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Money Reimagined: Defanging FAANG – CoinDesk

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Most people would be happy to have World Wide Web creator Sir Tim Berners-Lee’s wealth, which is reportedly somewhere between $10 million and $60 million. 

Yet, Berners-Lee’s net worth pales into insignificance against that of Amazon founder Jeff Bezos, who last week became the first person ever to be worth more than $200 billion. 

There’s something wrong with this picture. The inventor of an information system that transformed the world has earned from it a tiny sliver – no more than 0.03% – of that which has flowed to someone who controls one of that system’s 2 billion websites. Amazon.com has delivered Bezos a fortune that exceeds the gross domestic product of 159 countries and is 3.3 million times more than the U.S. median household income.

You’re reading Money Reimagined, a weekly look at the technological, economic and social events and trends that are redefining our relationship with money and transforming the global financial system. You can subscribe to this and all of CoinDesk’s newsletters here.

Many Americans will view Bezos’ Amazon, whose $1.73 trillion market capitalization makes it the second-most valuable corporation in the world, as a symbol of the U.S. economy’s success. The same people think similarly about the U.S. roots of the four other companies in the world’s top five: Apple, which last month became the first company to surpass a valuation of $2 trillion and is now at $2.1 trillion; Microsoft ($1.71 trillion); Google owner Alphabet ($1.1 trillion); and Facebook ($835 billion.)

I argue the opposite: These ridiculously large numbers are evidence of a deep problem with the American economy.

This is not the argument of a socialist, as I have sometimes been wrongly described by people who hear me say such things. I thoroughly believe in a free market economy in which entrepreneurs are incentivized through profits to improve and grow their businesses.  

It’s just that there’s no way a single person or company can accumulate such a colossal amount of money, relative to that of everyone else, without operating a competition-killing monopoly, without acting as a rent-seeking gatekeeper of others’ capacity to generate income and innovate. 

This is the destructive nature of the centralized platforms the internet has spawned, a situation that gives Berners-Lee such angst that he’s now seeking to tame the beast he created. With network effects to their advantage, these behemoths have a data-monopolizing capacity that lets them control and quash competition. And their algorithms have accumulated such a deep knowledge of user behavior that they can bend us to their will. It’s a power as great or more than that of governments, which is why they represent as big a threat to the free market as excessive regulation. 

A solution may lie in a new breed of blockchain-powered “Web 3.0” protocols. These will give users control over their data and enable them to join decentralized communities and marketplaces to share content and products without middlemen. These models could break the back of the internet platforms’ – so long as users can be convinced to migrate away from them. 

(Emma McIntyre/Getty Images)

Still, even if these newcomers are successful, the Bezos lessons should be heeded. Power bases forming in the blockchain ecosystem around “whales” resemble those of the centralized internet, where a capacity to set the rules of the game are vested in a few. The crypto community should welcome innovative governance solutions that push back against that inequity and foster broader distributions of power. 

Limiting the spoils of growth

Monopolies harm an economy for various reasons. In the trust-busting era of President Theodore Roosevelt, the concern was that an absence of competition empowered companies to impose above-market prices on consumers. But they also constrain innovation, creating an opportunity cost for society. If better alternatives to the status quo aren’t brought to market, productivity stagnates.

Capital markets perpetuate this problem. Investors favor the big guys – witness the investment advisor mantra of “just buy FAANG” (Facebook, Apple, Amazon, Netflix and Google) – leaving their competitors with comparatively more expensive capital, which only makes the challenge of surpassing the platforms even bigger. 

Their advantage is buttressed by legal ambiguity. Antitrust laws fixate on the prices paid by consumers, but as the American Economic Liberties Project notes in a piece calling Amazon a “21st century gatekeeper,” the consumer harm done by the e-commerce giant “tends to be disguised or hard to calculate.” The report’s authors say regulators should instead be looking at how it manipulates everyone – suppliers, potentially competitive startups and customers – by placing them into “a position of dependency, and then exploiting that dependency to leverage itself into powerful positions in new markets.”

It’s not clear, though, that the solution lies with government.

Washington could, for example, break up Amazon, Facebook et al. But what’s to stop each of the component parts obtaining their own gatekeeper powers? Alternatively, it could regulate the platforms as utilities. But do we really want Uncle Sam regulating – censoring? – an information platform? Or it could subsidize promising startups aiming to beat the platforms at their game. But even if a challenger can garner the network effects necessary to overcome barriers to entry, their own shareholders will ultimately pressure them into using the same exploitative methods. 

Web 3.0 to the rescue?

This is where crypto-based solutions hold promise. In Web 3.0, user networks exist on top of a decentralized protocol that no single party controls. 

Web 3.0 startups must still convince users to migrate from a big, proven network to a small, unproven one, but growing concerns about privacy, censorship and fraught battles over disinformation, “fake news” and toxic behavior could encourage them to do so. And recent progress in the development of Web 3.0’s underlying infrastructure offers hope that gatekeeper-bypassing internet applications are on the horizon.

Interoperability protocols such as Cosmos and Polkadot, which allow digital asset exchanges across blockchains, have reached key development and funding milestones in recent months. Decentralized storage and hosting solutions such as Sia and Filecoin are garnering both user and investor interest. A host of self-sovereign digital identity providers are starting to offer users a way to keep their data private and interact autonomously with each other without relying on the platforms’ identity management systems. And all this is happening during an explosion of innovation in decentralized finance (DeFi), which could enable smoother integration of payments and finance in a Web 3.0 environment.

Crypto inequity

To be clear, blockchains are no panacea against monopoly.

For one, crypto has its own inequality issue. Because of sharp price appreciation and the front-loaded issuance schedules built into many cryptocurrency protocols, a small number of early adopters have profoundly more wealth than the vast majority of later participants. (One analysis of Bitcoin’s Gini wealth coefficient, a common measure of wealth inequality, put it in a range of 0.88 to 0.98 between 2012 and 2019, higher than any country in the world.)

julian-hochgesang-unsplash
(Julian Hochgesang/ Unsplash)

One could argue it’s the removal of gatekeeping intermediaries, not inequality itself, that matters. But the reality is that “whales” with large token holdings have outsized influence over blockchain governance systems and can often dictate terms in their favor. This is especially so in proof-of-stake consensus systems and it’s playing out in voting on interest rates, collateral rules and other parameters attached to decentralized finance (DeFi) protocols. 

It’s also relevant to bitcoin. Wealth is necessary to build the big mining farms needed to consistently win block rewards and although core development work is, by definition, a not-for-profit activity, the most prolific contributors to its code are funded by wealthy bitcoiners. While their financiers’ largesse is justified in terms of protecting a public good, their direct line to the engineers affords them real influence over protocol development.

Still, blockchain-based protocols create opportunities for founders to experiment with governance to get around these problems, which, encouragingly, is happening in DeFi. (See the item on “fair launches” below.)

We’ll never attain utopia, but at least in crypto there’s an innovation-driven approach to finding a path to it.

Denominators matter

At a glance, the first chart below from DeFi Pulse, which tracks the value of all crypto assets locked as collateral in Ethereum’s DeFi ecosystem, suggests the spectacular bubble of August might have met its end in early September.

And yes, the first week of September is a reminder that what goes up can come down. Still, it’s worth looking at the charts further below the first one to remind ourselves that discussions of crypto value tend to be distorted by the denominator of measured historical performance. Any assessment of the U.S. dollar (USD) value of funds invested in DeFi collateral contracts is beholden to the value of the dollar itself, which will vary against the key crypto denominators according to a vast array of factors that have very little to do with DeFi.

total-value-usd-locked-in-defi
Source: DeFi Pulse

The charts below measure the amount of actual a) ether or b) bitcoin that’s locked up in DeFi contracts. 

eth-locked-in-defi
Source: DeFi Pulse

btc-locked-in-defi
Source: DeFi Pulse

The good news for DeFi believers is that even with the damage that this week’s sell-off has done to the dollar value of bitcoin and ether, the crypto community’s internal bets on the DeFi system continued to rise, albeit at a slower rate. The unanswered question is, how truly independent of the fiat world is this system? Will the past week’s slide in the value of ether and  bitcoin versus the dollar start to impact how holders of those cryptocurrencies think about their yield-earning opportunities in DeFi? Or are there now greater incentives to cash out back into dollars? Time will tell.

Global town hall

FAIR LAUNCH = FREE LUNCH? One of the hottest of the many hot new speculative projects to flow through the booming DeFi universe has been that of yearn.finance, whose YFI token soared by more than 700% in August to flirt with a $1 billion market capitalization. It was more than the price gain that got people excited. It’s that the founder, Andre Cronje, launched the project without retaining any of the tokens for himself beforehand, carrying out what’s being called a “fair launch.” Unlike the leaders of many projects who typically set aside around 20% of tokens to compensate founders and developers for the time and effort put into building the project, Cronje and his team had to commit their own capital and time their bets right to ride the speculative boom in YFI.

One reason why this is appealing is that it creates a framework for more equitable governance of the tokens, whose conditions are determined by token holders according to the protocol’s consensus-based voting system. Typically, the largest holders can sway votes, which means token-holding founders can set the game up in their favor. Ian Lee, IDEO CoLab Ventures managing director, says such models pose a threat to venture capital managers like himself. If projects can launch without prior equity or token exposure for either founders or funders, what’s in it for VCs? he asked in a blog post. 

Who would fund such projects? People who simply want to see new financial innovations live in the wild and are prepared to bet further on them after they’re built. Well, Lee and some of his team members appear to be among those types of people, as they quickly rolled out a new concept – note: not an entity per se – called “fair launch capital.” Described as a “community resource providing free access to capital for new Fair Launch networks and projects,” the group is receiving an “incredible amount of interest and support from the crypto community,” he said. 

Meanwhile, Yearn itself fostered a new concept that could further unlock capital for such launches: a “delegated funding DAO vaults,” which essentially use the power of  connections and relationships, along with some fancy insurance-like mechanisms, to provide unsecured lending for developers of such projects. A lot of bets will go wrong, no doubt. But this kind of experimentation with new forms of governance, risk management and credit are what make the DeFi movement so interesting. 

mr-yang-peiyan-qin-museum-xian-china
(Tim Graham/Getty Images)

PEOPLE’S PRIVACY. When it comes to China, the only thing to be said with any certainty is that mainstream Western portrayals will employ sweeping generalizations and miss a more nuanced reality. In a well-written take on Beijing’s surprisingly robust efforts to boost data privacy standards, MIT Technology Review writer Karen Hao describes one such situation. 

While the article lays out the familiar story of the expansion of state surveillance under President Xi Jinping and the growing use of “social score” metrics, it also reveals how a pro-privacy activism among Chinese citizens is prompting some aggressive data protection responses from top Chinese officials, including measures that constrain the actions of provincial government agencies. With the country now implementing a legal model quite similar to that of Europe’s General Data Protection Regulation (GDPR), tensions with the national government’s own data collection strategy seem likely to arise. It remains to be seen what all this means for China’s implementation of its Digital Currency Electronics payments system, which Western critics often describe in ominous terms as a privacy-destroying “panopticon.” 

As Hao writes, China’s privacy protection effort “raises a question: Can a system endure with strong protections for consumer privacy, but almost none against government snooping?” To be sure, that system, otherwise known as the Chinese Communist Party, has managed to accommodate many such contradictions in the past. But the message here is that we should not underestimate the voice of the Chinese citizenry – or, more precisely, of its Netizens, as China’s internet activists have become known.  

THIS MEANS WAR. Those of us who write about how governments, companies and decentralized communities will compete to define the digital money of the future often use the term “currency war” to describe the competition for people’s monetary trust that looms on the horizon. The winner is the one that attracts the most demand and, therefore, most likely, rises the highest in value. But in traditional foreign exchange markets, the concept applies more to central banks using their powers of intervention and monetary policy to competitively drive down the value of their national currencies – in other words, reduce demand for them – so as to boost exports and make imports more expensive. 

With the dollar falling consistently due the Federal Reserve’s aggressive COVID-19 monetary easing measures, concerns about such a war arising were given a boost when European Central Bank’s Chief Economist Philip Lane made what some labeled as a “verbal intervention” just as a rising euro was approaching the psychologically significant level of $1.20. As Bloomberg Opinion writers Mark Gilbert and Marcus Ashworth warn in response to Lane’s remarks, “A full-blown currency war … could distract policy makers from their key task of mending the post-pandemic global economy.” 

All Lane said was, “The euro-dollar rate does matter” because it “feeds into our global and European forecasts and that in turn does feed into our monetary policy setting.” That’s a pretty indisputable point. Yet, the euro fell immediately after he’d dropped the comment. The remarks did break with international protocol, by which central bankers are supposed to resist mentioning their currencies and instead focus on domestic economic conditions, even when those conditions are the result of exchange rate changes. But it was hardly a declaration of war. Such is the super-sensitivity around the value of money right now that modest shifts in language can send markets into a tizz. There’s an end-game feeling to this.

Relevant reads

The Crypto-Dollar Surge and the American Opportunity. Don’t fear stablecoins, embrace them. That’s CoinDesk columnist Nic Carter’s message to U.S. policymakers. Yes, encouraging the use of these dollar-denominated digital bearer assets would entail giving up on the international surveillance that bank-based dollar surveillance grants the U.S., but the free flow of a new form of money with its roots in the U.S. will ultimately serve U.S. interests, Carter argues. The alternative is to allow people suffering under the regimes of pariah states like Venezuela to migrate to “slipperier alternatives.”

3 Reasons Bitcoin Just Tanked Below $11K for First Time in a Month. Bitcoin’s price has been on a rollercoaster ride this past week. After BTC briefly got above the psychologically important $12,000 mark in the New York afternoon Wednesday, successive waves of selling that began in Asian hours Thursday had pushed it within a few dollars of $10,000 just 24 hours later. Although it bounced off that level, the largest cryptocurrency was still struggling as of this writing Friday. Why the sell-off mid-week? Brad Keoun offers three plausible explanations.

For DeFi to Grow, CeFi Must Embrace It. For all the excitement around the DeFi phenomenon, it is still a miniscule part of even the cryptocurrency market. To make it more mainstream, CoinDesk contributor William Mougayer argues the centralized exchanges that dominate the larger, more liquid form of crypto investing should engage with DeFi protocols. How? By listing their tokens, building new, easier-to-understand products and creating user-friendly marketing information to bring them into the mainstream.  

Brazil’s Central Bank Says Nation Might Be Ready for a Digital Currency by 2022. Brazil is the latest country to say it’s creating a central bank digital currency. In fact, it could have one by 2022, says the country’s central bank chief, Roberto Campos Neto. Danny Nelson reports. 

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Disclosure

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.





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Binance US Pursuing Plans to Go Public, Opts for IPO amidst Regulatory Crackdown

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Binance US will be competing for a public spot proceeding despite facing allegations from global regulators.

Binance US which is a cryptocurrency exchange operating in the American market will opt for an IPO way to go public. The firm is currently in the process of navigating heavy regulatory concerns and crackdowns. Binance CEO Changpeng Zhao has commented on the possibility of the firm listing on an IPO and communicated possible plans of the company concerning regulatory requirements and protocols.

The CEO further highlighted how the company is still embroiled in regulatory trouble with central regulators and had taken accountability for the same. However, Zhao has been confident in making Binance US seek a public spot through the IPO and expressed his decision to accelerate compliance efforts to work in sync with the guidelines to safeguard the company’s interest and stake.

Binance US Opts for a Strategic IPO Listing

Binance US will be competing for a public spot proceeding as a separate company that seeks branding from the global exchange Binance. The company will be taking a fresh initiative to go public in the upcoming months.

It is to be noted that  Binance which is the leading cryptocurrency exchange was facing allegations from global regulators that involve claims such as the company being implicated in illegal trading in the USA. The concerning matter was later investigated by the States Department of Justice and the Internal Revenue Service. Later on, the company was approached by the US Commodity Futures Trading Commission on similar grounds.

Binance CEO Changpeng Zhang has asserted that the company is surely battling regulatory issues and interventions at the moment but is confident enough to accelerate the work operations by shifting the company into the financial domain from a previous tech setup.

The CEO has further admitted that they might encounter troubles with the regulators but this will never disregard the company’s vision to go public one day. Binance US is now pursuing ways to opt for a traditional initial public offering route to seek credible transition.

In a virtual blockchain summit called REDeFINE Tomorrow 2021, Zhao was seen communicating his plans regarding Binance’s prospects and strategies as well the company’s new goal that involves an IPO listing. Zhao later restated that the company will be expediting its compliance efforts that will also include hiring former regulators to speed things up.

In the summit held on Friday, Zhao was seen admitting the fact that the regulatory issue that the firm is currently facing will be mitigated very soon and the compliance efforts will be accelerated to localize communication in a structured manner.

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Juhi Mirza is an archaeology major who is obsessive about blockchain/Crypto technology and deems it to be the foundational philosophy of the future. Her dogged ability to research and crystallise technical facts/multiple perspectives into rivetting stories makes her an accessible finance writer. She tends to her archaeological pursuits and loves unearthing the past over the weekends.



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TSLA Stock Up 2% Yesterday, Musk Anounces Opening Tesla Supercharger to All EVs

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Tesla is planning to make Superchargers that are accessible by all vehicles in most of the countries.

The founder and CEO of Tesla Inc (NASDAQ: TSLA) Elon Musk announced that the company’s chain of fast-charging stations for its electric automobiles, aka Tesla’s Supercharger network, will commence serving other brands of electric vehicles from this year.

Meanwhile, Tesla stock went up by 2% yesterday, reaching $660.50. Today in the pre-market, the stock lost 0.23%.

The tweet was posted on Tuesday by the business magnate. This announcement follows years of gossip on the development of Tesla charging stations that are compliant with all electric vehicles.

Despite the tall claims by Musk, there has, as of now, not been any communication on the details about this venture. For starters, where will the DC fast-charging stations be set up still remains a question. However, according to the Billionaire, Tesla is planning to make Superchargers that are accessible by all vehicles in most of the countries.

In recent times, the billionaire has communicated the idea of introducing Superchargers to other EVs and collaborating on the technology together. In an interview in 2014, Musk suggested contributing and curating designs to create a mainstream blueprint that can be exchanged across industries.

In a gathering in 2018, Tesla CEO had, however, answered a query during an earnings call that the Supercharger Network is not anomalous to a ‘walled garden’. By this, the billionaire wanted to suggest that different brands and designs of EVs might have different charging stations that are compatible.

The most critical marketing strategy for Tesla Electric vehicles has been the fact that the company has exclusive charging stations. This herculean advantage set the company apart from its competitors in battery vehicles. The Tesla charging network is accessible to operators of Tesla vehicles without any membership fees. The company keeps a tab of the charging per minute or kilowatt-hour.

The company’s new level 3 Charging Stations have not been opened to the general public, and are available only to the owners. The connectors used in powering the vehicles can be plugged into Tesla vehicles only, enabling less crowd and higher accessibility to the Tesla customers.

Several US companies have discussed and struggled to provide charging stations that cater to battery vehicles from different brands. The companies include ChargePoint, Electrify America, Sema, and many others. Tesla’s website claims that the company currently manages more than 25,00 charging stations across the globe.

In December 2020, Musk mentioned his company’s plan to create Supercharging stations for all electric automobiles. In a conversation with YouTuber MKBHD, Marques Brownlee, the billionaire said that other Brands of EVs were “low-key” on the lookout for access to Tesla’s Superchargers and that the apparatus was already being made available to other electric cars.

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Sanaa is a chemistry major and a Blockchain enthusiast. As a science student, her research skills enable her to understand the intricacies of Financial Markets. She believes that Blockchain technology has the potential to revolutionize every industry in the world.





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OpenSea Becomes Crypto Unicorn after Raising $100M in Its Series B Funding Round

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One of the key changes that OpenSea will work towards is to enable cross-blockchain operations on its platform.

NFT marketplace OpenSea is now valued at a total of $1.5 billion post its Series B Funding round where it raised $100 million. Crypto is still a developing industry however some entrepreneurs have already made a place for themselves in the future crypto world. OpenSea is one such entity that allows traders, owners, and developers to create, trade, and develop non-fungible tokens on its wide digital market platform. NFTs hit the popular culture early this year and became a part of the regular conversation since the artist Beeple made headlines post selling his NFT, a digital art for $69.3 million.

OpenSea has only benefitted from this explosion though it had carved a niche place for itself in the industry before that. It was in March 2021 that the company had raised $23 million as part of its Series A funding. Now months later, in their Series B funding, OpenSea has raised an impressive sum of $100 million. Both the rounds were led by Silicon Valley-based Venture Capital firm, Andreessen Horowitz. Some of the other players in the recent funding comprise Coatue, Michael Ovitz, CAA, Kevin Durant, Kevin Hartz, and famous actor Ashton Kutcher. It is now officially a crypto unicorn and one of the largest NFT marketplaces in the world.

OpenSea and Its Plan of Action amid Successful Funding

The new funds will target the infrastructure issues concerning the Ethereum blockchain. Besides, some of it would be used to attract new and competent engineers, in the international expansion to capture new developing markets and in the overall development of the marketplace, platform to make the NFT transactions seamless and secure.

As mentioned earlier, one of the key changes that OpenSea will work towards is to enable cross-blockchain operations on its platform. The company’s large carbon footprint is a result of the high amounts of computing power and energy used in the NFT creation. The high gas fee due to minting NFTs on the blockchain has been a constant roadblock for OpenSea. To make the transactions more energy-efficient for long-term stability and feasible for customers, OpenSea has already moved transactions on the Polygon platform, which is a popular Layer 2 Ethereum blockchain.

Apart from Polygon, the marketplace will also integrate its platform with Dapper Labs’ Flow and Tezos in the future. These scalable blockchains would ensure the company stays relevant and ahead of its competitors while at the same time opening up to a diverse customer pool and not just the high-value artwork market ruled by the ultra-rich.

About the Company

This Ethereum blockchain-based platform for trading NFTs i.e. non-fungible tokens was born in 2017. They brand themselves as the world’s first and largest digital marketplace for crypto collectibles and non-fungible tokens (NFTs) where users can buy, sell, and discover exclusive digital assets. It allows users to conduct transactions through any crypto wallet they have.

OpenSea wishes to lower transaction costs across platforms while also enabling people to choose from a plethora of payment methods available. They want to become NFT educators in the market and be known as the brand synonymous with NFTs. Digital art ranging from art, music, domain names to virtual worlds, sports, and trading cards, OpenSea displays a large set of NFTs on its platform. Its recent revenue numbers are a key witness to its unstoppable growth. June 2021 saw OpenSea selling digital assets worth $160 million. This translates to a 45 times increase in growth since its $8 million sales in the first month of 2021.

“We’re excited about NFT’s representing a paradigm shift in technology where most of the consumer tech has been dominated by a few large companies,” Finzer said. “We think NFTs are bringing back a Renaissance, where creators, collectors, developers, and all sorts of projects will emerge, very analogous to the paradigm shift where the birth of the internet brought thousands of new early applications and ultimately, billions of people, changing their lives in a big way,” said CEO Devin Finzer.

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Content specialist with interest across sectors like Finance, Politics, Environment, Technology & Education. Loves Fiction! A reader, dreamer & blogger. When not writing, you will find her enjoying solitude like her cats



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