The idea is that the
more a community works to improve itself, the more people want in and the more
valuable its tokens become.
This can be an effective mode of organizing. And Friends With Benefits, in
particular, has found a way to make it extremely
lucrative.
But most DAOs are also pretty limited in terms of what they actually do, once
everyone is all together in those private Discord channels.
Most DAOs treat tokens like voting stock in a company: token holders, rather
than majority shareholders, get to decide how to spend the group' collective
crypto.
"DAOs are basically like if you started a business that went public on day
one, and held shareholder votes way more often,"
says
the writer Nathan Baschez. There' a program called Snapshot that facilitates
this voting process, allowing DAO members to use tokens as votes in a group
poll. The more tokens you have, the more votes you get.
The result is that most big DAOs end up as investment collectives, putting
money into NFTs that they eventually hope to unload on the secondary market.
PleasrDAO,
SharkDAO
and
FlamingoDAO
all work this way.
There are other ways to orient a DAO: Seed
Club
is a DAO that runs a kind of boot camp for the crypto-curious; MetaCartel'
Venture
DAO
works a little like a VC firm; and
PartyDAO
built a program for bidding on fractionalized NFTs. Decrypt, my old employer,
is taking a stab at a media
DAO.
I'm excited about the potential of rallying a community around shared
financial interests without the need to actually incorporate anything (time
will tell whether the U.S. Securities and Exchange Commission shares this
view), but I remain skeptical about the current wave of hype in and around
DAOs.
That' largely because DAOs, in their current form, have an almost impossibly
broad ambit. It' worth making sense of the chaos: What should a DAO actually
do once everyone has found their way to the paywalled Discord channel? Crypto
utopians say DAOs are the new companies, but, for now, many just operate like
social clubs; a list of DAOs in a Twitter bio has become a status symbol in
certain corners of crypto.
Successful DAOs, like PleasrDAO and SharkDAO, have kept their scope relatively
narrow. But it' the smaller ones, like the aforementioned PartyDAO, I'm most
interested in keeping an eye on.
As with traditional companies, DAOs need coherent roadmaps if they're going to
grow and change over time. None of the DAOs I've mentioned so far have existed
for much longer than a year, and the effectively leaderless shareholder model
could lead to power struggles and coordination problems down the line.
It' a new paradigm – something that' clearly still in its infancy. But if DAOs
are going to succeed in the long term, they'll need to get serious about how –
and if – they plan to capitalize on their increasingly broad ambitions.
–Will Gottsegen
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The Chaser...

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