Blueprint: ConstitutionDAO defeated by Ken Griffin of Citadel; public Nubank airdrop; $200MM ConsenSys raise
Gm Fintech Futurists — our agenda for today is below.
DAOs: A hedge fund billionaire outbid crypto investors for a rare copy of the US Constitution (link here)
NEOBANKS: Fintech unicorn Nubank expects twin public listings next month, invites app users to become partners (link here) and Neobank N26 confirms exit from US market (link here)
WEB3: Ethereum Giant ConsenSys Valued at $3.2B on Strength of MetaMask, Infura (link here)
RESEARCH: The role of Alameda and Cumberland as USDT market makers (link here)
PODCAST: Digitizing banks with better BNPL, Underwriting, and Anti-Fraud Tech, with Amount CEO Adam Hughes (link here)
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Short Takes
DAOs: A hedge fund billionaire outbid crypto investors for a rare copy of the US Constitution (link here)
In an exciting saga last week, we saw the collective power of crypto investors pooling their assets in a bid to acquire an original copy of the US Constitution. All of this was facilitated by a rapidly-built organization called ConstitutionDAO.
DAOs, short for decentralised autonomous organisations, are digital tribes with agreed-upon qualitative and quantitative rules, and procedural control distributed amongst token holders (i.e., voting). These organisations are a novel form of both (1) rapid crowdfunding and (2) collective coordination, where — typically — anyone can become a member by acquiring the DAO’s token, contributing where they see fit, and being rewarded for their contributions.
With ConstitutionDAO, we saw 17,000 people come together to raise $47 million in a bid to acquire a physical copy of the document in less than a week. The purpose of the acquisition was, on its face, to preserve and protect the Constitution as highlighted in their FAQ. But the more powerful motivation is to push the art of the possible for digital polity, and demonstrate the strength that individuals have as a collective in this interconnected world.
Unfortunately, the fairy tale did not end as planned. The key downfall was that given the transparent nature of DAO fundraising, in this case using Juicebox.eth, it was clear for all to see how much the group had raised. That means everyone knew their maximum possible bid in the auction. Ken Griffin, CEO and founder of trading firm Citadel, swooped in with a winning bid of $43.2 million. The entire $47 million could not have been bid by the DAO, since a portion of the funds had to be reserved for insurance, transportation, and storage. The ConstitutionDAO will now be dissolving, and plans to return all funds raised back to contributors, minus transaction fees.
While this wasn’t the desired ending, it tells us a story of the collective power of individuals and DAOs. It draws on memories of WallStreetBets GameStop saga and how there is a cultural driver for transitioning power from large corporations to the individuals that fuel them. For more, read our long-take on DAOs or check out our thematic coverage here.
NEOBANKS: Fintech unicorn Nubank expects twin public listings next month, invites app users to become partners (link here) and Neobank N26 confirms exit from US market (link here)
Brazilian neobank Nubank, the biggest neobank in LatAm, is going public in both the US and Brazil with planned listings on the NYSE and B3 stock exchange. Nubank is also taking a novel approach to rewarding their customers prior to their IPOs. Every user of their app is able to apply to a program called NuSócios, where they can follow the instructions in their mobile app to claim Brazilian Depository Receipts (BDRs). The BDRs are worth approximately one-sixth of a class A common share for parent company Nu Holdings, whose value will be determined post-IPO. Total BDR valuation will be capped at a limit of approximately $33 million, with the option for management to increase the cap by 2025, depending on the amount of claimants.
We have two key takeaways here: (1) these pre-IPO distribution are designed to empower NuBank users financially, educating them on investing and how the stock market works (potentially drawing them into additional products/services), and (2) this is a example of rewarding users with reward mechanisms that have been developed by the crypto space in bootstrapping community engagement. Your usage of the product entitles you to its financial bounty.
On the flip side, German neobank N26 has decided to leave the US market, with current accounts shutting down on January 11th, 2022. The fintech also pulled out of the UK market in February 2020, citing Brexit as the main factor. All this exiting has not stopped them from raising $900 million a few weeks ago, perhaps because they’re not alone in being unable to make progress in the US market. Monzo had also withdrawn their US banking license application last month due to regulators stating it would be unlikely to be approved.
We think the attempts at international expansion never made sense in the first place. Neobanks are not international payment rails, and are in fact beholden to them. They also aren’t sufficiently scaled in their native geographies yet, other than maybe Nubank and Tinkoff, to need to win new markets. Perhaps there is strategic confusion about trying to build a global super app like Ant Financial, which, you know, has also seen its share of regulatory headwinds this year. Or perhaps the oversupply of blitzscaling venture capital is to blame. All that to say, this means neobanks now must be hyper-aggressive in taking share from incumbent banks at home — something a lot less fun that plotting taking over the world.
WEB3: Ethereum Giant ConsenSys Valued at $3.2B on Strength of MetaMask, Infura (link here)
Big news for the Web3 ecosystem — ConsenSys, the company building MetaMask, Infura, Quorum, and several other enabling blockchain technolgies raised $200 million at a $3.2 billion valuation. Investors include both traditional financial institutions and crypto native investors; Marshall Wace, Third Point, ParaFi Capital, and Think Investments contributed to the round alongside Dragonfly Capital, Electric Capital, Spartan Group, DeFiance Capital, Animoca Brands, Coinbase Ventures, and HSBC.
The company’s traction is driven by two key products: (1) MetaMask, the leading non-custodial crypto wallet, and (2) Infura, a developer infrastructure that enables 350,000 users to build decentralized applications. For scale, MetaMask has a global user base of 21 million MAUs — a 38x increase from 2020 — and interacts with approximately 3,700 unique Web3 applications. MetaMask’s in-app swap feature has enabled more than $10 billion USD in peer-to-peer token swapping. This is likely the Web3 super app that will outcompete the traditional alternatives.
We’ve seen a shift in ConsenSys from Ethereum-only to a more inclusive vision of Web3, which includes networks like Polygon, Optimism, Arbitrum, zkSync, BSC, Celo, Avalanche, and NEAR/Aurora. This suggests that Ethereum remains a core high-value settlement layers for a variety of networks that expand its processing, scale, data, and storage capacities. The company is also engaged in 10 CBDC projects across the world.
Rest of the Best
Here are the rest of the updates hitting our radar:
REGULATION: US Senate leader will add stalled China tech legislation to defence policy bill (link here)
METAVERSE: $400M funding round to help Gemini build in the decentralized metaverse (link here)
METAVERSE: Snoop Dogg, Deadmau5 Headline New Members of Outlier Ventures’ Metaverse Accelerator (link here)
DEFI: Maple Finance Launches First DeFi Syndicated Loan for Alameda Research (link here)
CRYPTO: Introducing the Brave Wallet, a Browser-Native Crypto Wallet With No Extension Required (link here)
CRYPTO: LA’s Staples Center will be renamed ‘Crypto.com Arena’ (link here)
CRYPTO: Coinbase co-founder launches biggest VC fund in crypto (link here)
INSURTECH: Definity raises $1.1B in largest Canadian IPO of 2021 (link here)
VR: Leading Hand-tracking Company Ultraleap Raises $82 Million Investment (link here)
VR: Social VR Startup Raises $57 Million Investment Led by Major Japanese Mobile Network (link here)
DATA: Aviva Investors Develops Macrobond Viewer (link here)
Blueprint Updates
Analysis: The role of Alameda and Cumberland as USDT market makers (link here)
How are institutions interacting with USDT and what comparisons can we make to orthodox and decentralised finance?
We look at a recent report from Protos that traces the issuance of USDT to the institutional players in the centralized crypto capital markets. The data reveals the market share of players like Alameda, Cumberland, Jump, and others in powering trading in exchanges. We try to contextualize this market structure with what exists both in (1) investment banking and (2) decentralized finance. The analogies are helpful to de-sensationalize the information and calculate some rough economics.
Podcast Conversation: Digitizing banks with better BNPL, Underwriting, and Anti-Fraud Tech, with Amount CEO Adam Hughes (link here)
In this conversation, we chat with Adam Hughes – the Chief Executive Officer at Amount, a technology company focused on accelerating the world’s transition to digital financial services via its digital retail banking platform, world-class digital authentication & fraud prevention tools, and ecommerce point-of-sale financing technology. Prior to his role at Amount, Adam was President & COO at Avant, an industry-leading digital consumer lending platform.
More specifically, we touch on digital lending industry Buy Now Pay Later (BNPL), as well as the trends of working with large banks and enabling their digital transformation to access some of these themes as part of embedded finance and banking-as-a-service.
“…Buy Now Pay Later today means an innovative financing product that a customer can choose to take advantage of primarily online when buying goods. So, when you're buying something online, let's take actually one of our customers. So, if you're going to Nordictrek.com and you're trying to buy a treadmill, on the checkout page, you're either going to be able to put in your credit card as most customers do all the time, or you can take advantage of TD Bank's pay overtime product, typically either a split pay product where you can pay over four equal installments or a longer installment, typically one year to two years pay over time. And that's what the "buy now pay later" products typically mean.”
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