For our Thursday episode focused on major news topics this week, we discussed the latest drama surrounding crypto mega exchange Binance which is making its presence known in the stablecoin game and shaking up the ecosystem as it looks to muscle its way to supremacy.
Welcome to Chain Reaction, where we unpack and explain the latest in crypto news, drama and trends, breaking things down block by block for the crypto curious.
For our Thursday episode focused on major news topics this week, we discussed the latest drama surrounding crypto mega exchange Binance which is making its presence known in the stablecoin game and shaking up the ecosystem as it looks to muscle its way to supremacy. We also covered:
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Lucas Matney 0:02
Everyone, it's Lucas Jackie and Anita, welcome to chain reaction where we unpack and explain the latest in crypto news drama and trends breaking things down block by block for the crypto curious. Anita, I know you've been busy following YC demo days this week, what's going on there any big crypto startups we should keep an eye on?
Anita Ramaswamy 0:22
So actually, it's interesting because YC demo day, it's happening right now as we record this, it's also happening tomorrow, which is the day this episode comes out. And of this batch already, there are 30 Crypto startups total, which is about 13% of all of the startups that are part of the YC cohort this summer. So pretty huge concentration in crypto. And it's actually slightly up from the percentage that it was in the last batch earlier this year. So yeah, it seems like crypto is a pretty big chunk of the companies. And there's a lot of founders building in web three as part of YC. And we're seeing a lot of the same areas from the last batch in terms of areas of interest. Like there's a good number of NF T startups, which I know is a big theme we saw last time. There's also a bunch of startups working within defy, which I think is interesting, just given a lot of the conversations around the defy ecosystem recently in crypto. And there's a pretty good mix as well of both startups that are building institutional facing products and consumer facing products. So I think there's three or four in there that are all building different crypto wallets, and they're focused on different niches. There's a lot of interesting stuff going on in the crypto realm within YC. And if you want to learn more about that, I did actually write an article on it with Natasha. So that's up on the site. If y'all want to check it out.
Lucas Matney 1:31
We'll drop that in the show notes. Yeah. All right. Well, I think we can kind of jump into some of the news that we had going on this week. It's a fairly big news week across tech. Maybe a little bit less happening in crypto, though. Yeah,
Jacquelyn Melinek 1:41
so so rare, has teamed up with the NBA for a new fantasy basketball game for background. So rare is the Ethereum based blockchain fantasy video game company, and it was valued at $4.3 billion after a $680 million Series B round. And basically, it teamed up with both the NBA and the National Basketball players association, which is the MBAs union. And for background software, allows players or I guess users in the sense to buy and sell digital cards representing basketball players, then if they want, the users can then put together lineups of basketball players and earn points based on real life performances in their fantasy games. It's kind of a mix between something like fantasy football and having like the special trading cards, like of Michael Jordan, or Steph Curry or some big NBA player or soccer player or whatever team you're you're rooting for. But it's a multi year partnership. And the launch for the NFT base basketball game will happen this fall. And it'll be called something super original called so rare NBA. And I feel like this is pretty significant because it's coming right after they launched their first fantasy soccer game, or as they call it football in other countries. And then they also partnered with the MLB earlier this year, and the NBA is definitely not new to the crypto world. In the past, some teams on the NBA dove into it, like the LA Lakers agreed to a 20 year arena naming partnership contract or $700 million with crypto.com. And the Warriors signed a $10 million global rights agreement with FTX too. And the NBA organization as a whole got into NF T's with NBA Top Shot, which is where NFT holders can trade quote top shots that go up and down in value over time. And it's also worth noting, I saw this before we started recording that NBA sponsorship revenue hit $1.6 billion, and it's 2021 to 2022 season, and it was up 13% from the previous season. And that's not all coming solely from crypto, I want to clarify that. But crypto is the second most lucrative sponsorship category for the NBA behind tech. So it's really climbing up the ladder here in terms of sponsorship deals. And that can mean anything from like Miami Heat doing its deal with FTX for the naming rights to putting logos on players jerseys to this game we're seeing. So it's definitely like a big snowball effect. I feel like we're seeing across the board. And this is just another like, extra exciting thing for both the sports world and the
Anita Ramaswamy 4:12
crypto world. One random thing I noticed like soccer is a French company, right? Yeah, it is.
Jacquelyn Melinek 4:16
And it's actually interesting because it has about 2 million users and most are based in Europe and Asia. But as we know like NBA is mainly an American thing. So it's an attempt I think to attract more of a US based clientele and it'll be interesting to see how that works. And we've seen like sports partnerships proliferate over the past year or so like give or take so I think expanding beyond the European market is an interesting angle by them.
Lucas Matney 4:47
It's kind of funny because dapper which does NBA Top Shot is based in Canada also. So I didn't know they were Canadian. That's why it was Yeah, NBA just refusing to place a bet on a US startup to rock. The NBA like you know, one of these wide marketplaces. Yeah, so it's kind of fascinating though, because NBA Top Shot was obviously really big at the beginning of last year. And it like really pushed like a lot of people say that NBA Top Shot was the catalyst for NF Ts, sales taking off in the first place. So they had this big build up at the beginning of last year. But when the first kind of like NFT, micro bull run ended, they never recovered volume wise, because all of that action went to Aetherium based marketplaces and exchanges. And NBA Top Shot has their own proprietary thing called flow that they run on. So like a big part of their sell is getting other developers to build on flow. But all the money in crypto and NF T's is pretty much on Aetherium. So I think it's interesting that the NBA is trying to basically invest in a platform through so rare that is putting their trading card platform on Aetherium. And I don't know if it's on like main net Aetherium. Or if it's on, you know, some layer two or something. But it's where the money is.
Jacquelyn Melinek 5:55
Yeah, it's definitely where the money is. I think it's giving sports a new way to expand beyond the physical world, especially with this like trading aspect. And the value of it really comes from the way these players are performing. It's not just like, oh, the price is the floor price. And that's it like, no, it's based off how, I don't know, bringing up Steph Curry again, because I'm not an NBA Pro, like how he performs. And it's giving fans a way to engage more closely with these players that they love it No, personally, like, I don't follow it extremely close. But I think there's a deep connection between fans and their team. So launching this partnership with massive organizations like the NBA, that have millions of fans can bring on this, like this greater adoption that we're seeing across the board and other sectors.
Anita Ramaswamy 6:39
Yeah, I think that the global angle is kind of interesting, too, just because like the NBA has historically been a league that has embraced its global fan base a lot more like outside of the US. And you know, they had this like big push in China a couple years ago. And I mean, it seems like NF T's are kind of an interesting way for the NBA to actually grow its fan base abroad as well. So it's not just like so rare, you know, trying to capture us customers, but perhaps a little bit of synergies there.
Jacquelyn Melinek 7:02
Yeah, definitely. I think it'll be interesting to see overall whether or not these partnerships and deals pay off and if the American audience will propel as much as so rares international one. Speaking of international markets. Anita, do you want to tell us what's going on over there?
Anita Ramaswamy 7:19
Yeah, well, okay, look, I can't say that my topic for this week is as interesting or fun as basketball, but we're going to talk about competition between Stable coins. So uh, oh, yeah. Some spicy stuff? No, but but actually it is because Okay, so what happened on Monday was that by Nance, which is the largest global crypto exchange by volume, basically announced that they are killing access to three of the Stable coins on their exchange on their platform that compete with its own Stable coin. And there's a lot of nuance to this, but their Stable coin is called B USD. It's like the, you know, the Stable coin that they issue. And I think it's important, like, let's take a step back. Why do people coins even matter? And like, why are there so many of them, they're important because they provide the ability for crypto traders, a lot of who really want to do like fast paced transactions to have instant or close to instant liquidity. So it's sort of like it's a cash equivalent. All of these Stable coins, at the end of the day be USD, and then the three that they're actually banning from their platform, which are USDC, the Pax dollar and true USD, all of them do sort of the same thing. They're all supposed to be equivalent to the dollar in value. They're all backed by some sort of reserves. And in the case of all of these coins, there's a physical vault of dollars somewhere, theoretically, that it's $1 for every Stable coin that each of these companies is issuing, which kind of begs the question like, then why are there so many Stable coins, right? Like if they all essentially do the same thing? And my answer is like, okay, capitalism, like competition, obviously, there's different companies that have different incentives. And all of these issuers are essentially trying to say, we're the most reliable, we're the most unbiased and especially after what we saw with Tara, that was a little different, because it was an algorithmic Stable coin that wasn't actually backed by dollar reserves. But still, when it comes to Stable coins, stability is super important. So that's part of the reason for all of this competition. And all of these different issuers are competing on that basis. So by Nance USD, is actually the third most popular Stable coin right now by volume. The number one is tether, which is issued by a Hong Kong based company. The number two is USD C, which is one of the ones being revoked from by Nance. And the third one is B USD. And it's not to say that they're basically banning this USD C and the other two Stable coins completely from the platform, but they're essentially discouraging users from being able to trade them on the platform, so they won't be able to trade them. But technically, if you want, you'll still be able to deposit your USDC onto by Nance and withdraw and USDC. But what you can't do is defy stuff. And that's a huge use case for Stable coins like that's what traders love to do. They use Stable coins for staking for defy activities to earn yield. And you won't be able to do that anymore on the buy Nance platform unless you're holding the B USD Stable coin. So essentially they announced that all of the deposits of these three Stable coins on the by Nance exchange are going to automatically now be converted to be USD, which is the by Nance home currency. So it's a pretty big move from by Nance
Lucas Matney 10:11
it is yeah, I mean, it's funny because as we've talked about with places like Coinbase, all these big exchanges are having to diversify their revenue streams, they can't just take it off transaction fees alone at this point. And so it's funny to see them kind of like go into vampire mode for other successful crypto financial verticals, and just being like, you know, what, the platform where people actually deposit the money, we're going to take over this and this is going to be our thing. Yeah,
Anita Ramaswamy 10:37
well, and people are pissed about this, people are pissed at finance, in general, because it's just such a bold move. I mean, a lot of people were calling it a power grab, or a money grab and saying that there were even some comments I saw on Twitter, which I don't think are fully true. But a lot of people were saying, you know, in any other industry, this would be an antitrust issue. This is basically by Nance trying to build a monopoly. I don't think that's true, because there are so many other platforms that you can use, like USDC. And these other two Stable coins on that it's not like by Nance is completely killing the competition. But it is a very bold move from them to essentially say like, we're gonna promote our own assets on our own platform. And it's just another reminder of centralization. You know, the people in crypto are always trying to focus on decentralization and this is just a flex by by Nance and they're saying like, yeah, you're you're gonna use our platform, we're gonna convert your coins into our coin. Sorry,
Jacquelyn Melinek 11:25
I think there's something to be said about how like by Nance is the largest crypto exchange by volume and removing access to some of these competitors Stable coins, though, and only a select amount of them is interesting, in my opinion. And I think even though there are other exchanges out there that will offer it and people could move to that a lot of people rely on by Nance. So the fact that they're taking it away, some people I don't want to say lazy, but some people might not be inclined to go seek out those alternatives on other platforms, they might just say, Okay, bye. Nance got rid of it. And here I am, you know,
Lucas Matney 11:57
yeah. And they're certainly like plenty of countries, where by Nance is just majorly the primary exchange being used, like there's not even a double digit competitor in terms of market share. So, I mean, I think it's fair to say that this probably would be an antitrust issue in another industry, potentially, I mean, maybe not stateside. But yeah, it's just this was bold. And finance makes bold decisions sometimes, because they're kind of operating without borders, theoretically, because they never say what legal jurisdiction they're in.
Anita Ramaswamy 12:26
Right? Right. They're also eight times larger than FTX, which is the next biggest crypto exchange. So they're really gigantic. But there's one like missing dimension to this that I wanted to bring up, too, that people have been talking about, which is the elephant in the room in a way because it's sort of like what's the most popular Stable coin right now it's tether. They're the largest one by volume, the one that's run by this company in Hong Kong, and it's super interesting to see that by Nance has decided to sort of revoke the ability to trade and all of these other Stable coins, but tether remains unimpacted. And so, so the foundation that runs USTC, the company is called circle and their CEO basically came out and tried to spin this as a positive thing. And he was saying that be USD, even though you can use it on the by Nance platform, you can't really take it out and use it on other platforms because it's just not popular anywhere outside of finance, whereas USDC fair enough, like is used across a lot of different chains across a lot of different applications. So I think what could possibly happen is people start you know, they'll have to trade and hold their cash equivalents on the buy Nance platform in the binance Stable coin, but when they actually make those withdrawals they may still choose to make it and USDC but somehow like tether is just completely missing from the conversation. And obviously the USDC issuer you know the CEO Jeremy alehrer is saying that it's a good thing for his his company, it's good thing for USCC other people are saying that it's a really bad thing for USDC and this is actually going to help tether but you know by Nance sort of being the number three in this situation introduces a lot of really interesting competitive dynamics and you would never think that in a space as sort of dry as Stable coins where it's supposed to just be like these products that act just as cash equivalents and track the US dollar that competition would be so heated Oh juicy.
Lucas Matney 14:06
I feel like something tells me that some money exchanged hands in the background here I mean, I feel like why is the circle CEO being such a company man for by Nance in the situation like either they got some money or they had some like financial stresses that by Nance was just like, alright, we'll help you out. But you got to do this. This isn't nothing I have any information on but this is my conspiracy theorists tin hat on you're not
Anita Ramaswamy 14:29
totally off because what happened for this deal to actually come together was by Nance circle, and then the two other Stable coin issuers they all talked beforehand, before by Nance made this announcement so it's not like by Nance just like rug USDC or something like they all coordinated and knew that this was going to happen. And so it's possible that either tether didn't want to cooperate, or there were other sorts of incentives playing out behind the scenes.
Lucas Matney 14:51
Very interesting. Game theory in in crypto exchanges.
Anita Ramaswamy 14:56
Yeah, exactly. But yeah, let's talk about another popular coin. Yeah, I
Lucas Matney 15:00
don't know if you are on crypto Twitter at all, you probably recognize his name Michael Saylor. He's a really big Bitcoin Maxy he's a billionaire. He runs a tech company called MicroStrategy which owns more Bitcoin than any other corporation in the world. They have 130,000 Bitcoin several billion dollars worth this guy. He's been known to give a hot take or to to put it lightly. Yeah, they'll put it that way. And and he's had an interesting month. So at the beginning of last month, he stepped down from his role as CEO with MicroStrategy. People were kind of theorizing that it could just be like the board wasn't happy that he was putting so much balance sheet money into Bitcoin. He had put a lot in when Bitcoin was a lot higher than it is now. And they've lost about a billion dollars worth they recorded a billion dollars worth of losses on their investment. So people were theorizing could have been that. But then there's this new wrinkle this week when the Attorney General of DC announces that he's suing Michael Saylor, and MicroStrategy, for tax evasion for not paying any income tax in DC despite being a billionaire and the Attorney General alleges a resident of the district of columbia Yikes. So it just a full lawsuit. And they're they're saying that they estimate that Saylor could owe as much as $100 million to DC. And this is like they have some new rules in place where people can kind of whistleblow often people who owe taxes and that this is like one of their first people that they're going after so bad luck. I mean, he has a lot of haters, I guess I would imagine. Yeah, some eath Maxis had the receipts and send it to the the AGM out Yeah, exactly. So yeah, Taylor alleges that he is a full time resident. Well, I guess enough a full time legally resident of Miami where he owns a home he says that he votes and yeah, performs jury duty. All the hits in Miami, right? Yes, in Miami is like the rest of us. Exactly. But you know, the Ag alleges that this just isn't true. And it's just this like very complex scheme by him not to pay taxes, which like $100 million owed is fairly substantial. Florida doesn't have income tax. So obviously a nice place to be if you got a few Billy a few. Yeah, we're, we're, we're in this situation now where the lawsuits been filed. And he's just he's this guy who's known for having very hot takes. But he responded to this in a very just like tepid capacity. He was all he said was, I respectfully disagree with the position of the District of Columbia and look forward to a fair resolution in the courts.
Anita Ramaswamy 17:29
You know, his lawyer called him up and was like, Michael, like, you better not fucking say anything.
Lucas Matney 17:34
Like, please, for once shut the fuck up. Say what I tell you. Oh, wow. So, so some nice drama amongst crypto personalities.
Anita Ramaswamy 17:42
I think it's good timing too, because, you know, just just funny and ironic that one of the most prominent faces of Bitcoin and one of the biggest supporters of Bitcoin is sort of getting hit by this right before the Ethereum merge is about to happen, which a lot of people think is going to be really good for the Ethereum network. We'll have to see how that goes. But I just feel like the universe is shedding some irony on this whole situation.
Lucas Matney 18:03
Yeah, it is kind of wild. And just a quick note on markets eath is above $1,500. Bitcoin is below 19,000. There's the kind of ratio payer of Ethan Bitcoin eath is just getting worth more as a network while bitcoin is kind of falling in comparison. So we're a couple of weeks away from the merge, it seems at least a week a week. Yeah. So a week about Well, we'll see how it goes. But yeah, a lot going on for sharing. I think a concern amongst Bitcoin Maxis is that somehow Michael sailors just gonna get wrecked by this lawsuit, and that they're in some capacity MicroStrategy might have to offload some of this Bitcoin to cover legal fees or something like that they haven't sold, but maybe this is the catalyst that forces them to do. So
Anita Ramaswamy 18:46
we'll see that can't be good for price. So
Lucas Matney 18:48
wouldn't imagine. Yeah,
Anita Ramaswamy 18:49
there's there's a long drop on the way down. And I don't know how that's gonna play out for our man, Michael. But stay tuned, we shall see.
Jacquelyn Melinek 18:58
This week, I'm working on a story about the impact of the merge on institutions and how some are saying it could increase adoption from traditional players, which could be exciting for the Ethereum ecosystem as a whole.
Lucas Matney 19:10
Yeah, this week, merge is definitely the talk of the town. I'm kind of interested in what is on the long term horizon for the merge. So it opens up a lot of different possibilities for the Ethereum network, talking to some people about what happens in terms of sharding fee reduction, some of those long term improvements,
Anita Ramaswamy 19:25
and I've been pretty busy with YC Demo Day. This week, I covered the early stage crypto and fintech startups in the cohort, so you can check that out on our website. But outside of that, I've been helping plan for disrupt this October in San Francisco. I am super excited. We're gonna have some big crypto names there like Chris Dixon from a16z. Anatoly Yakovenko from Solana but also people outside of web three. I'm really excited to hear from Serena Williams in particular who's going to be there. You can use the promo code react. That's our E AC t all caps for 15% off your passes exluding online and Expo. And if you can't join us in person, you can use the promo code would react same code for 25% off of an annual pass to TechCrunch plus, which is our membership and subscription service.
Jacquelyn Melinek 20:09
We'll be back every week with the top news on the crypto ecosystem. Catch us on Tuesdays for interviews with experts in the web three space. You can keep up with us on Spotify, Apple Music or your favorite pod platform and subscribe to our companion newsletter also called chain reaction. Links to the newsletter and the stories we talked about can be found in our show notes. And be sure to follow us at chain underscore reaction on Twitter chain reaction
Anita Ramaswamy 20:31
is hosted by myself Anita Ramaswamy along with my co hosts Lucas Matney and Jackie melanic. We are produced by Yashad Kulkarni on our associate producer is Maggie Stemettes with editing by Kyle Keller Bryce Durbin is our Illustrator Alyssa stringer at leats audience development and Henry pika that manages TechCrunch his audio products. Thanks for listening and see you next week.