Feeling the FTX, OpenSea's loyalty to royalties, and deadly VR (Issue #47)
The easiest way to make a small fortune in crypto and NFTs is to start with a large one.
If we sound like insiders, it’s because we are insiders. The team at Metaversal builds and invests in iconic NFTs and the technology behind them. We are collectors, investors, creators, and artists. We believe in the power of web3 to create a creator-first future. And we’ll be here come bull or bear.
The Metaversalist helps you stay on top of what’s essential in a space that changes by the hour. Delivered fresh to your inbox each week. Seasoned with our signature blend of spice and sass.
In this week’s edition:
Is Binance indecisive? Well, yes and no. 🤔
Musk also can’t make up his mind 🐦
OpenSea announces its allegiance 👑
Right, let’s get straight into it!
Since the Satoshi whitepaper, there’ve been innumerable cryptocurrency fiascos and debacles, hacks and scandals. From the Mt. Gox theft to the Silk Road takedown, the Bitfinex hack, to the more recent collapse of Terra, none of them have done anything to improve the reputation of a sector many outsiders already view with suspicion. But this week, a new mishap made matters even worse while also eroding — or outright destroying — fortunes and sending Bitcoin, Ethereum, Solana, Tezos, and every other major cryptocurrency tumbling.
First, though, let’s outline the dramatis personae. There’s Changpeng Zhao (AKA “CZ), the co-founder and chairman of Binance, the world’s largest cryptocurrency exchange. Then there’s Sam Bankman-Fried (AKA “SBF”), the 30-year-old CEO and founder of both FTX (the world’s second-largest crypto exchange) and hedge fund Alameda Research. And then there’s a supermodel, her football-playing husband, and — finally — millions of retail investors. Whether this is a tragedy or a farce likely depends on your proximity to the cast.
Binance was an early investor in FTX, but eventually let the then-scrappy upstart buy itself out, handing Binance ~$2.1 billion worth of FTX’s own FTT token (which it uses to reward people who use its platform) in the process. CZ has been feuding with SBF in recent weeks over the latter’s efforts to use his connections to the U.S. government to control how the all-but-inevitable regulation of crypto exchanges plays out… and how it affects foreign businesses like Binance.
Perhaps because of that spat, perhaps because of some insider info, or perhaps because he saw a chance to destroy a rival, CZ announced Binance would begin offloading its FTT position… which unsurprisingly created panic and prompted a sell-off of FTT, sending the price from ~$30 a token down to $2.50.
This might not have been so problematic for FTX if it had massive cash or crypto reserves and could service its debt… but it turns out, much of FTX’s balance sheet (and at least a quarter of Alameda’s) consists of its own FTT token, plus FTX loaned Alameda a heap of money using only FTT and SOL as collateral, so when Binance’s move tanked the price, the house of cards began to collapse. That’s also, in part, why Solana has taken such a beating — Alameda, which looks set to evaporate alongside FTX, has over $1 billion of SOL on its books.
Then things got even weirder. SBF announced that FTX was selling itself to Binance, so that it could make good on its obligations to its customers and avoid going under. Needing your biggest rival to step in because you’re on the cusp of insolvency isn’t a good look for anyone, but it’s particularly bad for Bankman-Fried, who until now has been the darling and unofficial poster child of the cryptocurrency markets… but who’s now a pariah. To make matters worse, a day later, once it had a chance to look at the books, Binance backed out of the deal. Yikes.
At first blush, this may look like a massive win for Binance, but the news has collectively wiped out billions of dollars of net worth from millions of users… sullying not only the reputations of all cryptocurrencies in the process but those of the numerous celebrities who’ve aligned themselves to the FTX brand in recent years.
Back in April, SBF launched a new ad campaign featuring supermodel Gisele Bündchen and announced plans to spend $1 billion on lobbying and backing politicians seen as sympathetic to crypto-related issues (he eventually spent $40 million and admitted his original claims were, perhaps, somewhat exaggerated).
Now, in a matter of days, Bankman-Fried’s fortune has plummeted 94% according to Bloomberg, relegating him to the rank of a mere multimillionaire, and Bündchen, her NFL superstar husband Tom Brady, and many other vocal (and deeply invested) backers of FTX look set to lose fortunes too, albeit lesser ones.
It’s not over-exposed or over-leveraged executives or celebrities we feel sorry for, though — nor the numerous institutions who’ve come out and announced their varying levels of exposure to either FTX or Alameda Research (or both) — it’s the retail investors who may never see their capital again, and who may have invested too much of it, believing the ads served to them implicitly promising the line would only go up… or at least that it wouldn’t nose-dive to nearly zero in a matter of days.
We don’t need a groundhog seeing its shadow to tell the crypto thaw — never mind the crypto spring — for which so many of us have been hoping has been significantly postponed by the events of this week. They say bear markets are for builders, so if there’s a silver lining, it’s that there’s now even more time to build… assuming, of course, the capital with which you’re building wasn’t in FTX’s virtual vaults, that is.
As usual, Matt Levine over at Bloomberg, has a great take on the whole Binance/FTX mess, which came before Binance backed out, but makes for great reading nevertheless (we also expect he must be enjoying writing about something that doesn’t rhyme with Mee-long Eee-usk for a change).
🤓 Larry warned us 🚨
Metaversal IRL 🖼
Marfa, TX | perceive () exhibition by Art Blocks (opening Nov 11)
Anticyclones are a weather phenomena. They pierce through darkness to instill peace and calm. Their planetary scale reminds us of how little we are and how powerful they can be. The "Anticyclone" series is an artistic exploration and interpretation of those concepts.
NYC | MetaLetters at CADAF Art Fair
Our very own Jessica Angel and Sam Brukhman will be speaking at CADAF Art Fair this weekend. If you’re in the Big Apple, swing by Bryant Park to see the AR activation featuring MetaLetters artists IRL.
Probably nothing 🤔
Royalties on the OpenSea 💰
OpenSea has announced it’s created a smart contract solution for new collections that will allow creators to bake in royalties and prevent NFTs from being listed on platforms that don’t enforce them, like Blur and Magic Eden (it later added it would continue to enforce royalties on existing collections, too).
Of course, to some people, placing these sorts of restrictions on NFTs is anathema to the “decentralize everything” mantra of web3. But for creators whose livelihood is threatened by removing royalties, it’s a reason to stick with the world’s most popular NFT exchange.
We’re sensitive to the argument that royalties are bad for traders and can remove liquidity from the market… but we’re also always creator-first. Many artists entered the NFT space precisely because it allows them to make recurring revenue from their work, much like filmmakers and musicians do. Removing royalties immediately discourages newcomers.
Moreover, killing royalties creates the wrong incentives for artists and can have negative consequences for almost everyone else in the ecosystem (everyone, accept traders, admittedly). If artists can’t rely on royalties for part of their income, they must constantly bring new work to market. That increase in supply can erode value for other collectors. It also encourages pump-and-dump collections rather than motivating creators trying to build longevity and sustainability into their projects.
Does OpenSea have problems? No doubt. But we hope this move to defend royalties will encourage other marketplaces to follow in its footsteps nonetheless.
Meta gets mauled 🩸
FacebookWhatStagram parent Meta announced it’s laying off over 11,000 of its employees (or around 13% of its ~87,000 employees). Last month it revealed dismal quarterly results — which showed its Reality Labs division (the one focused on its metaverse-focused efforts) is hemorrhaging money — and its share price has plummetted 70% this year.
Of course, Meta isn’t the only tech giant that’s had a rough few weeks. Last week Elon Musk laid off half of Twitter’s 7,500-strong workforce. The macroeconomic headwinds don’t help, either. But while Twitter’s move is an effort to make up for its new owner massively overpaying for it, Facebook’s cuts are a result of it hiring too aggressively in recent months, and betting the farm it can own the emerging metaverse… something investors and consumers alike appear less convinced of.
🤝 You can tell a lot from a handshake 😱
We need this like we need three holes in the head 💥
Palmer Luckey, the billionaire entrepreneur who — among other things — founded the virtual reality company Oculus VR (that Facebook subsequently acquired for $2 billion in cash and stock and rebranded), has built a new VR headset equipped with three explosive charges aimed at front of the wearer’s brain. The concept behind it is a macabre but simple one, and it’s one that’s been around for almost as long as the idea of VR has: “If you die in the game, you die in real life.”
The headset is Luckey’s take on the NerveGear, a fictional VR headset from the world of the web-novel-turned-anime-series Sword Art Online that immerses the wearer in a hyper-real game they have to complete successfully… otherwise it kills them with blasts of microwaves to the head. Luckey's version uses the aforementioned three explosive charges instead to maintain wearability and a “narrow-band photosensor” detects the appropriate game-over screen. As Luckey explains:
The good news is that we are halfway to making a true NerveGear. The bad news is that so far, I have only figured out the half that kills you. The perfect-VR half of the equation is still many years out.
Umm, as fascinating as the idea is, and as novel a display piece as this headset is, if it’s all the same to you, Palmer, we’re going to stick to playing Beat Saber.
To the moon 🌛
Twitter rolled out its controversial pay-for-verification option after abandoning a previous two-tiered blue-and-gray checkmark model and also threatening to possibly paywall the whole platform behind a paywall (lol).
Doodles plans to host a “live experience” called “DoodlePutt” at Art Basel Miami next month.
Metaplex is adding a host of new features, including the ability to enforce royalties on-chain and a new creator studio (but there’s no deal with artist Beeple, which the presentation announcing the new features implied).
Yuga Labs launched a new website for news about its various projects.
Meanwhile, NFT platform OneOf has launched a new NFT collection called “Lobster Perks+” that’ll ship holders — you guessed it — packages of Maine Lobster.
🪡 Thread of the week 🧵
Goats only 🐐
No matter whether you’ve lost an SBF-sized fortune or you took Larry David’s advice, you should be watching or listening to Goats and the Metaverse.
In each episode, collectibles OG and entrepreneur Stan “The Goat” Meytin and Metaversal co-founder and CEO Yossi Hasson talk about digital and IRL collectibles, NFTs, and the week’s news worth knowing.
Check out the latest episode here:
Aside from providing invaluable insights into digital art and collectibles, Stan and Yossi have assembled a collection of NFTs dubbed “The Goat Vault.” When the show hits 5,000 subscribers on YouTube, one of those lucky subscribers will win the contents of the vault, which at last count is valued at more than 9.7 ETH (~$11,400).
Follow for more 🐦
Congrats on making it all the way down here, fren!
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Until next time, see you in the metaverse!