JZL Capital Blockchain Industry Weekly Report No. 39

1. Last week's industry trends:

1. Last week's industry trends:

This week, the digital currency market rode the "roller coaster" of the US stock market on Wednesday. During the FOMC meeting, it rose and fell sharply. Within 15 minutes after the start of the meeting, Bitcoin first fell by 5.12%, and then rose by nearly 4% in a row. In the end, it did not resist the pressure of the market and dropped to around 18200 on Thursday. However, in the next few trading days, the encryption market rarely went out of a trend different from that of the U.S. stocks. In the case of continuous decline in U.S. stocks, the encryption market was basically in a sideways market, showing strong resilience. As of writing, BTC closed at 18990.2, During the week, it fell by 4.16%; Ethereum was affected by the exhaustion of all the benefits, and was under strong selling pressure. It closed at 1311 during the week, with a drop of 7.49%. The current market is embarrassing for Ethereum. If the market continues to slump , may affect the progress of the upgrade of Ethereum Shanghai. For the 12% of the ETH circulation pledged in the Ethereum PoS, it is roughly estimated that their cost will be around 2,500 US dollars. It can also be seen from the pledge action of BeaconChain. After March this year, the daily pledge amount has increased significantly. Many of these people want to cut their flesh after the Shanghai upgrade. Therefore, some Ethereum core developers claim that the Shanghai upgrade may be 6-12 months after the merger. Execution, which is quite different from the few months hinted at by Vitalik at this year's ECC5 conference.

In addition to the macro events this week, the top crypto market maker Wintermute also suffered losses from hacker attacks. Hackers stole $160 million from Wintermute’s Defi account by cracking the private key. When serving Optimism a month ago, 20 million OPs were stolen because of a low-level error in the wallet provided. Compared with the previous hacking incidents, the way of theft this time is different. This time, the hacker cracked the private key of Wintermute through brute force cracking, and the reason why the private key of Wintermute is easy to crack is that the Profanity "Pretty number" production tool.

On the U.S. stock market, this week’s market retreated slightly on Monday without even touching the 5-day line, and it started to fall from Tuesday, especially after Powell’s speech on Wednesday. The lower shadow line, the lowest point almost broke through the year's low of 10565 points. This week, the Federal Reserve continued to raise interest rates by 75 basis points, and the rate of interest rate hikes was in line with expectations. In terms of meeting minutes, Fed officials’ expectations for terminal interest rates are more noteworthy. In June, officials expected interest rates to be 3.4% at the end of the year, compared with 4.4% now and see some room for interest rates to rise to 4.6% next year, with no cuts until 2024 and 2.5% in 2025 Overall, all the attention is focused on rate forecasts for 2022 and 2023. The Fed's dot plot was hawkish, 25 basis points higher than expected, and the market quickly priced in this expectation, and importantly, the Fed also signaled another 125 basis point rate hike this year, Nov 75 1 basis point, 50 basis points in December, or at least one 75 basis point rate hike in 2022. Although Powell's remarks are generally dovish, he said that inflation expectations seem to be under good control, and that the dot plot expectations do not represent plans or commitments, and may slow down rate hikes at a certain period of time, but such remarks have no effect on the market It has a strong soothing effect, and the reason is that the expectation of economic recession is also gradually expanding. First, Powell himself said that he is not sure whether raising interest rates will cause an economic recession. Second, the Fed expects the unemployment rate to reach 4.4% in 2023. With an increase of 1.235 million unemployed people, it feels that the Fed's control of inflation has to be completed at the cost of rising unemployment and slowing economic growth. This may cause further liquidity reduction for investors. After all, holding cash is a more rational approach under the economic crisis.

2. Macro and technical analysis:

2. Macro and technical analysis:

After the interest rate hike, the capital market was worried about the subsequent recession, and the overall decline. The digital currency market was also affected by this, and it went out of a downward trend. It once fell below 19,000 USDT and is currently trading sideways at 19,000 USDT.

ETH has the same trend as BTC, but it is likely to be weaker than BTC.

The two-year U.S. debt is still high and sideways, suggesting that interest rates still need to be raised by 125bp this year.

The two-year U.S. debt is still high and sideways, suggesting that interest rates still need to be raised by 125bp this year.

Nasdaq fell as expected, breaking an important support level, and it is just around the corner below 10,000 points.

Arh999: 0.33, the cost performance is already in a relatively good position, and regular investment can be made.

MVRV: 0.8868, and the price/performance ratio is relatively high.

3. Summary of investment and financing:

3. Summary of investment and financing:

Investment and financing review

• Investment and financing review

• During the reporting period, the number of financing and projects were relatively sluggish. There were 21 investment and financing events disclosed (a month-on-month increase of 67%), and financing was about 345 million US dollars (a month-on-month increase of 44.35%);

• In terms of specific tracks, Web3.0 & NFTs still dominate in quantity, but Infrastructure outperformed other tracks by a large margin with a financing amount of US$126 million;

• During the reporting period, there was no project that raised more than 100 million yuan. Led by BrevanHoward Digital, with the participation of new and old investors such as FTXVentures, SamsungNext, and CoinbaseVentures, Messari, an encrypted data analysis platform "Bloomberg of Crypto", has raised $35 million in Series B financing, which has become the focus. In addition to team expansion, this financing is mainly used for the development and online operation of ProtocolMetrics and DataApps under Messari. Among them, ProtocolMetrics allows users to compare assets across multiple networks through data, and analyze the operation status, growth and usage of protocols; DataApps is more biased towards enterprise users (Enterpriseusers), providing convenience for enterprise customers to search for customized data. In the future, Messari will not only be a powerful data provider, but also an analysis research provider;Compared with Bloomberg, Bloomberg provides real-time quotes, historical financial market data, prices, transaction information, news and communication tools for companies, news agencies, financial and legal professionals around the world, and also proposes。

The business philosophy that we must provide services to partners 15 minutes earlier than any competitor

4. Encrypted ecological tracking:

1.NFTs

1) Market overview

• 1) Market overview

• This week, the NFT blue chip index ushered in a rebound in the middle of the week. As of 14:00 on September 25, the blue chip index returned to its highest point in a month.

• This week, the total market value of the NFT market increased by 1.93% year-on-year, and the total transaction volume increased by 26.13% year-on-year. However, compared with the previous three months, the transaction volume of NFT is still low, and the market is still in a cold state.

• The top three NFTs with the highest trading volume in the market this week are ENS, BAYC, and MAYC.

2) Dynamic focus

• 2) Dynamic focus

• This week, Opensea has officially launched OpenRarity, an open standard for NFT rarity. This standard is jointly developed by Opensea, Curio, icy.tools, and Proof. It can calculate the rarity through reasonable open source mathematical methods, so as to improve the rarity ranking of NFT transparency. Currently, users can view it in the NFT projects CoolCats, PudgyPenguins, and Moonbirds series. But if people buy NFT in the future, the first thing they pay attention to is rarity, will the characteristics of NFT itself as a work of art be dispelled?

This week, several sports-related NFT projects have been disclosed/launched successively. With the World Cup approaching, football-related NFT projects will continue to pay attention.For example, FIFA+Collect launched by FIFA has been officially launched. This project collects a collection of historical classic fragments of international football championships in the form of NFT on Algorand. Based on the data disclosed on the official website, as of September 25th, Beijing time, the number of NFTs currently being applied for is less than 1/10.

AC Milan and MonkeyLeague, an e-sports company in the Solana ecosystem, plan to cooperate to launch a new NFT, which will serve as a pass card for the official newly developed football game and have the opportunity to obtain officially launched wearable devices. AC Milan has always been active in the NFT market. At the beginning of 22, AC Milan cooperated with OneFootball to launch the official NFT of exciting moments and develop football-related games; in January 21, it cooperated with Socios to launch NFT and launched fan tokens .

PGATOUR has partnered with Autograph to create a golf-themed NFT platform, where the NFT includes top golfers and their peak game records. In the future, the NFT may bring benefits including exclusive videos, on-site experience opportunities, etc.

• 3) Key projects

• This week, TwitterScan completed a $4.56 million seed round of financing. The project party disclosed that it will promote the development of its DID ecology and lightweight social platform and the development of NFTDID ecology based on this financing. This round of financing was led by Redpoint Ventures, Sky9Capital, UpHonestCapital, KuCoinVentures, HuobiVentures, GateLabs, MiranaVentures, Element, NGC, AntalphaVentures, 7upDAO, RedlineDao, CoboVentures, LingFengCapital, Fenbushi US, CyberConnect, SNZ, ViabtcCapital, S FCapital, MetaStoneCapital, OneBoatCapital, BitCokeVentures 25 institutions including , MEXC Ventures, AlchemyPay, Nstone and YMCapital followed up with the investment.”

• Recent status of the project: In the past week, the project has been aggressively promoted, and it can be seen that there is a strong support from the media traffic alliance behind it. Community activity has increased rapidly. Discord has more than 6,000 concurrent online users, and the number of new users exceeds 10,000 per day. The founding team disclosed in the AMA on Saturday night that the current daily activity of the Twitterscan application is 10,000+

• Function description: TwitterScan is an NFT data website launched by MetaScan. Previously, Twitterscan mainly integrated the opinions released by KOLs distributed on Twitter, and could count the data performance of KOLs in social media, and use numbers to visualize Maximize the influence of each KOL, and finally organize and output to users according to a fixed structure, providing support for users' investment decisions. In addition, TwitterScan also launched a free NFT whitelist lottery tool, which can empower project parties to complete lottery actions based on certain growth indicators (such as Twitter likes, reposts, attention/holding NFT/joining Discord, etc.) .

2. GameFi chain games

overall review

• overall review

This week, mainstream tokens in the Gaming sector followed the market down, but the decline was relatively small, and the overall market capitalization ranking remained unchanged.Kapital DAO

• Item of the Week –

• KapitalDAO, a provider of Web3 game asset management technology, announced the completion of a new round of financing with an undisclosed amount (according to the official website, the cumulative financing is 7 million US dollars). Investors and strategic partners include PolygonVentures, Algorand Foundation, HBAR Foundation, Solana Foundation, NEAR, YGG, SamsungNEXT, GSR, Wintermute, Keyrock, etc. Consultants include joint creation of YGG, Illuvium, LagunaGames and other projects. Financing will be used for technology development, expanding operations and security.

• KapitalDAO is an enterprise-level game asset management platform and game community. On the one hand, it provides services for the web3 game community, and on the other hand, it is also a web3 game community. As the web3 game community grows into a complex economy, the need for management and operational tools has become a pain point. KapitalDAO provides a complete set of management tools for the game community (mainly game guilds), including functions such as data analysis and payment, so that the game community can manage and operate more efficient. In addition, KapitalDAO also has the function of deploying DAO organizations with one click. By reducing the cost of guild management, KapitalDAO's vision is to allow 1 billion people to enter the web3 game world.

• The founder of KapitalDAO is Sam Peurifoy, who graduated from the University of Miami and has a Ph.D. in chemistry from Columbia University. He has worked in institutions such as Columbia Technology Ventures and Goldman Sachs.

• KapitalDAO is expected to issue KAP tokens in the near future, with an upper limit of 1 billion, and the distribution ratio is: 60% for ecology (including community treasury, pledge rewards, etc.), 20% for private investors (lock-up period of 12 months, and linear in the next 12 months) Unlock), project team 20% (lock-up period of 12 months, linear unlock within the next 12 months). According to official documents, KAP’s token value capture is relatively high. In addition to the governance utility, all fees on its platform will be charged using KAP, and the external tokens obtained by the treasury will also be traded as KAP.

3. Infrastructure construction

1) Market overview

1) Market overview

As of September 25th, the overall lock-up volume (including staking) of each public chain was 62.7 billion US dollars, which was less than 1% lower than last weekend. There was no major change in the chain as a whole. The top five public chains were Ethereum and BSC , Tron, Avalanche, Polygon, Solana fell out of the top five.

2) Key ecology

• Algorand

From the TVL changes in the last month, it can be seen that the TVL of Polygon has dropped by more than 35%, and the currency price has only dropped from 0.79 to 0.76 (less than 4%). It can be seen that more TVL reductions are caused by the outflow of activities on the chain. It may be due to the relative activity of the recent Ethereum upgrade and other Layer 2 projects (such as Optimism and Arbitrum: Curve will support Arbitrum and Optimism; OpenSea announced that it will support Arbitrum).

ALGO’s currency price and TVL have risen by 26% in the past month, which shows that the market recognizes Algorand’s development prospects. Although the market value and market attention at this stage are still far from the blue-chip public chain, it is still one of the top 30 in the market value ranking. competitors.

Algorand was founded by Turing Award winner, MIT professor, and cryptographer Silvio Micali in 2017. It is committed to building future finance (FutureFi), integrating traditional finance and decentralized models, and focusing on financial public chains. The consensus mechanism is Pure-POS (Pure Proof of Stake), which means that users can obtain the permission to participate in the consensus through the assets they hold without mortgaging their own tokens and making them lose their liquidity to obtain the permission to participate in the consensus.

From the perspective of the investor matrix and cooperative institutions, Algorand is a technology-oriented and traditional public chain, which is why it had fundamentals but lacked market attention. However, it is also because of continuous development and cooperation that Algorand has a basis for new narratives. On August 31, 2021, Koibanx, a Latin American blockchain asset tokenization and financial infrastructure company, announced that Koibanx has signed a cooperation agreement with the government of El Salvador, a sovereign country that uses the US dollar, and will be based on the Algorand Technology Development Zone Blockchain infrastructure.

In September 2022, the Algorand network was upgraded, and the upgrade of the PoS mechanism increased the transaction capacity on the main network to 6,000 transactions per second. Algorand's blockchain has added cross-chain communication and improved transaction speeds in a recent protocol upgrade.

Similarly, Algorand, which recently hired Michele Quintaglie, former head of communications at Fidelity Investments and Visa, as its CMO chief marketing officer, is looking to build its own brand and expand its reach through strategic growth initiatives. Look for sponsorship opportunities.

From 2005 to 2014, she was Head of Communications at Fidelity Investments, Global Head of Communications at Visa for 3 years, and worked as a Press Officer and Crisis Speaker at the United Nations World Food Program WFP and UNICEF people.

In May, Algorand entered into a partnership with FIFA, the world's top soccer federation. The ALGO token received a bullish boost after FIFA announced that Algorand would become the organization’s official blockchain platform, helping it gain wider exposure. Since its partnership with FIFA, Algorand has received increasing attention from investors and fans.

The most recent highlight is FIFA and Algorand's partnership to enable cryptonetwork access to FIFA+Collect. The platform is where users can purchase many types of NFT items. According to FIFA+Connect details, the platform will function like NBA Top Shot. Its users can buy artwork, highlights, images, and more from famous football matches. The platform will be launched ahead of the World Cup scheduled for November.

TerraClassic

ALGO has not successfully passed the JZL level 1 and a half investment standards in the past. The recent various layouts and market feedback have given it a better chance to become an investment target, but at the same time we will further pay attention to the data on the chain and judge this " Whether "winter" is suitable for opening positions at the bottom of ALGO.

TerraClassic had previously adopted a proposal to enable a 1.2% transaction tax burning mechanism to destroy the supply of LUNC (from 6.9 trillion to 10 billion). This proposal once caused LUNC to skyrocket (see the 36th weekly report for details). However, this upgrade can only take effect for on-chain transactions, and it cannot do anything for off-chain transactions of centralized exchanges. Therefore, if centralized exchanges do not cooperate with the proposal, the 1.2% transaction tax will be useless.

Binance, Kucoin and other exchanges previously announced that users will be deducted 1.2% tax when withdrawing/depositing LUNC, but for transactions on the platform, transaction tax deduction has not been enabled. Therefore, there have been voices in the LUNC community hoping that the centralized exchange can support its proposal. Binance owns more than 50% of LUNC trading volume, its decision will be the decisive factor for LUNC burning.

However, CZ said in AMA and subsequent Twitter last week that the mandatory transaction tax is a centralized decision, and the LUNC community resolution has no right to affect private entities, so Binance will allow users to choose whether to participate in the transaction tax. As soon as the news came out, the price of LUNC plummeted by 20% in an instant, and then recovered slightly, but it was still in a downward trend.

According to LUNCBurner Online data, according to the current destruction data, it will take 59 years for LUNC to reach the destruction goal.

For centralized exchanges and traders, LUNC’s transaction tax is similar to the prisoner’s dilemma. If any exchange implements transaction tax, traders will obviously choose to withdraw funds to other exchanges that have not implemented transaction tax for transactions; while for For traders who choose not to pay the transaction tax, it is obviously the lowest cost option to "free ride" with coins.

In addition, the "win-win" expected by the LUNC community is not realistic. The community seems to believe that the value of tokens will increase if the circulation of tokens is reduced, but this conclusion needs to be established when the utility (demand) of the tokens remains unchanged. However, LUNC currently has no practical utility. In the highly competitive public chain track, charging users with a transaction tax of up to 1.2% will further reduce user usage and token demand.

In addition to the meme attribute of the previous skyrocketing LUNC, the expectation of transaction tax burning is its fundamental logic. At present, this logic no longer exists, and the future of LUNC is still uncertain.

4. DAO Decentralized Autonomous Organization

Vitalik published an article "DAO is not a company: the decentralization of autonomous organizations is important" in his personal column last week (DAOs are not corporations: where decentralization in autonomous organizations matters).

Please see https://vitalik.ca/general/2022/09/20/daos.html for the original text, where we summarize and discuss the main content.

Some current views believe that decentralization will lead to inefficient governance, while traditional corporate governance structures are better able to make correct decisions and create value. V God refuted this view in this article, and proposed: 1) Decentralization can make better decisions in concave environments; 2) Decentralization for resistance to censorship; 3) Decentralization into credible fairness.

Decentralization can make better decisions in concave environments

Centralized decision-making is better in a convex environment, such as new crown policy, military decision-making, and technical routes. In this case, choosing A or B is effective, but the choice of compromise will reduce the utility; decentralized decision-making in a concave environment Better results, such as judicial decisions, public goods financing, and tax rates, rely on the wisdom of the crowd to give better answers.

Decentralized and Censorship Resistant

Vitalik proposed that a DAO or protocol needs to be able to operate and protect itself in the event of external attacks, including attacks from large corporations and even state actors. Taking BitTorrent's highly decentralized network as an example, DAOs should behave similarly to BitTorrent, providing services that not only avoid permanent censorship, but also avoid pure instability and interruption.

Decentralization as Credible Fairness

V God proposed that DAO needs to undertake some national functions, and because the government’s ability to supervise DAO is weak, DAO needs stronger self-regulatory capabilities, which requires decentralization to achieve (higher than efficiency). Here are three examples:

Algorithmic stablecoins require multiple oracles to vote and feed prices to prevent hijacking attacks.

Whether the decision-making of the decentralized arbitration system Kleros is fair and centralized has caused controversy, and a more decentralized structure is needed to prevent the public system from being subject to centralized manipulation.

The Optimism retroactive financing mechanism may need to introduce more voters to prevent insider trading and bribery, etc.

Summary: V God believes that in some cases, it is appropriate for DAO to use the form of a company to complete tasks, but some special forms of DAO (including the above cases) need to start with politics and maintain in a non-corporate decentralized form. stability of the entire system.

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JZL Capital is a professional organization registered overseas, focusing on blockchain ecological research and investment. The founder has rich experience in the industry. He has served as the CEO and executive director of many overseas listed companies, and has led and participated in eToro's global investment.

The team members are from top universities such as University of Chicago, Columbia University, University of Washington, Carnegie Mellon University, University of Illinois at Urbana-Champaign and Nanyang Technological University, and have served Morgan Stanley, Barclays Bank, Ernst & Young, KPMG, HNA Group , Bank of America and other well-known international companies.

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We are always looking for creative ideas, business and cooperation opportunities, and we also look forward to your reading feedback, welcome to contact hello@jzlcapital.xyz.

If there are obvious facts, understandings or data errors in the above content, welcome to give us feedback, and we will correct the report.