🌸 April’s showers brought more than May flowers 🌸

Who had the collapse of a top 10 cryptocurrency triggering massive market downturns on their 2022 bingo card?

Pictured: Some crashes are more epic than others. Photo by Conor Samuel on Unsplash

There has yet to be a boring month in 2022, and while it feels like crypto can’t get more wild, May did a great job of making us eat crow. Terra — the blockchain ecosystem known for its native currency LUNA and stablecoin UST (now rebranded as TerraClassicUSD, USTC) — had a rough go of it early in the month when UST depegged from $1 USD, culminating in a death spiral of holders seeking liquidity to flee from the falling asset. 

As a result of the collapsing ecosystem, Chainlink oracles were forced to halt their Terra feeds, leading to several protocols being exploited during the downtime, and the stablecoin Tether (USDT) saw over $7B worth of redemptions. While the immediate fallout has been fairly dramatic, made more so by current market conditions, the second and third order effects of Terra’s collapse are still not fully apparent.

However, this latest crypto market crash has done nothing to stop the flow of great and interesting crypto journalism and research. Keep reading to see this month’s top hits.

Check our Twitter, Telegram and Discord server for more info on upcoming Off the Record sessions, and to meet up with other ACJR members now that conferences are coming back. 

Reminder! Want to see your op-ed in the ACJR newsletter?

The ACJR newsletter has an open call for op-eds! Reach out to Molly Jane or Anthony on Telegram if you’d like to submit a piece for the newsletter.

₿ 😎₿

Top Crypto Journalism in May

Terra Flops by Matt Levine, Bloomberg

• In his characteristic casual-intellectual vernacular, Matt Levine brings us what is probably the best (if not the most digestible) overview of the blockchain Terra’s recent collapse. Matt explains the mechanisms that powered Terra and Luna and were meant to stabilize the UST price, and how those mechanisms ultimately were the stablecoin’s Achilles’ heel. 

UST’s Do Kwon Was Behind Earlier Failed Stablecoin, Ex-Terra Colleagues Say by Sam Kessler, Danny Nelson, CoinDesk

• Do Kwon, founder of the Terra blockchain, was allegedly also the mastermind behind Basis Cash, an earlier failed attempt at an algorithmic stablecoin, the design which would ultimately kill Terra. CoinDesk discovered that early members of the Terra ecosystem were connected to Basis Cash, and in investigating uncovered evidence that Do was “Rick,” one of the token’s pseudonymous founders.

EOS Was the World’s Most Hyped Blockchain. Its Fans Want It Back by Gian M. Volpicelli, Wired

• Back in 2018 — a watershed year for crypto when the ICO craze came to a screeching halt — Block.one made waves after generating over $4 billion in their initial offering to build the EOS blockchain. In light of what the community largely sees as Block.one’s failure, a community-led organization called the EOS Network Foundation was birthed as a means to restore the blockchain to its former glory and beyond. Gian brings us up to speed with what happened in the wake of the record-setting ICO and the current fight for the soul of EOS. 

Crypto Investors Roleplaying as Pee-Obsessed Goblins to Cope With Crash by Jordan Pearson, VICE

• If you’ve never been welcomed to Goblin Town, consider yourself lucky. Named in homage to a catchy tune from The Hobbit animated movie, in the world of crypto, Goblin Town refers to the depths of a bear market when liquidity, buy volume and speculation dry up. Jordan Pearson recounts a Twitter Space where fans of a new NFT project, Goblintown.wtf, spent over two hours talking like goblins (except one intrepid soul). If nothing else, the recording of the Space serves as an interesting slice of bear market psychology

‘Move-to-Earn’ Solana App StepN Is Latest Crypto Gaming Craze by Rita Liao, TechCrunch

• Rita Liao introduces us to StepN, a Solana-based play-to-earn game that everyone you know with a Solana wallet is probably playing. Liao explores a crucial line of thought in this part of the crypto space: is StepN actually a game or just a gamified financial product? Semantics aside, many play-to-earn and other crypto-based games come under fire for being, basically, low quality games where gameplay is an afterthought to tokenomics.

The Math Prodigy Whose Hack Upended DeFi Won’t Give Back His Millions by Christopher Beam, Bloomberg

• In the fall of 2021, DeFi platform Indexed Finance was exploited, and the attacker made off with $16 million in assets. The story stood out from other exploits around the same time not because of the amount stolen, but because of how quickly the attacker was identified and their response. After Indexed reached out with a white hat bounty for discovering the exploit, the attacker rejected their offer and instead tested the “code is law” theory in court. Christopher Beam gives a great overview of this story, the timeline of events and how the legal action against the attacker is now playing out.

How Not to Run a Cryptocurrency Exchange by Lavender Au, CoinDesk

• Liquid, the Japanese crypto exchange recently acquired by FTX, is in some hot water. Insiders report that leadership was misrepresenting or not disclosing security breaches, ignoring theft by employees, and stopped the investigations into last year’s $90 million hack. CoinDesk spoke with over twelve former Liquid employees and reviewed internal documents for this piece, which Lavendar Au artfully used to paint a picture of a chaotic, struggling organization.

Paradise at the Crypto Arcade: Inside the Web3 Revolution by Gilad Edelman, Wired

• Part ETH-Denver conference report, part history of blockchain, part psychological profile of the crypto industry, this piece by Gilad Edelman represents a perfect sample of today in crypto: how did we get here and what’s the next step? Edelman looks at the good, the bad, and the ugly as Web3 tries to reconcile its moral philosophies of decentralization and freedom with the need to feverishly execute and ship code. A balanced look at the personal and technical challenges the industry is facing as it matures. 

You and Whose Army? The Many Maxi Militias of the Crypto World by Ben Munster, Decrypt

• Maximalists, or “maxis,” are token holders who see crypto as a zero-sum game: in order for my project to succeed, yours must fail. Maxi behavior is characterized by overzealous, antagonistic support of a specific project to the point of being toxic. Tokens and cryptocurrencies appreciating value can attract tens of thousands of people into different crypto communities, some with better reputations than others. Ben gives us a who’s who of some of the largest crypto tribes roaming the internet in 2022.

Typo Moves $36M in Seized JUNO Tokens to Wrong Wallet by Sam Kesler, CoinDesk

• An unprecedented community governance vote on the Cosmos-based Juno blockchain was intended to seize millions of dollars’ worth of JUNO tokens from the wallet of a whale suspected of gaming the JUNO airdrop. Unfortunately, a typo sent the tokens to an address that nobody has access to, instead of the community-controlled wallet as planned — Sam breaks down what happens when a fat-finger typo loses millions.

Methane Is a Big Climate Problem That Bitcoin Can Help Solve by Trung Phan, Bloomberg (Opinion)

• Beginning in January 2021, ExxonMobil has worked with Crusoe Energy Systems to use excess gas from its North Dakota oil fields to mine Bitcoin. The oil production process gives off gas as a byproduct. For logistical reasons, not all of the gas can be captured and transported, meaning it’s typically burned. Crusoe Energy Systems is working to use that excess gas to power Bitcoin mining, reducing the proof-of-work chain’s overall emissions. With all of the coverage of Bitcoin’s harmful effect on the environment, this piece offers a refreshingly different perspective on the mining industry.

Dorsey, Saylor, Fidelity and Others Defend Environmental Impact of Bitcoin Mining in Letter to EPA by MacKenzie Sigalos, CNBC

• Michael Saylor and Jack Dorsey, among others, have jointly signed a letter to the Environmental Protection Agency refuting many of the claims made by House Democrats around the impact of cryptocurrency mining. The letter was sent to EPA Chief Michael Regan and had participants including Fidelity Investments, Benchmark Capital, and cryptocurrency mining and industry experts. MacKenzie (one of our most-often-cited journos), deftly breaks down the story.

And now — on to some research!

₿ 😎₿

Top Crypto Research in May

"Replicating Portfolios: Constructing Permissionless Derivatives" by Estelle Sterrett, Waylon Jepsen, Evan Kim, Primitive Finance

• The Primitive Finance research team published this paper exploring derivatives made possible by RMM-01, a Replicated Market Maker. Currently, derivatives in the DeFi space rely on oracles (software that collects external data and supplies that feed for use with smart contracts, like the price of an off-chain asset). RMM-01 developed by Primitive replicates the approximate payoff of a Black-Scholes covered call option. RMM-01 is the first implementation of an on-chain expiring option mechanism that relies on arbitrage rather than an external oracle for price.

"Decentralized Society: Finding Web3's Soul” by E. Glen Weyl, Microsoft Research; Puja Ohlhaver, Flashbots; Vitalik Buterin, Ethereum Foundation

• Presenting joint research from Microsoft, Flashbots and the Ethereum Foundation, this paper proposes and discusses “soulbound tokens,” a potential mechanism for representing a Web3 native digital identity. Soulbound tokens are non-transferable, and better enable systems, “that reward trust and cooperation while protecting networks from capture, extraction, and domination.”

"A16Z State of Crypto in 2022 Report" by Daren Matsuoka, Eddy Lazzarin, Chris Dixon and Robert Hackett, A16Z

• Investment firm Andreessen Horowitz published the first of their State of Crypto reports, an annual overview of trends in the crypto industry that they’ve identified working with entrepreneurs and developers in the space. The 50+ slide report is summarized into five key takeaways, and the full report goes into much greater detail.

₿ 😎₿

Top Crypto Unhinged Tweet in May

With this new section, we wanted to highlight a tweet that we’d love for you to try to explain to your grandmother (or even to yourself five years ago).

We’re looking forward to another month of wacky projects, wild markets, and deep research! Follow along on Telegram, Twitter, and Discord, and hopefully we’ll see you IRL soon!

Remember breakout session whiteboard etiquette:

Meme courtesy of Molly Zuckerman

Subscribe here! No seed phrase required! 😉