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Preamble rant:

The recent collapse of FTX, a large crypto exchange, and its associated entities, left many of us disappointed and disgusted with flashbacks to Enron and Lehman Brothers. Nothing is new under the sun. Unfortunately, whenever humans are involved, there is a potential for bad actors to make poor choices that wreak havoc. This has proven true across industries, countries, and time. But regulation and controls can help safeguard the little guy. I expect more regulation, legislation, and guidelines in the months and years to come.

Still, I worry that the wrong lessons are being learned. Some folks might see the FTX implosion as vindication that “crypto is bad”. Others might see it as the death knell for crypto and blockchain technology at large. This is a mistake. Technology is neither good nor bad. Humans use technology for good or bad. That’s an important distinction. One of my takeaways is to double-down and continue uncovering ways in which crypto and blockchain technologies can solve real-world problems. Let’s go!

Giant maps and summer road trips

When I was a kid, my family would go on road trips every summer. It was a great adventure. From time to time, we would pull over to the side of the road while our parents struggled and fumbled through giant fold-out maps. This was Nigeria in the 1990s. There was no internet. The maps were sometimes outdated. As you can imagine, we got lost a couple times. One day, we narrowly escaped being detained by the military because we inadvertently were driving towards Aso Rock, which was then the presidential palace of Abacha, one of Nigeria’s brutal dictators! Yikes!!

Today, I can’t remember the last time I opened up a giant fold-out map. Thank God for Google Maps! I now use it every day to find the optimal route for my commute. It’s been a massive time-saver as I’ve learned to deal with the joys of New Jersey’s clogged up highways. If you are like me, you might not have realized that some companies such as Uber pay Google to embed Maps in their products. Some other companies use Google Maps to optimize the distribution of their products. It’s really important for these companies that Google Maps is accurate and frequently updated.

As much as I love Google Maps, it’s not perfect.

Google Map’s gaps

I am going to highlight two gaps with existing mapping services: (1) Updates and (2) Ownership.

1. Updates

Google has done a great job mapping out the world. However, new roads and buildings are constructed every day, new businesses emerge with new signage. Logically, Google Maps prioritizes map updates for high population cities. Thus, Google updates Street View and Satellite pictures of big cities like London at least every year while smaller cities like my ancestral hometown, Ijebu-Ode, might be updated every couple of years. Is there a better solution?

1. Ownership

In 2013, Google acquired Waze for $1B. Waze was a fast-growing Google Maps competitor that utilized an army of volunteers to submit real-time traffic updates and review maps. Over 420,000 people volunteered to edit Waze’s maps. Additionally, Waze had ~100 employees at the time of acquisition. But get this: the average Waze employee received $1.2M after the acquisition but the volunteers received nothing. Ouch. Is there a better solution?

Introducing Hivemapper

Hivemapper is a decentralized map built by people using dashcams. It solves both of the problems - updates and ownership - outlined above by providing crypto-incentives and technology to anyone interested in participating.

Did you know that each photo in Google Maps’ Street View was taken by a Google employee in a specialized car with a 3D camera? One can imagine that the cost would be astronomical. Wouldn’t it be better if we could crowdsource images from drivers on their daily commute or road trips? Imagine if just 1% of all drivers did this. They would continually map every new highway off ramp, new small business, freshly created pothole, etc. But that’s not all. In the future, these drivers could also collect other types of data such as air quality, weather, noise, wireless coverage, and so on. These contributors would be rewarded with HONEY, the native token of Hivemapper. The best part is that it does not require any change in behavior, contributors need only install a dashcam the size of a deck of cards.

The Hivemapper Network recently launched on November 3, 2022. There are two dashcam models available priced from $549 (larger design) to $649 (smaller, more compact design shown above). If you order before January 7, 2023, you will be airdropped 500 Honey tokens. Then you will earn more tokens as you drive once the dashcam is activated.

Behind Hivemapper

Hivemapper is led by executives at the confluence of tech, logistics and crypto. The team has individuals who built and scaled global maps and geospatial products at Yahoo Maps, Scale AI, and Mapbox. They are mathematicians, physicists, computer scientists, logistic experts, artists, and designers working together to create a decentralized mapping network.

Hivemapper raised over $18M in its Series A from investors including Spark Capital, Multicoin Capital, Solana Ventures, and Founder Collective. Today, the company has a number of esteemed advisers including the current or former CEOs of Solana, Helium, Masterclass, Zillow, Tinder, and the former head of Apple Maps.

Concerns

While Hivemapper sounds interesting, it also set-off a number of alarm bells in my head. My concerns are centered around privacy, hacks and the HONEY token.

A. Privacy

Every website you visit and every click that you make on the internet is being monitored. Advertisers take that information to market new products and services to you. Now, imagine if your offline activities were being similarly tracked. Kinda scary, right? But I guess Google Maps is already tracking wherever I go.

Hivemapper says it has privacy by design. The dashcams only collect the minimum required information. Furthermore, the company blurs licenses plates and people’s faces in the pictures and videos captured.

B. Hacks

Even if Hivemapper does what it says it would do to protect privacy, imagine if a bad actor hacked the dashcams and started collecting unauthorized information. It could be ugly. Hivemapper needs to have in place strong information security protocols to safeguard its contributors and collected data.

C. HONEY token

If a contributor successfully earned 1,000 HONEY tokens while driving across the country, what can they do with it? Worst case scenario, they might sell it. But what is supporting the underlying value of HONEY? For starters, there is a cap on the total amount of HONEY. Thus, if demand increases over time, the price of the HONEY tokens should rise. I also think Hivemapper could establish partnerships with major brands then enable HONEY holders to trade them in for Uber Eats credit or airline loyalty points.

Some others have raised eyebrows about HONEY’s tokenomics. About 60% of the total HONEY supply has been pre-allocated to insiders with 20% going to employees, 15% to the company itself and 5% to the affiliated foundation. HONEY’s initial allocation of tokens to insiders is unusually high. For context, Ethereum only had 15% allocated to insiders while newer blockchains like Avalanche and Solana had 42% and 48% respectively.

But one of the golden rules of tokenomics is to avoid projects with high concentration of token ownership amongst a few owners:

Early successes

Despite some of these misgivings, Hivemapper has achieved some early wins.

During the alpha launch, the Hivemapper Network covered 95% of all roads in Manila, the capital of the Philippines in 6 months. It mapped 110,000 miles of road. Crucially, 75% of the map of Manila was refreshed every month. This is much higher than Google Maps.

Additionally, the city of Shreveport, Louisiana has also become a Hivemapper customer. The city paid $7,000 for dashcams to be put in the city’s fleet of garbage trucks. Shreveport hopes the frequently updated maps will provide greater visibility into residents’ challenges ex potholes etc.

Ideal customer

I have considered getting a Hivemapper dashcam just to test it out and engage with the network. But I don’t think I drive enough to accumulate a significant amount of HONEY tokens. I think the ideal customers might be owners of large fleets of vehicles. For instance, cross-country trucking companies, school buses, taxi companies, and mail delivery services. These large fleets cover a lot of miles on an ongoing basis and could generate a lot of HONEY tokens. Nonetheless, it might still be worthwhile for a regular Joe who moonlights as an Uber driver to try it out.

What do you think?

I hope you have a wonderful week ahead. Stay grounded and seize the day.

All the best,

Afolabi

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

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If you are like me, then you were a little awkward in college. Here’s an example of an interaction I had on campus as I walked from my dorm to class.

Pretty college co-ed: “Hey! Do you want a free t-shirt?”

Me: Uh! (Awkwardly looks away. Runs in the opposite direction.)

Don’t hurt me🤕

It’s complicated.

Let’s flash back a few months before this awkward interaction.

So many thoughts rushed through my head as I packed my bags. I wondered if my American professors would understand my Nigerian accent. I wondered if I would easily make friends, maybe meet a nice girl. But then my mother rocked me back to earth as she exclaimed “Please stay away from credit cards o!”. Apparently, someone’s son was drowning in credit card debt. I guess he thought the money was free.

In Nigeria, less than 3% of consumers have access to credit. It’s a stark contrast to the US, where 83% of adults have credit cards (Federal Reserve). My mum’s friend’s son had recently relocated from Nigeria to the US for college. He was woefully unaware of how to manage credit. He would stop and chat with the pretty college co-eds waving free t-shirts in front of the gym. Eventually, he signed up for a couple of credit cards. Then it all went downhill. He didn’t stand a chance.

And so I stayed away from credit cards.

The case for credit 💳

But my views have evolved. I no longer see credit as a tool for self-destruction. Rather, I see credit as a tool - it’s neither good nor bad - it’s just a tool. If used properly, credit could help people build wealth and live healthier and happier lives. But if used improperly, it could lead to financial ruin. Credit is a double-edged sword.

Living in Nigeria meant you paid cash for everything. The words “mortgage”, “car loan”, “student debt” and “credit card bills” were not in our vocabulary. No one had credit! And so you paid 100% cash when you bought a house or a car. The lack of credit also meant that no one had a credit score. So if you wanted to rent an apartment, you would have to pay 1-2 years of rent upfront. Needless to say, many of my cousins lived with their parents well into their late 20s and early 30s.

Can you imagine if the US had the same setup as Nigeria? There would be untold pain. According to the National Association of Realtors, the average new home buyer in the US paid just 7% of the total purchase price as a downpayment and took out a loan for the rest. Similarly, according to Statista, 85% of new car purchases in the US are financed. Collectively, Americans owe more than $1.2 trillion in car loans. In Nigeria, the total is closer to $0.

The ability to thoughtfully take on credit could save lives. Many hospitals in Nigeria require full payment before treatment is rendered. Too many people have needlessly died while family members frantically rushed to raise funds to pay for life-saving treatment. It’s desperately heart-wrenching.

The ability to take on mortgages could help many families own their homes and start building multi-generational wealth. Construction loans also enable investors to deliver more housing units to eager customers.

Access to credit could enable a business owner to grow and sustain their business. Businesses might need loans to purchase raw materials to fulfill large orders. Businesses could even offer credit to customers, enabling them to buy more products. Credit could provide the runway a growing entrepreneur needs to take off.

The list could go on. The bottom line is that access to credit could help grow the economy while enabling people and businesses to lead more prosperous lives. If this is true, then why do only 3% of Nigerians have access to credit?

Problems dey 🚧

My sense is that credit penetration is low for a couple of key reasons:

• Structural: Nigeria does not have a well-established credit score system. In other countries, credit scores are linked to a national identity number ex Social Security Number. In recent years, Nigeria introduced a National Identification Number. This is a key first step.

• Enforcement: Nigeria experiences weak enforcement of justice, that’s putting it nicely. This means that creditors are highly exposed if the debtor does not pay. I’ve heard of judges being bribed, police turning a blind eye, and uneven treatment. Creditors may not reliably have recourse for bad loans.

• Other business: Given the aforementioned risks, historically Nigerian banks considered other business opportunities to be more lucrative than lending. Providing credit to the masses was not high on their priority list. Fortunately, in recent years Nigerian banks have started offering secure credit cards backed up by deposits to their customers.

• Policy: Government policy does not expressly encourage the extension of credit to the masses. Incentives, if any, do not appear to be working.

Nonetheless, there are many exciting FinTechs working to crack this nut. I recently met a couple of them at a FinTech Happy Hour in NYC.

Local solutions to local problems 👷

QuickCheck is one of the exciting FinTechs extending credit to Nigerians through a mobile app. The start-up was founded in 2017. It uses artificial intelligence and machine learning to extend microloans to its customers. Quickcheck’s lending process is very fast (less than 10 min) and does not require any paper documents.

Quickcheck has funded over 1.1 million micro-loans averaging $80 for 30-day terms. The total value of loans disbursed exceeds $40M. Most of the customers are middle class and 80% are between 25 and 43 years old. Returning customers account for over 70% of loans provided each month. The average interest charged is 40-50% per annum but bear in mind that most loans are only for 1 month-long term. Customers often use the loans to cover emergency expenses, school fees, or business expenses.

QuickCheck works like a middle-man. They borrow large chunks of money at lower interest rates from high-net-worth individuals (HNWI) and institutions, then they turn around and lend out small chunks of money at higher interest rates to individuals and small-medium-sized businesses. They profit from the difference between interest rates, however, they also take the risk of issuing bad loans and the cost of operations.

Figure 1: This is an illustration of QuickCheck’s business model

QuickCheck needs to borrow more money so that it can grow its lending business and extend its impact. Unfortunately, it finds itself in an underserved in-between class of small- and middle-sized enterprises. Typically, businesses that need to raise less than $100k can access funds from local high-net-worth individuals (HNWI) or the capital markets. Larger businesses seeking to raise more than $5M can often access institutional creditors. But Quickcheck’s needs are in between these extremes.

DeFi to the rescue? 💻

Decentralized Finance (DeFi) seeks to reduce costs and increase efficiency by using smart contracts and blockchain technology to eliminate middlemen like banks.

For instance, today if you wanted to borrow $100k to buy a house, you might go to Bank of America. They will assess your creditworthiness and determine what interest rate to offer you. Mind you, Bank of America has thousands of employees and expensive offices all around the country. Thus, the interest rate they offer you need to be high enough for them to offset their costs and deliver a profit to their shareholders. Additionally, the United States has a recent history of bias in lending. Several banks, most notably Wells Fargo, have admitted that some under-represented minority groups were unfairly charged higher interest rates than others with similar qualifications. DeFi could help fix this.

DeFi relies on smart contracts. This helps remove bias. Smart contracts are computer code. They simply operate based on data. If a person wanted to borrow $100k, the smart contract might check to determine if certain qualifications are met, if true then it disburses a loan. And because DeFi applications don’t have thousands of employees or expensive offices, they could offer more competitive interest rates than traditional lenders.

Today, much of DeFi relies on over-collateralization to issue loans. Thus, if you wanted to borrow $100k cash you might be required to provide $150k of bitcoin which is held as collateral while you repay the loan. Overcollateralization works for crypto-rich, cash-poor people who believe that the value of digital assets would rise in the future. However, it does not work for the under-banked or those who do not have significant a pile of digital assets. DeFi needs to extend beyond over-collateralization in order for it to achieve more impact. There are a number of exciting Crypto projects working on this.

Meet Goldfinch 🐦

Goldfinch has provided QuickCheck with $1.45M debt since January 2020.

Goldfinch is a decentralized protocol that allows for borrowing without crypto collateral. It is focused on reaching underserved emerging markets in Africa, South America, and Asia. In January 2022, Goldfinch raised $25M in funding from Andreessen Horowitz, Coinbase Ventures, SV Angel, Bill Ackman, and others. The startup previously raised $11M in June 2021.

Goldfinch works by the interplay of four types of protocol participants:

• Borrowers: Small- and medium-sized businesses seeking to borrow funds. Borrower Pools list the loan terms the Borrower seeks ex. interest rate, amount, and loan term. Borrowers typically request funds in USDC, the stablecoin backed 1:1 with US dollars.

• Backers: Backers assess the Borrower Pools and determine whether they should provide first-loss capital. First-loss capital means that the Backers are eligible to receive a higher return on the loan than other capital providers but if the Borrower defaults, the Backers will be the first not to get paid.

• Liquidity Providers (LP): LPs provide the senior line of credit to earn passive yield. They don’t have to actively assess every proposed Borrower. Rather, LP funds are invested if there is a sufficient level of commitment from Backers. When LPs provide senior credit, a portion of their interest is redirected to Backers to incentivize Backers to properly assess Borrowers.

• Auditors: Auditors vote to approve Borrowers. They provide a human-level check to guard against fraud. Auditors are randomly

Figure 2: Illustration of the Goldfinch protocol

Once a loan has been issued, Borrowers make repayments to the Borrower Pool based on the interest rate and payment period. When the Borrowers pay more than the interest owed, the remainder is applied to the principal balance.

The Borrower Pools have a Senior Tranche and a Junior Tranche. LPs provide funds for the Senior Tranche while Backers supply to the Junior Tranche. When the Borrower repays, the Borrower Pool first applies the funds to interest and principal owed to the Senior Tranche at that time, and the remaining funds are then applied to the Junior Tranche’s interest and principal balance.

Backers and LPs receive an NFT when they initially supply capital. The NFT tracks the amount that was supplied and the amount that is still outstanding. NFTs ensure that no one can redeem more than their proportional share of the total repayments as they come in. For instance, if two Backers each supplied $1,000 for a total of $2,000 borrowed, and the Borrower has only paid back $400 thus far, the NFTs ensure that each Backer can only redeem up to $200, which is their portion of the repayments thus far, rather than each Backer racing to redeem the full $400 themselves.

For more information on Goldfinch and how the protocol is structured and participants incentivized, please check out their white paper.

Closing thoughts 💭

There is a tremendous and growing market for credit, especially in emerging markets like Nigeria. It is exciting to see crypto solutions like Goldfinch tackle this problem. But Nigeria has over 200 million people. Goldfinch is still a drop in the ocean of opportunity. Fortunately, technology does not scale linearly. Adoption could grow exponentially. I believe the market is big enough for many more players to emerge.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

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Preamble

My wife and I recently packed our bags and relocated to New Jersey! Texas was good for us but now we are on to our next adventure in Greater New York City. Would love to meet up if you are in the area.

It’s been fascinating observing people’s reactions when I say I work in crypto. Some acquaintances immediately start walking me through their crypto portfolio while others clutch their pearls and flee for dear life. Jokes aside, I am often the first person they have met who works in the space. Sometimes, I get the sense they don’t quite know what to make of me. Crypto’s unsettling reputation has not been helped by the recent market downturn, hacks, and bankruptcies. My singular refrain has been that “the underlying technology could solve real-world problems, focus on that”.

But you can’t bury your head in the sand and ignore the world around you. If you fail to study history, then you are bound to repeat the same mistakes. We are living through the early days of Crypto’s history. Let’s learn from this moment lest we fall prey to the same dragons.

Heartache 💔

Celsius - a prominent centralized crypto lending company - filed for bankruptcy on July 13, 2022. Customers had been unable to withdraw their funds since June 12, 2022. It now looks unlikely that they will ever reclaim all their funds. Some devastated customers have written letters to the judge presiding over the bankruptcy proceedings. These letters are gut-wrenching. Here are excerpts from two of them:

But how did we get here?

Celsius: Background🔎

Celsius was founded in 2017 by Alex Mashinsky (CEO), Daniel Leon (former COO, now Chief Strategy Officer), and Nuke Goldstein (CTO) in Hoboken NJ. Celsius provides customers with high interest-bearing accounts for cryptocurrencies and crypto-collateral-backed loans.

High interest-bearing crypto accounts

Example 1: Johnny cashed out some of his cash savings and stock investments to buy 1 bitcoin on Coinbase. He then sees an ad from Celsius offering 17% interest rates for customers who deposit bitcoin with the company. He looks at his regular bank account and is reminded that Bank of America is only offering 0.1% interest. It’s a no-brainer! Johnny moves his 1 bitcoin from Coinbase to Celsius to earn high interest.

Crypto-collateral-backed loans

Example 2: The price of bitcoin has more than doubled. Johnny is feeling good about his investment. Time to finally buy that engagement ring he has been eyeing. The price of bitcoin is $50k but he only needs $10k. However, Johnny doesn’t want to sell his bitcoin because he believes the price will be much higher in the future.

Step 1: He transfers 0.3BTC valued at $15k as collateral for a $10k cash loan.

Note: (a) There are no interest payments on the loan but he has 1-year to pay it back. (b) There are no credit checks because the loan is overcollateralized with a loan to value (LTV) ratio of 67% => $10k loan / $15k crypto collateral.

Step 2: Celsius will monitor the LTV ratio as the price of bitcoin continues to fluctuate. If the price of bitcoin drops deeply, Johnny will have 24 hours to add more collateral or pay down the loan if the LTV hits the predetermined threshold ex 90%. If Johnny fails to bring the LTV back to an acceptable range say ~67% within the prescribed time then Celsius has the right to sell his collateral for cash.

Besides lending, Celsius generated revenue from token sales, bitcoin mining, and discretionary trading of cryptocurrencies. As of June 2022, Celsius had lent out $8 billion to customers and had $12 billion in assets under management. The company had 450 employees and reportedly 1.7 million account holders.

How did it go wrong?⚡

TLDR: Celsius CEO said the company went bankrupt due to “..certain poor asset deployment decisions”. Basically, weak risk management. Unfortunately, this does not appear to be an isolated incident, rather, tales of poor decision-making and under-resourcing are emerging from different parts of the organization.

On the surface, the main thrust of Celsius business model was sound. It’s the same model that banks have used for centuries: pay interest to depositors then loan those funds out to another entity at a higher interest rate. Then you simply profit off the difference in interest rates.

Celsius grew rapidly by offering up to a 17% interest rate on crypto deposits. At its peak, it had $24B of assets under management. This helped it raise $750M in Nov 2021 at $3.3B valuation. That fundraising round was led by the second largest pension fund in Canada. But it all came crashing down when Celsius filed for bankruptcy due to the $1.2B hole in its balance sheet.

Celsius reported its total assets were $4.3B but total liabilities were $5.5B. Of the $5.5B liabilities, Celsius owes its customers $4.7B but does not have the assets to pay them. The company only has $125M cash on hand. Much of the $4.3B of assets are said to be Celsius’ holdings of its own crypto token which has dropped in value from a peak of $7.7 in June 2021 to $0.9 in July 2022. There are questions about the current market value of the $4.3B listed assets and fears the actual is lower than what has been reported.

Where did risk management fail?

We are still learning about the failures that led to Celsius bankruptcy. Here’s what I have gathered thus far:

1. Failure of leadership

Celsius executives reportedly told the Chief Human Resource Officer NOT to run background checks on the incoming CFO, Yaron Shalem. This is a major red flag 🚩 In Nov 2021, Shalem was arrested in Israel and charged with money laundering at his previous company.

Perhaps stronger controls could have identified a CFO who might have steered Celsius away from taking on increasing levels of risk. But ultimately the CEO is responsible.

1. Under resourcing

Disruptors don’t color within the lines. They dream up new industries and take risks executing their visions. This is the nature of technological disruption. Uber and Airbnb are great examples of disruptors who launched products ahead of supporting laws, rules and regulations. The Silicon Valley swagger to move quickly and break things has produced results….but one wonders if it is a fit for financial services.

Celsius reportedly only had 3 compliance professionals serving 1.7 million account holders. Some banks serving fewer customers might have 10 to 30x compliance professionals. A former Celsius compliance employee shared how the department was seen as a cost center and not a strategic partner for the business. One could extrapolate and imagine that the same attitude of under-resourcing likely applied to risk management too.

1. Poor fund management

Celsius CEO said in retrospect, they made poor fund deployment decisions. These decisions primarily fall into two camps: (a) over-leveraged positions and (b) over-exposure to stETH.

(a) Over—leveraged positions:

Celsius loaned out depositors’ funds on MakerDAO, a decentralized lending platform. One loan is ~$550M. This loan is overcollateralized like the loans Celsius itself issues. One challenge is that the price of Bitcoin has tumbled more than 60% since the 2021 highs. As a result, Celsius has had to pay down the loan or provide more collateral to bring the LTV back in range, otherwise, the entire $550M collateral would be liquidated. Celsius likely used new customer deposits to secure the collateral consisting of old customer deposits. Celsius came close to losing $550M a couple of times. It has reportedly lost smaller amounts due to insufficient liquidity to shore up the LTV ratio.

A sound risk management approach would have considered that crypto prices could fall significantly and perhaps limit Celsius exposure to this high-risk strategy.

(b) Over-exposure to stETH

Celsius used customer deposits to acquire over $400M of stETH, an irresponsible amount given that no counterparties hold a comparable amount to trade with. stETH is an illiquid receipt stoke for staked ether. stETH is a derivative of ether with each stETH representing one staked ether on the new Ethereum blockchain. However, the price of stETH and the price of ether decoupled in recent months, stETH now has a 3% discount at the time of writing.

A sound risk management approach would have considered whether Celsius should have used user’s deposits to acquire stETH, and if decided to, there could have been controls to limit the amount of exposure to this illiquid asset in Celsius portfolio.

What next for Celsius customers? ⏭

Celsius presented itself like a bank but operated more like a hedge fund. Many customers did not read the fine print in Celsius terms and conditions. Reading through now would yield several realizations.

Uninsured deposits

Depositors at US banks are protected by the Federal Deposit Insurance Corporation (FDIC). If a US bank goes bankrupt, all depositors’ funds are insured for up to $250k. Unfortunately, Celsius is NOT a bank and did not hold any insurance for depositor’s funds.

Section 13 of the Celsius user agreement explicitly states that if the company goes bankrupt, customers may not be able to recover ANY funds.

Bankruptcy claims

Celsius customers are filing bankruptcy claims. Some have also written letters petitioning the judge to release funds to them.

Interestingly, although Celsius is headquartered in Hoboken NJ, the bankruptcy suit was filed in New York’s Southern District. Judges in this district are thought to be more savvy and experienced with major bankruptcies having previously handled notable cases like Merril Lynch and Bernie Maddoff. Unfortunately, it’s not looking good for customers.

What lessons have been learned? 📔

Not your keys, not your coins

My friends who have been in crypto for several years frequently admonish everyone to move their holdings off centralized exchangers like Coinbase and lending platforms like BlockFi and Celsius. This episode has made the reasons painfully obvious. It’s clear to see why they recommend one self custody crypto holdings in a cold wallet.

Leadership matters

It looks like Celsius executives lost their heads in the ecstasy of the bull market. They kept on layering on high risk moves perhaps imagining themselves to be invincible. But truth be told, I think the rot started way before the crypto bull market. The absence of background checks for senior executives, the under-resourcing of compliance are symptoms of a culture that turns its nose at the modern financial services industry. I agree that there are some financial services which are ripe for disruption but there are also risk management practices and standard operating procedures which have successfully safeguarded the interest of customers. These mustn’t be discarded with the bath water.

Please do considerable research as you invest your funds. Look at the background and statements of the leaders. Sometimes people who are undisciplined with finances reveal themselves to be undisciplined with their words too.

Real human impact

1.7 million affected account holders may never fully recover their funds. This would undoubtedly leave a lasting bad impression. Some of the stories are simply heart-breaking. There’s the story of a worker close to retirement who sold off their stocks and bonds and deposited everything into Celsius. There are countless stories of families who put decades of life savings into these accounts. Some people will never recover financially. It must be taking a heavy emotional toll too. I fear, a few people may even take their own lives similar to the suicides following the Great Stock Market Crash of 1929.

Diversify

Please do NOT put all of your eggs in one basket. Diversify to reduce your exposure to any one platform and any one company. Consider moving some or all of your crypto holdings into multiple cold wallets and securely store them in waterproof, fireproof, and tamperproof environments.

Risk management is a differentiator

Crypto has been pulling in top talent from a variety of backgrounds. Sometimes I sense a tension between the tech-forward move fast crowd and the deliberate, cautious, and risk averse financial services crowd. But we need both legs to run into the future.

The Celsius meltdown has given me a renewed appreciation for risk and compliance. In recent days, crypto lending companies have been at pains to explain their risk management approach and distance themselves from Celsius. I expect there could be a flight to quality, with consumers gravitating to more established and regulated providers. There is an opportunity for banks to make a move here.

More curious about DeFi

Humans are fallible. People get greedy and risky, then bad things happen. This is not limited to crypto. It happens across every industry. One of the beautiful things about decentralized finance (DeFi) is that it runs on smart contracts aka code. It takes the human out of the equation and executes based on the written code. But no system is infallible. DeFi solves for one risk - human behvaior - while heightening another risk: hackers. DeFi is poised to continue growth and eventually will underpin a chunky slice of the mass market.

Brace yourself for more regulation

Society functions around a set of rules of engagement. There are consequences when you break those rules. Every industry needs regulation. Crypto is no different. I hope that the regulation is thoughtful and not a knee-jerk reaction. I hope the regulation would seek to protect the consumer, not prevent the consumer from engaging with crypto. I hope the regulation is crafted in partnership with industry, seeking to support technology advancement and not strangle the baby in the bassinet.

I’m optimistic. Many advances we take for granted today went through a storming phase in their infancy. I have seen newspaper clips from the 1800s railing against electricity and cars. Today we can’t imagine our lives without them. I expect the US will eventually strike the right balance with crypto regulations.

PS - But wait, there’s more

There’s more to the Celsius story. For instance, I didn’t get into the alleged token manipulation and potential insider trading.

PSS - Former Coinbase PM arrested for insider trading

Speaking of insider trading, this week, a former Coinbase product manager was arrested along with his brother and a friend for insider trading.

Background

There are about 2,000 crypto tokens. Binance lists over 300 of them on their exchange. Coinbase has been intentionally listing more tokens to close the gap and give their customers more choice. Coinbase currently lists about 200 tokens. It’s been observed that new tokens experience a significant price jump once they are listed on Coinbase. It could be due to millions of users suddenly gaining access and increasing demand.

The Coinbase PM obtained intelligence on which tokens would be listed then relayed it to his accomplices. The trio then got wallets controlled by other people to opportunistically buy and sell these tokens. They earned at least $1.5M through this insider trading scheme.

Blockchain to the rescue

Public blockchains permit anyone to view transactions. The challenge is that it’s not always obvious to the observer who owns the wallets but that’s why blockchain analytics firms like Chainalysis, TRM Labs and Elliptic specalize in.

An avid observer noticed this pattern of sales from a wallet. He shared his observations on Twitter. Soon financial regulators were hot on the chase and identified the trio and notified Coinbase. The Coinbase PM was invited to a meeting where at Coinbase where he was presumably fired. Regulators sent him a letter. He bought a ticket to fly home to India on the same day. The suspect was apprehended before he could flee the country.

Contrary to some widely held beliefs, blockchain technology is not just a haven for would-be-criminals, rather, it can be a valuable tool for law enforcement to catch criminals.

It’s been long rumoured that there is significant insider trading at some crypto tokens. Perhaps this case is the first of many to come. The industry needs to police itself and partner with law enforcement.

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I’ve got a confession. (Cue Usher’s hit single “Confessions”)

I am not exactly sure what the metaverse is. There I said it. I feel so much lighter lol :-)

Last year, “metaverse” burst onto our collective lexicon when Facebook announced it was reinventing itself as Meta. Mark Zuckerberg produced an hour-long video explaining what the metaverse was and how Facebook was going to engage in it. I didn’t watch the video then but I did see a few clips. It felt important. I felt like it must be a big deal if one of the world’s richest men was betting his ENTIRE fortune on it. I didn’t want my ignorance to cost me this opportunity.

So I started a little exploration. I spent part of my New Year’s Eve in the Decentraland metaverse. I started buying a few metaverse tokens and invested in a metaverse-themed ETF. During the hype, I even considered buying some virtual land in the metaverse. Now to be clear, my investments were pretty limited…way less than 1% of my portfolio.

But since Facebook’s fateful announcement, the world’s most prestigious investment banks and consulting companies have published a slew of reports on the metaverse opportunity. Citi Bank forecast that the metaverse economy could be worth $13 trillion by 2030. The Boston Consulting Group (BCG) had a less bombastic view, forecasting that the metaverse economy would be worth $1.3 trillion by 2030. To put things in context, in 2021, the total value of the US car and automobile manufacturing market was $83B. The bottom line is this - some smart folks are saying the metaverse could be at least 12 times the US car market in 7.5 years. No one knows the future but there is some consensus that the metaverse could be BIG business.

Ok…you’ve got me interested. But what is the metaverse??

I have been digging trying to learn more. I finally watched the Zuckerberg metaverse video. I listened to a bunch of podcasts, watched more YouTube videos, read some essays, and flipped through a couple of decks. I’m still organizing my thoughts and refining my thinking. Figured it might be helpful to share some of my preliminary thoughts. Let’s go!

What is the metaverse?

High school level definition

The metaverse is a 3D version of the internet. It is a convergence of the physical and digital worlds.

According to Matthew Ball, the metaverse represents the 4th wave of computing. The first three waves were mainframe computing, personal computing and mobile computing. So if the mobile era was defined by easy ability to get online, the metaverse era would be defined by always being online, this is called ambient computing.

College-level definition

According to Roundhill, the metaverse is the successor to the current internet that will be interoperable, persistent, synchronous, open to unlimited participants with a fully functioning economy, and an experience that spans the virtual and 'real' world.

TLDR: the metaverse is an immersive, interactive environment generated by a computer.

What is NOT the metaverse?

Did you notice that none of the definitions mention virtual reality headsets? That was a big surprise to me. I had originally imagined a future where VR headsets became as common as cellphones are today. While I think sales of VR headsets are poised to going to continue rising, they are NOT required to access the metaverse. In fact, some of the closest metaverse-like experiences in gaming are accessible via cell phones.

Side note - my jaw dropped when I recently learned that Meta sold 8.7 million Oculus VR headsets in2021. That’s more unit sales than Xbox consoles in 2021! Do you have one? I’m thinking about getting one to test it out. Sales of these VR headsets have doubled each year. Now Meta is opening up physical stores so more people can experience it firsthand.

TLDR: VR headsets provide one way to access the metaverse but they won’t be the only way to experience it.

The metaverse must be experienced.

One of my cousins in Nigeria told me how undergrads studying computer science did not have access to computers. They would write computer code by hand on paper and then submit their homework to professors to review. These students did not get the opportunity to actually run the code to see if the code did what it was supposed to do. They did not get to practice how to troubleshoot bugs in the code.

We can all agree that this is a subpar way to learn. I think about the metaverse along similar lines. It’s nice to read and write about it but ultimately one is best served by diving in and playing with the emerging technology. It’s kinda like going back in time to the 1920s and trying to explain the internet to your neighbors. Not easy lol.

Ok. Sounds nice but what problem does the metaverse solve?

I’m still ruminating on this. Right now, I think the metaverse could increase accessibility, remote collaboration, education, gaming, social relationships, industry, and more.

a) Accessibility: One of my friends in college was a fountain of dry jokes and witty takes. She was also a triple major who graduated with a 4.0 GPA. But I’ll never forget when she shared that she sometimes had to drop classes that she wanted to enroll in because the building was not wheelchair accessible. My heart sank. I did not realize that not all buildings on campus were wheelchair accessible or had elevators. This opened my eyes to the inequity of access. I hope the metaverse can extend access to people who might have different mobility abilities. But then I think about people who are visually impaired and hope access is somehow extended to them too.

b) Remote collaboration: I’m tired of Zoom. I love people and I’m energized by engaging with people. But sitting in a chair going back-to-back on never-ending Zoom calls is draining. It’s also often subpar when some coworkers are meeting in person and others are on Zoom. Last year, Bill Gates said that within 2-3 years most work meetings would be held in the metaverse. I laughed when he said it. I still think his timeline is unrealistic. But I hope he is directionally right. I hope a metaverse solution improves the Zoom experience. Perhaps a future where coworkers can use holograms or avatars in 3D to engage with each other and express more body language beyond facial expressions.

c) Education: Let’s face it. Not all teachers are created equal. Some are very engaging and can bring a seemingly dry subject to life. But others struggle to impart knowledge to students. Students have different learning preferences. Students who are strong audio-learners are advantaged in the existing education system. Now imagine if students had the opportunity to travel through time and space to experience natural phenomena and historical events. Imagine if instead of memorizing the planets you could see them close up and see the icy rings around Saturn. Or be on the front row as Abraham Lincoln gave the Gettysburg Address. Imagine if medical students could go on a safari through a human’s veins and arteries to learn about heart disease. These immersive experiences would be resonant and more engaging. Researchers say immersive experiences lead to 30% greater retention. This increased understanding could trigger more technological breakthroughs. I’m excited!

d) Social relationships: When my grandpa went to medical school in England in the 1930s, his letters would travel 6-10 weeks before they reached his parents in Nigeria. Today my family is spread out across Africa, Europe, and North America. Video calls and cell phones have made the world feel much smaller. But I hope the metaverse could take it to the next level. It would be amazing for my parents to have more immersive experiences with their grandchildren. My nieces are becoming more curious about our culture and heritage, it would be amazing if my parents spend even more time with them and give could give them a virtual tour of our ancestral village or the cities they grew up in. Obviously, I don’t think the metaverse would be a perfect substitute for in-person interaction but I think it could be a bridge over oceans and great distances.

e) Industry: According to McKinsey, BMW was designing its most advanced manufacturing plant when a team member suggested they build a virtual replica in the metaverse before beginning construction. So they did! BMW executives and technologists were able to physically tour the metaverse plant. Soon they realized 30% of the design choices were not ideal. They significantly revised the designs before proceeding to construction. Testing it out before construction led to substantial financial cost savings.

Sounds good….what are the downsides?

In life, you gotta take the rain with the sunshine.

a) Terror risks in 3D: Technology is neither good nor bad, it all rests on the application. Unfortunately, bad actors are often early adopters of new technology. Terrorist groups have leveraged Facebook, YouTube, and Twitter to find and radicalize young people. The same may become true in the metaverse. In fact, the metaverse might provide better tools to train terrorists. We will need to develop new counter-terrorism tools.

b) Loss of person-to-person contact. The pandemic illuminated the loneliness crisis in many Western countries. Many of us coped with the social-distancing measures by increasing our time spent on social media. But for thousands of years, humans have needed person-to-person interaction to sustain wellness. It remains to be seen if the metaverse will be able to replicate this interaction.

c) Too much tech. I’m embarrassed by how much time I spend looking at screens. I’m usually working on a laptop, scrolling on my phone, or watching TV on a big screen. No wonder my eye prescription keeps getting progressively worse! Should we be concerned that there is too much technology in our lives? I wonder if the rise of the metaverse will drive the appreciation of natural, in-person activities. It might become a luxury to travel in real life. We might see more people yearning for eco-tourism vacations where they are cut off from technology.

What’s going in the metaverse today?

Do you remember when newspapers uploaded a scanned copy of their publication on their website? Over time, newspapers have developed internet-native publications that have functionalities that were not possible with a paper copy. For instance, newspapers can target ads with much greater precision today. They are able to get much more detailed feedback on how readers respond to their articles and headlines.

I think the metaverse might be similar. Initially, companies will copy and paste existing models into the metaverse but over time they will develop new metaverse-native models with functionalities that were not possible with the 2D-internet.

Do you remember the first concert you went to? Mine was loud, sweaty, and crowded, but so much fun. We stood shoulder-to-shoulder, singing at the top of our voices waving our hands while awkwardly dancing with a cold beverage in hand. Today’s tweens and teens are having a very different experience. Cathy Hackel, self-proclaimed queen of the metaverse, shared how her 10-year-old son’s first concert was a virtual one on Roblox! But this was no isolated incident. In 2020, Travis Scott made headlines when his concert in Fortnite was attended by 12.3 million people (link to the concert). [FYI - Roblox and Fortnite are both gaming platforms].

Side note on gaming:

In 2010, Chris Dixon famously said that the next big thing would first look like a toy. Gaming is a big business and a gateway to the metaverse.

Fortnite is the blockbuster video game produced by Epic Games. Epic is privately held so financial details are limited. However, we know that in 2020, Fortnite had 80.1 million monthly active users. 63% of its players are aged 18-24. 38% of users spent more than 10 hours a week playing Fortnite.

Roblox appeals to an even younger demographic. According to Roblox, two-thirds of US children aged 9-12 use its platform. In 2021, Roblox earned $1.9B of revenue from 45.5 million daily active users who spent 41.4 billion hours engaged on the platform.

I am highlighting these because I’m not a big gamer..yet. And as a millennial, I’m beginning to feel a lil old lol. I am recognizing that I may have a big technology blindspot because gaming is often on the bleeding edge of technology. Gaming could give a preview of what might go mainstream.

Meta is NOT alone

Meta is not the only major company investing in the metaverse. Microsoft, Apple, and Alphabet are reportedly pouring billions into it too. This year, Accenture, the global consulting company, will onboard over 100,000 new employees through its metaverse platform. This all started at the height of the pandemic. New employees were sitting at home remotely going through 16-24 hours of Zoom presentations. Definitely not an ideal experience. And so Accenture changed things up! They sent each new employee a virtual reality headset. The new hires then created customized avatars (cartoon-like representations of themselves) and were guided to Accenture’s metaverse headquarters. They were put into small teams and worked on simulations to solve customer problems. Crucially, there were opportunities to have 1-on-1 and small group conversations. Partners who often have tight travel schedules were able to readily welcome the new employees from anywhere in the world.

Who knows? Maybe in a couple of years, it may be common for new employees to get a new company laptop AND a virtual reality (VR) headset. Times are changing!

What’s next?

More baby steps forward. The metaverse is very much in its infancy. It requires advances across a range of technologies such as 5G, 3D graphics, virtual reality, augmented reality, and cryptocurrency to move forward. It’s going to take a while. The current hype will simmer down but the building will continue. But I think mass-market adoption will gradually deepen over the next 5-20 years. It’s time to pay attention so you can make the most of this opportunity.

So what do you think about the metaverse? I would love to hear from you.

Onwards & Upwards,

Afolabi

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Hey y’all!

This will NOT be a typical newsletter.

I started writing as a forcing mechanism to learn more about crypto. It has been fun. Along the way, I’ve learned a ton, made new friends, started Bitcoin mining, and got a new full-time job in crypto. Thank you for coming on this journey of discovery with me.

The vision of 5x5 Crypto was to simply explain the 5 most important developments in crypto in about 5 minutes. Lately, it has become a drag to consistently produce weekly updates. The truth is that I am no longer satisfied with just reporting news developments in crypto. I want to go deeper. I want to explore real-world use cases of crypto. I am curious about doing more analytical pieces. It’s time to dream again.

Introducing Crypto IRL

I am repositioning the newsletter. Introducing: “Crypto IRL”. My goal is to explore crypto in real life. I aim to produce 1-2 publications each month on a variety of topics. I have a list of topics that I want to explore and I can’t wait to dive in. Lately, I have been thinking about the metaverse, Bitcoin mining profitability, and crypto applications in Africa. Let me know if there are topics you would like for me to explore.

But crypto markets are crashing…

Yeah. Crypto markets have tumbled lately. My conviction is unchanged. I am still investing weekly. I had been waiting for a price crash since Q3/Q4 last year. But it seems that Crypto Winter has finally arrived. It was expected. Crypto has historically had multi-year cycles of “summer” (price rise) followed by “winter” (price crash)…with each new summer rising to a new high. Veterans say the Crypto Winter is when serious building happens. It’s the time when fair-weather fans fade into the background. It’s the time when one’s conviction is tested. It’s the time to go deeper and explore. This is the perfect time to pivot. Will you join me?

You don’t have to do anything. You will receive the new publication in your email. Please stay tuned. I hope you enjoy this new season. If you do, please be sure to forward it to your friends :-)

I hope you and your family have a wonderful week ahead.

Onwards & Upwards,

Afolabi

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Hey y’all!

Did you hear the remarkable story of how an inexperienced passenger safely landed a plane when the pilot became incapacitated? Here’s some background:

I listened to the recording of the passenger calmly explaining the situation to the air traffic controller multiple times. I listened intently as the air traffic controller steadily guided the passenger to land the plane. And he did it! He safely landed the plane.

I was struck by how calm and measured the passenger was. He had a pregnant wife at home. This was a potentially fatal situation. His whole life was at stake! One might have expected to hear the terror, fear, and shock in his voice. There was none. I guess he is ‘built different’.

God forbid, if I were in a similar situation, I hope I can be as calm and measured as he was. How do you react when your world is turned upside down? Well, the crypto and stock markets have taken us on a downward heading rollercoaster these past few weeks. How have you dealt with it? Are you ‘built different’ too?

Thoughts on ‘Built different’

I am often intrigued by how multiple people could have the same experience but polar reactions to it. For instance, we have all experienced the recent plunge in the stock and crypto market, some folks have been writhing in pain and selling off assets while others have been pleasantly buying up investments at ‘bargain’ prices. There’s also a group of people who are steadily executing their investment strategy, unfazed by the market turbulence. I’m in the last group but I’m fixin’ to go bargain shopping.

In management consulting, we often heard the refrain “manage expectations”. It is key because disappointment occurs when our expectations fall short of reality. Increasing a company’s profitability by 20% within 1 year is neither good nor bad. It’s only when you factor in expectations that one is able to define the performance. If the company’s CEO was expecting a 30% increase in profitability, then 20% suddenly looks like a shoddy disappointment. However, if the CEO was expecting a 10% increase, then the 20% result is an impressive feat worth celebrating with bonuses and promotions. Managing expectations is key.

If you are a long-term subscriber, you’ll know that I’ve been waiting for “crypto winter” since the end of Q3 2021. You might also know that I’ll be unsurprised if the price of Bitcoin fell back to the $10k level or lower but then surge to new highs, dare I say six figures, in the next bull run in a couple of years. This is not based on any technical analysis. Rather, I have glanced at the historical performance of Bitcoin (a proxy for the wider crypto market) and recognized that large price swings are part of the process but over the long term, the price tends to go up. I’m managing expectations I’m in this for the long haul. Over the past seven Mays (2016-2022), the value of the S&P 500 stock market has increased 2x while Bitcoin price has increased 67x. Zooming out can provide a helpful perspective.

Tail events and a flight to quality

I recently read “Tails you win”, an article by Morgan Housel. He reminds us that most results are due to tail events.

For instance, out of 21,000 VC investments between 2004 and 2014, 65% lost money, 2.5% made 10-20x, 1% achieved more than 20x returns. Incredibly, only about 0.5% or 100 companies achieved the glamorized 50x returns. The vast majority of the industry returns are due to a tiny fraction of investments. We glamorize and idolize these investments and some of us even aspire to make similar 50x returns too. But the odds are not in our favor. Morgan’s analysis on the VC market was not shocking but I had not fully considered what he said next: that tail events drive the vast majority of results is a truism of nature and other disciplines.

Each human is a miracle. Just one sperm out of the millions deposited, gets to fertilize the egg and develop into a baby. Or consider that in 2020, just 5 companies (Amazon, Apple, Meta, Microsfot and Tesla) accounted for a whopping 37% of the S&P 500’s total market returns. [S&P 500 consists of 500 publicly traded companies]. Warren Buffett famously said that he has owned 400-500 stocks during his life but he made most of his fortune from just 10 of them….despite painstaking research and analysis on all of them.

So what does this mean for crypto? Well, extending the analogy would suggest that the just a handful of crypto tokens will stand the test of time and generate the lion share of returns. Looking back at snapshots in time between Dec 2016 and today, indicates that only 3 tokens: Bitcoin, Ethereum and Ripple, have consistently made the top 10 list. This is not say that other projects will not stand the test of time. But if you are looking to build and sustain long-term value, these might be a helpful place to start. Of course, do your own research as I’m not a financial adviser.

Warren Buffet also famously said that “you should be fearful when others are greedy but greedy when others are fearful”. Fortunes are made in downturns. There may be attractive opportunities to acquire high-quality crypto and stocks at “bargain” prices.

The reality is that it takes a lot of discipline to execute on this strategy. Plus no one knows if the prices will drop further. Personally, I have focused on dollar-cost-averaging i.e. consistently investing in cryptos and stocks on a weekly or monthly schedule irrespective of market conditions. It’s all automated.

The Terra-sized elephant in the room

The biggest story in crypto has been the Terra Luna collapse. It might rank in the top 5 most catastrophic events in crypto. Terra was an algorithmic stablecoin. I did not have any exposure to it although I have friends and cousins who did. Many other people more knowledgeable than me have touched on this topic. If you are interested, check out this Twitter thread

Speaking

I recently participated in an industry panel for the Black Professionals in Tech Network (BPTN) on blockchain. It was great fun. I really enjoyed the audience questions and engaging with other panelists and the event sponsor CIBC.

Next up, I’ll be leading a company-wide lunch and learn on “Global perspectives in crypto” at Cross River (~800 people). My goal is to bring stories of how people are using crypto around the world to solve problems in their lives. Wish me luck!

That’s all folks! I hope you have a great week. Get outside and enjoy the sun!

Ciao

Afo

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What a difference a year makes! About a year ago the price of Bitcoin hit $63k, today it’s $43k (-30% YoY). But attendance at the annual Bitcoin conference in Miami increased 2.5x to 30,000 people this year. So what’s the deal? Let me tell you a little secret: it’s not just about price.

The conference itself is a bit of a sideshow. Tons of people I know went to Miami without stepping foot in the convention center. A lot of the action happens behind closed doors in meeting rooms, rooftop bars, and yachts. Investors, builders, technologists and enthusiast converge for one week in the sun to network and get things done.

Bitcoin 2022 key takeaways

Bitcoin magazine, the organizers of the conference, posted videos of panels and speeches on their YouTube channel. I’ll highlight some of the

CashApp launches 3 new Bitcoin services

Get Paid in Bitcoin enables CashApp users to auto-invest a portion of their paycheck into bitcoin.

Bitcoin Roundups enables CashApp users to round up payments to the nearest dollar then buy bitcoin with the difference.

Lightning Network integration enables users to receive Bitcoin in Cash App through the Lightning Network. The ability to send bitcoin through that network was enabled in January.

My thoughts:

CashApp is key to onboarding people. The fast-growing app has 30 million monthly users. But the demographic is younger and more diverse than the typical bank account holder. CashApp knows that culture leads finance. They routinely partner with hip-hop stars like Megan the Stallion and Lil Nas X for cash and Bitcoin giveaways. This helps drive adoption and builds goodwill for the brand.

CashApp meets people where they are: Offering bank-like features like auto-investing and roundup is familiar to the average Joe. Additionally, CashApp excels where crypto falters, CashApp user experience is simple and easy to follow. Building out auto-investing would produce a baseline of steady income for Block (owners of CashApp). It’s a win-win.

Walled gardens to open fields: Today you can only send funds to people who have the same app. So now I have a zillion apps on my phone…ugh. For example, I only use CashApp to pay my barber but then I use PayPal to pay my powerlifting coach. CashApp and PayPal are walled gardens, they are not interoperable. Imagine if you could ONLY send emails to people who had a GMail account. That would be incredibly annoying. We would all end up with a zillion email accounts. But in the future we should be able to pay like we email. The future is wide open fields not walled gardens. The Lightning Network can help us get there. But we need more businesses to integrate the Lightning Network….

Robinhood is integrating Lightning Network ⚡

6 months ago Robinhood announced it was launching a Digital Asset wallet. It quickly garnered a waitlist with over 2 million people

This week, Robinhood announced that it would integrate Lightning Network to enable faster Bitcoin transactions

This is meaningful as Robinhood has over 22 million users. Like CashApp, its users tend to be younger than the typical bank account holder. So far only about 10% have indicated interest in the crypto wallets but I expect that could grow with time. 2 million is good but we need a LOT more integrations to the Lightning Network….

Strike integrates Shopify and NCR (largest POS operator)⚡

Jack Mallers, CEO of Strike, announced that they are integrating the Lightning Network into Shopify and NCR. This is a HUGE deal.

Shopify is the third-largest online retailer in the US behind Amazon and eBay. There are over 1.1 million live stores on Shopify in the US and another 1.2 million around the world

NCR is the largest point-of-sale (POS) operator. POS machines are the gadgets we swipe our cards in to pay for goods and services as we are checking out of the grocery stores, coffee shops etc.

These integrations would enable millions of merchants to transact using the Lightning Network. Access would be extended to brands, merchants and stores that you are familiar with.

The cool thing is that this integration would enable customers to pay in Bitcoin or stablecoins or even dollars. Exciting times ahead. But the question is, will we see adoption?

I don’t know. Why?

HODL: I don’t want to part with my Bitcoin today because I believe the price will be higher 5-10 years from now.

Inertia: The typical person would default to continue paying the same way unless there is a trigger. There needs to be significant benefit or cost to trigger behavior modification. For international payments, Lightning Network is cheaper, faster, and more convenient to use than some existing options. But domestic payments…I think the interoperability between walled gardens could be one driver. I think merchants stand to save money on interchange fees by switching to the Lightning Network, it would make sense for some merchants to offer discounts to customers who pay with the Lightning Network. But other than that, am I missing something?

Lightning Labs ⚡

The leading Bitcoin developer has raised $70M in it’s Series B from Valor Equity Partners and global asset manager Baillie Gifford, both early backers of Tesla and SpaceX; Robinhood CEO Vlad Tenev, NYDIG and Silvergate CEO Alan Lane.

The goal is to transform the network into a multi-asset layer atop Bitcoin. The first step would be to add stablecoins. Lightning would enable fast and high volume stablecoin transactions. In the future, other asset types like NFTs could be added too.

What’s on my mind

Walk to earn 🏋️‍♂️

I like fitness. I like making money.

This week, I discovered Fitness + Money = “walk-to-earn”. Have you heard about this?

There are a couple apps where you sign-up for a workout commitment e.g., walk 10,000 steps a day then you get get paid in crypto for following through. I haven’t signed up yet but I’m immediately think what’s the catch? So far, it looks like some of these apps require you to buy some tokens and perhaps you get penalized if you don’t follow through.

Check out Step and learn more here.

I hope you spend sometime outside this week. It’s spring and the weather has been glorious. I’m aiming to walk outside for at least 30 min every day. Join me!

Ciao

Afo

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Weekly rant: Is Bitcoin religion?

The crescent moon was spotted. Ramadan is here.

This is a particularly holy time for the 4.5 billion Muslims, Jews and Christians around the world. Muslims are fasting from sunrise to sunset for a month. Jews are preparing for Passover. Catholics are giving up vices to observe Lent as all Christians gear up for Easter.

But the world is losing religion. Mosque, synagogue and church attendance have been falling in the West. Is Bitcoin the new religion?

The similarities are eerie.

Bitcoin maxis seek to evangelize and orange-pill non-believers much in the same way a missionary might seek to convert a pagan. The Bitcoin crowd flocks to Twitter Bitcoin celebrities like the faithful grasp on to every word uttered by televangelists. The plebs tweeting condemnation at Ethereum enthusiasts are reminiscent of the fundamentalist ferociously yelling that all sinners are going to hell. Some tout Bitcoin as the solution to all the sorts of problems just as the devout look to God. But I guess the difference is that we have not had any Bitcoin holy wars….so much blood has been shed in the name of religion. Hopefully Bitcoin does not add to the tally.

This week, Miami will host Bitcoin 2022 - the single largest crypto conference in the world. Brace yourself. It’s going to be an eventful week. Many of the speeches will likely be a rehash of content one can already find online but I expect some major announcements. Controversially, President Bukele of El Salvador is set to give a speech. I have mixed feelings about him. On the one hand, I admire a technology-forward leader. At the same time, I’m disturbed by reports of human rights abuses and corruption. Sigh. This reminds me of the early days when Bitcoin was adopted by Silk Road and other unsavory characters. I hope mass media focuses on the underlying technology not the cast of early adopters. The reality is that savvy criminals adopt new technology to evade police tactics. This is not new. Don’t throw the baby away with the bath water.

NEWS 🖨📜

1. Cross River raises $620M Series D

Full disclaimer: I joined Cross River’s Crypto team at the end of last year. We are hiring 😁

Funds were raised from an enviable set of investors including Andreessen Horowitz and T Rowe Price. Cross River cut it’s teeth by providing infrastructure for the FinTech revolution. The next phase of growth will come from doubling down, expanding internationally and developing new crypto solutions.

Now that we have raised more resources, it’s time to execute. Come build with us. For more info - check out this Tech Crunch article and our website. DM me with questions.

1. Bitcoin Miner goes public via SPAC 📈

PrimeBlock, a US-based Bitcoin miner, plans to go public through a merger with a special purpose acquisition company (SPAC) for an estimated enterprise value of $1.25B

PrimeBlock has over 110 MW of installed data center capacity across 12 facilities in North America. It sources ~60% of it’s power from non-carbon emitting sources. In Q4 2021, it generated about $25M revenue in Q4 2021.

Some investors unwilling or unable to directly purchase Bitcoin have gotten exposure by purchasing shares of publicly traded Bitcoin mining companies like RIOT Blockchain. Shares of Bitcoin miners tends to move in sync with the price of Bitcoin. See below:

Personally, I prefer to hold the real thing rather than a proxy. Do your own research!

1. Axie Infinity: Hackers steal $600M😱😳🥴

I’m a bullish about play-to-earn games. I think there’s tremendous opportunities for them to grow in developing countries with high unemployment and young populations. Axie Infinity is the darling of play-to-earn….this makes the news of this hack all the more devastating.

Here’s what I have gathered: Hackers used social engineering and took advantage of a human error to get away with $600M worth of Ethereum and USDC in the Ronin bridge. The bridge is kinda like a bank for the game. For context, Axie Infinity allows players to trade characters and win earnings which can then be exchanged for ETH or USDC and withdrawn for use in the real world.

The impact was swift: 34% drop in volume of trading in the Axie Marketplace within a day (according to DappRadar). But many Axie players while frustrated, have continued to play on.

Investors in SkyMavis, the owners of Axie Infinity, include Mark Cuban, Alexis Ohanian, and Animoca Brands. SkyMavis said that they will make impacted players whole. Gosh…I hope they have insurance for that….I doubt it.

Unfortunately, this hack is not an isolated incident. Over the past year, hackers have exploited weaknesses in Ronin bridges to steal over $1B.

The Philippines is the biggest market for the game where there are over 2.5 million players. The road to Axie Infinity growing 10x to 25 million players will be paved with tougher security.

1. US crypto policy debate heating up💵🏛

President Biden’s executive order on crypto intensified ongoing debates around how to regulate crypto

This week, Sen Elizabeth Warren (D) once again voiced her support for the US to issue a Central Bank-backed Digital Currency (CBDC). She thinks a well designed CBDC could drive out private digital currencies like Bitcoin and improve safety and efficiency of the market. Opponents fear the CBDC would give the US government unprecedented surveillance over citizens. Additionally they fear that a CBDC which the Federal Reserve could issue at will would not be sound hard money. Rather, an extension of the current system where the US government printed printed billions of dollars over the past 2 years whereas Bitcoin is a deflationary store of value by design. There will only be 21 million Bitcoin.

Sen Cynthia Lummis (R) is working on a new bill that would propose rules to clarify the role of the SEC and other agencies and provide definitions that would classify many popular tokens as securities.

The definition of whether a token is a security is key. If tokens like Solana are deemed to be securities then they would need to be registered with the SEC, crypto exchanges would need to delist them or become broker-dealers…and a host of other adjustments. The net effect is that they would likely increase the cost of serving the customer. That said, there may be some consumer benefits. I need to dig more into this.

That’s all folks!

I hope you have a great week ahead.

Thank you

Afo

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Is the economy gonna boom or bust? Lately, this question has been popping up everywhere. The Russia-Ukraine conflict has pushed oil prices sky high, inflation has been soaring and many people are feeling the pinch in their wallets. So what’s the deal? Apparently, the answer lies in men’s underwear🩲

Alan Greenspan, former head of the Federal Reserve, once said that sales of men’s underwear are a key economic predictor. The theory is that men’s underwear are discretionary spending…no one sees them except when men change in the locker room or when they are about to….😈. BUT when the economy is bad, men postpone replacing their tired, worn, nasty underwear. This theory proved true during the 2008 recession. I found a study across 56 countries that explored this topic. The takeaway is that the theory does not hold true across all countries…Researchers found a strong correlation between men’s underwear sales and economic performance in Kuwait (0.903), Armenia (0.914), Ecuador (0.917) whereas there was a negative correlation in Cyprus (-0.966), France (-0.955), and Mexico (-0.940).

Friends, I have got one question for you: do you plan to buy more underwear in the next 30 days? Fill out this anonymous survey 😁

On my mind 🧠

Crypto for good💖

I have 60 first cousins. I recently had a nice long chat with one of them. During the pandemic she and her husband buckled down and refocused. The result: they doubled their income over the past year🙌.….BUT they are not any happier.

Instinctively, I know this to be true. Beyond a certain point, additional money does not yield more happiness. In fact, it might be the opposite! The great poet Biggie said it best “Mo’ money, mo’ problems”.

Don’t get me wrong. I am an ambitious person. I want more. One of my goals is to leave an inheritance for my grandchildren. That said, I have come to realize that achieving that “number” won’t necessarily make me any happier. Life is unpredictable. There will be tears and laughter….SO if you are guaranteed to cry, is it not better to cry in a Rolls Royce…(or a Lucid for me) versus a broken down and unreliable dumpster fire of a car? 🤣

But what would make me happier? Impact. Positive impact.

This week was the 15th anniversary of my maternal grandpa’s passing. He was a phenomenal human being. A simple, hardworking, ambitious, and kind man. Grandpa’s life was transformed by a scholarship in 4th grade. Through grit and grace, he became a doctor then the Chief Medical Officer of Nigeria. He directly treated thousands of patients but his influence positively impacted millions.

Unlike a bunch of my cousins, I decided not to become a doctor. Instead, I’m going Otolorin (in Yoruba this means “choosing a separate path”) in crypto. But the shared values endure. I have always been guided by potential for impact as I have navigated my career journey.

This brings me to crypto. Too often people focus on price but miss the underlying technology. I believe crypto can be a force for good by solving real world problems. I want to dig in and learn more about these solutions. Would you be interested in a series where I highlight some of the solutions, people, and technologies addressing real world problems? Vote here. Tell me what you would like to see or not.

News📰

1. Ukraine: First Crypto war, now NFTs?🕶🕯

It’s been said that Russia’s invasion of Ukraine is the first crypto war, now NFTs are getting in on it too.

Given West Africa’s colonial past, I’m painfully aware that it is the victor who gets to write history. The Ukrainian government is establishing an NFT collection memorializing the war - presumably it would feature stories of Russian atrocities and Ukrainian courage. Each piece will be art representing a story from a trusted source written onto an unchangeable, globally distributed blockchain

The funds raised from the sales would support humanitarian relief. Would you get in on this?

1. Russia accept Bitcoin for oil and gas ⛽️

On the other side of the conflict, Russia has been increasingly isolated by Western countries

Now, the Russian government is indicating that they may soon start accepting bitcoin payments for oil and gas sales

This is part of a larger story where the US dollar, some say the “petrodollar”, is being challenged as the de facto currency for global oil trade. When China buys oil from Saudi Arabia, they pay in US dollars. Isn’t that odd? If you lived in the US but wanted to buy avocados from Mexico, would you pay for them in Nigerian Naira…I don’t think so! But there is a history and reason why it is that way today. And now it’s been challenged by China’s Yuan…and also Bitcoin. There could implications for the US economy if this catches on at scale…that’s a whole ‘nother conversation.

1. Big oil is mining Bitcoin 🤠

I love it when my world’s collide….for context, I started my career in in oil & gas as an engineer then a market analyst…..now this week, ExxonMobil disclosed that it has been mining Bitcoin with waste natural gas in North Dakota

Exxon is reportedly also considering Bitcoin mining projects around the world including Nigeria, Argentina, and Germany. Exxon is far from being alone in this endeavor. ConocoPhillips are other companies have been doing so for sometime.

Last year, a friend and I evaluated starting a company to mine bitcoin with flared gas in Nigeria. We had some deep concerns and it did not progress. I’m feeling wistful reading about Exxon executing on this idea….maybe we should have persevered…maybe it’s not too late?

1. First fashion week in the metaverse💋💅🕴🎫🛍

Calling all fashionistas! The first Metaverse Fashion Week (MVFW) is upon us.

Decentraland is hosting the MVFW from March 24-27 featuring over 60 established and digital-native brands including the likes of Estee Lauder to Forever 21.

Attendees can snag NFT wearables, listen to expert panels and have fun at after parties…all in the metaverse. Also, there’s a robot named Sophia who will be walking around wearing the latest NFT wearables. If you spot her in the metaverse, you can snap a selfie and enter a giveaway!

1. Gov of Florida: You should be able to pay your taxes in Bitcoin👨‍✈️

It’s tax season! Gov DeSantis of Florida wants to make it possible for businesses to pay taxes in Bitcoin. But why just businesses? You have to remember that there are no personal income taxes in the Sunshine State. I think this is probably more gimmick than substance because why would you pay your taxes with an appreciating asset (Bitcoin) instead of a depreciating one (dollars)? Nonetheless, this move is not surprising as Miami has been positioning itself as an epicenter for the crypto industry.

It’s particularly meaningful because Gov DeSantis is one of the frontrunners to be the Republican candidate for President in the next election. At the very least, he could bring introduce the topic at the national level.

But Florida won’t be the first! That crown belongs to Colorado. Earlier this month, the Centennial State became the first to accept crypto for tax payments. It’s expected to go into effect in June! In Colorado, the plan is to accept crypto payments BUT convert them into dollars for deposit in the state’s treasury. I guess the next move would be to hold crypto on the state’s balance sheet. Which state is going to be the first to do that?

That’s all folks. I hope you have a great week. Remember April Fool’s Day is on Friday!

O dabo

Afo

Thank you for reading 5x5 Crypto News. This post is public so feel free to share it.

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Hey y’all!

I hope you had a terrific week! I’m visiting New Jersey this week. I checked into my hotel, walked towards the elevator when I ran into this:

This is a first! I’ve seen Bitcoin ATMs before but never in a hotel. The narrative I’d heard was that there are 2 main sets of Bitcoin ATM users in the US. The first set are immigrants. They buy and send Bitcoin as a means of sending and saving funds for loved ones in their home countries ex Venezuela, Mexico and Nigeria. This is particularly helpful for people who might be undocumented migrants in the US - they may not be able to have a conventional bank account. The second set are people who value anonymity. They like to use cash to buy Bitcoin.

Have you used a Bitcoin ATM? If yes, what was your use case? What was your experience?

Personally, I don’t love them because the fees are way higher than crypto exchanges. I am curious about the economics of owning Bitcoin ATMs. Might be a interesting side hustle to pursue. Maybe I’ll do a deep dive to investigate assess first.

On my mind🧠

Introducing the world’s first Bitcoin mortgage: Milo! 🚀

Background

Milo! Depending on where you grew up, the word “Milo!” evokes memories of a sweet chocolatey drink ☕ or the 10th mayor of Tel Aviv. I’m in the first group. Yum!

Milo Credit is a global digital bank founded in 2018 to reshape mortgages for global consumers. Most people around the world don’t have access to a mortgage. They often never own a home. Many of those that do gradually build a house painstakingly over years as their funds allow.

This month, Milo Credit launched the first Bitcoin mortgage. They are offering 30-year mortgages up to 100% of the house cost as long as you provide surplus Bitcoin collateral. The interest rates are low and payment plans are flexible and adjustable.

So for example, if you wanted to buy a $200k condo, you might be required to provide $300k Bitcoin collateral. Milo establishes a minimum LTV (loan-to-value) - it’s 67% ($200k/$300k) in this example . My guess is that you would get a lower interest if you provide significantly higher collateral.

But that’s not all. We all know that the price of Bitcoin can be volatile. Milo would monitor the LTV ratio as the price of Bitcoin evolves. Milo would set a LTV ratio at which the borrower would need to either provide more Bitcoin or pay down the loan. Milo might also set an LTV ratio at which the borrower goes into default or loses the collateral. I’d love to learn more about the fine prints.

So continuing the example, if the price of Bitcoin dropped by 50%. The LTV ratio would then become $200k/$150k = 133%. I’m guessing Milo might set the limit for the LTV around 80-100%. This would trigger the borrower to provide more collateral to bring the loan LTV back into balance or risk a default.

Takeaway

Look, no one wants to be this guy:

The Bitcoin Mortgage is NOT a mass-market product. It’s targeted at the lucky few who have bags of Bitcoin but don’t want to sell the underlying asset. It makes sense not to sell today if you believe the value will rise over the next 30 years.

But the devil will be in the details. I’m keen to understand the terms and conditions of the mortgage. The lending risk is somewhat mitigated by the fact that the bank could repossess the house if the value of Bitcoin crashed.

This is an important first step. We still have a long way to go before uncollateralized crypto loans are possible and we are able to extend mortgages to people who don’t have access today. We will get there!

News📰

1. Coinbase is subject to class-action lawsuit🚨

3 individuals who purchased crypto through Coinbase have filed a class action lawsuit against the firm. They allege that Coinbase operated as an unregistered securities exchange because they claim that 79 of the tokens listed on the website are securities.

This lawsuit is not unexpected. The Chair of the SEC is thought to hold the view that many tokens/cryptocurrencies except Bitcoin, Ethereum, dollar-backed stablecoins are securities. If this is true, then Coinbase and other crypto exchanges would be required to register as securities exchanges and adhere to additional requirements.

I don’t think there is cause for extreme alarm. This is bigger than Coinbase. I hope this lawsuit nudges the industry closer to achieving clarity and supportive legislation.

1. Crypto goes to Congress: Dems split 💔🪓

Democratic party is split on crypto. But it’s not progressives vs centrists. The progressive wing is split. On one hand, Sen Elizabeth Warren is a vocal opponent concerned about consumer protections. On the other hand, folks like Rep Ritchie Torres (NY) are embracing the potential to reach the unbanked and cut lower the cost of services.

I liked this quote from Rep Torres:

“The project of radically decentralizing the internet and finance strikes me as a profoundly progressive cause….You should never define any technology by its worst uses. ... There’s more to crypto than ransomware, just like there’s more to money than money laundering.”

This week, Congress questioned leading crypto experts on the potential of Russia to use crypto to launder money and evade sanctions. TLDR: No evidence to suggest that this happening at scale. Here’s the link if you are curious:

1. 68% of US millionaires own crypto 💸💰💲

Survey from Motley Fool finds that we are in good company!

Bitcoin is preferred. 60% of US millionaires own some Bitcoin while 50% of them own Ethereum. Turns out they aren’t immune to memecoins with 86% saying they had invested in the likes of dogecoin and Shiba-Inu

Looking ahead, 59% expect to allocate more of the portfolio to crypto over the next 5 years while 50% of those who don’t currently own any crypto plan to buy some within the next year.

Public Service Announcement: It’s less than a month before Tax Day. Commiserations to my crypto trading friends. Let me know how it goes and what tools helped you.

O dabo

Afo

Subscribe at afolabio.substack.com

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Tomorrow (3/14) is Pi day! Yes, guilty as charged. I’m a recovering math and science nerd. Pi day is an annual celebration of the mathematical constant “pi” which relates to the circumference of a circle. It’s also a great excuse to eat lots of pie.

In honor of Pi day, I wanted to take a walk around the world and touch on a couple crypto relevant stories

Ukraine vs Russia: Crypto in war?

EU may ban proof of work - misguided?

Jambo: Can Play to earn take off in Africa?

Holy metaverse?

1. Ukraine 🇺🇦 vs Russia 🇷🇺: Crypto in war?

The good:

War is an ugly business. It brings out the worst of humanity. Yet even in those dark days, heroes emerge and necessity gives birth to innovation.

Over $100M of crypto has been donated to Ukraine from around the world. Without crypto, many of these donations would have taken 2+ business days to be processed and charged up to 6% fees. But with crypto, we have solutions that provide instant, free-to-near-free international payments.

Speed can be the difference between life and death. Imagine you lived in the US but your loved ones were under siege in Ukraine. They urgently requested money to flee. It could be heart wrenching having to wait 2+ business days. Mind you, if the request came on Friday, funds might not arrive till Tuesday. This could be unnecessary exposure.

The ban:

Many Western governments and companies have put in place sanctions against Russians. This culminated in 7 leading Russian banks being cut-off from the SWIFT global payment network.

SWIFT is a global payment messaging system. It links over 11,000 banks across 200+ countries. The system does not transfer money rather its like an email system for banks. It conducts about 42 million messages every day. The ban on 7 Russian banks would cause inconvenience but I expect they might eventually develop workarounds over time. It remains to be seen how effective the sanctions are. Could crypto provide a workaround?

The other side

In Nigeria, we say, when two elephants fight, the grass suffers. Deep wounds are being gored on both sides. Much of the US news coverage is focused on Ukrainian courage amidst Putin’s over-reach. I have also been thinking about regular Russian citizens - they did not choose this war.

The sanctions and exits of Western companies are dealing a heavy blow to the their economy. Global companies like McKinsey & Company, Visa, PWC, McDonald’s are among the dozens which have ceased operations in the country. Many Russians now find themselves without a job at the exact moment their local currency (the ruble) has lost 40% of value against the US dollar and inflation rising.

Crypto could offer some solutions for them too. Russians could convert their life savings from rubles to US-dollar backed stablecoins or Bitcoin. Out-of-work Russians could consider Play-to-Earn games. Crypto payments could provide optionality in the event that sanctions.

My heart goes out to Ukraine 🇺🇦 and all who have had their lives disrupted by the invasion.

1. EU 🇪🇺may ban proof-of-work

The European Union (EU) has a legislative framework for governing digital currencies, it’s called Markets in Crypto Assets (MiCA). It contains a provision that could limit the use of proof-of-work cryptocurrencies like Bitcoin and Ethereum

Proof-of-work has been a lightning rod as it is an energy-intensive mechanism. Some environmentalists have decried coal-powered bitcoin mining in China as detrimental to the fight against climate change. It is in the in this vein that proof-of-work came under heavy scrutiny. However, I don’t think this premise is based on full understanding of the current state.

Bitcoin miners are highly mobile and incentivized to pursue the lowest energy source. Today, 39% of bitcoin mining is powered by renewable energy while only 13% of US power generation is renewable (EIA). Bitcoin mining can subsidize capital investments to build more renewable energy facilities.

The EU is right to consider opportunities to reduce carbon footprint. But it is odd to start with Bitcoin mining given its miniscule carbon footprint compared to other related activities like the traditional banking system (650x), gold mining (90x), and paper currency printing (11x). Furthermore, a 1% reduction in carbon emissions from global aviation sector would be 5x larger than total carbon emissions associated with Bitcoin mining. Shouldn’t we focus on that?

1. Jambo: Play to earn in Africa💰

Last year, I shared the story of how Play-to-earn NFT games were providing thousands of Filipinos a means of livelihood. Africa has many of the same strong fundamentals: 60% of the population is below 24 years old and almost 50% of university graduates in Africa are unemployed.

James Zhang, a 3rd-generation Chinese-Congolese, founded Jambo in Kinshasa to capitalize on the same trends in Africa. Jambo’s goal is to become the Web 3.0 super app for Africa. They have already reached 12,000 students across 14 countries (Morocco, Nigeria, Ethiopia, Equatorial Guinea, Kenya, Congo, Uganda, Rwanda, DR Congo, Tanzania, Zambia, Namibia, Madagascar and South Africa).

The students go through a 10-weeek program to explore opportunities in play-to-earn gaming and decentralized finance (DeFi). Jambo also takes on some of the students to become local ambassadors. Jambo provides scholarships which enables students to earn money. In some cases, students are making 2x what their salary might be.

Jambo recently raised $7.5M from a group of investors including Coinbase Ventures, Alameda Research and other notable crypto investors. The goal is to achieve 1M downloads by the end of year.

Too often, US VCs looking to invest in Africa focus in on Nigeria, South Africa and Kenya. It makes sense these are some of the most mature and dynamic hubs on the continent. However, it belies the difference and opportunities in the other 51 countries in Africa. I’ve been impressed by Jambo’s strategy of quickly getting boots on the ground in a a variety of countries.

1. Holy Metaverse ⛪️✝️

This week, I learned that there is a VR Church in the metaverse! They host Sunday services, weekly groups, and offer volunteer opportunities…100% in the metaverse. The clincher is that it was established in 2017!

One of the great hopes of the metaverse is to improve access. This has proved true in the VR Church. One of the leaders shared how she had been diagnosed with a neuro-muscular condition which effectively left her homebound since 2010. VR Church has given her an avenue to be actively engaged in a community.

Just when I was thinking this was pretty fringe stuff, today my sister and brother-in-law shared that their church was planning to run part of their youth summer program in the metaverse.

Church attendance in the US has declined in recent decades. It makes sense to leverage technology to reach the next generation. However, VR Church proves that there is staying power. It delivers on creating a more accessible and global experience. What a great time to be alive.

I hope you have a wonderful Pi Day and week ahead.

O dabo

Afo

Subscribe at afolabio.substack.com

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What’s your favorite animal? For a long time I really didn’t have one. When asked, I’d sometimes pick a random African animal or something philosophical to try and impress whoever I was with. Ugh. Thankfully I’ve passed that stage. Lately, I’ve been watching squirrels. I see them everywhere from our backyard to the parks when I’m out cycling. Beyond their cute fluffy tails, squirrels just always seem happy, energetic and playful. They seemingly bound from tree to tree without losing enthusiasm. Have you ever seen a sad or moody squirrel 🐿 ?

Crypto prices crashed this week. How did you fare? I hope you channeled your inner squirrel. I’ve been zen. My approach is to devise a strategy then automate execution over the long-term. If prices continue to slide then there might be some very attractive opportunities. Are you ready? What projects are on your shopping list? Remember, Uncle Warren Buffett said “be fearful when others are greedy and be greedy when others are fearful”.

Crypto shopping list🛒

One of my goals this year is to significantly expand my crypto portfolio beyond my bitcoin and ethereum base. I missed out on a TON of upside last year by playing it very safe and not executing on recommendations from my friends. If the crypto price slide extends there might be opportunities to pick up some coins at decent entry points.

I recently finished reading “The Psychology of Money” by Morgan Housel. It argues that we all make rationale financial decisions based on our background. The challenge is that we all have very different backgrounds, personalities and aspirations. For me, the most important thing is peace. A super aggressive strategy might give me amazing returns but it might cost me my sleep at night. That’s not a cost I'm willing to pay.

Additionally, we often only think about returns that we could have made but we discount the losses we could have incurred. Social media is a highlight reel. Most people share their triumphs but are mute on losses. So I say this to say, don’t cry over spilled milk. Figure out what works for you then get it done. As we say in Nigeria, “paddle your own canoe”.

Disclaimers:

I don’t offer any financial advice. I’m just a guy with a laptop trying to figure this thing out. Please do your own research.

My crypto shopping list is a work in progress. It’s subject to change at any time. I’m very much still learning. I’m also not sharing my full list of projects that I’m curious about - that might deserve it’s own edition or two lol.

Please share your ideas with me too!

Crypto shopping list

I already have some of these but I want MORE

Solana (SOL) - low transaction cost, seen as an ethereum challenger

Chainlink (LINK) - bringing real-world data on-chain

Avalanche (AVAX) - fast smart contracts

Ecomi (OMI) - NFT play; it’s the token for Veve which has major partnerships

Decentraland (MANA) - leading metaverse project

NFT update📈

Last week, I shared my excitement about the new Ancient Empires NFT collection. The collection celebrates the history of ancient African and Latin American civilizations by creating art NFTs which could appeal to a broader population. Well I did it! I made an impulse buy. (Not sure we should celebrate that but this is where we are…hahaha).

I chose this piece because of the cultural significance of the mask the man is wearing in the picture. Masks are a key part of the cultural heritage of the Yoruba and Benin people. (Context - I’m Yoruba; the Yoruba and Benin empires are in modern-day Nigeria but they have ancient linkages and a tremendous art heritage. Unfortunately, many culturally significant pieces were destroyed when our palaces were raided during wars with the Portuguese and British armies. Many of the surviving pieces were looted and put on display in museums across global art capitals from London to New York and elsewhere.

I named my NFT “Oranmiyan” after a prince of the Yoruba and Benin empires. Over 800 years after his death, his descendants still sit on the throne in Benin. My dude looks like a fierce warrior. Maybe I should hit the gym more so my arms match his…

NEWS 📰

1.Federal Reserve finally published it’s paper on CBDCs 💸

The US Federal Reserve FINALLY published it’s long waited paper on Central Bank Digital Currencies (CBDCs). The paper lays out pros and cons of CBDCs. It does NOT make a recommendation. Rather, the Fed is seeking input from the public and will only act if Congress tells it to do so.

I read the paper. I am not convinced 2 of the pros listed by the Fed are real.

Improve cross-border payments: The average outgoing international payment from the US has a 5% fee. Introducing a CBDC isn’t magically going to solve this. There will need to be conversions among various CBDCs. I am not convinced this system would outperform the existing crypto technology today ex lightning network.

Improve financial inclusion: 5% of the US is not banked and another 20% are significantly underbanked ex they routinely depend on high cost, inefficient services like pay day loans, etc. People say crypto and CBDCs will improve financial inclusion but they routinely fail to demonstrate how. This frustrates me. Illiteracy, lack of trust, and low income are leading drivers for exclusion. These are not addressed by a CBDC. Furthermore, during the pandemic CBDC advocates pointed out how the government payment of stimulus funds would have been more efficient if we had CBDCs and each US person held an account with the Federal Reserve. Well, the Federal Reserve Act specifically says the central bank can’t bank retail customers. Maybe I’m missing something.

That said, I definitely agree that it is in the US strategic national interest for the dollar to continue being the world’s reserve currency. Other countries want the influence it provides. The dollar could become vulnerable if other countries (cough China) provides a superior technology. The map below shows 9 countries (including Nigeria) have launched CBDCs with 14 countries (including China) running pilot tests and 16 countries (including Russia) have them in development. The US needs to move here.

1. Twitter verifying NFTs 🪞

Crypto Twittersphere has been awash with NFTs as profile pictures. Some say it’s the ultimate status symbol to indicate you are part of the community. But what’s stopping posers who don’t actually own NFTs from uploading a picture of someone else’s NFT and using that as their profile picture. Well nothing.

Until now! Twitter is linking your digital asset wallets to your profile. Thus, you’d only be able to upload NFTs you own as your profile picture. I guess if you do this there’ll be some kind of check mark to indicate it’s been verified.

This is an important move for 2 reasons. First, Twitter is one of the first social media platforms to integrate NFTs. Others will follow. Secondly, it marks a departure from Jack Dorsey’s Bitcoin-only philosophy as NFTs are primarily on Ethereum, Solana etc. I’m expecting to hear more from Twitter.

1. a16z makes first investment in Africa 🕹

a16z, the famed crypto, FinTech and consumer tech VC firm has made it’s first investment in an African startup, Carry1st. a16z was an early investor in Facebook, Coinbase and many other household names.

This investment stands out because it’s a gaming company headquartered in South Africa. Of course, there will be a crypto/web3.0 angle to this. I’ve been vocal about how bullish I am on gaming in Africa. I guess I’m in good company lol.

Carry1st already accepts various cryptocurrencies as payments. They are looking to expand that. Let’s stay tuned.

That’s all folks! Remember, be a squirrel 🐿

O dabo

Afolabi

Subscribe at afolabio.substack.com

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What’s your favorite animal? For a long time I really didn’t have one. When asked, I’d sometimes pick a random African animal or something philosophical to try and impress whoever I was with. Ugh. Thankfully I’ve passed that stage. Lately, I’ve been watching squirrels. I see them everywhere from our backyard to the parks when I’m out cycling. Beyond their cute fluffy tails, squirrels just always seem happy, energetic and playful. They seemingly bound from tree to tree without losing enthusiasm. Have you ever seen a sad or moody squirrel 🐿 ?

Crypto prices crashed this week. How did you fare? I hope you channeled your inner squirrel. I’ve been zen. My approach is to devise a strategy then automate execution over the long-term. If prices continue to slide then there might be some very attractive opportunities. Are you ready? What projects are on your shopping list? Remember, Uncle Warren Buffett said “be fearful when others are greedy and be greedy when others are fearful”.

Crypto shopping list🛒

One of my goals this year is to significantly expand my crypto portfolio beyond my bitcoin and ethereum base. I missed out on a TON of upside last year by playing it very safe and not executing on recommendations from my friends. If the crypto price slide extends there might be opportunities to pick up some coins at decent entry points.

I recently finished reading “The Psychology of Money” by Morgan Housel. It argues that we all make rationale financial decisions based on our background. The challenge is that we all have very different backgrounds, personalities and aspirations. For me, the most important thing is peace. A super aggressive strategy might give me amazing returns but it might cost me my sleep at night. That’s not a cost I'm willing to pay.

Additionally, we often only think about returns that we could have made but we discount the losses we could have incurred. Social media is a highlight reel. Most people share their triumphs but are mute on losses. So I say this to say, don’t cry over spilled milk. Figure out what works for you then get it done. As we say in Nigeria, “paddle your own canoe”.

Disclaimers:

I don’t offer any financial advice. I’m just a guy with a laptop trying to figure this thing out. Please do your own research.

My crypto shopping list is a work in progress. It’s subject to change at any time. I’m very much still learning. I’m also not sharing my full list of projects that I’m curious about - that might deserve it’s own edition or two lol.

Please share your ideas with me too!

Crypto shopping list

I already have some of these but I want MORE

Solana (SOL) - low transaction cost, seen as an ethereum challenger

Chainlink (LINK) - bringing real-world data on-chain

Avalanche (AVAX) - fast smart contracts

Ecomi (OMI) - NFT play; it’s the token for Veve which has major partnerships

Decentraland (MANA) - leading metaverse project

NFT update📈

Last week, I shared my excitement about the new Ancient Empires NFT collection. The collection celebrates the history of ancient African and Latin American civilizations by creating art NFTs which could appeal to a broader population. Well I did it! I made an impulse buy. (Not sure we should celebrate that but this is where we are…hahaha).

I chose this piece because of the cultural significance of the mask the man is wearing in the picture. Masks are a key part of the cultural heritage of the Yoruba and Benin people. (Context - I’m Yoruba; the Yoruba and Benin empires are in modern-day Nigeria but they have ancient linkages and a tremendous art heritage. Unfortunately, many culturally significant pieces were destroyed when our palaces were raided during wars with the Portuguese and British armies. Many of the surviving pieces were looted and put on display in museums across global art capitals from London to New York and elsewhere.

I named my NFT “Oranmiyan” after a prince of the Yoruba and Benin empires. Over 800 years after his death, his descendants still sit on the throne in Benin. My dude looks like a fierce warrior. Maybe I should hit the gym more so my arms match his…

NEWS 📰

1.Federal Reserve finally published it’s paper on CBDCs 💸

The US Federal Reserve FINALLY published it’s long waited paper on Central Bank Digital Currencies (CBDCs). The paper lays out pros and cons of CBDCs. It does NOT make a recommendation. Rather, the Fed is seeking input from the public and will only act if Congress tells it to do so.

I read the paper. I am not convinced 2 of the pros listed by the Fed are real.

Improve cross-border payments: The average outgoing international payment from the US has a 5% fee. Introducing a CBDC isn’t magically going to solve this. There will need to be conversions among various CBDCs. I am not convinced this system would outperform the existing crypto technology today ex lightning network.

Improve financial inclusion: 5% of the US is not banked and another 20% are significantly underbanked ex they routinely depend on high cost, inefficient services like pay day loans, etc. People say crypto and CBDCs will improve financial inclusion but they routinely fail to demonstrate how. This frustrates me. Illiteracy, lack of trust, and low income are leading drivers for exclusion. These are not addressed by a CBDC. Furthermore, during the pandemic CBDC advocates pointed out how the government payment of stimulus funds would have been more efficient if we had CBDCs and each US person held an account with the Federal Reserve. Well, the Federal Reserve Act specifically says the central bank can’t bank retail customers. Maybe I’m missing something.

That said, I definitely agree that it is in the US strategic national interest for the dollar to continue being the world’s reserve currency. Other countries want the influence it provides. The dollar could become vulnerable if other countries (cough China) provides a superior technology. The map below shows 9 countries (including Nigeria) have launched CBDCs with 14 countries (including China) running pilot tests and 16 countries (including Russia) have them in development. The US needs to move here.

1. Twitter verifying NFTs 🪞

Crypto Twittersphere has been awash with NFTs as profile pictures. Some say it’s the ultimate status symbol to indicate you are part of the community. But what’s stopping posers who don’t actually own NFTs from uploading a picture of someone else’s NFT and using that as their profile picture. Well nothing.

Until now! Twitter is linking your digital asset wallets to your profile. Thus, you’d only be able to upload NFTs you own as your profile picture. I guess if you do this there’ll be some kind of check mark to indicate it’s been verified.

This is an important move for 2 reasons. First, Twitter is one of the first social media platforms to integrate NFTs. Others will follow. Secondly, it marks a departure from Jack Dorsey’s Bitcoin-only philosophy as NFTs are primarily on Ethereum, Solana etc. I’m expecting to hear more from Twitter.

1. a16z makes first investment in Africa 🕹

a16z, the famed crypto, FinTech and consumer tech VC firm has made it’s first investment in an African startup, Carry1st. a16z was an early investor in Facebook, Coinbase and many other household names.

This investment stands out because it’s a gaming company headquartered in South Africa. Of course, there will be a crypto/web3.0 angle to this. I’ve been vocal about how bullish I am on gaming in Africa. I guess I’m in good company lol.

Carry1st already accepts various cryptocurrencies as payments. They are looking to expand that. Let’s stay tuned.

That’s all folks! Remember, be a squirrel 🐿

O dabo

Afolabi

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My wife and I typically do a quick getaway at the end of the year. It’s nice to ring in the new year in a new city but we also invest time to review our goals and set new ones. We hit all the big ones: relationship, fitness, financial goals and more.

This year, crypto has become a bigger share of our portfolio. We ramped up our investments and fortunately those investments have done well in the crypto bull run. We continue to think through how best to play in the space.

Six months ago, my brother-in-law and I started experimenting with bitcoin mining. I shared about it in April. Today, we will dive into the ROI of our bitcoin mining experiment and then address exciting developments in the cryptoverse.

REVIEW: Bitcoin mining with Compass🚀🚀🚀

TLDR: We earned 60% ROI on bitcoin mining versus 29% if we just bought bitcoin

Background

Compass Mining offers a white glove service for regular folks looking to get into bitcoin mining. We purchased a miner (high powered computer) and had it installed at a facility in Nebraska. It took about a month for the miner to be delivered from China. We chose to host the machine at an industrial site instead of our home because they have access to much lower electricity rates.

We recently sold the miner to upgrade to a more powerful model. Felt like a good time to assess if the ROI of mining bitcoin was better than buying and holding bitcoin.

Numbers

Case A: Bitcoin mining 💻

Costs: The miner cost $9,800 upfront and we paid $150 a month in hosting fees. Overall, it cost us $10,700 over the 6 months the miner was in operation.

Revenue: We sold the miner for $12,469. Yes, you read that right. We sold the miner for more money than we bought it. We benefitted from the tight market for machines. In addition, the miner produced 0.1 bitcoin ($4,697 at today’s price).

ROI: We achieved a 60% return on investment.

Case B: Buy and hold📈

Costs: If we did not buy a miner, we would have invested $9,800 in bitcoin on June 1st. This would have yielded 0.26 Bitcoin (based on $37,340 on June 1).

Revenue: The bitcoin would have earned about $287 interest in a BlockFi account. More importantly, there’s been significant appreciation since June. The initial investment in 0.26 bitcoin would now be valued at $12,327 (based on bitcoin price of $46,970 today).

ROI: We would have achieved a 29% return on investment.

Takeaways📊

Bitcoin mining could outperform buying and holding the bitcoin. However, the economics would look different if we sold the miner for less than we bought it. I imagine the price of miners will drop during the crypto market. Timing is key.

The 60% ROI is good but it pales in comparison to some other opportunities we could have pursued. During that time period, Solana was +460% and Chainlink was +280%. Bitcoin mining could be a part of a comprehensive crypto strategy. But please do your own research. I am not a financial adviser, just sharing my experience.

NEWS 🗞

1. Winter is coming: Are you in it to win it?

2021 has been a standout year for crypto. Millions of new investors have dived into the space. Millions of people have found utility and joy through the products and services enabled by blockchain technology. But it is NOT always going to be like this.

Crypto winter is coming. I don’t know when it will be or how long it will last but history tells us to expect a deep, sustained price crash for a couple years. The good news is that when winter is over, the crypto summer bull market will take us to new heights.

Crypto OGs like the winter because the fakers get out and the OGs double-down. Coinbase used the last crypto winter to buy up companies that have helped cement their dominant position. As an individual, you should have a strategy for the crypto winter. Remember, Warren Buffett said “be fearful when others are greedy, and greedy when others are fearful.” Are you in it to win it?

1. Crypto for Christmas?

CashApp and Robinhood have rolled out the capability to send crypto gifts just in time for the holidays.

I am excited about this because both of these companies have a sizable user base

This could be a great gift for that person who has everything. We have friends who have been gifting bitcoin to all the children in their life.

1. Metaverse Magna: Play to earn in Africa

I am very bullish about the potential of play to earn in Africa. This is because 60% of Africans are under 25yo, internet penetration is greater than 60% in key countries, and unemployment has worsened.

Metaverse Magna was launched this week. It is the first and largest African crypto gaming DAO with a scholarship program. In Asia, gamers have earned up to $1000 a month playing crypto games but the start-up costs can be high ($1200 for Axie Infinity).

Metaverse Magna has a scholarship program with over 160 gamers using rented out Axies and splitting the earnings. With Africa’s population set to grow to 1.7 billion by 2030 (World Bank), I am excited for play-to-earn games to gain a foothold on the continent.

1. Jack Dorsey names Bitcoin Trust board

Jack Dorsey and Jay Z previously announced they would donate 500 bitcoin to set up ₿trust, an endowment to fund bitcoin development with a starting focus on teams based in Africa and India.

This week, they announced 4 board members out of 7,000 applicants. The board will be made up of 1 South African and 3 Nigerians. I’m excited to see Nigeria (over?) represented. More excited to see what the trust will accomplish.

1. Everyone has an NFT, metaverse play

It feels like everyday another major company announces a play in NFT and/or the metaverse. This brings me back to the point about the fakers getting out of the space during the crypto winter.

This week, Nike bought a company that makes sneakers for the metaverse

Companies are opening up virtual offices in the metaverse for employees to return to work. Maybe Bill Gates was up to something, I remain a lil skeptical in the short-term.

Here’s a roundup of what companies’ said about the metaverse during their earnings call

That’s all folks! I hope you have a merry Christmas!

O dabo

Afo

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Hey friends,

About a year ago, I started publishing this newsletter as a forcing mechanism to document my learning, clarify my thinking and keep up with crypto news. I decided to share in the event that someone else might find it useful. Thank you for coming on this journey with me. #wagmi! (Crypto babble for “We’re all gonna make it!”)

Well fam, I’ve got some exciting news to share: I did it! I took the plunge. This week will be my first working in crypto full-time.

New beginnings 🚀

I came across a conversation between a McKinsey senior partner and executives at Cross River, a technology-forward bank. I was instantly struck by Gilles Gades’ (CEO) and Adam Goller’s (Head of FinTech banking) energy, innovation, and openness to crypto. So I reached out to the team. This led to a series of inspiring conversations and an offer to join the new crypto team!

Cross River is not your typical bank. It is backed by esteemed investors like KKR, Andreessen Horowitz, Battery Ventures, and Ribbit Capital. It provides banking-as-a-service to FinTechs like Stripe, Coinbase, and Affirm. For example, they power payments when you purchase a Peloton and pay for it in installments. Cross River also banks a number of crypto companies.

Many large and small businesses were hurt in the pandemic. Cross River leveraged technology to become the 4th largest processor of the Payment Protection Program (PPP) loans. In so doing, the 13 year old bank with ~600 employees outdid much larger rivals like Wells Fargo.

Now, the company is building a suite of offerings to enable FinTechs and other companies provide crypto payments, lending, and banking to their customers. Our mission is to onboard the next billion people into crypto by bringing crypto to FinTech. I’m really excited to join this talented and passionate team. And we are still hiring. Let’s go!

Ruminations 🧠

1. Meet people where they are

A couple months ago I conducted a survey and learned that consumers would prefer to access digital assets through their existing financial accounts. I can see the logic, why open up a new account with an untrusted brand if you don’t have to?

FinTechs like PayPal (392M users), CashApp (70M users), and Robinhood (23M users) are scratching that itch. These companies already enable customers to buy, sell and hold a limited set of crypto. But there is a LOT more they could be doing.

1. What about banks?

Only a handful of banks have enabled their Main Street customers to engage with digital assets. A year ago, Quontic Bank launched a bitcoin rewards checking account. Then a few months ago, Vast Bank became the first in the US to enable customers to buy, sell and hold crypto.

But for the most part, the initial focus of big banks has been enabling institutional clients and high net worth individuals to custody crypto. BNY Mellon, US Bank, JP Morgan, Morgan Stanley, Goldman Sachs and others have made public moves. There are also banks working privately. Bank of America now holds over 160 patents related to blockchain.

1. Why are banks moving gingerly?

Initially, it was lack of understanding. But today, bank executives are putting in the work to explore crypto. The COO of BoA reportedly pivoted from being a crypto denier to a crypto supporter after investing hours watching lectures, testing out products and talking with experts.

Now, I think the speed bumps are primarily regulatory. Banks are held to higher standards than FinTechs. Measures to safeguard consumers sometimes slow down innovation. Plus, regulations are still evolving and banks will need to build new fraud, AML, risk and compliance muscles to handle this new asset class.

Lastly, some banks legacy technology systems are not well suited to meet the increasing demands of modern consumers. Many of these systems would need to be replaced or may require workarounds to integrate crypto solutions.

As the fog rises, there will be a huge opportunity to partner with banks, FinTechs, and other companies to enable crypto payments, lending and banking services. I’m excited to help make this happen.

News🗞

1. Metaverse continues to be all the rage

Grayscale published a report stating that the metaverse is a $1 trillion opportunity

The red hot housing market extends to the metaverse! This week two records were set! A single plot of land in Axie Infinity sold for 550 ETH ($2.5M). Also an estate of 116 parcels of land in Decentraland sold for 618,000 MANA ($3.2M).

I have been dipping my toes into MANA (Decentraland). Still figuring out how best to gain appropriate metaverse exposure. I recently learned about two funds which kinda operate like ETFs for metaverse cryptos: Makara Metaverse and Index Coop Metaverse. Disclaimer: I have not invested in these. Please do your own research. Let me know your thoughts!

1. Hackers using Google Cloud to mine

86% of 50 recently hacked Google Cloud accounts were used for crypto mining

Crypto mining requires large amounts of computation power to produce yield, leveraging Google’s massive cloud computing eases that burden

But this is wrong! Unethical moves like this taint the industry and feed the false narrative that crypto belongs to shadowy underworld. Stop it, whoever you are!

1. Davido launches a social token

Davido is a living Afrobeats legend. His music sets the tone for every occasion. He is by far the most followed African musician on Instagram with over 22 million fans and another 36 million across Facebook and Twitter. I’m one of them. Full disclosure, Davido’s was the last concert I attended pre-pandemic.

This week, the 29 year-old launched a social token “Echoke” to give power back to the fans…and cut out the middleman.

The tokens will be airdropped for free to fans for a year beginning Nov 28. Holders of the token will get free access to giveaways, NFTs, backstage passes, jobs, festivals, exclusive merchandise, media, and hospitality benefits. I’m looking forward to checking this out! Stay tuned.

That’s all folks! Thanks for hanging with me. Remember, no matter your circumstance, if you are able to read or listen to this then you have a lot to be thankful for. I hope you have a wonderful week.

Best,

Afo

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Last week, I scored a personal win. I deadlifted 405 lbs!

I remember when I was first struggling to deadlift just the 45lb bar. Now I have lifted 9x that! But it was not smooth sailing. I tried and failed to lift 405lbs at least 5 times over the past month. Truth is, I was intimidated. My mindset was my weak point not my body.

I love doing things which I did not think I could do…but it’s not easy. This growth mindset also translates into other spheres of life. I started my career as a chemical engineer designing oil refineries but I’ve reinvented myself a couple times as I transitioned to become an oil market analyst then a product manager then a management consultant and now a payments product strategy director.

Similarly, companies that have thrived for over a century have reinvented themselves and adopted new technology. Nobody wants to end up like Blockbusters or Kodak. However, I am increasingly concerned that some legacy financial institutions are not reinventing themselves with appropriate haste. Growth mindset is for people and corporations. Innovate or die.

News

1. Pay like you email

In the 1970s, my dad won a scholarship to attend college in England. His parents didn’t have a phone at home. So my dad would write letters that would end up on ships sailing from Europe to Africa. Sometimes it took months for letters to be delivered.

Flash forward 35 years, I left my family in Nigeria to attend college in the US. Thankfully, the internet made it possible for me to send emails and have WhatsApp calls. I was able to instantly communicate for free thanks to the internet: a global standard protocol for exchanging files.

In the time that communication rapidly evolved in leaps and bounds, payments have only taken tentative steps forward. We are still using many of the same dated solutions (ex Western Union, SWIFT) from when my dad was in college.

I use Gmail. Imagine if I could only send emails to other people who use Gmail too. Email would be extremely limiting, right? This is analogous to some of the modern payment solutions ex CashApp. The systems are not interoperable. Therefore, consumers end up with a bunch of apps.

The lack of interoperability is worse when you try to send money to a different country. There is no difference when I send an email to my brother-in-law in San Diego versus my other brother-in-law in England. They are both free! But it’s not the same with payments. Instead, you have to deal with different currencies, different apps, lots of fees….it is just a pain!

Bitcoin Lightning Network is like email. It enables users to transfer funds irrespective of country, app platform and best of all it’s free. I am extremely bullish on the potential for the Lightning Network to disrupt the payments space.

There are economic drivers for this too. In 2020, Costco had $122B sales. They paid about 2.9% fee on their Visa transactions generating up to $3.5B for Visa. If Costco switched from Visa to the Lightning Network, they could boost their profit from $21B in 2020 to $24B. Better yet, they could decide to share some of the savings with their customers like me and give us even lower prices. Nice!

Customers just want to get their job done. The average consumer has no idea how the existing payments system really works. I don’t think the average person cares or needs to know how the Lightning Network works either. People will flow to cheaper, faster, better solutions. The herd is coming.

1. Twitter Lightning Payments

This week, Twitter expanded its tipping program to now enable users send bitcoin payments to each other.

The tipping program already enabled users to send payments using CashApp and Venmo.

Bitcoin tips are possible using Strike which runs on the Bitcoin Lightning Network. Strike enables instant and free bitcoin payments globally.

I am really excited to see how users respond to this feature. I can imagine folks using tips as a way to send money to loved ones in different countries. I am also curious to see how the other social media platforms respond. Facebook has famously struggled to launch a digital currency. Why not just integrate into an existing one?

1. Bahamas: Sun, Sand and CBDCs

When I think of Bahamas, I think of sun, sand, swimming pigs….and now the world leader in Central Bank Digital Currencies.

Last October, Bahamas became the first country to launch a Central Bank Digital Currency (CBDC). The country consists of 700 islands scattered across the Caribbean. The Central Bank was incurring high costs flying cash across the archipelago. A CBDC fixes that.

The timing was fortuitous. COVID-19 suddenly increased the demand for government aid. This would have triggered long lines at social services offices at a time when public health officials were advising social distancing.

The introduction of the CBDC enabled the government to directly deposit money into citizens accounts.

Other

1. Nigeria Education Foundation

TLDW

Oct 1st was Nigeria’s Independence Day. I started a nonprofit to help advance K-12 education in Nigeria.

12+ million children in Nigeria are not enrolled in school, by far, the highest number anywhere :-(

Many children enrolled are getting a sub-par education, the government estimates 20% of Grade 6 students can NOT read or write

I’m partnering with Destiny Trust to sponsor marginalized children. If you would like to join, we are accepting US dollars, Bitcoin and other cryptocurrencies. We are a registered 501©3 non-profit. All donations go to the kids. You receive a receipt for tax purposes.

Thanks for your attention. Please let me know what’s on your mind. I always appreciate feedback. Have a great week y’all!

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They say history does not repeat itself but it rhymes. Today, Hurricane Ida hit the Louisiana coast on the 16th anniversary of Hurricane Katrina. I have gone through a couple hurricanes, they can be awfully devastating. Ida seems particularly nasty. My thoughts and prayers are with everyone impacted.

For this week’s episode, I’m taking a deeper look at 3 stories and not the usual 5. I think you will enjoy it. Let me know what you think.

NEWS

1. Culture eats finance?

Visa dropped $150,000 on an NFT this week. See the pic below. They are the first corporation to do so. But why does this matter?

CryptoPunk #7610 (2017). Courtesy of Visa, via Twitter.

The internet brought new services, products and careers like email, Twitter, and social media influencers. The crypto age is doing the same. In 2001, I could not have imagined sleeping in a strangers bed but 20 years later we are happy Airbnb guests. Keep an open mind, its early days for crypto.

NFTs have been on a tear lately! There were over $2.5B sales of NFTs in the first half of the year. Over 1 million pieces of crypto art have been sold for over $800M.

Now back to Visa. Visa believes that NFTs could play a role in the future of commerce. They did not just some cash, Visa also wrote a 17-page white paper about their thesis. They believe that every brand and company will create and/or acquire NFTs. I love that they are exploring and positioning themselves to help their clients. I need to dig into NFTs too. But here’s what I know:

NFTs connect to culture. They cut across visual arts, music, sports, gaming and more. NFTs allow fans to own a piece of sports history ex NBA Top Shot. NFTs enable collectors to have an immutable record of ownership. NFTs are good for creators - they could earn royalties on successive resales. Lastly, NFTs could enable gamers to own assets in game, then move and sell them elsewhere.

In the heydays of Clubhouse, there were rooms full of hundreds of people trying to learn about NFTs. Many of these people were creators, collectors and fans who were new to the cryptoworld. Culture not finance brought them over.

The race is on to see whether culture (ex NFTs) or finance (ex DeFi) will onboard the next 100 million users.

1. Crypto and sports: match made in heaven?

The love fest between crypto and sports is blooming. The top draft picks of the NFL and NBA signed endorsement deals with crypto companies. FTX has naming rights to the Miami Heat’s arena and Crypto.com will be sponsoring F1.

But right now, I think sport tokens is where the fun is at. In soccer, major teams like Arsenal, AC Milan and Barcelona have issued digital tokens which can be sold to fans and traded like an asset. I like it. Ownership of sports teams is a billionaires game. What’s the average die-hard fan to do?

Tokens enable fans to signify their devotion…think of it like a digital jersey. In exchange, teams let token owners have a small say in how the team is run. Juventus token holders voted on the song to be played when a goal is scored. Maybe future token holders might have a say on jersey or player selection.

COVID-19 related social distancing has crippled ticket sales and sports revenue. 40 soccer teams in Europe earned $200M in additional revenue from token sales. The value of tokens go up and down like stocks. This week, rumors that Cristiano Ronaldo was moving to Manchester City sent the value of their token surging 25%. But it now looks like Ronaldo may end up at Manchester United instead.

Tokens are enabling fans to learn a bit about crypto eco-system without even trying. Culture is eating finance.

1. Stablecoins: Will a rose by another name still smell as sweet?

Lightning does not strike the same place twice. Nah. Something is brewing. These were my sentiments when two leading stablecoin issuers made announcements in as many days.

The value of stablecoins, unlike cryptocurrencies, are pegged to another commodity. This means that a US dollar backed stablecoin should always equal $1. The 2 largest stablecoins, Tether and Circle, have published reserves indicating that they are not 100% cash and cash equivalent. This week, Circle announced it’s intention to move from 61% cash and cash equivalents by September.

The following day, Paxos, the issuer of Paxos Dollar (PAXD) announced two things. First, it was rebranding Paxos Dollar moniker from PAX to USDP. Second, it reaffirmed that it holds 100% cash reserves.

I think this flurry of activity is linked to Facebook. Facebook has struggled to launch a digital currency payment system. But it’s leadership indicated that its digital wallet could be launched before year end. Facebook has reportedly had conversations with Circle and Paxos about partnering on a stablecoin.

Facebook has almost 3 billion monthly active users. It has already launched WhatsApp Pay in India and Brazil. It could grow a formidable payments business across Facebook, WhatsApp and Instagram. But I expect they will continue to face a lot of regulatory scrutiny.

Tweet of the week

TLDR: It’s not too late to begin investing today.

Things that I’m excited to read

1. DeFi: Future of Finance

This new book written by a trio of a Duke professor, a venture capitalist and a DeFi founder, was recommended by one of our loyal readers. Thanks!!

The authors argue that the current financial landscape is ripe for disruption and we are seeing, in real time, the reinvention of finance.

This book conducts a deep dive into some of the most innovative protocols in the DeFi space such as Uniswap and Compound. Can’t wait to dive in!

1. Consensys: DeFi report

Consensys is the leading blockchain technology company that develops tools and enterprise solutions on Ethereum. If you have a Meta Mask wallet, you are their customer. They also partnered with JP Morgan to develop their crypto solution.

Consensys publishes a quarterly report on the state of DeFi. The Q2 2021 report is here.

Thanks for coming for this week’s ride. I’ll see you next time. Be safe.

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This weekend, Warri, a city I grew up in crowned a new king. I loved seeing the pomp and tradition on display. The new king is just 37 years old, very young in a country where monarchs are often crowned in their 50s through 70s. His speech spoke of history, inclusion and ambition. Hmm, that word: ambition. Friends, I have lots of ideas about topics to explore and share with you. But my time is limited. I am looking for someone to join the 5x5 Crypto team so we can go further faster. Requirements:

Curious about crypto

Ready to have fun

Let me know if you are interested!

News

1. Afghanistan: Funds transfer is life or death

Many of us were moved by the heart-wrenching scenes in Afghanistan this week. I can’t pretend to know how it feels. But I can marginally relate to the Afghans living in the US trying to send money home to help loved ones.

In this climate of fear and desperation, Western Union announced that it was stopping operations in Afghanistan…the very moment when sending funds could literally be the difference between life and death. This is infuriating. It does not have to be this way.

Yes, I understand that Western Union has a responsibility to care for their workers and business. It just illustrates that the existing model is broken. Fortunately, Bitcoin Lightning Network changes that. It provides a censorship-resistant avenue for people to send funds without rent seeking middlemen.

1. Lightning in Nigeria: 0% fee on US fund transfer

This is BIG! Bitnob’s integration with the Lightning Network is now enabling FREE, instant, non-reversible funds transfer between the US and Nigeria. Read that again.

In 2018, Nigerians in diaspora sent $25B back home. According to the World Bank, the average remittance fee in Africa was 8.4%. This means that middlemen like Western Union earned $2.1B that could have gone towards education, health, investment etc.

This is precisely the type of solution that is needed in Afghanistan and frankly everywhere. I can’t wait to try it out. Too often, people mistake crypto as purely a speculative venture. It’s not. Payment solutions like this are going to reshape the competitive landscape and challenge existing business models while creating new opportunities. Get ready.

1. What do Walmart, Amazon and Kroger have in common?

US retail giants are warming up to crypto. Walmart is hiring a crypto payments expert to develop and implement their crypto payments strategy. Amazon also posted similar job descriptions too. Meanwhile, Kroger has partnered with Fold to enable grocery shoppers earn bitcoin rewards for their purchases.

It’s all very interesting but I do not plan to spend any bitcoin buying milk. Why would I? When I believe the long-term price of bitcoin is higher than it is today. That said, I think stablecoins like USDC could be a real winner here.

Stablecoins allow instant, irreversible transactions UNLIKE credit and debit card payments. When you purchase coffee from a local cafe using a credit card, it could take 1-3 days for the merchant to receive payment. This could be especially frustrating for cash strapped businesses. Why the delay, it’s 2021? Stablecoins are instant.

1. Bankers: “digital assets will lead to greater compliance and transparency’

Deloitte conducted a global survey of financial service professionals to understand their attitudes towards digital assets (ex crypto like bitcoin, stablecoins, CBDCs).

Bankers familiar with blockchain said the top 3 benefits they anticipate from digital assets were: (1) improved access to funding sources (2) greater compliance and transparency (3) more efficient processes ex faster payments

It was great to see traditional finance begin to appreciate the opportunities ahead. The point about greater compliance and transparency flies against popular (and incorrect) narratives that crypto is a shadowy tool used only by the underworld. Bankers are saying it’s a force for good.

Lastly, it was interesting to note that 79% of all respondents expect digital assets to be somewhat important over the next 24 months. Meanwhile, 76% of respondents strongly or somewhat believe that digital assets will be a strong alternative or replacement for the existing fiat system within the next 10 years. If you are a bank and not thinking about this, you are falling behind!

1. Crypto-Infrastructure bill electrifies community

The Senate passed a $1 trillion infrastructure bill with a vaguely worded amendment on cryptocurrency. The idea was to increase taxes on crypto to help pay for roads, bridges and so on. But the resulting amendment was so poorly worded that it threatened to cripple crypto adoption and drive innovation abroad.

Texas Senator Ted Cruz questioned if up to 5 Senators could describe what a cryptocurrency is, much less ably craft thoughtful legislation about it.

Fortunately, IRS sources state that they will ignore the wording in this bill. Nonetheless, this episode has electrified the crypto community. We have seen the emergence of single issue voters and deep-pocketed individuals appearing from the sidelines to bankroll crypto education and advocacy in Washington. Let’s see how impactful this lobby becomes over the next couple election cycles.

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Thrilling week

Hey y’all! I love the Olympics. I admire the passion, discipline and resilience to win. There have been so many triumphs and disappointments. I particularly enjoyed seeing Philippines and Bermuda win their first gold medals EVER. What a thrill! It’s also been a thrilling week in crypto as bitcoin price rebounded to $42k.

I’m almost kinda famous

I recently appeared on the Citizens of Blockchain podcast. I got to share my “come to crypto” story. I also discussed crypto in Nigeria vs US, bitcoin mining, energy, banking and more. I really enjoyed the conversation. Please check it out here.

Side note - it’s a bit weird watching yourself on video. I was struck by how similar my brother and I are. We don’t look alike but boy do we have similar mannerisms and speech patterns. Twins!

NEWS

1. 200 million crypto users!

Research by Crypto.com finds there are now more than 200 million crypto users around the world, it took only 5 months to double from ~100 million in January

Bitcoin’s dominance was eroded from 67% (Jan 2021) to 51% (Jun 2021) share as other cryptocurrencies (excluding ethereum) surged from 20% to 38% share.

Investors are looking beyond the blue chips to Cardano, Polkadot, Solana and many others. Let’s not forget the impact of Elon Musk and dogecoin.

The chart below indicates that the big surge in crypto users occurred AFTER the bitcoin bull run simmered down. Odd. I would have expected more users jumping on board during the price increase. If this is true, then a number of users caught a falling knife. Will they have the conviction to #HODL?

Source: Number of users from Crypto.com and bitcoin prices are from Coindesk

1. Happy 6th birthday Ethereum!

The second largest cryptocurrency turned 6 this week. There aren’t many 6-year olds valued over $300B. What a run!

Last month, 20,000 validators staked their ethereum in anticipation of the move from proof-of-work to proof-of-stake. Ethereum now has over 200,000 validators representing about 5% of the ethereum supply earning about 6% yield.

Ethereum continues to be the main blockchain where DeFi applications are being built. However, it’s been plagued with high fees and increasing competition. The Eth 2.0 upgrade is expected to ease some of these issues.

1. Uniswap going mainstream

The internet never forgets. A new video from the EthCC conference was deleted last week. In it, Uniswap’s Growth Lead talks about plans to partner with FinTechs like PayPal, Stripe, to provide DeFi to mainstream consumers. Exciting!

The video was taken down at the request of Uniswap concerned that the comments might be understood and taken out of context.

Uniswap is the largest decentralized exchange on Ethereum. A marriage with FinTechs could enable mainstream users have access to a wider set of assets, 24/7/365 access and instant settlement…these are all wins for the everyman!

1. Wall Street in and out on crypto startups

Paxos announced that Bank of America and Coinbase joined it’s recent Series D fundraise. Paxos has raised more than $540M. BoA is also a Paxos customer after the US’ second largest bank joined Paxos Blockchain Stock Settlement Network.

It’s not all good news though. BlockFi has been faced with rising regulatory challenges from at least 4 US states. The lead investor in BlockFi is reportedly developing cold-feet and mulling pulling in the face of mounting legal and regulatory challenges. Stay tuned!

1. US Infrastructure bill targets crypto

The Infrastructure Bill was a centerpiece of President Biden’s campaign. Congress has been working on an ambitious proposal to build roads, railways, and other core infrastructure.

But that’s not all. Buried in the bill is language that could increase the tax reporting burden on crypto users. The verbiage is so broad and ambiguous that it is open to interpretation and stifle adoption.

Crypto industry groups are petitioning Congress to exercise restraint. President Biden is forcefully behind the Infrastructure Bill. Remains to be seen if this addition targeting crypto will stand in the final version.

Explore

1. Fractional NFT ownership

NFTs are still having a moment. The artist Beeple sold NFT for $69M. Since then NFT art have continued to post significant appreciation. However, iconic pieces are often out of reach of entry level collectors.

Enter Fractional Art. This platform enables fractional ownership of the world’s most sought after NFTs ex Beeple’s Elon piece. Fractional unlocks liquidity, reduces entry costs, and allows for synergy with other DeFi primitives.

I’ve been thinking about adding art to my investment portfolio. The fractional model exists for NFTs ex Fractional Art and conventional analog art ex Masterworks

1. More on retirement

Last week, I invited you to check out Choice which enables you to invest tax advantaged retirement dollars into bitcoin and other cryptocurrencies

This week, Choice announced that they are partnering with my friends at Compass Mining to enable users to purchase mines using retirement dollars. I like this idea! I expect Compass will expand the program to other retirement account providers.

Caution: One of my friends wrote back sharing his experience with Choice. It was not pleasant. He found the process to be a bit clunky and manual. He ended up closing his account and going with KeyKeeper IRA. Solutions like KeyKeeper might be particularly attractive if you value holding your own keys. To be fair, he tried using Choice earlier on, their products may have evolved since.

Tweets of the week

Thanks for reading. Let me know what’s on your mind. Have an awesome August!

Afolabi

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Listen now | BlockFi under fire, Crypto eating TradFi & more

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Listen now | Bitcoin upgrade. China cracks down on mining but Texas wants crypto

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Listen now | Survey results and insights

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Listen now | Freedom and prosperity. Not just profits.

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Listen now | Beware of the dangers of a single story

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Listen now | Today is a somber day of reflection. Thank you to all who gallantly serve in the military. My thoughts are particularly with the families of those who are deployed and those who fell in the line of duty. One of my buddies is a captain in the US Air Force. He grew up as an army brat. His family frequently relocated to US military bases across the Lower 48 and in different countries. I imagine sending money across countries was an ordeal. The legacy financial system is slow (2-4 days) and costly. I am excited that digital currencies can help these service men and women gain access to faster, better solutions.

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I hope you got a slice or two. Yesterday was Bitcoin Pizza Day. On May 22 2010, Laszlo Hanyecz bought 2 Papa John’s pizzas with 10,000 bitcoin. It was the first commercial transaction with bitcoin. Today, those pizzas would be valued at $333M. That’s a pretty penny per slice. Crypto enthusiasts celebrate the day by chowing down on pizza. Unfortunately, my allergies have been in over-drive so it’s been a soup and sleep kinda weekend for me….still I got in one slice :-)

This was a turbulent week for the crypto market. In the future, we will look back and see that this week was a blessing in disguise. Two main reasons: (a) buy when the price dips and (b) accelerate redistribution of mining capacity beyond China and more renewable sources

News

1. Crypto market crash

The price of cryptocurrencies crashed across the board with Bitcoin plunging 30% in one week. Last week, Elon Musk had tweeted concerns around the environmental impact of bitcoin mining. It is thought some other institutional investors may come under pressure about Bitcoin emissions too.

Elon Musk clarified that Tesla continues to hold $1B worth of Bitcoin but the market was already spiraling down. Bearish sentiment from the OCC (banking regulator) and China only added fuel to the fire.

In spite of these concerns, Bitcoin is still trading 3x price this time last year. Cathie Woods of Ark Investment continues to hold a long-term forecast of $500,000 per bitcoin. Market corrections and volatility are part of this journey. I used this as an opportunity to extend my position across Bitcoin and Ether.

1. China crypto crackdown: a blessing in disguise

A high ranking government official in China declared a “crack down on bitcoin mining and trading” as China continues to ramp up it’s launch of its digital currency.

Some miners reportedly panicked and dumped bitcoin onto the market. This increased supply further lowered the price of bitcoin.

China has about 65% of global bitcoin mining capacity. This could accelerate a more equitable distribution of mining capacity. This a golden opportunity for new bitcoin mining facilities to be built and powered by renewable sources.

My sense is that decentralized systems like bitcoin are philosophically at odds with the ethos of the communist party. Therefore, Bitcoin could join a long list of technology solutions that are effectively banned in China including Wikipedia, Google, Facebook and Netflix.

1. New OCC to review all crypto guidance

The new acting head of the OCC, a key bank regulator, does not believe rules allowing banks to engage with digital currencies and blockchains involved all relevant stakeholders. Therefore, the OCC, will review all crypto rules.

An African proverb says “if you want to go fast, go alone but if you want to go far, go together”. I wonder if the OCC pushed out a slew of crypto guidance last year to force other regulators to react.

My gut says review really means “revise” crypto guidance to make it more restrictive or higher bars.

1. BlockFi promotion goes wrong

Fewer than 100 people were impacted and less than $10M is still outstanding. BlockFi has apologized and revised procedures to ensure this does not repeat.

One person received 701 bitcoin ($10M) instead of $701. This transaction was reversed but a few others transferred the bitcoin rewards off the platform.

Mistakes happen. Citibank erroneously wired $500M. Traders mishaps have turned million dollar transactions to billion dollar fiascos. This got me wondering if the back-office operations are more manual than expected. BlockFi is now partnering with Matt James, the first black Bachelor, to promote crypto. Hopefully no mishaps!

1. US Treasury and IRS change things up

US treasury is calling for businesses to report digital currency transactions greater than $10,000 to the IRS. This proposal is on par with transactions with fiat currency (ex dollars) greater than $10,000

The IRS plans to more than double it’s size by hiring 86,000 people over the next 10 years. The goal is to more aggressively enforce compliance and close the $7 trillion “tax gap” by going after people who cheat on their taxes.

I think these are great moves. Improved enforcement of rules could increase government revenue and reduce risk of the government printing more money

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Listen now | 20x ATMs. Facebook's Diem to launch US stablecoins. Philanthropy.

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Listen now | Galaxy buys BitGo. NYDIG and FIS partner to help banks. Bitcoin water heater.

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Listen now | Cardano goes to Ethiopia. Paxos gets OCC charter. JP Morgan change of heart.

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Woohoo! This is my 20th edition! I started writing on a whim without a plan. I knew I wanted to learn more about crypto and share with others interested and so I just started. Thanks for coming along on this ride. Be sure to invite others who might get a kick out of this too. There is room at the table.

Quick rant: I intentionally do not spend a lot of time talking about the price of bitcoin or other cryptocurrencies. Developments in this ecosystem are going to transform our lives, the products we buy and build. Sometimes, I feel like the price is a distraction. #DollarCostAverage #BuyTheDip #StackSats #HODL

News

Luxury goods get on blockchain

Over $600B of fake goods are sold each year. How would you feel if you unknowingly bought a fake $5,000 Rolex watch or $50,000 Birkin bag?

LVMH (ex Louis Vuitton), Prada, and Richemont (ex Cartier) formed the Aura Blockchain Consortium to provide customers with proof of authenticity and ability to track ownership and post-sale repairs.

This is huge for the pre-owned market for luxury goods. Maybe one day you could whip out a phone and scan watches, bags, jewelry to find if its real.

Binance US names Brian Brooks as CEO

Binance US is the American arm of the world’s biggest crypto exchange. The company has a big vision with projects in payments and stocks.

For example, the US stock market is closed more hours than it is open, Binance has tokenized Tesla stock so that you can buy and sell it 24/7/365

However, Binance US needs a steady hand to navigate complex regulatory environment. Brian is the crypto-loving former head of a bank regulator. Sounds like a win-win!

Venmo goes crypto

Do you remember writing checks or using cash to pay your nanny? Person-to-person payment solutions like Venmo and CashApp have changed the game.

Venmo is owned by PayPal. Last year, PayPal announced it’s grand vision for digital assets like bitcoin and stablecoins.

Now Venmo enables users to buy, hold, and sell a few cryptocurrencies. They have over 52 million users in the US. This is a big advantage over crypto exchanges like OKCoin who have to work hard to acquire new users

Crypto mining to subsidize renewable energy

Electricity from wind and solar is now cheaper than natural gas. However, it is not consistent. The wind is variable and sun only shines during the day.

Building bitcoin mines at wind and solar facilities would enable them to gobble up any surplus electricity. It could subsidize these investments.

Square and Ark Investment partnered on a research project exploring this topic. If implemented, it would be a win for the climate and the bitcoin network. It would end the narrative that crypto is bad for the environment.

NYDIG acquires bitcoin mine financier

The supply of bitcoin mining machines has not kept up with the surging demand. The price of machines has more than doubled in the past year.

Time is of the essence if operators want to capture record high bitcoin mining revenue. Arctos Capital provides financing for bitcoin mine investments and leasing of mining equipment.

This week, NYDIG acquired Arctos Capital. NYDIG provides a range of services including custody for institutional investors like Mass Mutual.

Explore

Did you know you could passively earn bitcoin by shopping?

This week my Fold card arrived! Fold is a bitcoin rewards debit card. I’ve been using the app to buy Amazon gift cards which I use for my regular shopping. Now, I have the card so it’s easier than ever.

I’m excited to #StackSomeSats (FYI: sats are the subunit for bitcoin like cents is to dollar except 1 bitcoin = 100 million sats)

Check it out: Fold

Did you know there are also crypto credit cards too?

I used credit card points to pay for my honeymoon at a 5-star luxury island resort. It was amazing.

But wouldn’t it be cool to get rewards for an appreciating asset? Enter crypto credit cards.

BlockFi, Gemini, and Crypto.com have or are launching crypto credit cards. Check them out and get in line!

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Mid April usually means one thing tax day. This year, the IRS has postponed the deadline by a month. Get on it if you are running behind!

This year, mid April is all about COVID vaccines. Good news is that I’ve now received my second dose of the COVID vaccine. Bad news is that I’m feeling a bit under the weather. Instead of preparing a separate issue for the “Explore” section, this week, I touch on two topics that have been on my mind. Let me know which one you think I should do a deep dive on next. As always, I welcome your feedback. Thanks y’all!

News

Coinbase goes public

Coinbase shares ended their first trading day priced at $328 implying a valuation of $68B. That puts them in between UBS and Goldman Sachs.

Unlike during an IPO, Coinbase did not issue additional shares for its direct listing. The only shares available were sold by employees and investors.

Notably, the CEO sold 1.5% of his shares for $290M. A few eyebrows were raised when the CFO sold all of her shares for about $100M.

Blackouts in China slows bitcoin mining

Xinjiang and Sichuan provinces of China account for more than 50% of global bitcoin mining activity

A series of accidents at coal-powered plants in Xinjiang led to government mandated power outages

These outages led to ~20% drop in bitcoin mining i.e. computing power to secure the network. This underlines the risks of concentration and need for greater distribution of bitcoin mining capacity around the world.

US minority speaker says bitcoin is geopolitically strategic

Kevin McCarthy, the Republican minority speaker of the US House of Representatives, stated that bitcoin and other digital currencies are geopolitically strategic.

I see 2 strands to pull here:

a) China could drive adoption of its new digital currency by strong-arming aid-receiving countries and business partners. This could challenge the US dollar status as the global reserve currency.

b) As more US investors embrace bitcoin, the risk rises of contagion spreading if a catastrophic event impacted bitcoin.

Citigroup’s former chairman joins crypto payments firm

Dick Parsons became the first member of Celo’s external board. This is a significant vote of confidence in this 4-year old organization.

Celo aims to empower anyone with a smartphone anywhere in the world to access financial services, send money to phone numbers, and pay merchants

Celo’s ecosystem includes a variety of applications including stablecoins. Stablecoins are pegged to the value of another commodity like the US dollar. They improve on the existing system by enabling near real-time

Canada approves 2 ethereum ETFs in one day

Two months after Canadian regulators approved Bitcoin ETFs, they have now approved 2 ethereum ETFs

A crypto ETF mimics the price of the cryptocurrency. This gives investors exposure to the cryptocurrency without buying the asset class.

Additionally, in South Africa, there are plans to launch a bitcoin ETF. Closer to home, the US SEC still has not approved a bitcoin ETF. Dozens have been proposed over the past 8 years, there a couple under review.

Explore

Future of faster payments: Who will win?

The Federal Reserve Bank and US banks are investing millions (probably billions) in implementing a faster payments network. This new system will provide near instant final settlement within the US.

Unbeknown to most, when you swipe your card at your favorite grocery store, the money does not instantly get delivered to the merchant. This process can take a couple days to several weeks! The new solution will shrink that to seconds.

In parallel, crypto enthusiasts are building out the lightning network on top of bitcoin blockchain. One start-up, Strike, is working to build a global payments network that would enable low-cost, final settlement of domestic and cross-border payments without using the likes of Visa or banks.

Will these two systems co-exist? Will regulators or merchants prefer one to the other? What is going to happen to traditional cross-border heavyweights like Western Union? I’ve got so many questions. I might do a longer study into this.

Bitcoin mining - a driver for sustainable development?

It’s been argued that bitcoin mining is the most profitable use for stranded energy that is otherwise not economically feasible to develop or export.

Oil and gas companies in the US and Canada are using gas that would have been flared to power bitcoin mines

Could this be extended to lower carbon energy? Could bitcoin mining subsidize the development of hydroelectric dams or solar farms in Africa? So many questions here! I might do a longer study into this too.

Let me know what you think and if you have a preference for which area I should dig in next. Until next time, I hope you stay safe and healthy. Have a great week!

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I hope you had a great week. It’s been sunny in Texas, almost feels like summer is here. Meanwhile, the crypto news cycle continues heating up. Next week is the much anticipated Coinbase IPO. But first let’s dive into some highlights from last week. As always, I look forward to your feedback. Let’s go.

News

Coinbase had a monster Q1

Coinbase reported 56M users and 11% of all crypto assets are on their platform (both retail and institutions). Some analysts have upgraded their valuations over $100B ahead of Wednesday’s IPO

Lately, I have been thinking about two flavors of the Coinbase effect

Messari Research reported that tokens listed on Coinbase average a whopping 91% price increase in the first 5 days! For more information check this out this link.

The IPO is going to mint a fresh batch of millionaires. Real estate agents and car dealerships are salivating. I also expect to see an exodus of talent as employees explore new opportunities. Some may become angel investors and pump more funds into the crypto sector.

Crypto Twitter is divided on whether or not to invest in Coinbase. Bitcoin maximalists believe bitcoin will outperform Coinbase in the long run. They are also fundamentally opposed to the centralized exchange.

Pragmatists argue that Coinbase is a key part of the ecosystem. Besides, whenever crypto prices inevitably fall, Coinbase may prove more resilient than bitcoin. After all, Coinbase profits from transactions irrespective of the price.

Q1: Robinhood had more crypto traders than Coinbase

In Q1, 9.5M Robinhood customers had crypto transactions each month. This was ~50% higher than Coinbase’s monthly users (6.1M).

Unlike Coinbase, Robinhood does not charge a commission for cryptocurrency transactions. However, Coinbase pays interest on deposits in its account and covers more cryptocurrencies.

Robinhood and other companies with existing customer bases have an advantage over crypto native solutions that have to work harder to win each customer. This begs the question when will retail banks and other FinTechs enable customers to buy, sell, and store cryptocurrencies?

Crypto crosses $2T

The total value of all cryptocurrencies topped $2 trillion for the first time this week.

Bitcoin accounts for more than 50% of this value. This week we reached a milestone where 100 cryptocurrencies were valued at $1B or more

In Q1, the top 5 gainers were: BinanceCoin, Cardano, Uniswap, Polkadot, and Ripple. I hope to dive into these in the future.

Crypto climate accord

The Crypto Climate Accord is styled after the Paris Climate Accord. It has an ambitious goal to achieve net-zero emissions for the entire industry, including eliminating all historical emissions by 2030.

Ripple, CoinShares and ConsenSys have joined the accord. I expect some other prominent players will follow in the months ahead.

The environmental impact of cryptocurrency mining has been a hot button issue in recent months. CoinShares research found that 74% of cryptocurrency is powered by renewable energy largely due to surplus hydroelectric capacity in China. Critics think it is lower.

The push to net-zero emissions may have implications for new miners aiming to use coal, gas and crude oil to power their operations

Chinese companies pivot to crypto

China is ground-zero for cryptocurrency. Much of the mining capacity, miner production, and national digital currency innovation is centered there. This week, two Chinese companies made significant pivots to become players in the cryptocurrency industry.

The9, a publicly traded gaming company in China purchased $6M computers to become a cryptocurrency miner

500.com, an online lottery company in China, spent $100M to acquire Bee Computing, a manufacturer of cryptocurrency mining computers

These moves are even more aggressive than what we have seen in the US. Stay tuned.

Explore

Bitcoin Billionaires: This week, I a wrote book review on this book. I really enjoyed reading it and I’m convinced one day it will be made into a movie. It tells the story of the Winklevoss twins and the history of bitcoin. Check it out my review here

Bitcoin & Black America: I previously shared a book review on this book. It argues that African Americans have a lot to gain by embracing cryptocurrencies and decentralized finance. Check out my review here.

What should I read next? Let me know if you have any suggestions.

Crypto Course: This week, I’m starting a 3-week crypto course. I’m super pumped to learn more. I’ll keep you posted on how it goes.

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Today, I am doing a special session. It’s a review of a book called Bitcoin Billionaires by Ben Mezrich.

Accessibility: A

Learning: A

Enjoyment: A

Overview

Bitcoin Billionaires is one of those books you could see being made into a movie. It’s not that far fetched given that the author, Ben Mezrich, also wrote the award winning “Social Network”, the movie about Facebook. In some ways, it feels like Bitcoin Billionaires continues that story except the focus is now shifted to the Winklevoss Twins.

Tyler and Cameron Winklevoss became famous as the tall, Harvard-educated, Olympic rowers who alleged that Mark Zuckerburg ripped them off while founding Facebook. The author weaves the bold story of how the twins became among the first bitcoin billionaires along with a colorful dose of bitcoin history. The Winklevoss twins founded Gemini, one of the largest US based crypto-exchanges and Nifty Gateway, a leading NFT marketplace. The book lays bare the tension between ideologues like Ronald Ver and businessmen like Tyler and Cameron. Additionally, key developments like the Mt Gox hack and the Cyprus banking crisis also feature in the story. Mezrich does a great job making bitcoin history fun to learn.

Key stories

Storing bitcoin in banks: The twins have taken extreme measures to safeguard the private keys to their mountain of bitcoin. The private keys - a long alphanumeric code - are split up and stored in bank safety deposit boxes across the country. Funny how banks are keeping crypto safe probably without them even knowing it.

2013 Cyprus banking crisis: What would you do if you woke one morning and 10+% of your life savings were gone? This was the reality for bank account holders in Cyprus in 2013. The banks were too big to fail but the government didn’t have the funds to bail them out. As a last resort, the government dipped into all bank accounts while everyone slept. This set off a bitcoin price rally as consumers lost confidence in fiat currency. Flashforward to 2021, the US has printed unprecedented trillions of dollars related to COVID. There are rising concerns about the US government spending and the dollar’s value. Part of the current bitcoin bull run is motivated by investors seeking shelter for the funds.

Silk Road takedown: Ross Ulbricht founded Silk Road to enable anonymous transactions. It quickly became synonymous with drug smuggling, human trafficking and money laundering. Silk Road used bitcoin as its primary currency until it was shut down in 2013. However, the damage was already done. Bitcoin had become associated with criminals and the dark web, a shadow it’s still struggling to shake today.

Silicon valley vs crypto: Early bitcoin enthusiasts were outsiders in Silicon Valley. The Winklevoss twins were occasionally shunned by folks wary of not upsetting Mark Zuckerberg and Facebook. This outsider mentality is helpful as an innovator and an entrepreneur. Along the way, bitcoin became less fringe and much of Silicon Valley has embraced cryptocurrency to some degree. Google has gone from banning crypto ads to adding cryptocurrency prices in Google Finance.

Bitcoin ETF: The Winklevoss twins began the quest to launch the first US-based bitcoin ETF in 2013. 8 years later, there are now 2 Canada-based bitcoin ETFs but none in the US. Major firms like Fidelity have now also proposed ETFs. I think the SEC will eventually approve a US-based bitcoin ETF. This struggle highlights some of the difficulties associated with innovation and introducing a new asset class.

Purists vs Pragmatism: There is some tension within the bitcoin community between purists and pragmatists. Some bitcoin purists are wary of the existing banking sector and governments. They would prefer to operate in a peer-to-peer, permissionless, tamper free environment without government oversight. On the other hand, pragmatists prefer to operate within the existing banking sector and seek government regulation to foster growth.

Charlie Shrem: was the brains behind BitInstant. In 2012, BitInstant was the leading vehicle by which early adopters purchased bitcoin via a network of over 700,000 store locations.The author suggests that 23-year old Charlie was caught up in the tension between purists vs pragmatism. He was ambivalent about enforcing KYC (Know-Your-Customer) requirements and alerting authorities to suspicious transactions. Ultimately, Charlie was arrested and imprisoned for money laundering. He was released in 2016. His fall from grace highlights the importance of coloring within the confines of the law and delegating (he served as CEO and Compliance Officer). The optimist in me is rooting for a comeback story for Charlie. Let’s see.

Conclusion

I really enjoyed Bitcoin Billionaires. I probably wharfed it down in a couple long reading sessions. The book is accessible and engaging. I highly recommend it for folks who are new to crypto and want to learn about the history and key characters. One day there will be a movie made about the times we are living in. Let me know what you think. As always, I appreciate book recommendations or any other feedback you might have. Have a great day!

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Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!

Happy Easter y’all! Q1 2021 is over and we are in a new month. I hope you have been keeping up with your new year resolutions. If you have fallen off the horse, now is a great time to get back on. Last week, I shared that I will be tinkering with the format over the next couple episodes. I appreciate the feedback. Please keep it coming. Let me know why you subscribe and what you are looking to see. Thanks!

This episode includes 5 news stories and a link to help you explore bitcoin mining.

News

Visa to support digital currency payments

Visa became the first payment network to settle transactions on USDC. USDC is a digital currency that is pegged to the value of the dollar. Unlike Bitcoin, the price of USDC is stable (1 USDC = $1), hence the name stablecoin.

What does this mean? Why should I care? Why is this important?

Have you ever wondered why some gas stations offer a discount if you pay with cash instead of card? Well, it is because when you swipe your debit card, it takes several days and dollars before the funds reach the gas station’s bank account.

With USDC, the funds will be transferred near real-time and cost a fraction of a cent. It’s plausible that some merchants could eventually offer discounts to customers who pay with USDC. This is a win-win for the customer and merchant.

USDC will achieve near real-time payments by batching transactions on the Ethereum blockchain.

Figure 1. Illustrates fees associated with a credit card payment

Ether soars to an all-time high (ATH)

This week’s announcement that Visa would utilize Ethereum to settle USDC transactions fueled an 18% rally in the price of ether to ~$2100

Ether has almost tripled this year as deposits in DeFi doubled to $38B in Q1 and new Bitcoin investors explored Ethereum and the suite of applications built on top of it

Coinbase to finally go public on April 14

Lots of retail and institutional investors are prepping funds to go shopping on April 14.

The US largest crypto exchange will directly list 115 million shares. They are expected to price around $350 each which was the average weighted price in the private market in Q1.

Up to $40B could be raised putting Coinbase valuation up to $100B. This would make the highly anticipated debut one of the largest tech IPOs. Coinbase would be larger than some banking heavyweights like UBS, Barclays and BNP Paribas.

Coinbase will release its Q1 2021 earnings report before the going public. It’s most recent disclosures indicate it had $90B assets under management, over 43 million customers in more than 100 countries.

Figure 2. List of largest tech IPOs (CNBC)

Goldman Sachs goes crypto but don’t hold your breath for the others

Goldman Sachs wealth management to allow high net worth clients invest in bitcoin. This follows Morgan Stanley’s lead two weeks ago.

It’s unlikely that Wells Fargo would follow suit shortly. The bank has been under significant regulatory scrutiny in recent years.

Many retail banks won’t move on crypto until they have to. They are focused on upgrading their dated technology, being compliant with regulators, and keeping up with FinTechs and Neobanks. Some traditional retail banks have not yet put in the work to fully appreciate the promise and challenge of crypto and decentralized finance. They view it as a fad or an experiment waiting to crash

Former Chainalyis exec becomes FinCEN boss

The rise of digital currencies is expected to attract more regulation. There are concerns that some legislators and regulators may not be sufficiently well-versed in these technologies to adequately police and/or support them.

Some of these fears were abated with the recent appointment of Michael Mosier as the head of FinCEN (the US Financial Crimes Enforcement Network). Michael was previously the Chief Technical Counsel of Chainalysis, the leading crypto surveillance firm.

Explore

Bitcoin mining for dummies: Yesterday I dived into Compass, a company which makes it easy for anyone to become a bitcoin miner. I profiled Meltem Demiror’s experience, she used to be a treasury analyst with ExxonMobil but now she is the Chief Strategy Officer at CoinShares. Check it out if you are curious about what bitcoin mining is and the potential returns you could earn. Click here.

I hope you have a great day. Let me know what you think and what you’d like to see.

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Listen now | Exploring how Compass makes it easy to become a bitcoin miner

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Listen now | 5 news stories + 1 actionable insight

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Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!

The 15th of March aka The Ides of March are best known as the day that Julius Caesar was assassinated. What I did not know until recently, is it’s the traditional deadline for Romans to settle their debts. I was thinking about this as I read stories of early bitcoin investors who have paid off mortgages, student loans and basically achieved financial independence. I hope you achieve your goals too.

This week, the news ranges from the bizarre to the thought provoking. Let’s go.

NYC man sells fart for $85

Yes, you heard that right. And frankly, that could have been you.

Alex Ramirez-Mallis, a 36 year old Brooklyn artist and his friends, recorded the sound of their farts every day for a year

They are selling each fart sound as an NFT for $85. Fans are also bidding on the entire year long collection and the highest bid is currently $183.

So what?

So Alex did not originally intend to sell his (sniff) farts. It’s actually kind of a protest. He finds the current NFT craze absurd and is frustrated that the buzz is more about price tags than creativity.

Look, I can see how the current hype could feel like a bubble. The price tags are astronomical and NFTs are everywhere. There are two things to keep in mind

Collectors will always collect. They buy original art pieces then store them behind Matrix like security. Some collectors only care about appreciation. This is not new. This is not going to change. Sorry Alex.

If NFTs were in place 500 years ago, then Leonardo da Vinci and his heirs would have gotten a slice of the pie every time one of his masterpieces was sold. Instead, when a Saudi prince bought one of his paintings for almost $0.5B, all of the spoils went to the collector. NFTs enable creatives to get their fair share. They are here to stay.

Morgan Stanley goes crypto

Morgan Stanley wealth management is enabling its customers to invest in bitcoin

However, it’s only limited to individuals with $2M assets at the bank or corporations with $5M

So what?

This is a big deal because Morgan Stanley is the first major bank to do this. Last week, we talked about how JP Morgan was creating an index to mimic bitcoin exposure. It’s clear that there is demand from clients. Expect more banks to follow suit.

That said, I’m kinda frustrated that it is limited to only high net worth individuals. Many of the best investment opportunities have a high minimum of $100k or more. Whereas you could start with bitcoin with as little as $5. Fortunately, regular folks could get started using CashApp, OKCoin, Swan Bitcoin or one of other options.

Taking a step back, Morgan Stanley has been making steady moves in this direction. Last year, they acquired 10% of MicroStrategy which is one of the largest corporate holders of bitcoin. This weekend, it was rumoured that Morgan Stanley was trying to acquire South Korea’s largest cryptocurrency exchange. Stay tuned.

The promise of decentralized insurance

A study by Accenture found that 65% of insurance executives believe that they must adopt distributed ledger technology in order to remain competitive.

So what?

It is important to keep in mind that there is a lot more to crypto than bitcoin. Decentralized insurance is just one of the many applications that could one day have billions of users.

McKinsey estimates the global insurance industry is valued at about $5 trillion, that’s equivalent to a quarter of the US GDP. The growing middle class in developing countries is driving growth as they seek coverage for their health and property as their purchasing power expands.

The insurance industry is ripe for disruption: payouts are often slow and transparency is limited. Decentralized insurance utilizing smart contracts could expand access, lower costs and speed up payouts.

So who are the winners? It’s still early days. Nexus Mutual is one of the companies to watch. The 3-year old company now has over $300M total value locked. There’s definitely more to come.

Kentucky wants bitcoin mining

Kentucky’s state legislators overwhelmingly voted in favor of passing 2 laws aimed at attracting more bitcoin mining to the state

Miners won’t have to pay 6% sales taxes nor 6% excise taxes on their rigs' electric bills and mining equipment

So what?

The cost of electricity is the biggest driver of bitcoin mining operating costs. Kentucky already has some of the lowest electricity prices in the country, the tax breaks make it even more attractive.

According to the EIA, 71% of Kentucky’s energy is sourced from coal. An increase in bitcoin mining in Kentucky would likely increase the carbon impact of the cryptocurrency. Hmmnn. Is this what we want to do?

Taking a step back, we have seen an uptick in cities, states and countries competing to lure in tech companies. Amazon’s search for it’s second headquarters and Miami’s ongoing overtures to crypto companies are great examples.

Source: US Energy Information Administration (EIA), November 2020

Watch list: Upcoming crypto IPOs

Coinbase delays IPO to April 2021: direct listing on Nasdaq for the largest US-based crypto exchange with 43M users is expected to be valued at $70-100B

Krakken aiming to IPO in 2022: US-based company is considering a direct listing on Nasdaq in 2022, the crypto exchange has more than 5 million users. Expected to be valued around $10-$20B.

eToro IPO in 2021: Israel-based firm is going public by SPAC IPO, eToro provides customers to purchases stocks and cryptocurrencies through its exchange. Expected to be valued around $10B.

Northern Data AG in 2021: Germany-based company claims to be biggest bitcoin miner. It is considering issuing shares on Nasdaq to raise about $500M

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Hey, so I am trying something new. I have been reading books as I’ve been going down the crypto rabbit hole. Figured it might be helpful to share some key takeaways and guidance if you are also on this journey. Today, I'll be providing a quick book review of Bitcoin & Black America by Isaiah Jackson.

Summary:

What would you do if a stranger knocked down your door and stole a little money each month?

Isaiah Jackson says most people sit by and let inflation steal their hard earned savings. He argues bitcoin is one way to fight back.

Black America is particularly vulnerable. The net worth of a typical black family is about 10% of a typical white family. The FDIC found that 32% of Black Americans are underbanked. Older African Americans in particular have deeper distrust given banks long and recent history of discrimination. For example, in 2012, Wells Fargo paid $175M for charging black and Hispanic customers higher mortgage interest rates than similarly qualified white customers.

Isaiah shares his own “Come to Bitcoin” story and his passion for crypto evangelism. He argues that Black America has more to gain from embracing digital currency and decentralized finance (DeFi). For example, race is not a factor when obtaining credit from DeFi. He lays out how individuals, professionals, business owners, churches, HBCUs etc. can get involved. He also highlights a ton of people and organizations who are developing programs and capabilities for digital currency economy. For example, there’s a summer camp in North Carolina that teaches school-aged children about crypto.

Review:

Bitcoin & Black America is an easy to read. This stands out in a good way in a sea full of technical jargon and weird terminology. This was the third crypto book I bought but it was the first I finished. Props to the author for making this topic more accessible.

He highlights a lot of people and companies from a wide variety of backgrounds who are embracing and driving crypto forward. I enjoyed learning these stories and finding new people and projects to follow.

While the book is easy to read, at times, it wasn’t the most enjoyable. This is because I’m partial to a story with a good plot twist. Parts of this book feel like a reference book. This isn’t a bad thing, it’s actually quite helpful. Just mange your expectations.

Overall, I think it’s a good book to read if you want a new perspective or if you are new to crypto. For more information, check out Isaiah on Twitter: @BitcoinZay

Next book

I have a couple books lined up next. Let me know if you have any recommendations or want to join the crypto reading club.

Have a great week!

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Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!

Ladies and gentleman, it’s finally here. Tomorrow is pi-day. One of my newer traditions is to gorge myself with a variety of pies every 14th of March. I hope you celebrate too. Hopefully we don’t blow up like NFTs have this week. Let’s dive in.

NFTs are blowing up

Christie’s auctioned 5,000 digital art pieces by Beeple for a record $69M, this is the third highest sale by a living artist

So what?

You might have only just heard about NFTs but they have been around since 2012. Like many innovations that seem like an overnight success, the current NFT digital art buzz has been years in the making. Beeple, the artist who is now $69M richer, had created one digital art piece everyday for the past 13 years. There are no shortcuts. I’m inspired by his consistency in honing his craft.

The fact that Christie’s, the venerable 255 year old British auction house, hosted the sale speaks to the inroads NFTs have made into high end art scene. NFTs will likely prove to be a key gateway for folks to engage with the crypto universe.

So the big question is what next? I’m not sure. Beeple’s success will draw more creatives into NFTs. Collectors will also pile in. The NFL is not far behind and I bet companies like Disney and Marvel are figuring out how to play in this new world.

Who are the winners? I think the Winklevoss Twins are well positioned to do well. They own Nifty Gateway which is one of the leading marketplaces for NFTs. Some analysts now estimate this company is now valued at $1B.

This is one of the 5,000 digital works of art that sold for $69M

Binance launches app for merchant payments

Binance Pay is an app that enables person-to-person payments along the lines of Venmo for crypto. The news is that, it now enables users to pay merchants using the app.

For some background - Binance is the world’s biggest crypto exchange, yes bigger than Coinbase. It was founded in China and has significant market share in Asia-Pacific. It also has a US subsidiary that is quite popular too.

Although Binance Pay supports 30 currencies including euros, Brazilian Real and Bitcoin, it is NOT available in the US. Boohoo!

So what?

McKinsey estimates the global payments revenue in 2020 was $2.1 trillion. Banks account for about 38% of this revenue with the rest accruing to payment providers and FinTechs.

Jeff Bezos famously remarked that “your margin is my opportunity”. Crypto enabled payments are faster and cheaper than traditional payments. This year, PayPal plans to enable its 26 million merchants to accept cryptocurrencies. Binance Pay is positioned to handle both fiat and crypto currencies too.

The race is on to provide the pipelines for the future of payments. Banks beware.

Aker to set up bitcoin company

Aker is a Norwegian conglomerate with over $5B annual revenue from oil & gas, maritime, and other business units

Aker is forming a new company, Seetee, to invest in bitcoin and other blockchain projects

So what?

Kjell Rokke, the CEO and majority shareholder of Aker, wrote a 24-page announcement sharing his reasoning and aspirations

Kjell shared that he regrets not being an early investor in internet businesses two decades ago. He expects crypto and blockchain applications are another opportunity to reimagine industries. He wants in.

I was excited by the thoughtfulness and vulnerability of Kjell’s long letter. I think there are great opportunities to build solutions that leverage Aker’s existing expertise. Additionally, I’m inspired by a 62-year old who wants to keep learning and dive deep into a whole new space.

JP Morgan to launch fund with indirect bitcoin exposure

The new fund is a basket of 10 companies stocks with some exposure to cryptocurrency. It includes MicroStrategy which holds about $5.5B of bitcoin and PayPal which is committed to supporting crypto payments

So what?

The Winklevoss twins of Facebook infamy were the first to propose a bitcoin ETF in 2013. They were not approved. There have been many applications since which the SEC has similarly not approved. A bitcoin ETF would enable investors to access bitcoin like a stock.

In lieu of a bitcoin ETF, JP Morgan has proposed an investment offering made up of a basket of companies with bitcoin exposure. The idea is that the performance of these companies would move in sync with bitcoin. This could prove attractive to investors curious about bitcoin but unable or unwilling to invest it.

I am not convinced that this basket approach will be as sensitive to the price of bitcoin as some investors may hope. For instance, while NVIDIA produces chips used in bitcoin mining, it is not a big driver of the company’s revenue and share price. The same could be said for many companies on the list. Buyer beware.

[Investors might be better served by going straight to a company with direct exposure. Argo is a bitcoin miner listed on the London Stock Exchange]

Argo acquires 320 acres in West Texas

Argo Blockchain, a publicly traded bitcoin miner, has completed the acquisition of 320 acres in West Texas to build a 200MW mining facility in the next 12 months

So what?

Bitcoin miners run computers to rapidly solve difficult math problems. It’s a relatively low margin business, thus, miners aim to minimize their costs. West Texas has some of the most abundant and low-cost supplies of electricity.

Argo is committed to powering its mining operations with sustainable energy. It primarily uses hydroelectric supplies for its mines. In West Texas, Argo aims to use wind energy.

Much has been said about high energy consumption associated with bitcoin mining. Argo’s operations are an example of low carbon bitcoin mining.

Meanwhile, Kentucky, one of the leading coal-producing states in the US, is considering new laws to give bitcoin miners tax breaks

In general, I think miners like other businesses, will seek to minimize costs by using the cheapest energy available. It is up to government and policy makers to put in place carbon taxes or other measures to incentivize the use of low carbon solutions.

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Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!

This year has been flying by. Can’t believe its already one week to pi day. I’m looking forward to some good shepherds pie, key lime pie, and Patti LaBelle’s sweet potato pie…hmm. But that’s not why we are here. Crypto. This week did not disappoint. NFTs are still booming, corporates are making moves and bitcoin mining is under pressure. Let’s dive in.

Pay with crypto

Rakuten launches a cryptocurrency that enables users to pay within their ecosystem

Customers can earn rewards too

So what?

One of the biggest criticisms of cryptocurrencies is the inability to pay for regular expenses like rent, utilities, and groceries.

To be clear, it’s possible but not easy. I know of a guy who lived off bitcoin for 3 years in San Francisco. That’s a different story.

Rakuten is often called the “Amazon of Japan”. The company serves over 1 billion people across 30 countries. The conglomerate includes a range of businesses including the largest e-commerce site in Japan

Rakuten is launching Rakuten Cash, a cryptocurrency that can be obtained for free by exchanging bitcoin or other cryptocurrencies. This enables users to essentially shop across Rakuten with cryptocurrencies.

I am excited to see how much traction this gets. I bet other platform companies like Amazon and Apple are paying attention but they would need to tread carefully given how the Facebook-backed Libra (now called Diem) project fared.

PayPal deepens crypto ambitions

PayPal is creating a new business unit focused on crypto and digital currencies

PayPal is reportedly acquiring a Curv, a crypto custodian

So what?

PayPal wants to become a SuperApp. Enabling users to pay, however, they want is a big part of that. The company also recognizes efficiencies from using cryptocurrencies.

Last year, PayPal enabled its US users to buy and hold bitcoin and a few other cryptocurrencies using their app. This year, they will extend that offering to a greater share of its 346 million users while also enabling its 26 million merchants to receive cryptocurrency payments

The purchase of a crypto custodian like Curv would position PayPal to offer more crypto services while driving down the costs of operations

We should expect more activity as PayPal builds out the new crypto business unit

China bitcoin mining down; Canadian Bitfarms bought 48,000 new machines and 8x production by Dec 2022; Bitcoin miners brought in record $1.36B in Feb

Chinese province cracking down on energy intensive industries including bitcoin mining

US and Canadian bitcoin miners continue to invest

So what?

Bitcoin miners earned $1.36B in Feb 2021. High revenue helped fuel vigorous debate about high energy consumption.

Inner Mongolia, a Chinese province, accounts for 8% of global bitcoin production. The local government has banned new projects and is shutting down existing ones in April. The local government is also taking a look at other high consumption industries like steel production. That said, bitcoin mining is a lot more mobile than steel, so it makes to focus on that first.

Meanwhile, US and Canadian bitcoin miners continue to expand. We have previously new projects in West Texas and now Bitfarms is buying 48,000 new machines to 8x its production capacity by next Christmas. In a reversal of manufacturing trends, we could see more bitcoin mining migrate from the East to the West. Let’s see.

Brave is launching search

Brave is the privacy-first web browser. This week, it announced plan to launch search in the first half of 2021.

So what?

Brave was launched in 2019 by one of the co-founders of Mozilla. It is ad free web browser that loads 60% faster than Chrome.

One of the cool things, is that Brave allows you to opt into watching ads and earn BAT - Brave’s cryptocurrency. Additionally, you can also tip some participating websites in BAT.

I am a power user of Wikipedia and you know how they run campaigns asking for donations. Honestly, I think I tried to contribute at least once but not sure if I finished the transaction. That said, I would be much more inclined to donate to Wikipedia if I had money coming into my Brave wallet.

Anyway, search is a huge business. Google has over 90% market share. If Brave can develop a competitive offering that gets traction, they could onboard millions of people onto cryptocurrencies and help usher in Web 3.0

I’ve joined the waitlist. Stay tuned.

NFT craze continues

King of Leon and 3LAU launch NFT albums

Jack Dorsey is auctioning the first tweet as an NFT

Square buys Tidal

So what?

Last week, we touched on the booming NFT art market. Now it’s extending to music with the Kings of Leon selling collectible albums as NFTs.

Jack Dorsey jumped into the action by auctioning off the first tweet. Last, I checked, the highest bid was $2.5M. The cool thing about NFTs is that Jack will get a slice of the pie whenever the tweet is resold.

This week, Square announced it was buying Tidal with Jay Z joining Jack Dorsey and others on the board of Square. Perhaps there’s a world where Square helps musicians and other creatives issue NFTs and get their far share. Not sure how this is going to play out, but I’m curious. What do you think?

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Each week, I cover the “So what?” of 5 key crypto stories in about 5 minutes. Let’s go.

This week:

Federal Reserve Outage

MIT to strengthen bitcoin

Coinbase is $100B

NFT record art sale

Dubai Fund sells bitcoin, buys Cardano and Polkadot

Federal Reserve outage exposes single point of failure

Federal Reserve Bank’s payment systems were out of service for several hours due to an operational error.

The impacted services include but not limited to FedACH, FedWire, FedCash, and settlement

FedACH system handles direct deposits of payroll, Social Security and income tax refunds as well as scheduled payments for mortgages and utility bills. It supported 62 million transactions a day in 2019.

So what?

The outage disrupted payment transactions across the economy and highlighted the single point of failure. A pattern could be emerging as FedACH had 2 disruptions in 2019.

Recently, I read Sandworm by Andy Greenberg, this book helped drive home the point that the next great war might be fought in cyberspace. High traffic systems with a single point of failure built on dated technology are attractive targets.

The US might be better served by a more resilient decentralized system perhaps one that leverages blockchain technology

MIT to strengthen bitcoin

MIT’s Digital Currency Initiative has launched a 4-year R&D effort to strengthen bitcoin security

The program has been endorsed by cryptocurrency industry leaders

So what?

Bitcoin ascended from an obscure project to a robust network that secures over $1 trillion in value due to millions of hours invested by open-source developers

The program will contribute neutral, expert resources to improve the robustness of Bitcoin protocol and security. This could include exploring new programming languages and pre-emptive investigations against possible attacks

I think this is great news particularly in light of the recent outage at the Fed

Coinbase releases financials ahead of $100B IPO

Coinbase, the US leading digital currency exchange, is now expected to be valued over $100B at IPO

In 2020, Coinbase reported $322M profit on $1.28B revenue. The company also served 43M retail investors and 7,000 institutional investors. 76% of customers are based in the US.

So what?

The Block Research has forecasted that Coinbase could generate $2.4B revenue in Q1 2021 alone. That’s more than 2x full year 2020 in the first quarter.

IPO at $100B would make Coinbase a top 20 financial services company right below Goldman Sachs and above S&P.

The data implies about 10% of Americans have a Coinbase account. It is not farfetched to anticipate the valuation rising 5-10x as adoption of digital currencies scale. Some industry observers believe Coinbase will become a trillion dollar company.

Select Coinbase Financials from The Block Research

NFTs: Beeple art sells for record $6.6M

Mike Winkleman is the artist also known as Beeple. Everyday for the last 13 years he creates one piece of digital art. This week, one of those pieces was sold as an NFT for a record $6.6M.

Next week, Christie’s will begin a 2-week auction of 5,000 pieces by Beeple with payments accepted in ether.

So what?

NFTs have been booming lately. The market size grew over 700% from $42M in 2017 to $338M at the end of 2020 according to NonFungible.com

Think of NFTs as a new type of file like JPEG or MP3. NFTs are encrypted files authenticated by blockchain technology. They are not limited to art, for instance NBA Top Shot enables fans to purchase officially licensed video of key plays.

NFTs are ushering a new era for creators. Leonardo da Vinci painted Salvatore Mundi which sold for $450M in 2017 setting a world record. Yet, in his lifetime, he likely was a cut or two above a starving artist. With NFTs, in the future, the creator or their estate could receive commission (~10%) upon the resale of their work

Bottomline: Digital Art and NBA Top Shot are opening doors for new consumers to engage with cryptocurrencies and blockchain applications

Crossroads by Beeple sold for $6.6M this week

Dubai fund sells $750M Bitcoin to buy Cardano and Polkadot

FD7 Ventures has $1B under management; the crypto fund’s thesis is that Cardano, Polkadot and Ethereum will be the foundation of Web 3.0

So what?

Investors are going beyond bitcoin. FD7’s decision highlights growing excitement about Ethereum, Cardano, and Polkadot; these blockchains support greater functionality than Bitcoin.

Cardano is a third generation cryptocurrency network, it aims to improve upon Bitcoin by having faster and more secure blockchain. It is also more scalable and safe than Ethereum. There are pilot projects in Ethiopia and Tanzania leveraging Cardano to extend financial services to the unbanked.

Polkadot aims be the platform for Web 3.0 by connecting a new web of decentralized blockchains. In Web 3.0, trust is built in the network, individuals have more power than corporations and governments, and people own their data.

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Listen now | Each week, I cover the “So what?” of 5 key crypto developments in about 5 minutes. Let’s go. Bitcoin now has a $1 trillion market cap This week the price of bitcoin soared to new highs over $56,000 Adoption continues to grow as BlackRock revealed it has started “to dabble” in bitcoin. BlackRock is the world’s largest asset manager with $8.7 trillion under it’s nose. I wonder what “dabble” means to them.

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Listen now | Nigerians go gaga over education. Parents strain to send their children to the best schools possible to give them an edge in a country plagued by rampant unemployment. About 15 years ago, my mum told me about her friends who were sending their teenagers to boarding school in Kenya. The school had a track record of churning out MIT and Oxford graduates who blossomed into government ministers and captains of industry. The school sounded ritzy and getting there would cost a pretty penny. Our family friends had to fly from Lagos to London then switch over to another flight from London to Nairobi. It blew my mind that the safest path to travel across Africa from Nigeria to Kenya was through Europe. They repeated this long and expensive journey multiple times a year until each child completed high school. Surely, there had to be a better way!

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Each week, I cover the “so what?” of 5 crypto news stories in about 5 minutes.

What a week! In the past 5 days, crypto news has been on freaking overdrive. But I’ve filtered and done some research so let’s go.

What do Tesla, BNY Mellon, and MasterCard have in common?

This week, they all made major commitments to digital currency

The big news this week was Tesla invested $1.5B into bitcoin; the car company is open to selling cars for bitcoin

BNY Mellon, one of the oldest banks in the US; random fact it was founded by Alexander Hamilton and Aaron Burr, is going to custody cryptocurrency later this year

MasterCard is going to support digital currency payments, likely via stablecoins

So what?

So you are gonna buy a Tesla with 2 bitcoin? I don’t think so. Maybe if you are a bitcoin OG with tons of coins just lying around. But if you a mere mortal with more humble assets, you are probably better off #HODLing

Much of the Twitter hype focused on Tesla but lets be real, Tesla is a disruptor, are we really surprised? Now BNY Mellon is said to be a very conservative bank. They also do business with a lot of traditional banks who will be watching and learning from their experience.

I think stablecoins are poised to play a bigger role as a medium of exchange. Gaming, trade and remittances are key use cases. I think MasterCard is taking a path that makes sense for their business and frankly more palatable to risk averse banks.

First bitcoin ETF in North America is approved

Canadian regulators approved the first exchange traded fund (ETF) that will track the price of bitcoin

Remember that, ETFs can be bought and sold like stocks on apps like Robinhood and Fidelity

So what?

This is important because ETFs would give retail investors an easy path to bitcoin exposure without having to create new crypto exchange accounts

ETFs tend to be winner take all. For example, there are 31 gold ETFs, however, the top 2 account for 75% of the $130B market cap. The race is on to become the dominant bitcoin ETFs.

This move could increase the likelihood that the SEC would approve a US-based bitcoin ETF. Stay tuned!

Fed paper says DeFi is a paradigm shift

The Federal Reserve (read: US central bank if you are not a yank) shared a paper concluding that decentralized finance (DeFi) could be “a paradigm shift” and contribute to a more robust, open, and transparent financial infrastructure.

So what?

DeFi has been having a moment lately with high praise from the Fed and the likes of Mark Cuban. Expect interest to grow as new crypto converts seek to go beyond bitcoin to check out DeFi projects like Aave

Nonetheless, it is not all sunshine, rainbows and unicorns. The paper also outlines three risks to DeFi

(i) Smart contract risk: Last year, over $100M was lost to DeFi hacks. Hacks mostly happened due to coding errors when writing smart contracts.

(ii) Operational security risk: DeFi staff could be bribed into letting bad actors gain access to project admin keys and compromise smart contracts; this could be mitigated by multi-signature controls by a large group

(iii) Interdependencies: Many blockchains and projects interact with each other. This means that a failure in one area could have a ripple effect.

JayZ & Jack Dorsey launch bitcoin non-profit

Donating 500 Bitcoins - currently valued at $23M - to establish ₿trust endowment to fund bitcoin development in Africa and India

So what?

Africa and India have over for 2 billion people with more than 50% of them under the age of 25. This young and increasingly internet savvy population could propel cryptocurrency usage if adopted en masse

One challenge is that there is rising government opposition with Nigeria and India banning or considering banning banks from engaging with cryptocurrency.

₿trust aims to advance the development of bitcoin as internet’s money by giving grants to local developers and projects advancing bitcoin. Stay tuned!

More Bitcoin mining headed to Texas!

Argo is buying 320 acres in West Texas to build a 200MW data center for bitcoin mining in the next 12 months. The land was acquired for $17.5M and mining facility to be built with an investment of $100M. There is room to expand up to 800MW.

So what?

There is an ongoing debate about bitcoin mining’s energy consumption and environmental impact. West Texas is a hot destination for bitcoin mining because it has some of the world’s cheapest and most abundant supplies of wind, solar, natural gas and oil.

Argo’s project could leverage the region’s cheap wind energy and deregulated power market to achieve lower costs and higher profits

But there is a catch. Bitcoin mining produces a lot of heat and in this case, it will be compounded by the steamy desert heat of West Texas. Argo may need to develop innovative cooling technology to sustain operations.

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Listen now | Each week, I cover the “so what"?” of 5 key crypto developments in about 5 minutes. Let’s go. Bitcoin Senator joins Banking Committee Senator Cynthia Lummis of Wyoming is the only member of Congress who has disclosed owning cryptocurrency; she first bought bitcoin in 2013 based on a recommendation from her son-in-law

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Each week, I cover the “So what?” of 5 key crypto stories. Let’s go.

India Proposes Crypto Ban

BJP, India’s ruling party, has proposed a ban on private cryptocurrencies in favor of developing a national digital currency

So what?

My first question is why can’t they coexist? What’s the trigger? My sense is that some government officials have two fears - the first is cryptocurrencies will be be used by criminals and the second is that the central bank may lose some control if a significant portion of the economy moved on chain

And so...with the flick of a pen, an outright ban would exclude almost 20% of the world’s population from participating in private digital currencies. It could set the precedent for more nations to follow suit.

That said, while the ban would discourage interest, it might prove difficult to fully enforce. India already has 5-7 million citizens who own cryptocurrencies.

OKCoin launches blockchain domain name

OKCoin became the first digital currency exchange to to offer blockchain domain names by partnering with Unstoppable Domains

So what?

If you have ever had the nerve racking, heart thumping experience of transferring a large amount of cryptocurrency between wallets then you can relate. One of the steps involves copying and pasting the wallet address which is a super long mix of letters and numbers into a field. If one character is missing or off, then you risk sending your crypto to the wrong address and there is basically low to no chance of a refund.

But wait - there’s a fix for that. I’m excited about the ability to use a blockchain domain name like David101 instead of that super long mix of random letters and numbers.

I think this a great step in improving user experience and making this space more palatable for mainstream consumers who are used to seamless experiences with Apple and CashApp

I expect other wallets and digital currency exchanges will join the party.

Visa to integrate crypto

Visa is partnering with wallets and exchanges to enable users to purchase these currencies using their Visa credentials or to cash out onto their Visa credential to make a fiat purchase at any of the 70 million merchants where Visa is accepted globally

So what?

Visa is positioning itself to continue to be a payments player irrespective of the technology used

Visa has been active in the crypto space. Visa has partnered with 35 digital currency exchanges and platforms such as Fold and BlockFi to issue Visa cards. These partnerships have potential for 50 million Visa credentials.

Visa is a leading payment system in the West. This could encourage traditional banks to move towards holding deposits of digital currencies and supporting transactions.

Coinbase to direct list IPO

The direct listing is expected to occur late February to early March

So what?

Coinbase says it is proceeding with a direct listing because it more closely aligns with the crypto ethos of access for all. I don’t think it hurts that this allows the company to avoid a ton of investment banking fees

Now, Coinbase shares are reportedly trading around $200 a pop on the secondary market. This implies a valuation of around $50B, which would make it larger than Credit Suisse and Deutsche Bank.

The stock market has been pretty exuberant lately. I am excited to see this thing pop.

Miami wants to lead blockchain

Mayor Saurez aims to position Miami as a hub for blockchain innovation and “the most crypto competitive city on the planet”

He appointed Saif Ishoof as the city’s first Chief Technical Officer to provide “concierge services” to the industry

So what?

Much has been written about California’s “tech exodus”, irrespective of your position, it’s clear that other cities and states are rolling out the red carpet

I don’t think Miami is trying to dethrone Silicon Valley but perhaps it could become the Charlotte-Raleigh-Durham banking equivalent for crypto

Miami’s ties to the Caribbean and Latin America suggests some locals may already have exposure to digital currencies for cross-border transfers and and trade

The city could become a pioneer and a testing lab for new initiatives like paying property taxes in digital currency, holding part of the city’s cash reserves in digital currency….and so on. These symbolic moves could strengthen its reputation and help attract more entrepreneurs and VCs to the ecosystem.

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Crypto crime drops to 0.34%

Chainalysis reports total cryptocurrency sent or received by criminals dropped to 0.34% of total in 2020 down from 2% in 2019

In contrast, the United Nations Office on Drugs & Crime estimates money laundering takes up 2-5% of the global GDP each year

So what?

Cryptocurrencies like Bitcoin earned a bad reputation because criminals were amongst its earliest adopters; now it appears that cryptocurrency has a lower share of criminal activity than the traditional fiat payment systems

Scams accounted for 54% of the criminal crypto activity with ransomeware accounting for 7% of crime but increased 311% year-over-year

Firms like Chainalysis partner with the FBI, IRS, DEA, ICE and EuroPol to track the flow of illicit funds along the blockchain; they have identified and seized substantial amounts of money

Source: Chainalysis 2021 Crypto Crime Report

Coinbase has over 43M users:

Coinbase now reports 43+M users across 100+ countries with $90+B assets on the platform

The number of users has increased by 8M (22%) since the last update in mid-2020

Coinbase’s custody business for institutional investors now has $20B assets with $14B received within the past 6 months

So what?

Coinbase is cementing it’s leading position in the cryptoexchange market as interest has grown

Some industry analysts estimate that it’s IPO could fetch $28B or more.

Coinbase could see increased competition for institutional investors as Anchorage recently obtained a federal banking charter and is well positioned to provide sub-custodial services and other crypto-related financial services to large institutions.

New $10B Samsung plant could support US bitcoin mining

Samsung may invest $10B in a 3nm computer chip making facility in Austin, TX

These chips could be used by bitcoin mining operations; however, there could also be demand from the likes of Apple and Nvidia

So what?

China has ~65% of global bitcoin mining capacity while the US and Canada account for ~10% led by 15 mining facilities at scale (>50MW)

China’s dominance is largely due to access to low cost energy after a decade of investing in hydroelectric, coal, and wind energy facilities

Bitmain is building the world’s largest bitcoin mine in West Texas to take advantage of abundant wind energy and deregulated power market; there are couple other large bitcoin mining operations planned or in operation in the Lone Star State

Retail bank develops stablecoin

Sber, the largest retail bank in Russia is developing a stablecoin for use by its corporate clients

The stablecoin will be backed by the Russian Rubble, and could enable low cost, instant payments saving corporate clients high fees

So what?

Sber is the 3rd largest bank in Europe with ~140M retail clients and 1.1 million corporate clients across 22 countries

Sber could eventually apply lessons learned to its retail business

Banks in the US and abroad are receiving regulatory clarity as new guidelines are issued regarding their use of digital currencies; expect more announcements

China is expanding its DCEP pilot

China’s pilot of the Digital Currency and Electronic Payments (DCEP) has netted over 4 million transactions valued more than $300M

It’s now being expanded to Shenzhen where officials will conduct $3M red envelope giveaway

So what?

80% of central banks in major economies are conducting R&D into digital currencies

China’s pilot is one of the most advanced and has morphed from small-scale closed loop to larger-scale open loop tests

Expect rollout beyond China’s Tier 1 cities later this year

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Listen now | Each week, I cover the “So what?” from 5 key crypto news stories in about 5 minutes. Let’s go! This week: Anchorage gets national bank charter Brian Brooks leaves the OCC Goldman Sachs looking to go crypto Gemini considers IPO, bitcoin rewards card Millions of dollars of bitcoin missing

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