Nashville Driving Crypto Tax Law

Good morning. Today we go waayyy down on the market cap rankings for Altcoin Friday. We've also got my hometown, Nashville, TN, serving as a crypto tax battleground, an update on the Wormhole hack, and more! Happy Friday and don't forget to shoot around this newsletter to your friends!

Bonus Content Coming Soon: I'm close to having my notes out from Messari's Crypto Theses for 2022. I'll include a link to my notes in this newsletter, however, the full report is definitely worth a read. The report is now in podcast form and can be found here.

Market Update (as of 7:45am ET):

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Top 5:

1. Jump Trading saves the day for Wormhole and many others. The firm stepped in to back and replace the 120,000 ether that were stolen from the Wormhole protocol on Wednesday. Jump's backing wasn't entirely altruistic as the company is a major investor in both Solana and Wormhole. Additionally, by backing the stolen funds, Jump helped prevent potential widespread impacts to Solana's DeFi ecosystem as much of the stolen ether was pledged as collateral in other protocols on the blockchain. Already on Wednesday, users were pulling assets off the Solana blockchain and the total value locked into the network dropped 12.3% according to DeFi Llama data.

A good thread on the mechanics of the hack can be found here.

SSS (sat-sized summary): Jump Capital, a major investor in both Solana and Wormhole, stepped in to replace the ether stolen in the hack. The backing of Wormhole helped prevent broader negative impacts to Solana's DeFi ecosystem thus protecting Jump and other investors.

2. Bitcoin as a web3 platform? That's the goal for Muneeb Ali and J.P. Singh who raised $150 million for their company Trust Machines. “With the early foundation built, it’s time to concentrate on unlocking the next level of applications and platform technology on Bitcoin, enhancing the platforms for speed, scale and functionality, and making Bitcoin apps a reality for hundreds of millions of users.” Ali said in the press release. The company will build off of and expand on the programming layer built by Stacks, in order to develop more functionality on top of the Bitcoin blockchain.

SSS: Building on the Bitcoin network is certainly a challenge and there's essentially no existing ecosystem when compared to other blockchains like Ethereum. It will be interesting to see what this team creates and if they can draw in more developers to make Bitcoin a web3 platform that others build on.

3. Altcoin Friday #8 - Maple Finance ($MPL)

Overview:
- Current price (as of this writing) of $14.91
- Market capitalization of $62.8 million (486th overall)
- Maple Finance is a decentralized corporate credit market built on the Ethereum blockchain and launched in 2021
- Maple offers borrowing exclusively to institutional borrowers, but lending is open to all
- The protocol provides undercollateralized lending for institutional borrowers and fixed-income opportunities for lenders
- The protocol currently has $539 million in total value locked
- Maple plans to launch on Solana in March of 2022

Value prop:
- Maple offers institutional borrowers the opportunity to borrow under-collateralized without fear of liquidation and margin calls
- Lenders in the protocol can earn interest and MPL rewards by lending to reputable institutions
- Stakers receive a percentage of interest and MPL staking rewards


How it works:

Note: Additional research from Messari can be found here, while the Maple docs can be found here

4. Tax precedent being set for staking rewards. A couple in Nashville, TN is in a court battle with the IRS over taxes paid for tokens they received while staking on the Tezos blockchain. The couple, Josh and Jessica Jarrett, had previously requested a tax refund of $3,293 from the IRS for the staking rewards they received, but did not sell or exchange. The IRS offered a reimbursement, but the Jarretts, along with the Proof of Stake Alliance (POSA), decided to file a lawsuit in order to establish a legal precedent. The case is being watched closely in the crypto and accounting worlds and some firms are already adjusting their tax reporting options for clients to exclude staking rewards from their income. A trial is set for March 2023, so don't hold your breath on any outcome.

SSS: Staking rewards are the center of a court case with the IRS that argues the rewards should not be taxed unless sold or exchanged. The outcome of the case could establish legal precedent for crypto taxation moving forward.

5. NFTs (not even all of them) are bigger than the movies

Weekend Reading:
A Nonsensical Jumble of Misused Words Requires Discussion - a detailed piece on how collateral is rehypothecated in global financial markets and the risk it presents

Top Sharers of the Crypto Top 5:
1. Donna Y. - Nashville, TN
2. Jake Y. - Greenville, SC
3. Forrest H. - Evansville, IN

External Resources:
1. Cryptopedia from Gemini - if you see a word, acronym, or phrase in this newsletter that you don't understand, there's a good chance you can find an explanation here
2. Crypto Explainer+ - intro level courses on Bitcoin, Ethereum, decentralized finance, NFTs, and more
3. Crypto Jobs! - looking for a new job? Check out this page from Anthony Pompliano with hundreds, if not thousands of listings

Disclaimer: The information contained in this newsletter shall not be understood or construed as financial advice. I am not an attorney, accountant or financial advisor, nor am I holding myself out to be, and the information provided is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.