Decentralised ML Layer 1 $43M Fundraise

DAO Decentralization Dilemma | L1 Tokens Revenue & Inflation

Marco Manoppo & Karon Pangestu
June 12, 2023

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Good Morning,

The crypto markets fell over the weekend as top altcoins were named as securities by the SEC. As the US becomes hostile towards crypto, a16z expands its crypto division to the UK.

Our Co-founder Karon has recently been more active on Twitter. Follow him on Twitter for more quick takes on crypto, startups and venture capital.

In Today's Email:

What Matters: DAO under threat ⚠️
Products: Gensyn, decentralized ML compute protocol 🤖
Charts: L1 tokens 1Q23 revenue and inflation 📈

Narratives: Stay cautious. Market might be choppy for another year similar to the period from 2018-2020. If you must trade, pay attention to Rocket Pool and Frax Finance liquid staking initiatives.

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WHAT MATTERS

CFTC Wins Against Ooki DAO

CTFC

State of play: US Court ruled that OokiDAO operated an illegal trading platform and unlawfully acted as an unregistered futures commission merchant.

The original lawsuit alleged the DAO neglected KYC requirements while serving retail traders.
OokiDAO never formally responded to the CFTC’s lawsuit, but it geofenced the US after the suit was filed.
The judge ordered OokiDAO to pay a $643,542 penalty, permanently stop its operations, and close its website.
CTFC claimed that OokiDAO was the “successor of bZeroX” and acted as a vehicle to evade the law.
CFTC points out the judge’s ruling that the DAO is a “person” under the Commodity Exchange Act.

What’s next: Regulators will and can go after the founders of the organization if the product that is being offered on those smart contracts violates regulations.

SEC has guidelines on DAO governances.
SushiSwap is being subpoenaed by SEC.
CFTC’s complaint indicates the regulator sees all voting governance token holders as potentially responsible members of a DAO.

7. What This Means for DAOs
personal liability remains a real risk & is a reason to rethink DAO practices & terminology/narratives.
The role of voting tokens should be providing users with trust reduction re: smart contracts they use--*not* operating a business.
— _gabrielShapir0 (@lex_node)
2:02 AM • Jun 10, 2023

Our take: This month we are seeing important actions and milestones in SEC and CFTC ‘crusade’. After the submission of the lawsuits against CEXs by the SEC, the CFTC claimed a ‘victory’ against DAO.

However, the victory or the battle is not that ‘glorious’ after all:

The ruling is not as strong as it may appear, as it holds limited precedent significance because it is a default judgment.
The ruling is not affecting the liability of members of the organization, just the liable admins with tech control and business control.
Drew Hinkes, a Miami-based crypto lawyer, is concerned that the lawsuit could create fear of liability among members of DAO. His concern came alive as the court ruled the OokiDAO case.

Coindesk

For builders and investors: It is crucial to separate business entities and DAOs.

Here are some tips on decentralizing, credits to Gabriel Shapiro.

@lex_node

Take a peek at our new referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

PRODUCTS OF THE WEEK

Gensyn, a Blockchain-Based Computing Resource for AI Platforms

Gensyn

A decentralized machine learning compute protocol. Gensyn is a Layer 1 Proof-of-Stake blockchain based on the Substripe protocol.

Gensyn connects ML-capable computing hardware in a blockchain-based marketplace, enabling end users to build AI systems while paying on demand.
The secret sauce: Gensyn cryptographically verifies that the machine learning work conducted via the protocol has been completed correctly.
Gensyn just secured a $43M Series A led by a16z.

Other cool products:

WaspGPT, a generative blockchain data explorer.
Blynkkr, a secure & private digital identity platform.
Crypto Hub, a Coin tracker & stats, portfolio app.
Dexfin Wallet, a self-custodial and secure wallet solution.
Stubs, a no-code page builder for web3.

CHARTS OF THE WEEK

L1 Tokens Q1 2023 Revenue

Messari

State of play: Ethereum’s Q1’23 revenue is $457M, 2.8x more than every other featured L1s on the list combined.

Hedera’s Q1’23 revenue is ahead of Polkadot, Near, Wax, and Tezos. It has seen a significant revenue increase of 489% QoQ.

Our take: Revenue increase is not always a positive sign as it might happen alongside rising fees, which can ultimately hinder growth.

Deflationary L1 Token

Messari

State of Play: Only BNB and ETH experienced deflation during Q1 2023, with BNB deflating by 5.4% and ETH by 0.2%.

Our take: Understanding the dynamics of token vesting unlock and staking rewards will be critical in a period of minimum crypto liquidity.

L1 tokens with high inflation and SEC’s scrutiny risks will face a reckoning in the near future.

QUICK BITES

CFTC wins lawsuit against Ooki DAO.
EU Watchdog targets social media giants for crypto scams
FTX tries to keep its customer names private.
Crypto.com to Shut US Institutional Exchange.
Microsoft emphasizes the Minecraft NFT ban is coming
Nigeria Regulator says Binance must halt operation.
Sturdy Finance exploited for $800,000.
Solana Foundation responded to the SEC's claim that SOL is a security.
Polygon Labs responded to SEC's claim that MATIC is a security.
TaxBit cuts staff by 40%.
TrueUSD pauses TUSD minting
Robinhood ends support for Solana, Polygon, and Cardano.

MEME & NOTEWORTHY READS

a16z crypto’s read on its expansion to the UK.
Vitalik Buterin’s read on the three transitions.
WSJ’s read on how North Korean hacker stole $3B of crypto to fund Nuclear Program.

that time of the cycle again
— Crypto: Unhinged (@CTunhinged)
1:43 PM • Jun 10, 2023

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