⚔️ Endgame: Is Binance the Next FTX?

ConsenSys zkEVM Chain | $JOE Rise on Arbitrum

March 29, 2023

Good morning 👋🏻

We're finally at the endgame. CFTC vs Binance. In an unsurprising crypto markets fashion, prices went down briefly before soaring back up. "4", iykyk. Let's dive in 👇

In Today's Email:

What Matters: CFTC sues Binance 👨🏻‍⚖️
Case Study: Trader Joe rise on Arbitrum 🐔
Governance & Features: Linea, Consensys zkEVM chain 👩‍💻

Narratives: Still on Arbitrum and zk-based chains. Pay attention to protocols "expanding" to Arbitrum/Zk..

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WHAT MATTERS

CFTC vs Binance

Binance

State of play: CFTC has charged Binance and CZ with willful evasion of US laws and operating an illegal crypto derivatives exchange. Binance responded.

The filing names Changpeng Zhao and Binance's former Chief Compliance Officer, Samuel Lim.
The complaint states that Binance has an intentionally opaque common enterprise to obfuscate its operations, citing that "there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors."
The CFTC has extensive chats and documents from insiders. It shows that CZ knows about US customers and took steps to hide it.
Binance has 300 house accounts that directly or indirectly owned by CZ. These accounts trade on Binance (against customers) without reasonable anti-manipulation controls.
Binance was caught turning a blind eye when the terrorist group HAMAS utilized its platform.

Adam Cochran summarizes it well:

If Binance fails to engage with US courts or fails to defend itself, the CFTC would win flat out, and some criminal contempt/obstruction charges would be added which would extend issues to other countries.
If they do show up and engage, then the discovery process will be opening all their books internationally to US regulators from all entities including those personally owned by CZ to churn up other issues.

The only safe path for Binance is some sort of settlement, which will most definitely be record-breaking.

Crypto Legal experts - If the CFTC brings its Binance case before the SEC brings Coinbase, would the implied ruling of major crypto being commodities set the US legal precedent? It seems the CFTC will move faster. Is that the game they are playing - CFTC land grab is established… twitter.com/i/web/status/1…
— Raoul Pal (@RaoulGMI)
12:24 PM • Mar 28, 2023

Why it matters: Regulation by enforcement is a common theme. The outcome of CFTC vs Binance will most likely affect the outcome of SEC vs Coinbase, and vice-versa.

Out of these cases, we'll get clarity. Unfortunately, it will take a while.

For builders: Don't rely on any centralized exchanges in the foreseeable future if you don't need to. Focus on finding PMF amidst the changing dynamics in the crypto ecosystem.

For investors: Pay close attention to how other jurisdictions will respond to US aggression.

The entire crypto exchange regulatory concerns boils down to this one paragraph beautifully summarized by Matt Levine 🫡
— Marco Manoppo (@ManoppoMarco)
8:35 PM • Mar 27, 2023

CASE STUDY

The Rise of Joe on Arbitrum

Trader Joe

State of play: Trader Joe, the DeFi protocol that was originally built on Avalanche, has been climbing in the volume ranking of Arbitrum since the $ARB airdrop happened. It's right behind Uniswap.

Simply put, $JOE is able to hedge its chain-dependence risk by expanding to the right chain at the right time. That said, the following edge also made it work:

Trader Joe's v2 uses a Liquidity Book (LB) design instead of concentrated liquidity. LB proponent argues that it allows for less slippage and better pricing.
It also offers strategies such as ladder orders, depeg bets, curved pools, and many more.
$JOE stakers will also benefit from revenue share, unlike Uniswap because of its US-centric team.

As a result, the $JOE token has tripled in price from the lows.

Our take: Trader Joe is able to capitalize on the growth of an exciting chain to revive itself from an ongoing downtrend. Whether you like it or not, the majority of capital in crypto still resides within the Ethereum ecosystem.

While Avalanche is EVM-compatible, it is still further away from Ethereum as its own L1, compared to Arbitrum.

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FEATURES & GOVERNANCE UPDATE

ConsenSys Launches Linea

ConsenSys released its zkEVM testnet. Called Linea, ConsenSys has released its innovative Layer 2 zkEVM chain on a public testnet. It has since processed 350,000+ transactions.

Linea will be natively integrated with the MetaMask wallet and Truffle developer toolkit.
The private testnet was launched in January 2023 and reached 1.5 million transactions in just the first few weeks.
Linea is built with a developer-centric approach, allowing builders to create or migrate scalable dApps without rewriting the smart contracts.

Why it matters: zk-based chains will be all the mania in the next few months. All the big players such as Matter Labs and Polygon have also launched their own zkEVM. It might just be the excitement that we need amidst this bear market.Builders and speculators, do pay close attention.. 👀

Other notable feature updates:

Fantom releases fWallet.
Magic Eden expands to Bitcoin
Polygon zkEVM goes live.
EOS EVM testnet goes live.
USDC launches natively on Cosmos via Noble.
dHedge launches v2 staking.
Loopring launches staking.
Perpetual Protocol launches hot tub vaults.
LooksRare launches an aggregator.

QUICK BITES

Binance sued by the CFTC, CZ responded.
Ethereum confirms Shapella upgrade date: April 12.
CFTC Behnam reinforces view that ETH is a commodity.
Fidelity expands its crypto and token research team.
Binance US sales on hold.
Disney eliminates its metaverse division.
DYDX to launch its private testnet on Cosmos.
Radix identified itself as the unnamed US firm in Binance CFTC lawsuit.
SBF faces new indictment over Chinese bribery charge.
UK drops plans for NFT.
Ticketmaster releases perks for NFT holders.

MEME & NOTEWORTHY READS

Cooper & Kirk's read on cperation choke point 2.0.
Adam Cochran's read on CFTC vs Binance.
Adonai's thread on the story of ROOK.

If your financial advisor is wearing this, you have nothing to worry about.
— Douglas A. Boneparth (@dougboneparth)
12:45 PM • Mar 28, 2023

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.