A great deal of news happened in the web3 wild west: Over 30,000 people preordered Solana Mobile's new handset, the much awaited Electric Capital developer report had both positive and negative news for developers, Coinbase went to court, and India saw additional cryptocurrency difficulties. More information is provided below.
Preorders for Solana Mobile's second phone are extremely high due to a buying frenzy.
Chapter 2 had 30,000 preorders in the first 30 hours
Following the announcement earlier this week of a second, less expensive web3 phone called "Chapter 2," Solana Mobile is shooting for the stars. Its second handset is selling out far faster from the start than its first, Saga, which sold out like a growing avalanche in the US and the EU, slowly at first, then all at once..
According to Raj Gokal, co-founder of Solana and president of Solana Labs, demand for the Chapter 2 is reportedly so great that Solana Mobile met its seven-day sales target in the first 24 hours. Newsreedom exclusively obtained this information.
According to Gokal, Solana Mobile had over 25,000 preorders for the phone in the first 24 hours after its announcement, and by the 30-hour mark, it had 30,000. With those figures, the sales of Solana's first phone, Saga, during a full year have already been surpassed by this new gadget.
The characteristics of the new phone will be comparable to those of the old one: It is an Android-based platform with an integrated cryptocurrency wallet, a Seed Vault, and a "dApp store" for decentralised cryptocurrency apps. Originally available for $450, it is priced lower than the $599 that the Saga is sold for. In the first part of 2025, Chapter 2 will be released, according to a Solana representative.
"Solana Mobile is opening up a huge opportunity for crypto app teams who want to reward their users," Gokal stated. It provides them with a focused route of distribution to devoted, ardent users. It enables them to accomplish this without having to pay expensive app store fees.”
Gokal continued by saying that the gadget shows what can be done with cryptocurrency and offers people incentives for using apps.
Saga’s climb
When Solana initially released its $1,000 smartphone in the middle of 2023, there wasn't much of a market for it. However, the low demand prompted the manufacturer to quickly drop the price to $599. Even more, Saga was dubbed the "worst new phone of 2023" and deemed a "bust" by YouTuber Marques Brownlee.
At first, it appeared that the phone's poor sales were due to its lack of recognition in the congested smartphone market. However, when dog-focused memecoin BONK's decentralised application (dApp) revealed that it was giving away 30 million BONK tokens to Saga owners for free, the ears of the crypto-savvy public perked up. The Saga then nearly sold out right away.
Users essentially received the phone—or the tokens, depending on your point of view—for free, as 30 million BONK tokens were worth more at the time than the phone itself cost. Prior to it, owners of Saga games received other cryptocurrency incentives, such as the Claynosaurz NFT collection mint, but previous promotions did not attract as much publicity. But after the BONK craze, other dApps started to offer comparable incentives, which made more people want to purchase the phone in order to take advantage of its worth.
"The Saga sold out as the market recovered in Q4 of last year, with the majority of those sales occurring over just two days in December," Gokal stated. "Thousands of requests for more have been made every day since then, flooding us with requests."
With Chapter 2, Solana now hopes to recreate that same enchantment. Owners of the new devices will not be able to access the Saga genesis token, the non-transferrable NFT that came with every Saga and allowed owners to redeem incentives. However, the business states in its FAQ that it hopes to "build on this experience in Chapter 2."
Giving back to the community has a snowball effect, according to Gokal, who said that when additional developers release apps with cryptocurrency incentives to Solana Mobile customers, adoption will increase even more. According to him, sponsors of Chapter 2 include Backpack, Tensor, Phantom, Solflare, Magic Eden, and Drip, who want to compensate owners.
"Chapter 2 leverages lessons learned over the past two years to enable greater flexibility for developers and users," Gokal stated. "It is focused on wider distribution and greater accessibility."
According to Gokal, the new gadget has "been in the works" for more than a year since the business intended to offer "complete freedom for crypto developers and users" by not imposing any fees or limitations on NFTs or tokens.
Coinbase argues for motion to dismiss SEC’s ‘securities violation’ allegations
During a hearing to determine if it committed securities laws on Wednesday, Coinbase, one of the biggest cryptocurrency exchanges in the world, retaliated. Coinbase is requesting the lawsuit be dismissed.
In June 2023, the U.S. Securities and Exchange Commission brought the lawsuit, a day after it had sued Binance, the biggest cryptocurrency exchange in terms of volume, for securities violations.
Coinbase Chief Legal Officer Paul Grewal on the exchange’s plans amid SEC charges.
The SEC also claimed that the 13 cryptocurrencies that could be traded on the exchange were securities in its lawsuits against Coinbase. Major tokens like Solana, Cardano, and Polygon are on the list. Twelve cryptocurrency holdings were included as securities in the Binance lawsuit, despite it being distinct. The SEC designated the two's six overlapping tokens—SOL, ADA, MATIC, FIL, SAND, and AXS—as securities.
As it claims that cryptocurrencies aren't subject to SEC regulation like equities are, Coinbase has asked New York District Judge Katherine Polk Failla to dismiss the lawsuit. The exchange believes the SEC has overreached its authority, as do other cryptocurrency companies.
During the court proceeding in Manhattan, Failla asked questions of the SEC. The court ordered the securities-focused body to provide an explanation of what components of cryptocurrency assets are considered investment contracts. The SEC's request for authorization to "broaden the definition of what constitutes as a security" worries Failla.
Assistant Chief Litigation Counsel for the SEC Patrick Costello contended that cryptocurrency assets are like investment contracts since they are usually connected to a blockchain network or "enterprise." According to the agency, Coinbase is attempting to create its own version of the Howey test, which is the legal standard used to identify whether an asset qualifies as an investment contract.
Number of monthly active crypto devs fell 25% in 2023
But seasoned builders remained committed
In 2023, there were 25% fewer monthly active crypto developers overall than in the previous year, but long-term participants demonstrated greater resilience than in the past, according to a recent developer report from Electric Capital.
According to the survey, developers who have worked in the cryptocurrency space for more than two years are at an all-time high, having grown by 51% annually over the previous five years. Additionally, developers with at least a year's experience in cryptocurrency increased by 15% annually to make up 63% of all monthly active developers.
According to Maria Shen, general partner at Electric Capital, "very quantitatively [long-term developers] matter because about 75% of code commits are written by developers who have been in crypto for over a year." Shen made this statement to TechCrunch+. However, there is also an obvious qualitative explanation. You want those working in the field to remain employed. Developers' persistence in the field is indicative of something fundamental, as evidenced by their decoupling from prices.
The quantity of developers employed in the cryptocurrency industry is equivalent to what Shen has seen since joining the field in 2018. "A core group of people stay through the mania, but there are periods of frothiness, insanity, and a lot of people coming in and going out."
Developers who had been a part of the cryptocurrency ecosystem for less than a year, known as "newcomers," saw a 53% decline in 2023 compared to the previous year. "Prices and newcomers are highly correlated," Shen stated. "Price increases attract more developers, price decreases repel more developers."
However, Shen noted that a "devoted segment of developers that stick around, that are completely separate from the volatility in crypto" is the reason that cryptocurrency has been able to evolve, grow, and advance.
Google pulls Binance, other global crypto apps from India store
Google removed numerous cryptocurrency exchanges, like as Kraken and Binance, from its Play Store in India on Saturday. This is the latest setback to the already diminishing web3 dream in the second-largest internet market in the world. Two weeks have passed since these international cryptocurrency exchanges were reported for conducting business in the South Asian market "illegally."
Nine cryptocurrency companies received show-cause notifications from the Financial Intelligence Unit (FIU), an Indian government agency that monitors financial transactions, late last month. The notices claimed that the companies had violated anti-money laundering regulations in India. The apps were removed by Apple earlier this week, and on Thursday night, a number of ISPs and telecom networks started to block the URLs of the cryptocurrency exchange websites.
The Indian IT Ministry had been requested by the FBI to restrict the websites of all nine Indian services. The apps for Bittrex, Bitfinex, Huobi, Gate.io, and Bittrex have also been removed from exchanges. "We are aware of an IP block that has an impact on several cryptocurrency companies, including Binance. Before its Android app was removed earlier on Saturday, Binance stated earlier in the day that this only affected customers who tried to visit the Indian iOS app store or the Binance website from India.
"This does not effect current users who are already using the Binance app. In order to safeguard users and foster the growth of the Web3 business, we are steadfastly committed to abiding by local laws and regulations and to keeping lines of communication open with regulators.
Revised on Saturday at 12:56 a.m. Indian Standard Time: Indian ISPs are now blocking Binance and other apps that have been reported to be conducting business "illegally" in the nation. Not too long ago, venture capitalists from India were rushing to prove their expertise in cryptocurrency. Twitter profiles festooned with ENS addresses. Over a dozen venture capital firms
Due to India's onerous 30% capital gains tax and 1% transaction fee that will be implemented in 2022, many local cryptocurrency traders have moved to international platforms that offer laxer know-your-customer regulations. A famous Indian exchange called WazirX had a 97% drop in trading activity over a two-year period as a result of regulatory arbitrage and a general crypto winter.
CoinSwitch Kuber and CoinDCX, two well-funded Indian marketplaces, continue to need stringent identity verification. Fiscal officials claim that the defecting traders appear to have avoided such examination on specific foreign competitors, displaying traditional tax evasion behaviour.
Ashish Singhal, co-founder and chief executive of CoinSwitch, wrote on X earlier this week, "CoinSwitch and CoinSwitch PRO, as well as several other Indian VDA exchanges, are already compliant with India's PMLA requirements for VASPs, and there is no reason why offshore exchanges shouldn't do the same, should they wish to do business in India." "Offshore exchanges ought to proactively contemplate enrolling with the FIU-IND and adhere to the AML and CFT protocols of India." India's consumer protection will benefit from this as well because the ecosystem would be subject to more regulatory supervision.
India has always had strong opinions about cryptocurrencies and the businesses that facilitate trading in them. About five years ago, the Reserve Bank of India banned cryptocurrencies from being used within the nation. Even while the Indian Supreme Court ultimately overturned this restriction, the central bank has continued to push for the prohibition of cryptocurrencies ever since, and its top officials have compared virtual digital assets to Ponzi schemes..
How low can bitcoin ETF fees drop before it hurts a business?
Franklin Templeton's product currently has the lowest fee at 19 basis points
With the SEC's approval, eleven spot bitcoin ETFs have begun trading in the United States for a little over a day. Even if the initial volume was higher than anticipated, some of the authorised issuers are going above and above to make sure their product is unique.
At the end of the day on Thursday, Franklin Templeton's Franklin Bitcoin ETF, with $65.45 million in first-day trading volume, was rated sixth out of 11 funds.
However, the business desires more. The company cut their charge on Friday from 29 basis points to 19 basis points, which is 0.01% less than Bitwise's 0.2% fee and the lowest post-waiver fee of any spot bitcoin ETF. (Note: For a brief while, a number of issuers, including Franklin, are waiving fees.) The highest charge is 1.5% for the Bitcoin Trust offered by Grayscale.
There's good reason to think that large investment companies will eventually want a piece of the action when spot bitcoin ETFs and other related products make their way onto the market. "Investors are becoming aware of this new kind of ecosystem," stated Sandy Kaul, Franklin Templeton's head of industry advisory services and digital assets. "Over the last 12 to 18 months, we have observed a noticeable increase in interest from our clientele."
All of the products had trading activity of $2.3 billion on the first day of trade, according to a post made on X by Eric Balchunas, a senior ETF analyst at Bloomberg. The $4.6 billion total for the 11 issuers included an additional $2.3 billion from Grayscale's GBTC fund, which on Wednesday changed into a spot bitcoin ETF.
Crunching numbers
According to a post on X by James Seyffart, an ETF analyst at Bloomberg Intelligence, trading volumes across all 11 issuers topped $11.95 billion with assets in aggregate about $27.7 billion within four days, as the crypto industry absorbs the spot bitcoin ETF clearance from last week.
Before the spot bitcoin ETFs were approved by the U.S. Securities and Exchange Commission, several analysts told me they anticipated $10 billion in trading volumes in a year, not a week. It is safe to conclude that these figures far exceed the demand that was first projected.
Our favorite web3 post on X
With a reference to the Bitcoin community, Franklin Templeton, a 77-year-old firm that manages over $1.4 trillion in AUM, has a PFP with laser eyes and posts about memecoins like dogwifhat. That probably wasn't on your bingo card for 2024.
I spoke with Monica Long, the president of Ripple, a blockchain-based digital payment network and protocol, for this week's episode.
One of the earliest cryptocurrency companies is Ripple, which was established in 2012. Over the past ten years, Monica has advanced through the ranks of Ripple, rising from director of communications to president.
We discussed traditional finance, cross-border payments, Monica's professional development, and the necessity of regulatory clarity.
We also explored Ripple's legal action against the SEC, the XRP Ledger, its 2024 goals, and recommendations for the community.
To stay up to date on the newest episodes, subscribe to Chain Reaction on Apple Podcasts, Spotify, or your preferred pod platform. If you enjoy what you hear, please give us a review!
Follow the money
- Inception Capital closes flagship $30M fund of funds focused on crypto emerging managers.
- Staking technology provider Kiln raises $17 million in rare crypto funding round
- COTI launches $25M ecosystem growth fund to focus on privacy on Ethereum
- Crypto exchange WOO Network raises $9M to boost its liquidity
- Digital asset trading tech firm Flowdesk raises $50M in Series B round
Inception Capital closes flagship $30M Fund of Funds focused on crypto emerging managers
Inception Capital, a web3 firm that specialises in early-stage investments and was previously known as OP Crypto, has completed its first fund at a value of $30 million, as founder and general partner David Gan exclusively revealed to TechCrunch. This funding is on top of the $50 million Venture Fund I that the companies currently have.
Family offices and high net worth individuals seeking "diversified" exposure to early-stage crypto venture ventures were the intended audience for the fund, OP Fund of Funds I LP. Investors like FJ Labs, Serafund, and Mirana support it. According to Gan, "this vehicle is a good hedge and risk adjusted downside vehicle to get crypto exposure, instead of family offices trying to make the best investments themselves."
This vehicle does not support individual projects, protocols, or businesses; rather, Gan explained, it wants to invest in roughly five new investment managers and funds each year. "We're entrusting other institutional managers with our money, and the portfolio these funds are invested in is fairly diversified."
The flagship vehicle will concentrate on funding "up and coming" individuals who are "hungry" and seeking for early-stage businesses. According to Gan, this is an excellent year to expand your investment in the sector, start small, and support entrepreneurs.
With roughly 30% deployed so far, the fund intends to keep concentrating on up-and-coming managers in the cryptocurrency venture capital market.
It has made investments in Syncracy Capital, Escape Velocity, Alliance, OrangeDAO, and Everyrealm, as the five managers. Additionally, it has co-invested with Marc Andreessen and Chris Dixon of a16z, as well as Bain Capital Ventures, ParaFi Capital, and Multicoin Capital. (Note: The first two managers are owned by Inception Capital as general partners.)
Although the Fund of Fund (FoF) industry is a huge one with billions of dollars in cash, Gan noted that it is "very small" in the cryptocurrency field. "With one hand, I can count the number of crypto Fund of Funds."
However, Gan believes that going forward, managers who have expanded over the last few years will have great potential to take on institutional FoFs, pension funds, endowments, and sovereign wealth funds, which will then help to push the crypto venture space "to match that in the traditional market."
Staking technology provider Kiln raises $17M in rare crypto funding round
The previous year wasn't the best for cryptocurrency businesses. VC investments in cryptocurrency firms are down 68% in 2023 compared to 2022, according to data from PitchBook. In fairness, crypto firms managed to raise $9.5 billion. However, that sum pales in comparison to the $30 billion that cryptocurrency businesses raised in 2022.
Still, some startups are succeeding more than others. December 2023 saw the closing of a $17 million investment round for the French cryptocurrency firm Kiln, which is led by 1kx and includes participation from Crypto.com, IOSG, Wintermute Ventures, KXVC, and LBank. A few current investors increased their investments in the business as well.
Kiln may not be well known to you, even if you are familiar with the major players in the cryptocurrency market because Kiln has concentrated on developing infrastructure-focused white-label products. Kiln's technology powers the pooled staking services used by companies like Ledger, Crypto.com, and Coinbase in their non-custodial wallets (Coinbase Wallet, Ledger Live, etc.).
Recall that the purpose of staking is to safeguard a blockchain and its transactions by locking crypto assets within it. Staking assets offers financial advantages as you gradually accrue profits.
Users can stake cryptocurrency assets on a number of proof-of-stake blockchains, including Polygon, Solana, and Avalanche. However, Ethereum is by far the largest proof-of-stake blockchain; it made the move to this method in September 2022.
Kiln offers a set of smart contracts in this ecosystem that make staking easier. Essentially, Kiln uses these on-chain contracts to automatically handle staking. Users can engage in Kiln's staking pools and begin earning rewards with a straightforward transaction. A commission is also paid to Kiln and its partners; this is managed automatically by the smart contract.
And it's been doing incredibly well; at the moment, the business is managing 1,168,288 staked Ethereum. It amounts to around $3 billion in managed ETH assets at the current exchange rate. Kiln has boosted its "stake under management" five times in the last year.
The largest operator of Ethereum validator nodes
Kiln offers SDKs and APIs to make integrations with its staking pools easier in addition to these on-chain offerings. Additionally, it runs a sizable validator network. Based on Rated statistics, Kiln holds the greatest market share of validator nodes on the Ethereum blockchain, accounting for little over 4% of the total market.
"We can optimise for maximum financial performance while ensuring the highest level of security by running our own validator nodes. It is also beneficial for enhancing monitoring. Ultimately, Marie Siegrist, head of marketing at Kiln, told me that "this hands-on approach helps us appear as a legitimate company with strategic partners like the Ethereum Foundation, which shares our best practices and anti-slashing strategy."
One can offer staking, or "pseudo-staking," in a number of ways. For example, staking benefits are provided by numerous centralised exchanges such as Binance and Coinbase. These centralised exchanges look after your cryptocurrency holdings in the background. Lido is one of the protocols for liquid staking that offers an alternative token to symbolise an ETH stake.
Kiln, however, seems to be a solid white-label technology supplier if you want to use one-click staking in a non-custodial wallet. It's a low-level method of staking, and some businesses have even asked Kiln to run their own specialised validators.
The announcement we made today shows how dedicated we are to expanding our enterprise-grade staking platform, and we are thrilled to have top investors in digital assets on board who are ready to support us in reaching our objectives. Co-founder and CEO of Kiln, Laszlo Szabo, said in a statement, "We have an exciting lineup of products and upcoming expansion plans, including the establishment of an office in Singapore."
Since its founding, Kiln has raised $35 million in total. Since the business charges a commission for staking prizes, revenue will increase in tandem with the overall assets under control.