Interesting narratives for the Summer

June 1, 2023June 7, 2023 Stan

Ah, Summer’s here. Remember DeFi Summer in 2020? What about Solana Summer in 2021? Last year was Contagion summer, where we dealt with the aftermath of Terra’s collapse.

So what’s Summer 2023 gonna be? I share some narratives that could potentially be this summer’s hit song.

Here’s what we got today:

Beijing on Internet 3.0. A report from China on the future of the Internet and Metaverse.
Possible Summer Narratives. There’s always a theme each summer.
Autopools 101. An introduction to a game-changing product from Trader Joe.
Around the Web. ~$600 M $OP unlock, Velodrome V2, Physically hacking Trezor T, and more.

Here’s your Edge 🗡️!

📉 THE MARKETS

“Selling your winners and holding your losers is like cutting the flowers and watering the weeds.” – Peter Lynch.

Beijing on Internet 3.0

The Beijing Municipal Government has released the “Internet 3.0 Innovation Development White Paper“. (It’s in Chinese, so you’ll have to use a translation app if you’re unable to read it).

The goal is to establish Beijing as a prominent global innovation hub for the digital economy. It wants to foster innovation and advance the industry. The commission has set a minimum annual allocation of 100 million yuan ($14 million) until 2025.

It spread like wildfire as the “Chinese Web3 report”. Let’s dive into it and clear up some misconceptions.

Is China Opening up to Crypto? Many people saw this as a positive signal of a potential crypto renaissance in China.

China Central Television (CCTV), the state broadcaster, aired a segment featuring the Bitcoin logo.
CZ, Binance CEO, noted the report’s timing and Hong Kong’s implementation of crypto regulations in June.

It’s a lot of hopium, but the report doesn’t mean China’s welcoming Bitcoin and Ethereum.

What is the report about? It is about “Internet 3.0”. This report is more about their vision for the Metaverse than about Crypto.

Internet 3.0 merges virtual reality and the real world to create a comprehensive online space that enhances communication and improves the efficiency of economic activities.

They see this as an inevitable result of current technological developments.

Most of the report explains tech and how it can advance different industries.

A few tech mentioned are: 6G, Blockchain, Virtual Reality, Computing Chips, Augmented Reality, and Artificial Intelligence.

Some Industries: Education, Healthcare, Supply chains, City Development, Internet of Things (IoT).

It also explained the system architecture, domestic & foreign development status, Beijing development status, and development suggestions for Internet 3.0.

Edgy’s Take: People were excited at the prospect of China releasing a regulatory framework around Crypto. Especially since the U.S. is so unclear.

However, unfortunately, this paper’s more focused on the Metaverse and not Crypto.

I’m not holding my breath that China will welcome Crypto with open arms. And even if they do, it’ll probably get banned a few months later.

Potential Summer Narratives

There’s always a big Crypto theme each Summer.

2020: DeFi Summer – the rise of DeFi
2021: Solana Summer – Solana’s price skyrocketed
2022: Contagion Summer – the industry dealt with the fallout of the Terra Luna collapse.

Here are some possible themes for this summer.

#1 LSDfi

We have been talking about LSDs since forever.

LSDs are fungible tokens representing staked assets. They have become the largest sector in DeFi with >$17.5 B in TVL. This was largely on top of Ethereum’s transition to PoS. And there are no signs of slowing down.

LSDfi refers to protocols that are built on top of LSDs. Some examples are:

LSD Vaults
Upfront Yield
Yield Marketplaces
LSD-backed stablecoins
And more.

Basically, there’s an entire ecosystem starting to build upon Ethereum’s staking rate.

Some examples of LSDfi protocols include Lybra Finance, Pendle Finance, unsheth, and more.

#2 Bitcoin DeFi

Bitcoin is not usually known as a hotbed of crypto experiments. However, it has been pretty busy lately. Average Bitcoin transaction fees went as high as $19.20 per transfer.

Much of this can be traced back to Ordinals. It is a method of inscribing information to individual Satoshis. There were rumblings about “Bitcoin Layer 2s” as well.

BRC-20 was another innovation built on top of Ordinals. It is a token built to mimic the fungibility of ERC-20. However, they are nothing like ERC-20. Right now, they are used to creating a lot of memecoins.

There are even smart-contract-like applications built on top of Bitcoin.

All of these are leading to high levels of activity on Bitcoin. Some new experiments on Bitcoin could potentially lead to Bitcoin DeFi this summer.

#3 Memecoin Season

Memecoin season took over with $PEPE a few weeks ago. It came out of nowhere and took over crypto Twitter. It’s currently valued at over $500M in market cap.

We see this continue with coins like $BEN, $PSYOP, & $LOYAL. These tokens capitalized on the attention influencers like @eth_ben and @Bitboy_Crypto could generate.

Well, these tokens are borderline scams. For the $PSYOP presale, people were asked to send money to a personal wallet, ben.eth. Still, he managed to raise around $7 million.

What’s going on? We’re around 1.5 years since the previous cycle’s tops. People have lost money and are bored to death. People want action so bad they’re willing to take risks on speculative memecoins.

#4 AI Coins

Artificial intelligence has completely taken over the public imagination. Has anyone else had to mute ChatGPT threads from their Twitter timeline?

VCs are talking about AI, founders are adding it to their pitches, and projects are adding it to their websites.

Thanks to this frenzy, Nvidia temporarily become a Trillion dollar company.

So you could see this narrative bleed over into A.I. Crypto coins.

Keep in mind that a lot of these coins are extremely speculative. And you have to watch out for the coins that have nothing to do with A.I. and did a rebrand for the pump.

#5 Metaverse Coins

a mockup of the new Apple headset

It is rumored to be a far superior product to any other competing product.

This will lead to massive interest in virtual reality, the Metaverse.

Do you remember how Facebook rebranded to Meta around two years ago? And they announced they were shifting their attention to the Metaverse. Well, metaverse coins like the Sandbox and Gala exploded despite having nothing to do with Facebook.

Could we see a similar thing happening?

These are my candidates for summer narratives. If you have any suggestions, feel free to reply to this email.

Trying to predict narratives is a good exercise for spotting narratives. Revisiting these in a few months will be a learning lesson.

Also, remember, we’re kinda in a choppy sideways market now. It’s completely ok to sit out of this Summer’s madness.

Protocol Spotlight
The Next Big Thing? Auto-Pools 101

The Evolution of DEXs. Traditional decentralized exchanges are easy to understand.

They allow people to trade tokens by creating a liquidity pool. Liquidity providers will provide tokens to the pool. And in return, they’ll get a token representing their share of the pool and fees paid by traders using the pool.

While there have been many innovations in DEXes, none fundamentally changed the protocols. Until…

Concentrated Liquidity entered the game. Uniswap V3 introduced it. And now everyone is moving to this model. In this version, Liquidity providers (LP) can provide liquidity within a certain range.

For example, you can only provide liquidity for $ETH within the $1700-2000 range. Liquidity Book is Trader Joe’s architecture for concentrated liquidity.

Without getting into technical details, Liquidity Book has several advantages over traditional architecture.

Capital efficiency.
More fees for LPs.
Helps with impermanent loss.
Variety of LP strategies for different situations.

Enter AutoPools. While the above features made Liquidity Book a superior product, it had a big weakness: only sophisticated users could participate. And it requires a lot of active management (babysitting).

Users had to have in-depth knowledge and actively manage their LP positions. AutoPools is a solution to this problem.

Users can deposit tokens into an auto-pool, which will actively manage their position, kinda like a fund manager but for providing on-chain liquidity.

AutoPools could be a big catalyst for $JOE. It makes the best AMM architecture accessible to everyone.

Which can attract more liquidity.
Which will improve the experience for traders.
Which will attract even more liquidity.
And the flywheel accelerates.

When all DEXes are moving towards Concentrated Liquidity Architecture, making things more accessible is more important than ever.

I talked about AutoPools and other topics with Fish on a podcast. Check out the highlights in the thread below.

🚀 DeFi Catalysts

Optimism unlocked around ~387m $OP tokens (worth ~600m) on 30th May. The prices have started sliding. It is down 33.2% on the monthly chart. Around 24.15 m will be unlocked around the end of June.

Optimism’s Bedrock Upgrade will take place on June 6th. It is a major bullish catalyst. It is the first ever official release of OP Stack. And OP chains like Base are waiting for it.

Sui will see an unlock of 61 million tokens (worth around $62 million) on June 3. This will increase the circulation supply of the token by 13%. There will be regular unlocks like this until November. Most of this will be going to retail users and Sui Foundation.

PancakeSwap launched a Play-to-earn game called Pancake Protectors. Holders of PankcakeSwap Bunnies & Squads will give a competitive advantage in the game.

BNB Chain is expected to undergo a network upgrade around June 11, called Luban Upgrade. It included three proposals to make the network faster and more secure.

Velodrome, the largest DEX on Optimism, will launch its V2 on June 15, 2023. New features include Velo FED, Custom pairs, and Flexible Fees.

Gateway to Cosmos conference, part of the Prague Blockchain Week 2023, is happening between June 3-5. We can anticipate big announcements from Cosmos projects.

The decentralized wireless network Helium can now connect with Internet of Things (IoT) devices. The Helium Foundation partnered with Oxit to create the feature Oxtech Module.

QuickSwap released a perpetual exchange on Polygon zkEVM called QuickPerps. It allows up to 50x leverage.

MakerDAO is voting on onboarding rETH to Spark Protocol. It looks like the proposal will pass. It will increase the utility of rETH and, thereby, the value of RocketPool.

Lybra Finance, a new LSDfi protocol, is working on their V2. The main upgrades include Omnichain via LayerZero, tokenomics upgrades, and accepting more LST assets.

🌎 What’s Happening?

📰 Industry News

unshETH‘s one of the private keys for the deployer contract was compromised. Deposited unshETH Ether is not at risk. But some of the ancillary protocol contracts (farms, bridge, etc.) are at risk.

Unciphered, a crypto security firm has claimed the ability to physically hack Trezor T hardware wallet. Trezor says it acknowledged a similar attack vector a few years ago.

Multichain team, the team behind the fifth largest blockchain bridge, is rumored to be arrested. This has raised concerns since it has around $1.56 B worth of assets.

Tornado attacker’s proposal to hand back the control of the DAO was passed. This has ended the governance attack without any big changes to the protocol.

LayerZero is now live on the Canto blockchain. With LayerZero, projects on Canto can extend their application to 30+ chains in the LayerZero network.

Ava Labs announced Ava Cloud. It is a Web3 launchpad for deploying and scaling no-code, fully managed custom blockchains.

MakerDAO is discussing raising the DAI Savings Rate (DSR) into 3.33%. This is expected to increase the DAI deposits into DSR. It’ll also nudge rates across DeFi upwards.

Circle launched Euro Coin, or EUROC, natively on Avalanche. Circle offers access to Avalanche EUROC liquidity for qualified businesses with a Circle Account.

DF Fintoch, a project that claimed to be associated with Morgan Stanley, seems to have taken off with $32 million of user funds. Morgan Stanley has denied any association.

Paradigm has removed the mentions of crypto and web3 from its front page. This rebrand is said to be for including “frontier” technologies such as AI.

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