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MEMO W06 FEB 2024

Nobody anticipates the very rare events eventually unfolding in front of their eyes, because they never happened in a lifetime. - xh3b4sd

This week I realized it has become all about crypto adoption. Traditional venture capital has apparently not woken up to it yet. And maybe that is where a lot of the opportunity in front of us is still coming from. We do still appear to be quite early. We hear people say crypto has no use cases. Let's see. For some time now stablecoins are wildly used by the average person in countries that operate less reliable financial institutions. Among the top ten countries by crypto adoption there are Vietnam, India, Argentina, Brazil, Nigeria and Kenya. The citizens of those countries use stablecoins for everyday payments. In parts stablecoins are even used to escape the collapse of the respective local fiat currency. Now, stablecoins are only one use case with a broader user base. Farcaster experienced exponential growth over the past two weeks in the decentralized social sector. I am personally at a point where Warpcast is my go to Farcaster client allowing me to substantially reduce my Twitter usage. I would say Warpcast/Twitter is 80/20 for me right now and the comparison is not even close. The engagement levels with real people on Warpcast are already on par or even better than on Twitter. I for one found a new home and the crazy thing for most people is probably that they would not even notice Farcaster is running on crypto rails. Another form of crypto adoption was highlighted this week by the news of a partnership between GoDaddy and ENS. GoDaddy is a domain name registrar and ENS is the Ethereum name service. All GoDaddy domains can now resolve to ENS names with a little bit of DNS configuration. As a result ENS users can send and receive funds using their GoDaddy domain, where the domain name becomes the alias for their Ethereum wallet address. And yet another crypto native sector is seeing more and more popularity with prediction markets. I started looking at all kinds of prediction markets on the Polymarket platform in order to gauge sentiment for several political, regulatory and financial issues. Polymarket predicts for instance that Donald Trump will become the next president of the United States. Among many others, there is a prediction market on the Polymarket platform estimating the approval date of an ETH Spot ETF. One thing I tried to figure out here is the historically proven efficacy of resolved prediction markets. It would be great to understand how much of a predictive property the Polymarket platform is actually able to generate over time. So far I couldn't find a Dune dashboard and creating a Dune query myself appeared to be too complicate of a task for me at the moment. If you, dear reader, come across such a Dune query or if you are able to create a Dune dashboard for Polymarket's efficacy please let me know. I would also be happy to offer a little bounty for that accomplishment. And just in line with the theme of crypto adoption there was an article pointing out what kind of services various banks and financial institutions do already offer. Among others, we see crypto trading, crypto custody, private crypto funds, public crypto ETFs, crypto enabled payments and tokenization of real world assets. Good morning Larry Fink! And on top of all of the above we see constant net positive BTC ETF inflows every day now after the Grayscale bleed tapered off. The institutions are here, today.

Ethereum's rollup centric roadmap is now getting into its 4th year. The L1 is serving an ever increasing amount of L2s causing fragmentation of liquidity and all kinds of other frictions for users and developers. It now just happened the past couple of weeks that Ethereum researchers achieved a mental unlock in understanding how the described fragmentation and friction can eventually be resolved in a world of the rollup centric roadmap. Justin Drake articulated ideas of based rollups being connected by Ethereum mainnet as shared sequencer using inclusion lists and based preconfirmations. Espresso systems has worked in that area for a while now and as of today is leading the charge. It appears that we are able to enshrine all of the necessary magic natively in the tech stack over the coming months and years. Unrelated and on an uneventful sidenote, Ethereum's Dencun upgrade is scheduled for the 13th of March, which includes EIP-4844 to reduce data posting costs for rollups using a new fee market called blobspace.

I haven't followed the Frax Finance ecosystem closely for a while and now just by accident I came across a screenshot pointing out that a Frax rollup is about to launch. This rollup is called Fraxtal, which is an EVM equivalent rollup utilizing the OP stack as its smart contract platform and execution environment. The alpha here is an eventual airdrop using FXTL points which are supposed to be tokenized after about 1 year from the rollup launch date. If my memory serves me right we have about 2 weeks before the snapshot. Note that all of this speculation on my part is unconfirmed hearsay.

Separate from the Fraxtal rollup there is potential for an interesting FXS trade to be had. In light of Fraxtal launching it may very well happen that FXS catches the narrative bug providing upside potential between 11.50 and 23.50 where the lower bound would be the trigger confirmation to overcome. That range is roughly 100% wide and just like the LINK setup I wrote about last week it may rather play out around the middle of the year. Slowly, and then all at once.

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