Yup! BlockFi is Bankrupt…

November 30, 2022

The Scoop

Welcome to another edition of The Scoop.

The Scoop helps make moving through Web3 easier like MetaMask and UniSwap, except that they take your data and don’t pay you for it…

And we believe you should totally get paid for it because it’s YOUR DATA.

The Big Scoop

Alright, so our intro today hints at one of our stories of the week which is that MetaMask and Uniswap are collecting data on you. 

BUT FIRST…

We bring to you the fallout of FTX for the FOURTH week in a row…

You should know that contagion isn’t anywhere near done spreading. While most Americans were busy celebrating their Thanksgiving holiday, people began to notice that WBTC, or Wrapped Bitcoin, depegged from the price of actual Bitcoin.

WBTC is an Ethereum-friendly version of Bitcoin that allows investors to stay tied to the price of Bitcoin using smart contract-friendly tokens IE tokens that can be traded on decentralized exchanges (Bitcoin can’t be traded on DEXs because it is purely a peer-to-peer payment system and does not contain smart contract functionality)

The big news is not so much that it depegged, but that Alamada Research (the sister company of FTX responsible for this whole mess) minted more than 100,000 of those WBTC tokens. That’s 50% of the total supply of WBTC.

THAT’S WHY THE CONTAGION IS STILL VERY REAL…

That’s not even mentioning EVEN BIGGER NEWS…

BLOCKFI IS BANKRUPT…

That’s right! News outlets are reporting BlockFi has $257 million in cash and between $1 billion and $10 billion USD in both assets and liabilities on its balance sheet. The problem is that they are also in bed with FTX (like a lot of other big crypto companies). 

That means they will likely need FTX bankruptcy proceedings to conclude before their own mess gets figured out.

And now the whole MetaMask/Uniswap thing…

ConsenSys is arguably the most influential blockchain development firm in the world. Its founder Joseph Lubin is one of the co-founders of the Ethereum blockchain.

The company admitted over the last week that it collects information related to IP addresses and Ethereum addresses from users of its ever-popular wallet, MetaMask.

Decentralized exchange Uniswap admitted a week ago that its privacy policy is updated and that the platform collects the on-chain public data of users too.

In a market where financial gain is difficult to achieve, the most valuable asset Web2 (and apparently Web3 companies) now have is your on-chain data. YIKES!

As we always say. Keep your money and your data to YOURSELF.

The News

BlockFi Bankrupt, Genesis on Shaky Ground as FTX Contagion Continues to Spread

Two more significant players in the crypto space have been hit by the contagion unleashed by the collapse of FTX.

Also, Wrapped Bitcoin (WBTC), the leading wrapper for Bitcoin on the Ethereum network has depegged from BTC, caused chiefly by FTX’s collapse.  

With arbitrageurs seemingly unwilling to trade WBTC’s price back up to parity with Bitcoin, and Alameda Research being the top WBTC merchant, having created more than 100,000 WBTC, many are worried about the future of the popular wrapper. 

On Kraken, WBTC has traded at around a 1% discount for the majority of the past two weeks following FTX’s collapse. Since then, the token has fallen as low as 0.98 BTC. 

Now back to the bankruptcies..

Earlier in the week, crypto lender BlockFi filed for bankruptcy. At the same time, Genesis Trading announced that it may share the same fate as the lender.

BlockFi's downfall started earlier in the month when it halted withdrawals, citing "significant exposure" to the FTX exchange and its sister hedge fund Alameda.

Following the company filing for Chapter 11, the lender filed a lawsuit against Bankman-Fried's Emergent Fidelity Technologies vehicle, demanding that SBF return the collateral the lender claims it is owed, including Bankman-Fried's 7.6% stake in the online trading app Robinhood.

Also, within the bankruptcy filing, BlockFi stated it owed money to more than 100,000 creditors, with the most significant creditor being Ankura Trust, which is owed $729 million. FTX is the second-largest creditor, which is owed $275 million.

Genesis Trading announced last week that it may face bankruptcy after its lending arm suspended services. However, following the collapse of FTX, the company was facing "abnormal withdrawal requests," casting about for a $1 billion bailout last week, which they said exceeded its current liquidity.

Genesis has stated they have "no plans to file bankruptcy imminently."

However, to alleviate the situation, Genesis stated it will "temporarily suspend redemptions and new loan originations in the lending business." 

While this is undoubtedly not the end of this saga, the impact on crypto prices has seemingly slowed as Bitcoin has sat around the $16,000 mark for the past week.  

MetaMask and Uniswap Admit to Collecting User Data

A new update to ConsenSys' API tool Infura allows the tool to collect information related to IP addresses and Ethereum addresses from MetaMask wallet users. 

This news naturally caused controversy within the space. 

The API-based Infura tool connects users' applications to the Ethereum network, providing the basis for many significant Web3 projects, including Aragon, Gnosis, OpenZeppelin, and MetaMask.

An update to ConsenSys' privacy policy states that if you use Infura as your default remote procedure call (RPC) provider in MetaMask, it will collect your IP address and your Ethereum wallet address when making transactions. 

For those using their own Ethereum node or a third-party RPC provider with MetaMask, ConsenSys states that "neither Infura nor MetaMask will collect your IP address or Ethereum wallet address."

The firm has stated that its "policy has always stated that certain information is automatically collected about how users use our sites and that this information may include IP addresses." They have pointed out that this feature isn't "Infura-specific" and that this type of data collection "is consistent with how web architecture works generally."

ConsenSys isn't the only one collecting user data within the Web3 space. However, it is the only firm that has recently decided to increase the amount of data it collects from its user base.

Uniswap, a decentralized exchange, has also recently started collecting off-chain data such as users' device type or browser. The exchange has said that the move was made to improve users' experience. 

Data collection within the Web3 space goes against why many have joined the innovative space. With data collection now becoming an issue within the space, the separation between Web3 and Web2 will start to shrink.

Chart.

YOURSELF. Two really insightful charts for you here today. The first one shows the breakdown of how many WBTC tokens belong to Alameda Research versus everyone else.

The second chart shows you that more than 72,000 WBTC are not accounted for.

Fundraising In Web3.

Venture capitalists are still dropping stacks on crypto projects set to change the world. Here are just some of the announcements that show investors were in a giving mood during American Thanksgiving 💲💸💰🧀🦃🍗:

Education.

Welcome to the Study Space, where we fill your brain with the most useful Web3 knowledge possible. This week, we deep dive into what a ‘Wrapped Token’ is…

It’s time to make your brain BIGGER🧠

Scoop Meme

The Final Scoop

While Web3 companies and projects are starting to feel the pressure, there is a positive in all of this.

Long term, these events are building a stronger foundation fo Web3. Projects will be forced to implement a true Web3 ethos to gain the trust of people around the world. 

The reality is, this is still a very young industry and bad actors will exploit vulnerabilities like they have in every other industry as well. With each exploitation though, it means we’re getting closer to a  stronger solution. Web3 is not going anywhere - it’s only getting stronger.

With that said, no matter what, be your own bank and be your own data center as much as you possibly can. Stay safe!

Share The Scoop

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Can you do us a favor and do that? If so…

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Thanks for reading,

See you next week!