Kyber Ventures Monthly Update - July
The Federal Reserve on July 27th enacted its second consecutive 0.75 percentage point interest rate which led overnight borrowing rate up to a range of 2.25%-2.5%. This move represents the most stringent consecutive action since the early 1990s. Besides, the US GDP growth release at -0.9% led the economy technically into recession as the GDP growth was negative in 2 consecutive quarters. However, the market recovered slightly despite the bad news.
It’s still under the cloud how this macro market will impact the crypto movement. Also, 3AC, Celsius, and Voyager Bankruptcies haven’t cleared out yet. We should closely watch the further impact of these incidents on centralized lending platforms, exchanges and miners.
KyberVentures team is in Seoul to attend Korea Blockchain Week! We are excited to meet brilliant devs, teams and funds to share insight and discuss how to work together! If you are attending #KBW, let’s connect! message @Beckyvn on Telegram or firstname.lastname@example.org to arrange a coffee chat.
Ethereum: Merge isn't priced in!
The prelude to the start of the Ethereum modular blockchain will soon be held through the merge upgrade in September. Introduced by Bankless last year, this modular blockchain is considered the best architecture that structure for the ETH2.0 roadmap.
The goal of modular blockchain is to maintain the decentralization and security of Ethereum while securing scalability, and many expect this could be achieved through sharding and L2 adoptions. Ethereum Mainnet operates as a consensus and data availability layer and has a structure in which other layers can leverage Ethereum while running their tasks. The modular blockchain has the potential to provide near-infinite scalability without harming decentralization, many are looking forward to the update, but these techs are not simple to develop and will take a long time to deploy on Mainnet.
The first step for Ethereum to become the leading modular blockchain is the gateway to PoS transition via Merge upgrade which is expected to take place soon.
As planned, the current Ethereum Mainnet merges with the Beacon Chain proof-of-stake system in September will mark the end of proof-of-work for Ethereum and the full transition to proof-of-stake. This transition will reduce Ethereum’s energy consumption by 99.95% and set the stage for future scaling upgrades including sharding.
Some may expect low gas fees and fast network speed to be realized immediately after the PoS transition but unfortunately, these improvements need more time. This would be done over several years through the stages of sharding and shard chain activation, Dapp unit integration, and optimization. Feel impatient to wait such a long time? don’t worry, we already have alternative solutions to improve Ethereum scalability issues and it’s developing rapidly now. It’s called Layer 2 solutions.
Layer 2 is a second layer on top of the L1 chain that enables thousands of small-value transactions to be stored as one record on the main chain, thus keeping Layer 1 chains from growing too large and becoming too cumbersome. It is expected as an ideal structure that can acquire scalability while maintaining the decentralization and security of Ethereum.
Since the last year, the L2 ecosystem has been rapidly expanding, and several well-known L2 chains launched mainnet this year. Well-known representative Ethereum L2 chains include Arbitrum, Optimism, Polygon, zkSync, and Starware. These chains’ TVL (total value locked) has increased steadily over a year and announced new development updates daily. Polygon’s recent announcement about zk tech, zkEVM that can be compatible with EVM, also made Polygon one of the leaders in zk tech field together with zkSync and Starkware.
With the upcoming Merge and L2 ecosystems’ growth, Ether's price has been overshooting BTC and other L1 chains for the last couple of weeks. Will this price increase continue after the Merge? Will the current Deflationary Asset Narrative continue to remain?
If ETH is used to pay gas fees on L2 ecosystems while L2 continues with broader adoptions, YES. This scenario will make ETH true ultra-sound money, but looking at L2 chains sequentially launching their own tokens, the ETH=Deflationary asset narrative may not play out in a long term.
In a situation where the L2 chains use their own token for gas and the ETH is used only when sending batches to Ethereum Mainnet, the number of transactions happening on Ethereum will naturally decrease, leading to a decrease in gas fees. Due to low gas fees and smaller transactions, the amount of ETH that is burned is expected to reduce significantly compared to now. More and more L2 chain ecosystem revitalized, we may see ETH switch to B2B (L2 chains become buyers) model and price decline due to lower retail demands.
However, KyberVentures, we have slightly different views on the future ETH adoption and price movements. We still keep our long position in ETH for the long term as we believe ETH price shouldn’t be evaluated only by network revenues or the amount of burned ETH. The gas cost will be significantly lowered through merge and sharding upgrades, and it’s not fair to state ETH is overvalued just because the Eth is not a deflationary asset anymore. We think ETH will be able to maintain its position as a global currency that encompasses all L2 ecosystems’ growth and adoptions. In addition, L2 chain foundations may lock up/maintain a certain size of ETH treasury for stable operations. This prediction could be applied to the relationship between other settlement layer chains and L2 solutions such as Polkadot with Parachain and Avalanche with Subnet.
We are really excited to see how L1 chains connect and collaborate with each other to bring broader mainstream adoption. To observe and experience Web3 innovation together with KyberVentures, follow up on Twitter and Newsletter!
Kyber Ventures Investments
Crypto Premier League (CPL)
Crypto Premier League (CPL) is a unique trade-to-earn game built on Binance Smart Chain, Polygon, Fantom, and soon on Klaytn. The team made a platform for both novice and advanced users easy to use to practice crypto trading and gain real rewards by playing trading games.
You get $1M virtual USD to buy and sell cryptos when you download the app and create a wallet. The app's interface looks similar to major centralized exchanges like binance and provides real-time trading prices. Users can join games to earn rewards when they feel more confident in crypto trading. To enter the contest, users need to pay a very small fee up to ~$1, and these collected game fees are distributed to top-ranked traders who profit most during the game period. The rewards in BNB or BUSD will automatically send to the user's non-custodian wallet. (Check out their tutorial video here!) They recently partnered with Binance to support fiat on-ramp service allowing users better app experiences.
According to Dappradar, CPL is now ranked in the top 50 in the game category. CPL's unique and excellent user experience attracts loyal users with high engagement, and app usage grows as users now spend over 90min per day in the CPL app. Even in a bearish market, CPL's monthly active users grew by more than 32,000 and daily active users stayed relatively stable at 3,000 users per day.
We think most people get exposure to crypto through trading on centralized exchanges and then setting up a non-custodian wallet to try out different Dapps. The CPL team understands this process can be very frustrating and easy to lose money through mistakes for newbies. They aim to build the best app that allows users to get familiar with digital assets, trading platforms, and non-custodian wallet usage while having fun joining trading games and practicing trading.
"Your hard-earned money shouldn't be lost. We are redefining gaming and trading for everyone with exclusive experiences, challenges and rewards" - CPL Team
CPL model may not be the most decentralized way but we believe mainstream adoption would start from the hybrid model that provides a certain level of simplicity and security. We are thrilled and excited to support the hardworking CPL and team and CPL app. Try out the app live on Google Play!