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Welcome back to 0xResearch. Here's what we’ve got for you today:
Takeaways from European Blockchain Convention
The truth behind Celo’s usage
Chart: Active addresses across chains
CT: Where we’ve been; where we’re going
5 takeaways from the EBC
I paid a trip to Barcelona this week for the 10th European Blockchain Convention.
The compact event, set in the Fira Barcelona Montjuic convention center, attracted about 5,100 attendees to the Catalonian metropolis.
The key themes were the consequences of a maturing crypto industry and how it will evolve with regulations.
Here were my top five takeaways:
1) A billion holders is doable. A billion users is hard.
Blockchain settlement is a fantastic invention but user experience at the application level “is like pre-DNS, pre-SSL internet,” said Notabene CEO Pelle Braendgaard.
Leeor Groen, managing director at Spartan Group, expressed the view that crypto’s speculative boom and bust cycles have been counterproductive, and has in fact “pushed out the adoption cycle by five-10 years.”
Drop “Web3” and aim to be known simply as “infrastructure, gaming and finance,” was one piece of advice.
2) Public permissionless chains are winning, but crypto needs to grow up
Composability is the reason public ledgers are able to compete and win against consortium chains, according to Piers Ridyard, CEO at RDX Works.
That’s one reason SG-Forge, part of French banking behemoth Societe Generale, took a deliberate and carefully-considered decision to build on Ethereum a few years ago. The move was approved at the highest levels of the bank, Forge’s CEO, Jean-Marc Stenger, told me.
The bank’s new euro stablecoin EUR CoinVertible (EURCV) will be listed on crypto exchange Bitpanda and will soon expand to Solana.
3) Think compliance, not regulation
There’s a tension between regulation and innovation, and whether it ultimately resolves in a healthy way will depend a lot on the details of the implementation.
But Ana Carolina Oliveira, chief compliance officer at Barcelona-based Venga app, outlined some points policymakers and startups need to carefully consider:
• Take a risk-based approach to anti-money laundering.
• Incorporate prudential safeguards, insurance and business continuity process, in case things go south.
• Maintain an information and communication technology (ICT) security system.
• Craft a complaints handling and whistleblower policy.
It’s an open question as to how much decentralization will obviate the need for measures like these under Europe’s MiCA regulations. For instance, Juan Ignacio Ibanez, executive secretary of the MiCA Crypto Alliance, observed that token issuers typically want to list on European exchanges, but don’t want to — or feel it necessary to — write a white paper that comports with the regulations. Nevertheless, exchanges may be required to have one on file.
4) Programmable money is the game changer
Crypto payments today “are like MP3 pre-iPod,” said Mastercard’s Christian Rau.
But the situation is improving fast. People don’t want cash but they want the benefits of cash, and paying with onchain assets will be easier than using offchain networks before 2030, was one prediction I heard.
5) EU regulation still needs work but may provide an edge
The sense is that “MiCA 1.0,” which fully goes into force at the end of December, is a step in the right direction, but a lot of uncertainty remains.
Will each regulator apply MiCA in a consistent way?
The hope is that consumer protection, rather than control, will be the focus of policymakers cognizant of the fact that the EU has produced no major global tech powerhouses.
Gillian Lynch, who heads Gemini exchange’s EU operations, said “it’s not perfect but we do have a good idea what the guardrails are.”
Marguerite de Tavernost, an investment director at Cathay Innovation, urged founders to plan being “compliant by design” as a competitive advantage.
On a broader scale, several participants felt that MiCA could itself be a competitive advantage for Europe as the US lags behind on crypto policy.
The truth behind Celo’s usage
Launched on Earth Day 2020, Celo is an EVM-compatible L1 with a marked focus on being carbon negative and driving real-world payments use cases for the unbanked in Africa.
Celo is beginning its transition to an Ethereum L2 today, but that’s not why it’s in the Twitter timeline limelight.
Celo is the talk of the town thanks to a shoutout from none other than Vitalik Buterin. Vitalik’s tweet spotlights Artemis’ data on the weekly average daily active addresses for Celo’s stablecoin usage, which surpassed TRON by a blip on Sept. 13.
It’s a picture-perfect story that ticks all the boxes on the public relations guidebook to showcasing crypto and blockchains as a source of social good, particularly in an industry where fraudsters run amok.
This has since been amplified in a Messari report as well as a CoinDesk article that frames Celo as a “challenge” to Tron’s historically dominant onchain stablecoin usage. The CELO native token has made about a 20%+ rally since.
The only problem is that the data doesn’t hold up to closer scrutiny. (See Chart of the Day.)
A Dune dashboard shows that the bulk of Celo’s “active addresses” (142.5K) in the last 30 days are coming from the universal basic income protocol GoodDollar, Blockworks editor David Canellis found.
In the last 30 days, 83,868 GoodDollar users have claimed a total of 1,536 G tokens, which comes up to a paltry 0.0013 USD per user.
Blockworks Research Analyst Darren Mims shed more doubt on most of the “daily address” usage being substantial enough to be considered significant.
“The number of wallets interacting with these apps floats at around 10-30k wallets per day beginning in April; however, the monthly cumulative value of stablecoins claimed across these wallets is only about $4,000,” Mims wrote in a Blockworks Research flashnote.
$4,000 is obviously a lot of money for the average person in the developing world.
But broken down on a per-wallet basis, that comes up to an extremely negligible $0.0003 USD — which, when converted to the Nigerian naira currency (one of Celo’s target markets) — is about 0.5 naira, or about 0.016 of what is needed to afford a Big Mac meal, Mims pointed out.
Finally, only $18.7 million of the $470 million USDT deployed on Celo is actually part of the circulating supply of users considering that $452 million sits in Tether’s treasury and CEX wallets.
Taken together, Celo’s usage appears to be overstated. For a deeper dive, see Blockworks Research’s report.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
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Celo active addresses:
Charts can be deceiving — a symptom of how notoriously unreliable the metric of “daily active addresses” can be.
Using Dune data, Variant Fund’s data analyst @jphackworth42 pointed out that 81.46% of Celo wallet addresses transferred less than a cent in September.
Artemis itself previously acknowledged how problematic counting active addresses can be.
— Donovan Choy
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.