Derek Hsue, cofounder at Reverie, discusses the recent controversial decisions by Solend DAO and Bancor, the importance of establishing processes for black swan events, and whether decentralized governance truly exists. Show highlights:

• what situation prompted Solend to feel it was in jeopardy
• what Solend DAO’s response was to that situation
• why Derek views it as “the nuclear option”
• why the proposal sparked an outcry from the crypto community
• whether this issue could have been prevented or managed differently if the protocol was built on a blockchain other than Solana
• why, a day later, the DAO reversed its first decision to take over the whale’s account
• whether Derek thinks the DAO made the right decision to not take over the whale’s account
• what is Impermanent Loss Protection, a feature offered by Bancor
• why Bancor decided to pause Impermanent Loss Protection
• whether Celsius and 3AC had anything to do with Bancor’s problem
• how Bancor’s decision was made unilaterally
• how DAOs should deal with black swan events

Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 

Ava Labs: https://www.avax.network/

Derek

• Twitter: https://twitter.com/derek_hsue

Reverie

• Website: https://www.reverie.ooo/

Solend DAO Situation

• Covered on Monday’s Unchained Newsletter: https://unchainedpodcast.com/does-this-dao-deserve-emergency-power%e2%81%89%ef%b8%8f/

Bancor Pausing Impermanent Loss Protection

• Bancor’s post: https://blog.bancor.network/market-conditions-update-june-19-2022-e5b857b39336

DAO Governance issues:

• Lido DAO proposes to reduce the existing scope of governance of its token holders: https://research.lido.fi/t/ldo-steth-dual-governance/2382

Main tweet

On this Friday’s Unchained, Derek Hsue explains:

* why the first Solend DAO vote was the “nuclear option”

* whether Solana’s history of downtime spurred the proposal

* Bancor’s decision to stop Impermanent Loss Protection

* what this all means for DAO governance

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Caroline Pham, commissioner at the Commodities Futures Trading Commission, discusses how we should build a regulatory framework for crypto assets, whether the SEC and CFTC should work together, what were the consequences of the Terra collapse, and much more. Show highlights:

Thank you to our sponsors!

Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 

Beefy Finance: https://beefy.finance/

EPISODE LINKS

Caroline Pham

Stablecoin regulation

FTX proposal to serve as the trading engine for derivatives:

Hester Peirce

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Mika Honkasalo, independent crypto researcher, discusses what is happening with Celsius and Three Arrows Capital, the importance of having proper risk management, and the contagion effects on the industry.

Show highlights:

• why is it so significant that Celsius paused withdrawals
• what is stETH and why is it important to understand the Celsius situation
• how the Luna/UST debacle started a contagion effect in the crypto space
• why Celsius’s investors won’t bail the company out
• what will happen to Celsius’s retail customers
• what Three Arrows Capital (3AC) is and whether they have a solvency problem
• how 3AC was levered long and whether they had poor risk management
• who will be hurt if 3AC goes under
• what would be the effect of 3AC and Celsius collapsing
• which types of funds that Mika will be eyeing to see if they also end up in a similar situation to 3AC and Celsius
• why Mika would counsel anyone who keeps their money with centralized crypto lenders to scrutinize their practices

Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 

Ava Labs: https://avax.network

Mika Honkasalo

• Twitter: https://twitter.com/mhonkasalo

Mika’s blog post on the stETH-ETH peg: https://mhonkasalo.substack.com/p/stetheth-peg-not-a-peg-presents-a?s=r

Celsius announcement that they would be withholding assets: https://twitter.com/CelsiusNetwork/status/1536169010877739009?s=20&t=hL-ZsBSKZOLF-whTwNmjgw

Nexo’s offer to buy Celsius assets: 

https://twitter.com/Nexo/status/1536256598993211393?s=20&t=vKmJCZGNToaOqZU-TEjcDg

Celsisus’s investors unlikely to bail out company: 

https://www.wsj.com/articles/celsius-networks-investors-unlikely-to-provide-more-funds-to-bail-out-crypto-lender-11655395113

Celsius hires restructuring lawyers: 

https://www.wsj.com/articles/crypto-lender-celsius-hires-restructuring-lawyers-after-account-freeze-11655250575?tpl=br

Why staked ETH is part of Celsius’s and 3AC’s woes: 

https://www.coindesk.com/markets/2022/06/14/staked-ether-becomes-focus-of-crypto-stress-from-celsius-to-three-arrows/ 

Conor Ryder on the stETH liquidity problem

https://twitter.com/ConorRyder/status/1537130483007508480?s=20&t=pZGZf17ed_DyOS18CHExmQ

The DeFi Edge on the 3AC situation: https://twitter.com/thedefiedge/status/1537465349976694786?s=20&t=Q29mo3EKSASasTenHVEm4Q

Who else has exposure to 3AC: 

https://fortune.com/2022/06/16/crypto-crash-hedge-fund-three-arrows-capital-insolvency-rumors-novogratz/ 

3AC withholding $1M in assets from 8 Blocks Capital: 

https://twitter.com/Danny8BC/status/1537224378554806272?s=20&t=Q29mo3EKSASasTenHVEm4Q

Meltem Demirors explains the problem from the balance sheet perspective:

https://twitter.com/Melt_Dem/status/1537155214897201153?s=20&t=Q29mo3EKSASasTenHVEm4Q

Adam Levitin on Celsius bankruptcy

https://twitter.com/AdamLevitin/status/1536932912674836481?s=20&t=Q29mo3EKSASasTenHVEm4Q

degentrading on Why Celsius and 3AC going under should cause you to worry

https://twitter.com/hodlKRYPTONITE/status/1536902115540742144?s=20&t=Q29mo3EKSASasTenHVEm4Q

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Olta Andoni, deputy general counsel at Ava Labs, and Ari Redbord, head of legal and government affairs at TRM Labs, discuss the Terra stablecoin meltdown, implications for impending international regulations, and the history of stablecoin regulation internationally. Topics covered include:

Thank you to our sponsors!

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Episode Links

Olta

Ari

Lummis-Gillibrand Bill

• Bill Introduction:

https://www.gillibrand.senate.gov/news/press/release/-lummis-gillibrand-introduce-landmark-legislation-to-create-regulatory-framework-for-digital-assets

FINMA

• FINMA:

https://www.finma.ch/en/

• FINMA on Stablecoins:

https://www.finma.ch/en/news/2019/09/20190911-mm-stable-coins/

• FINMA Publishes Stablecoin Guidance:

https://www.sif.admin.ch/sif/en/home/finanzmarktpolitik/digitalisation-financial-sector/stablecoins.html

NY DFS

• Guidance on Stablecoin Issuance:

https://www.dfs.ny.gov/industry_guidance/industry_letters/il20220608_issuance_stablecoins

• Press Release:

https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202206081

• CNBC Coverage:

https://www.cnbc.com/2022/06/08/new-yorks-financial-watchdog-issues-stablecoin-guidance-calls-for-reserve-requirements.html

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Welcome to The Chopping Block – in person at Consensus in Austin! Crypto insiders Haseeb Qureshi, Robert Leshner, and Tarun Chitra are joined by guest Kyle Samani of Multicoin Capital to chop it up about the latest news in the digital asset industry. Show topics:

EPISODE LINK

Hosts

Guest

Show Topics

https://plaid-cement-e44.notion.site/A-Message-to-the-Community-from-the-Optimism-Foundation-f49b913bb0974d8a854a8bdd409a9dd6

• Wintermute statement: 

https://gov.optimism.io/t/message-to-optimism-community-from-wintermute/2595

https://www.coindesk.com/policy/2022/06/07/key-us-senators-introduce-bill-outlining-sweeping-plan-for-future-crypto-rules/

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Lewis Cohen, lead attorney at DLx Law LLC, joins to discuss the recently proposed Lummis-Gillibrand bill, the Responsible Financial Innovation Act, which he helped shape. In this episode, we cover: 

• how Lewis was impressed by Gillibrand’s and Lummis’s offices’ hard work and bipartisanship  
• how the bill creates a new definition for an “ancillary asset” with split oversight responsibilities between the CFTC and the SEC 
• how the bill proposes a test of managerial centralization as a determinant of disclosure requirements for digital assets 
• his response to criticism that the ancillary token approach is more complicated than need be and gives too much power to the SEC 
• why the bill didn't adopt an approach more similar to something like SEC Commissioner Hester Peirce’s token safe harbor proposal 
• how Lewis would respond to SEC Chair Gary Gensler’s contention that the vast majority of digital assets are securities 
• how Cohen is concerned about legislation or regulation impinging on basic freedoms to transact by over-applying securities regulation
• what kind of SEC disclosures will be required for “ancillary assets” and the requirements for projects to be able to cease mandatory disclosure
• how the bill defines stablecoins
• whether the requirement for stablecoins to maintain reserves means the end of algorithmic stablecoins or whether they will just be called something else
• how the bill handles DAOs and how legislation in this area must be delicate
• why Lewis believes the proposal is a “bright spot” for thoughtful US legislation and bipartisanship
• why he doesn’t see the bill being adopted in the current Congress 

Thank you to our sponsors!

• Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 
• Ava Labs: https://avax.network  

EPISODE LINKS 

Lewis Cohen 

• DLx Law LLC: https://dlxlaw.com/

Lummis-Gillibrand Proposal (Responsible Financial Innovation Act) 

• Legal Memo from DLXLaw : https://dlxlaw.com/wp-content/uploads/2022/06/DLX_FSV-summary_RFIA_060722.pdf

Commentary:

• CoinDesk recap: https://www.coindesk.com/policy/2022/06/07/key-us-senators-introduce-bill-outlining-sweeping-plan-for-future-crypto-rules/

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Glen Weyl, RadicalxChange Foundation founder and political economist & social technologist at Microsoft Special Projects, and Puja Ohlhaver, strategist at Flashbots, discuss “soulbound tokens” and their implications for collaboration and social organization in a variety of spaces. Topics covered include:

• how Glen got involved in crypto, wrote a book, and came to co-write a paper with Vitalik Buterin 
• how Puja studied economics and got in touch with Glen in pursuit of a middle ground between left and right politics
• what soulbound NFTs are and how they work
• how Vitalik’s paper articulated how the concept of the soulbound token could advance decentralized collaboration in web3
• how decentralized reputation can enable larger networks of coordination
• how identity can be understood through the lens of community participation
• how the name ‘soulbound token’ came about
• how these tokens could provide a technology for those who value scarcity but disdain speculation
• how identity-dedicated tokens could work on a technical level (including recovery)
• what is DeSoc and why is it important?
• how non-transferable tokens can improve DAO organization, including resolving issues with quadratic funding
• how identity-locked tokens can be protected from bots and AI abuse
• how these tokens could support community privacy and responsible information disclosure

Thank you to our sponsors!

Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 

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Related Reading

• Decentralized Society: Finding Web3’s Soul (Weyl, Ohlhaver, and Buterin; 2022)

Soulbound Tokens

• Vitalik on Soulbound tokens
• • https://vitalik.ca/general/2022/01/26/soulbound.html

• TL;DR written by Glen
• • https://www.coindesk.com/layer2/2022/05/11/after-defi-desoc-finding-web-3s-soul/

• Other write-ups
• • https://nftnow.com/guides/soulbound-tokens-sbts-meet-the-tokens-that-may-change-your-life/
  • https://www.radicalxchange.org/concepts/soulbound-tokens/
  • https://fortune.com/2022/05/26/what-are-soulbound-tokens-web3-buterin/
  • https://thedefiant.io/vitalik-soulbound-tokens/

Projects Mentioned

• Ceramic

Glen Weyl

• Personal Website

Puja Ohlhaver

• LinkedIn

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Jason Gottlieb, a crypto attorney and partner at Morrison Cohen, discusses the insider trading case being built by the US Department of Justice against former OpenSea employee Nathaniel Chastain. Show topics:

• why Nathaniel is being charged with wire fraud and money laundering instead of insider trading
• what makes NFT insider trading different from usual insider trading indictments
• why an employee’s “duty of confidentiality” can be important when building an insider trading case
• whether the money laundering charge makes sense 
• whether moving money between self-custodied wallets constitutes money laundering
• why Jason does not think this particular case will have widespread implications for the NFT and crypto space
• Jason’s advice for employees at crypto exchanges and companies who may be tempted to trade on private information
• what happens next in the Chastain case
• why the potential sentences are so long – 20 years for each charge
• how likely it is that Chastain has to serve jail time

Thank you to our sponsors!

Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 

Ava Labs: https://avax.network 

Episode Links

Jason Gottlieb

• Website: https://www.morrisoncohen.com/jgottlieb

Department of Justice Press Release

Nathaniel Chastain

• Arrest
• • https://www.coindesk.com/policy/2022/06/01/us-charges-ex-opensea-exec-with-nft-insider-trading/
  • https://www.theblockcrypto.com/linked/149685/former-head-of-product-for-opensea-indicted-after-insider-trading-scandal
• Resignation
• • https://www.coindesk.com/business/2021/09/16/opensea-exec-accused-of-insider-trading-leaves-company/
• Insider trading allegations
• • https://www.coindesk.com/business/2021/09/15/insider-trading-allegations-rock-opensea-nft-marketplace-responds/
• Twitter

Insider Trading and Crypto

• https://www.morrisoncohen.com/siteFiles/files/Insider%20Trading%20and%20Cryptocurrency%20-%20A%20Primer%20for%20Traders.pdf
• https://papers.ssrn.com/sol3/papers.cfm?abstract_id=132529

Taylor Monahan Recap of the Case

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Welcome to The Chopping Block! Crypto insiders Haseeb Qureshi, Tom Schmidt, and Tarun Chitra chop it up about the latest news in the digital asset industry. Since Robert Leshner couldn’t make it, Laura also decided to hop on the show too! Show topics:

Hosts

Guest

Show Topics

Unchained Coverage on Optimism

Unchained Coverage on Osmosis and Keplr

Unchained Coverage on FTX x CFTC

• https://unchainedpodcast.com/ftx-wants-to-compete-with-cme-heres-why-its-a-big-deal/

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Sunny Aggarwal, co-founder of Osmosis Labs, talks about how Osmosis is being built, the innovations that are coming, the reasons to use app chains, and much more. Show highlights:

• how Sunny got into crypto 
• how the DAO hack turned him off Ethereum at first 
• how the scaling issues with Ethereum got him interested in the Cosmos vision of app-chains
• why he is interested in Proof of Stake
• what the vision of Cosmos is
• how Sunny compares the evolution of blockchains with human evolution
• why he thinks that Cosmos integrates the best of Bitcoin and Ethereum networks
• why he thinks that having more than one Proof of Work chain is fundamentally insecure
• which three technologies are necessary for Cosmos to succeed
• what IBC and the Cosmos SDK do
• why Sunny decided to build Osmosis 
• how automated market makers are massively underexplored
• why UX is such a priority for the Osmosis team
• why Sunny does not want to list the OSMO token on other exchanges
• why Osmosis has a curated dex as well as a permissionless one
• how Osmosis governance works 
• how security is provided on Osmosis
• what superfluid staking is
• how CosmWasm helps Osmosis compete with centralized exchanges
• how Osmosis is solving frontrunning with threshold encryption
• why the Osmosis team chose Axelar for bridging
• whether Yuga Labs could have used an app chain 

Thank you to our sponsors!

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EPISODE LINKS

Sunny Aggarwal

• Twitter: https://twitter.com/sunnya97

COSMOS

• What is Cosmos: https://v1.cosmos.network/intro

OSMOSIS 

• Twitter: https://twitter.com/OsmosisZone

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