Axie News, BPI, THORChain
Last week’s series of Axie Infinity essays were really well-received, and I wanted to take a moment to say thank you for all the shares and feedback from the community ❤. In the last few days, Axie hype train ran as hot as it’s ever been, with the game appearing on the news outlets everywhere from the Singapore Business Times to Coindesk to our local Brigada on GTV. This coincided with the busiest SLP trading week in months, with over 2B SLP changing hands on the Binance spot market. If you read any of the links above, it should definitely be Leah Callon-Butler’s op-ed on Coindesk, which really emphasizes the scale that Axie has achieved in such a short time. Both AXS and SLP are down from their highs last week, at 900 PHP and 13.50 PHP, respectively.
The game has really struggled to keep up with all the attention, and the web platform has been suffering from outages all week long. Unlike a traditional game where players just take a break and come back in a few days, an outage in Axie Infinity is essentially a lost revenue opportunity, and on Friday, disgruntled Filipino players took to the Axie Discord server demanding compensation for those “losses.” As is always the case with internet mobs, things got nasty fast, and the end result was that the entire Philippines channel was put on a timeout by the Axie moderators. Considering that Filipinos account for about half of the Axie population, muting ~250,000 people for a day is kind of a big deal. SkyMavis’ server problems do not appear to be easily resolvable, and it’s likely that we will continue to see user complaints for at least the next few days. With competing play-to-earn games like MyDefiPet (on BSC) and AlienWorlds (on WAX) just waiting in the wings, the Axie Infinity team will be under a ton of pressure to get their shit together quickly.
Earlier in the week, and on the complete opposite end of the Philippine crypto landscape: BPI president TG Limcaoco shocked absolutely no one by telling the media that he didn’t believe that Bitcoin was an asset class he would invest in, as he did not “see any underlying value.”
He went further to talk about central-bank-issued digital currencies (CBDCs, or basically “digital pesos on the blockchain”) which he believed would go a “long way in promoting financial inclusion.” This is of course completely untrue, and Limcaoco contradicts himself immediately in his next statement: “It will go a long way in getting rid of underground economies because all transactions will be able to be monitored and tracked. It will save the government a lot of money in terms of printing bills and coins.”
Firstly, “underground economies” are how a lot of people survive in this country and eliminating that only works if you build enough viable alternatives. Secondly, making transactions easier to monitor and track, and saving the government a lot of money are not objectives that have anything to do with promoting financial inclusion. CBDCs do nothing for financial inclusion … at least, no more than mobile wallets like GCash or Paymaya already do. Instead they actually reduce financial freedom because monitoring always implies censorship. So if we ever get to the point where, for example, the Bangko Sentral wants to stop people from buying or selling axies, they could do so by freezing the digital pesos within their CBDC wallet addresses. Is it any wonder that the country that is furthest ahead with deploying its own CBDC is China?
The polar opposite of CBDCs are of course, decentralized cryptos like Bitcoin and Ethereum, and decentralized exchanges that facilitate the permissionless trading of these coins. One project that I’ve been watching for a few months now is THORChain, which is ambitiously creating a cross-chain trading protocol to allow users to swap BTC for ETH directly, without need of a centralized exchange. Remember that most decentralized exchanges like Uniswap have to use wrapping mechanisms to facilitate such trades, which is a terribly confusing user-experience. (This is why you see pseudo-coins like wBTC on Uniswap; it represents a real bitcoin but they had to “wrap” inside an Ethereum token, since a real bitcoin would not be compatible with the Ethereum blockchain.) THORChain allows you to trade REAL BTC for REAL ETH (amongst other coins) which would be an incredible boon to the ecosystem if implemented properly.
Unfortunately, THORChain suffered a fairly large hack last week that resulted in a loss of 2,500 ETH (about $5M). The project appears to be well-funded though, and have told the users who lost money that they will be made whole “in the coming weeks.” It’s a fairly big setback but I’m not sure if it’s possible to build on-chain services like this without some risk of loss. The issue really is that you can only test so much before going live with something, and because a public blockchain app can’t limit the funds that it accepts, the potential losses always end up being quite outsized even for very young projects.
Speaking of centralized exchanges, Binance has been getting a real thrashing recently. I wrote about their regulatory issues in the European region on July 7th, and it now appears Ontario, Japan, the Caymans, and Hong Kong have joined the fray. Each jurisdiction has approached things differently, with most amounting to little more than a stern warning. Only Thailand has actually filed a criminal complaint against Binance for operating an unlicensed exchange within its borders. That said, the Thai SEC definition of “operating an unlicensed exchange” appears to be simply that Binance is accessible on the Internet and promoting its online service to Thai citizens. This is perhaps the most troubling thing about the Thai situation; if that’s all it takes then all the other crypto exchanges are in trouble too.
Our marketwatch is not very exciting today, as BTC ($31k), ETH ($1900), and BNB ($300) continue to tread water. I don’t really have any new observations about this other than to call it a holding pattern, while we wait for a new narrative to re-energize the markets. This tweetstorm from Dogecoin co-founder Jackson Palmer is the opposite of that, and although I don’t agree with his conclusions, it is worth reading to get a sense of what the worst-case-scenario actually looks like for cryptocurrencies. According to Palmer, “Cryptocurrency is like taking the worst parts of today's capitalist system (eg. corruption, fraud, inequality) and using software to technically limit the use of interventions (eg. audits, regulation, taxation) which serve as protections or safety nets for the average person.” As you can imagine, the Twitter response was fierce.
See you all on Wednesday, cryptofam!