Newsletter: The Ripple Effect

This week we cover the Ripple (XRP) W ruling, Social Media Chaos & new era of web3 social with Lens V2, Tokenless Governance debate feat new JokeDAO protocol, Deanonymization of crypto market with Akham, soundxyz $20m raise and Market Trends (financialization of NFTs), mainstream news and Signal TL;DR.

Good morning and welcome to edition 149th of the FF Newsletter.

This week we cover the Ripple (XRP) W ruling, Social Media Chaos & new era of web3 social with Lens V2, Tokenless Governance debate feat new JokeDAO protocol, Deanonymization of crypto market with Akham, soundxyz $20m raise and Market Trends (financialization of NFTs), mainstream news and Signal TL;DR.

It’s a packeedddd week so let’s get to it.

Week’s Highlight

It's a split W, but still a W.

On Thursday, a federal judge in New York handed down a ruling in the SEC's long-running battle against Ripple, the issuer of XRP.

Ripple had allegedly sold $1.3B worth of its token to, variously, institutional investors, retail investors on crypto exchanges, and employees it was paying-in-kind. The SEC also alleged two of its top executives had sold $600M worth. If XRP is a security, then Ripple would have had to file registration statements full of disclosures. Ripple has never done that. It has always insisted XRP is not a security.

The ruling, if it holds, will have massive implications for crypto in the US. Ripple's sales of XRP to institutional investors (such as VCs) met the test for a security, the judge found. Those institutional investors were due the protections of US securities law.

But crucially, Ripple's sales of XRP on crypto exchanges or directly to retail investors did not meet the test for a security. This is massive. According to the team at Messari, though, there are a few major details and implications of the ruling:

• No Ruling on Secondary Sales: The court effectively punted on ruling on secondary sales, and this remains an open point.

• Employee Token Payments Not Deemed Securities: Ripple's XRP payments to employees were not deemed an investment contract even though the employees are directly working for the advancement of the network because Ripple did not receive payments from these distributions. This is a huge win for DAOs and DAO contributors who are largely paid in project tokens. Additionally, this has positive implications for airdrops as there is no payment from the receivers of the tokens.

• Appeals: The SEC will likely appeal in the second circuit where there is a chance the positive rulings shared could be overturned.

Take Note. This is a huge win for the crypto industry, especially given how long and drawn out this court battle was. The threat of appeal still looms, but in a frothy regulatory environment, a win is a win.

What's Poppin'

Social Media Is in Chaos & Web3 Social new Unlock

Twitter is on the decline, Threads (Zuck's "copycat") is new, hot (hitting 100m users in ~5 days) and weird, and decentralized social is getting more and more popular. This is the backdrop for an internet-scale shift in the social media landscape. Protocols like Farcaster are gaining popularity, and Lens just announced Lens Protocol v2. The main change brought with the second version of Lens is "Open Actions," a feature that enables the execution of any external smart contract action directly from Lens' content posts. For example, with this feature, users can mint NFTs on an OpenSea contract directly from Lens' published content. This flexibility is a massive shift in the capabilities of social media platforms today, and the availability of the protocol will only unlock more and more opportunities for creators and curators.

Protocols as First-Class Concepts

In this checkpoint review of Summer of Protocols, Venkatesh Rao shares that during the inception of the program, Ethereum researcher Danny Ryan proposed that protocols should be recognized as a first-class concept for understanding the world. He argued that a powerful new first-class concept can enhance our comprehension of the world, yielding new ways of interaction and potentially reshaping our understanding of other seemingly well-understood aspects. However, such concepts also carry risks along with their potential benefits, hence the need to deeply understand both sides of the newly catalyzed agency. Examples of first-class concepts include nation-states, corporations, religions, and so on. The task at hand is not to promote protocols from being lesser-known concepts, but rather to clarify them. Halfway through SoP, progress has been made in the development of definitions and a shared language for discussing protocols, indicating that the concept may indeed hold the promise of becoming a first-class concept.

Rethinking Legitimacy in DAOs

This essay delves into the concept of legitimacy in societies, specifically focusing on its relevance to DAOs. The author notes that legitimacy, typically understood as the acceptance of authority, is a critical yet often underestimated element in any power structure. The text reflects on contemporary crises in the legitimacy of traditional institutions, ranging from political systems to scientific bodies, leading to an exploration of the mechanisms of legitimacy within DAOs. Various methods, such as coin voting, voting delegation, workgroups, and ungovernance, are analyzed, each with their pros and cons. The author introduces the idea of multistakeholder governance, a concept prevalent in political science and organizational design but not commonly applied in crypto projects. The essay concludes by proposing the need for a balanced governance model in DAOs, with representation from all key stakeholder groups.

Tokenless Governance for Onchain Communities

This week, Jokerace announced v3 of their protocol, which allows you to handle governance for any tokenized community using any EVM-compatible L2. Additionally, Jokerace v3 allows for tokenless governance: your community is whoever you allowlist to make decisions, and that means you can allowlist people to submit and vote based on any behavior that you can map to an onchain address. This unlocks a whole new design space for onchain communities who haven't launched or don't plan on launching a token, and makes onboarding 10x easier for new members. Some folks expressed criticism of the tokenless approach claiming that tokens are the lifeblood of crypto, but there is no denying the Jokeraces is innovating at the frontiers of community decision-making on the internet.

Empowering Musicians: Sound Raises $20m, Opens to All

Sound -- the music NFT platform that has so far been available only to invited creators -- empowers musicians to break free from the broken economics of streaming platforms by selling directly to fans and unlocking new revenue streams. In the past year they've generated $5.5 million in revenue for a select group of creators. This week, Sound announced a $20M Series A round and has opened its doors to all creators. The team announced that their plans are to scale this model to every artist out there, big or small, and become the number one destination for music discovery on the internet. Congrats to the Sound team!

The Deanonymization Debate: Arkham Intel Exchange Unveils Data Marketplace

Onchain data provider Arkham Intelligence has started a bounty marketplace that will let people buy and sell cryptocurrency data. The marketplace, dubbed the Arkham Intel Exchange, will feature a native token (ARKM) that is designed to "deanonymize the blockchain." "We believe that deanonymization is destiny in crypto markets, and that the intelligence technology built by Arkham will serve as a foundation for the self-regulation of the crypto economy," Arkham said in a tweet. Obviously, this received some backlash. Former core Ethereum development liaison Hudson Jameson o called the program "snitch-to-earn", but said that it could be "useful as a decentralized whistleblowing dapp for the public good."

Gemma First Commissioned Work Feat Petra Cortright

Gemma is an emerging community co-inhabited by artists, curators, and contributors with a shared vision for how culture can shape our future. This summer, Gemma is releasing weekly open editions from their Founding Artists. In their first Founding Artist Edition, Petra Cortright has conjured a magical patch of glowing pink flowers that seem to spring up just for you. Functioning as both a recorded experience and a landscape painting, Flowers For Gemma is now available to mint on Spotlight (on Zora Network).

Latest on Mainstream...

First, Europe's first Bitcoin ETF is set to launch after a 12 month delay. This comes at a time where US regulators are slowing down momentum for Bitcoin ETFs domestically.

Next, Google Play Store changed their policy on digital assets, allowing NFTs to be used and traded in apps and games on the platform. Apple continues to maintain an anti-digital asset policy.

Finally, the ex-CEO of failed crypto firm Celcius, Alex Mashinsky, has been charged with fraud.

Signal TL;DR

IPTs: A gain of function for IP-NFTs

This article explores the use of intellectual property non-fungible tokens (IP-NFTs) and tokenized IP pools called IPTs in the biotech sector. By utilizing IP-NFTs and IPTs, BioDAOs can securely hold and jointly manage intellectual property and research data, allowing for collaborative development, licensing, and sale of IP. These innovative approaches have the potential to address existing challenges in the IP market, promote innovation and collaboration, and offer decentralized solutions to patent examination and IP validation.

▹ NFT - Christie's x Gucci
▹ Research - Onchain Structured PM
▹ Interesting - Stablecoin Rating Agent
▹ Proposal - Celo Transition to L2
▹ Cool - Onchain Albums
▹ Watch - Bullish Blackrock CEO
▹ Listen - On Luxury Media
▹ New - Onchain Towns
▹ Techy - Developer Report 2023
▹ Tooling - Base Mainnet
▹ Happening - EthCC

◎ Check out Signal  for daily top web3 social headlines

Market Trends

The world of NFT financialization is growing. With NFTs expanding beyond just collectibles, pioneers are using DeFi mechanics to inject liquidity into these assets, creating novel financial markets. With market conditions deteriorating and user counts declining, the approach to NFT trading has shifted towards tools and charts that allow users to extract more value from the market. This shift is driven by the remaining diehard and professional traders in the NFT market.

The most well-known and widespread version of the phenomenon is NFT borrowing and lending. Other use cases include options, fractionalization, appraisal, liquidity scaling, and NFT rental protocols. NFT lending, in particular, has experienced significant growth.

Nick Emmons created a comprehensive market map of the NFT financialization space that is definitely worth exploring:

For the Culture

The information in this newsletter is not intended to constitute legal, financial or investment advice and should not be construed or relied upon as such. Any opinions reflected are the opinion of the author(s) of the newsletter only and not necessarily of Forefront. Please DYOR.