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Dominic Weibel
Head of Research, Bitcoin Suisse
The Weekly Wrap: Ooki DAO vs. CFTC , NFT adoption, Taro on testnet
Sep 30, 2022 - 3 min read
1. CFTC served papers to Ooki DAO via online forum
The Facts:
- On Tuesday, the CFTC (Commodity Futures Trading Commission) was forced to use an online discussion forum, a highly unorthodox method, to serve a lawsuit against pseudonymous members of Ooki DAO.
- Last week, the CFTC filed a federal civil enforcement action charging Ooki DAO that operates a protocol that offering off-exchange tokenized margin trading and lending services for violating law.
- The CFTC charged Ooki DAO, a successor to bZeroX, for offering illegal, off-exchange digital-asset trading, registration violations, and failing to comply with BSA (Bank Secrecy Act).
- After August 2021, bZeroX transferred control to Ooki DAO feeding the CFTC’s complaint that Ooki DAO and bZeroX are basically the same entity.
Why it’s important:
- Since it is the first ever case from the CFTC against members of a DAO, it might have broad consequences for the whole DAO space and how it gets regulated in the future.
- According to the CFTC describing DAOs as unincorporated associations “not immune from enforcement and may not violate the law with impunity”, token holders that used their governance rights are likely considered to be part of the DAO.
- Therefore, anybody that voted with their governance token might face unlimited liability for illegal activity by the DAO.
- As companies are usually set up limiting the liability of individuals, DAO members might run risk of unlimited liability, as DAOs usually avoid company structures.
- Any DAO that provides regulated services, like margin or leveraged trading or any kind of illegal or sanctioned services will likely be subject to further actions from the CFTC.
- As the DAO space grew massively, now counting 4830 DAOs with $9.6b in their treasuries, 3.9m governance token holders and 698k active voters, new developments in DAO regulation will affect a massiv amount of DAO participants.
- According to crypto lawyer Mathew Nyman, the CFTC puts DAOs in an awkward position, since it’s almost impossible for them to comply with the current rule set.
- Therefore, Ooki’s legal defense and outcome of the case will be of significant importance to the entire DAO space.
2. Apple, Walmart and Disney inching closer to NFTs
The Facts:
- This week not only saw massive sales in NFT markets, but also brought further adoption by some important companies and brands.
- As such Apple announced that it will allow in-app NFT sales in its app store.
- Walmart enters the metaverse with Walmart Land and Walmart’s Universe of Play on gaming platform Roblox after quietly filing for metaverse-related trademarks earlier this year.
- Disney is also implying a broader metaverse/web3 expansion as they are looking for a principal counsel specializing in NFTs and DeFi.
- As Disney’s CEO Bob Chapek recently explained, they rather use next generation storytelling instead of metaverse as the term has “a lot of hair on it”.
- Moreover, MetaMask also added custodial NFT features for institutional investors this week.
Why it’s important:
- Despite the crypto winter slowing down volumes, down 97% from January peak, across NFT marketplaces, a considerable amount of adoption and push towards the industry is happening alongside.
- Apples announcement was received with displeasure from some of the community, as Apple not only cuts 30% of NFT sales but also does not plan to enable crypto transactions for settlement, only USD.
- Not only Walmart is quickly approaching the new technology, but also Disney accelerated their web3 focused hiring in recent months; for instance, in February they hired Mike White as senior vice president of next generation storytelling and consumer experience to lead their metaverse strategy.
- Regarding NFT art, on-chain generative art keeps flourishing on stable demand as Tyler Hobbs’, the artist behind Fidenza, new QQL project yields $17m while the MoMa recently announced to extend their digital presence.
- Moreover, a CryptoPunk sold this week for $4.5m worth of ETH despite slowing volumes.
3. Lightning Labs releases first Alpha version of Taro protocol on Bitcoin testnet
The Facts:
- After raising $70m in a Series B earlier this year, it took Lightning Labs – the company producing the popular LND client node – only a few months from the first public announcement in April 2022 to announcing the first early alpha version of the Taro protocol
- Taro is a Taproot-based protocol for issuing assets on Bitcoin that can be transferred via the Lightning network.
- Concretely, the goal is to offer stablecoins on the Bitcoin and Lightning networks to address the need in many emerging markets to have a stable, fiat-denominated way of holding crypto assets.
- As a Layer-2 on top of Bitcoin, the Lightning network offers several distinct advantages compared to Bitcoin base transactions.
- Lightning payments are settled near instantly (sub-second instead of 10 minutes), do not involve PoW, and exhibit low fees (fractions of a cent).
- By design, the network has no hard limit on transaction throughput and scale with the number of active nodes.
Why it’s important:
- Bitcoin’s adoption as a payment solution has been growing significantly through Lightning in the last 12 months.
- Induced by El Salvador’s decision to make Bitcoin legal tender in September 2021, key adoption metrics significantly increased YoY: network capacity +65% to 4908 BTC, channels +16% to 86’331, and nodes +11% to 17830. (Sources: BitcoinVisuals and 1ml.com).
- Sometimes touted as old, slow, and not innovative, the Bitcoin ecosystem is showing progress in obvious (Layer-2, sidechains, performance) and less obvious directions (smart contracts, privacy, mining).
- These innovations have been gone largely unnoticed in the last twelve months as most of the crypto world was focusing on Ethereum’s move to PoS.
- Taro is only the most visible example of a new wave of innovation on Layer-2, and possibly Layer-3, of the Bitcoin network.
- Being the largest cryptocurrency and standing on the brink of a presumably large wave of institutional adoption, it is important to remember that we are dealing with programmable money that can morph and learn new tricks over time.
- Having reliable stablecoins on Lightning may be a game-changing development.
In other news
- September Inflation in Germany hits 70-year high at 10.9% (via Financial Times)
- FTX acquires assets of bankrupt Voyager with $1.4b bid (via Reuters)
- QoQ U.S. GDP growth rate hits matches forecast of -0.6% in Q2 (via NY Times)
- Robinhood launches non-custodial wallet in beta on Polygon (via Tech Crunch)
- Cirlce to expand USDC via cross-chain transfer protocol (via CoinDesk)
- Revolut gets UK approval to run crypto business (via Capital.com)
22%
Increase of U.S. Dollar Currency Index DXY YTD reinforcing the Dollar Milkshake Theory
Source: (Data) Tradingview, (Chart) Bitcoin Suisse Research
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