DeFi: Ripple's $250MM institutional custody acquisition; Apple lets Web3 NFT games into app store, but at a cost

STEPN and Axie Infinity come to iOS

Gm Fintech Futurists —

Quick note on format before we get into it. We have combined the Blueprint Short Takes and the Digital Wealth editions to create an issue focused on digital investing, banking, and payments sent out on Mondays.

This Thursday edition is our dedicated email focused on DeFi, digital assets, and blockchain protocols. We hope this change helps you make the most of the Blueprint, and as always we welcome any feedback.

Today we highlight the following:

1. DIGITAL ASSETS: Ripple Acquires Crypto Custody Firm Metaco For $250MM In Tokenization Push

2. WEB3: StepN Becomes First Blockchain Gaming App To Integrate Apple Pay & Axie Infinity Rolls Out ‘Lite' Version of Crypto Game on Apple App Store

3. CURATED NEWS

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Digital Assets & DeFi Short Takes

DIGITAL ASSETS: Ripple Acquires Custody Firm Metaco For $250MM In Tokenization Push & Rolls Out CBDC Platform for Governments, Financial Institutions (link here and here)

Ripple Labs, the parent firm of the Ripple protocol and maintainer of the XRP ledger, has acquired digital asset custody company Metaco for $250MM. Metaco had previously secured $17MM during its Series A in 2020. Competitor Anchorage Digital raised a similar amount in its own Series A one year prior, but was valued at $3B at the height of the crypto markets in 2021. The acquisition price suggests pressure both on valuations and ability to go-to-market. 

Source

Metaco’s platform integrates custody, trading, and tokenization. The product uses multi-layered security architecture for its custody services and has multiple vault types — (1) cold vaults are used for long-term asset storage and manual processes, while (2) hot vaults facilitate rapid transactions. It also offers direct order execution and smart order routing. Unlike other custodians, the company has a tokenization service, supporting users that may want to convert liquid or illiquid assets (e.g., art or real estate) into digital tokens. 

Given Ripple’s institutional business model, the company has worked with Santander, Bank of America, and PNC to leverage the XRP currency and the XRP Ledger. Ripple is also trying to cater to institutions and governments seeking to manage and customize CBDCs and stablecoins through its CBDC platform. Whether or not this strategy worked is another story. Similarly, Metaco has partnered with Citi, DZ Bank, DekaBank, and BNP Paribas, among others, targeting their services at large financial institutions.

Source

Metaco is competing with a variety of others, like Taurus, which raised $65MM in February. While tokenization services are a core value proposition from both firms, demand for security tokens has not reached the mainstream levels seen in public onchain assets like NFTs or protocol tokens. Perhaps this can change as meaningful assets classes — i.e., Treasuries — are brought onchain by dedicated protocols.

Source

We also note the ongoing lawsuit between Ripple and the SEC as it relates to categorizing XRP as a security. Leaning into the ability to support securitized assets via a custodian could have multiple underlying reasons.

👑 Related Coverage👑

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WEB3: StepN Becomes First Blockchain Gaming App To Integrate Apple Pay & Axie Infinity Rolls Out ‘Lite' Version of Crypto Game on Apple App Store (link here and here)

This week, the Apple app store introduced two of the biggest Web3 play-to-earn games — Axie Infinity and STEPN.

Axie Infinity is a Pokemon-like game featuring creatures called Axies, represented by NFTs. Users earn tokens by breeding and selling Axies through staking and investing in digital land. On the other hand, STEPN rewards users with tokens for walking and running in the real world, while owning specialized NFTs that represent sneakers. Both games have been massively popular in the NFT gaming space.

However, both projects have faced significant challenges due to unsustainable tokenomics and the market downturn, culminating in the crash of their in-game marketplaces. For instance, Axie Infinity's monthly user count is down from 2.8MM in January 2022 to 380k this past month — a decline of about 85%.

Source

Apple and Google's app stores have historically been challenging venues for NFT acquisition and trading. Both charge a 30% fee for in-app purchases, including on NFTs, leading to a prohibitive tax on users. Since NFTs are tradable assets by default, this significantly impacts transaction volume, and marketplaces like Magic Eden have disabled in-app purchases as a result.

STEPN and Axie have made different compromises to make their games work on mobile. STEPN allows users to purchase NFTs using an in-app currency known as Sparks — while this bypasses cryptocurrencies, prices are higher than those denominated in their native token with a 43% reported markup. Axie instead provides players with free non-NFT starter characters, moving away from the model of buying or renting NFTs to play. Perhaps NFTs will become available in the mobile game for users that own NFTs in the web version.

Source

Despite the compromises, this still marks a significant milestone for NFTs adoption. It is the first time Apple has supported externally purchased NFTs to be used in applications from the app store. However, while a 30%+ markup may be acceptable for other mobile games, it is likely untenable for most NFTs with significant value. Additionally, the removal of native tokens from in-app purchases also hampers token utility, and is destructive to value capture — a price to pay for Apple's 1.36B iPhone users worldwide. 

Big tech companies continue to be a potentially large barrier to digital asset adoption, exercising their monopoly power to protect financial interest that preclude disintermediation by Web3 commerce.

👑 Related Coverage👑

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Curated Updates

Here are the rest of the updates hitting our radar.

Financial Institutions and Adoption 

⭐ Congressman Emmer Introduces ‘Securities Clarity Act’ - The Defiant 

Bankrupt Crypto Broker Voyager Cleared To Repay $1.3B To Creditors - Decrypt 

Borderless Capital Leads Wormhole-Powered $50MM Cross-Chain Fund - CoinDesk 

BNY Mellon Commits to Long-Term Digital Asset Initiatives - Blockworks

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DeFi and Digital Assets

⭐ ZK Startup Lagrange Labs Raises $4MM to Build Secure DeFi Interoperability - CoinDesk

Coinbase Finally Launches Subscription Service Overseas, Focuses on Staking - Decrypt 

DeFi Exchange Uniswap To Launch On Polkadot Via Moonbeam Parachain - Decrypt

Climate Finance Firm Solid World Opens Forward Carbon Liquidity Pools With Polygon - CoinDesk 

Curve’s New USD Stablecoin Is Almost Ready for Users - Blockworks

​​Lido Enables Staked ETH Withdrawals With V2 Rollout - The Defiant

Crypto Custodian Anchorage Enables Institutional Clients To Participate In DeFi Governance - The Defiant 

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Blockchain Protocols

⭐ Multicoin Leads $2.3MM FastLane VC Deal, Continuing Its Bet on MEV Infrastructure -  CoinDesk

Ledger Expands Cosmos Integration, Aims At Adding 20 New Projects - Decrypt

Crypto Wallet Provider Ledger Delays Key-Recovery Service After Uproar - CoinDesk 

Visa Taps Ethereum's Goerli Testnet To Experiment With Account Abstraction - The Block

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NFTs, DAOs and the Metaverse

⭐ MakerDAO Founder Proposes Dedicated Blockchain And New DAI and MKR Tokens - The Defiant

Crypto Perpetuals Exchange dYdX Considering The Launch Of More SubDAOs - CoinDesk 

Transforming Dust Into Prizes: LooksRare’s NFT Raffle Hits The Market - Blockworks

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Shape your Future

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