Eterna's Insights - July 2023

Big News of the Month

The major news of the month was Ripple's partial victory in its case against the SEC over XRP. The SEC had accused the company of conducting a $1.3 billion unregistered security offering by selling its XRP token. A US judge ruled that Ripple Labs did not violate federal securities law by selling its XRP token on public exchanges. However, the court did rule that the institutional sale of tokens did violate securities law. XRP rallied by 75% over the news. This was an exciting win for the crypto industry against the SEC, particularly after the SEC’s recent lawsuits against Coinbase and Binance.

Worldcoin, the ambitious project co-founded by Sam Altman (CEO of Open AI) officially launched. Worldcoin is aiming to create a global digital currency that is distributed to everyone in the world as a universal basic income. To gain access, users must confirm their identity by scanning their iris through one of Worldcoin’s Orbs. Users can now download World App, the startup’s protocol-compatible wallet software, and visit an Orb, to receive their World ID. Worldcoin’s launch has sparked inquiries in Europe over concerns surrounding privacy. The UK, Germany, and France have all stated that they will be investigating Worldcoin’s privacy practices.

The Building Continues

While we may be in a crypto winter, innovation is continuing at a rapid pace. Starknet, a Layer 2 developed by Starkware, announced the launch of its Appchain framework. The new framework enables developers to create application-specific blockchains within its ecosystem, thus following the Modular thesis which has been gaining traction in the broader Layer 2 ecosystem. One of the first projects to launch its own appchain on Starknet is Paradex, a decentralised exchange (DEX) built by the crypto liquidity network Paradigm. The new DEX is a hybrid derivatives exchange that combines CeFi liquidity and performance with DeFi’s transparency.

Base, a new Layer 2 solution backed by Coinbase, launched its Mainnet for developers ahead of its public launch which is expected in early August. The pre-launch of the Mainnet is to enable developers to test applications and blockchain-based products before it goes live to the public.

The largest DEX in the world, Uniswap, announced a new blockchain protocol called UniswapX, which is a permissionless and open-source protocol for trading across automated market makers (AMMs) and other liquidity sources. The new protocol aims to solve multiple DeFi pain points including the growing complexity of on-chain routing and the fragmentation of liquidity pools. As such, it aims to improve self-custody swapping and grow on-chain trading by offering better prices through the aggregation of liquidity sources, gas-free swapping, protection against miner extractable value (MEV), and no cost for failed transactions.

Interoperability: Front and Centre

Interoperability between blockchains is a core focus of the industry and it is an area that has been getting significant attention recently. Chainlink, the leading data oracle, launched its Cross-Chain Interoperability Protocol (CCIP), which is designed to help build cross-chain applications and services. According to the Co-Founder of Chainlink, Sergey Nazarov, CCIP aims to unite a fragmented global financial system in the same way that TCP/IP (the core infrastructure of the Internet created nearly 50 years ago) managed to unite a fragmented Internet. The protocol is currently partnering with SWIFT to test connecting dozens of financial institutions to blockchain networks. In addition, Microsoft announced a partnership with Axelar, an interoperability network, to build a data integration and interoperability layer to bridge public and private blockchains. As part of the partnership, Axelar will become the first cross-chain protocol on the Azure marketplace.

BigTech Improving Adoption

Amazon Web Services (AWS) announced the launch of new tools for Web3 developers designed to make it easier for them to build Web3 applications. The tools called "Access" and "Query" were added to Amazon Managed Blockchain (AMB), a fully managed service that lets users build applications faster using provision blockchain infrastructure. Finally, the Google Play Store released new blockchain-based content policies which will allow NFT games and applications on its store. Whilst they are allowed, developers must clearly state the feature in their game descriptions. The incorporation of blockchain-based features into games and apps on the store is being tested with an initial group of developers with the new policy expected to fully roll out later in the year.

The Era of Bitcoin ETFs is Upon Us

The SEC has accepted BlackRock’s Bitcoin ETF application for review. To convince the SEC, BlackRock added a surveillance-sharing agreement with Coinbase. Competitors also filing Bitcoin ETFs have followed suit in making similar amendments to their applications. After accepting BlackRock’s application for review, the SEC also accepted WisdomTree, VanEck, Fidelity, and Invesco Galaxy. Furthermore, Jacobi Asset Management announced that it is finally ready to launch Europe's first Bitcoin ETF. The ETF was originally expected to be launched on Euronext Amsterdam in July 2022; however, the launch was postponed following the collapses of Terra Luna and FTX.

Eterna Portfolio Company Spotlight:

Hex Trust receives regulatory approval in France

Hex Trust has continued its expansion into Europe by receiving regulatory approval in France. It has obtained the Digital Asset Service Provider (DASP) registration granted by Autorité des Marchés Financiers (AMF) and Autorité de Contrôle Prudentiel et de Résolution (ACPR). This will enable Hex Trust to provide digital asset custody and the buying, selling, and trading of digital assets in France. This is Hex Trust’s second registration received in Europe. Last year, it obtained the equivalent registration from Italy’s Organismo Agenti e Mediatori (OAM). Both of these regulatory approvals should put Hex Trust on strong footing ahead of the European Union laws set to take effect in 2024.