Crypto Valentine

Welcome back. You know what this year’s Super Bowl lacked? Crypto ads. No Matt Damon suggesting that only cowards don’t buy crypto. No Larry David endorsing big crypto exchanges (granted, that one aged rather badly). Looks like this really is a bear market…

Today: Uniswap’s governance drama, a hard blow to NFT art, and concerns about Grayscale’s Bitcoin Trust. Let’s go.

—Angelina

Does Silicon Valley Control DeFi?

It might. When big-shot VC fund Andreessen Horowitz (a16z) attempted to influence a major on-chain governance vote on Uniswap last week, concerns arose over how much Big Money really controls the world’s leading DEX.

Some context: The Uniswap DAO is facing a time crunch. It must bring its decentralized crypto exchange to Binance’s BNB Chain before copycats can launch identical competitors. But the move onto BNB Chain requires the Uniswap DAO to select a cross-chain bridge protocol first—last week, community members voted on the deployment of the Wormhole bridge.

Where things got controversial:

• Back when a16z invested in Uniswap, it became the largest holding entity of the DEX’s UNI tokens (which double as votes in DAO governance procedures).

• A16z used its UNI bags to vote against last week’s bridge proposal, briefly tilting the vote 70% against the Wormhole deployment.

• The VC wants to see LayerZero, a bridge protocol that happens to be one of a16z's portfolio companies, be deployed instead of Wormhole.

A16z’s massive vote absolutely lit up the crypto Twitter night sky. For some, it proves that Uniswap is controlled by centralized forces. For others, the VC’s whale status is just the result of free market forces at work.

Big picture: Luckily, a16z’s governance move isn’t as bad as it looks. It’s 15 million “no” votes ultimately didn’t block the Wormhole-deployment from passing—despite being UNI’s largest holder, a16z still only controls 1.5% of the total token supply.

That being said… The a16z controversy serves as a reminder that DeFi/DAO governance isn’t inherently democratic (as it’s often made out to be) and is susceptible to centralization.

As decentralized governance evolves and DAOs mature, expect the money behind DeFi’s biggest protocols to come under further scrutiny.

Hèrmes: 1, NFTs: 0

What do you get when an iconic French luxury brand sues an NFT artist? A très important legal precedent bound to impact the future of the entire NFT art industry. Let’s unpack.

Hèrmes won a lengthy U.S. court battle against digital artist Mason Rothschild last week, who the luxury brand accused of copyright infringement. Rothschild’s popular “MetaBirkins” NFT collection features digital reinterpretations of Hèrmes‘ iconic Birkin handbags (that sell for 5 figures a pop).

The problem?

• MetaBirkins mislead consumers into believing that the NFT collection was officially associated with Hèrmes, the plaintiff argued.

• Rothschild therefore enriched himself off Hèrmes IP by selling his NFTs (floor price: 3.8 ETH).

• The jury awarded Hèrmes $133,000 in damages, dismissing Rothschild’s argument that his work is in line with a long-standing tradition of artists depicting branded products (i.e. Warhol’s Campbell’s soup).

Big picture: The MetaBirkins case is a towering landmark in uncharted legal territory. The jury classified NFTs as a commercial product (to which trademark laws apply) as opposed to digital art (to which they don’t). Emboldened by the decision, other companies could follow Hèrmes‘ example and sue NFT artists for violating their IP.

Would this lawsuit even exist had Rothschild chosen a more traditional art medium (like paint) instead of NFTs? I’m not so sure…

DCG Sells Grayscale Shares

The troubled crypto conglomerate Digital Currency Group (DCG) has started selling its holdings in the Grayscale Ethereum Trust—which raises bearish concerns not only for Ethereum, but Bitcoin too.

Refresher: Grayscale is DCG’s subsidiary digital assets manager that operates the Grayscale Bitcoin Trust (GBTC), which holds 633,000 BTC. That’s roughly 3% of all BTC ever mined.

Crash ahead? Should a financially distressed DCG decide to move on from selling Ethereum Trust to GBTC shares, some worry that this could swamp the market with BTC and cause strong sell pressure. For now, DCG hasn’t touched GBTC…but even if it does, it’s unlikely that the fund’s underlying Bitcoin would be dumped on the spot market carelessly.

In other news:

• Kraken settled charges with the SEC, raising questions about the future of U.S. staking service providers.

• Last year's major Coinbase insider trading case finally ended with a guilty plea.

• Bitcoin network activity hit a two-year high, thanks to Ordinals.

• Terra Classic is at risk of a takeover—with implications for other proof-of-stake blockchains.

• Could the art world finally be taking NFTs seriously? France's top modern art museum suggests so.

Crypto Job Board

• Build out the Stacks network as a Blockchain Engineer at the Stacks Foundation—fully remote.

• Social media savvy? Quench your thirst as a Junior Social Media Manager at APEdrinks.

• Dive deep into the world of dapps as a Financial Controller at DappRadar, the global leader in dapp distribution and analysis.

And that's what you need on your radar today in crypto. Spread the love this Valentines Day and shoot me a reply with your thoughts on today’s stories. Catch you next Tuesday!