Reservations? Try NFTs

Good morning. Today we've got some funny business over at Crypto.com, cryptocurrencies getting added to local treasuries, a new play-to-earn fund, and more! Food snobs (of which I am one), check out the last story for a bit of a crossover into the NYC dining scene.

Bonus Content Coming: I'm targeting early next week the end of the month to have 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 8:23am ET):

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Top 5:

1. Crypto.com Suspends Withdrawals After ‘Unauthorized Activity’
Early on Monday morning, Crypto.com ceased all deposits and withdrawals as the company investigated "unauthorized activity" that occurred on some users' accounts. The crypto exchange company tweeted out that enhanced security would be rolled out to all accounts and that users would be required to sign back into their applications and reset their two-factor authentication. Withdrawal services were restored yesterday afternoon and the company confirmed that "all funds are safe." Further details on the cause of the issue have not been released, but the team plans to share a post mortem after the investigation is complete.

SSS (sat-sized summary): Crypto.com, one of the largest crypto exchange companies, was forced to stop user withdrawals and deposits on Monday while it investigated "unauthorized activity" on some users' accounts. The company confirmed that all funds were safe later in the day and restored withdrawal services. Centralized exchanges continue to be a honeypot for hackers to target and keeping large quantities of crypto on exchange is not advisable in most cases.

2. Mechanism Capital Launches $100M Fund Focused on P2E Gaming
Mechanism Capital is launching a $100 million dollar fund focused on the play-to-earn (P2E) gaming industry. The fund, to be called Mechanism Play, will be lead by former Apple App Store games business manager, Steve Cho. The fund will specialize in gaming specific investments and partner with studios to develop new games. Funding for crypto gaming companies crossed the $5o0 million mark in the first half of 2021 alone, and P2E games like Axie Infinity and The Sandbox were among the most popular entrants in the space. Andrew Kang, co-founder of Mechanism Capital told Blockworks that he believes "play-to-earn has barely penetrated the gaming market, but we expect this to change in the next few years with mobile leading the way."

SSS: Mechanism Capital has launched a $100 million dollar fund focused on the play-to-earn (P2E) gaming industry. The company believes that P2E will grow over the next few years, especially on mobile platforms. What this means is that all that time you wasted on Clash of Clans could be directed to a game that has monetary/crypto rewards in the future.

3. Rio de Janeiro Wants to Become Brazil’s Cryptocurrency Capital
Last Thursday, the mayor of Rio de Janeiro said he plans to allocate 1% of the city's treasury reserves to cryptocurrencies. Rio has a population of 6.7 million and is Brazil's second-most populous city. Additionally, the mayor announced the creation of a working group to study crypto incentives, such as offering discounts when paying taxes with bitcoin. The results of this working group are set to be published in 90 days.

SSS: Rio de Janeiro is allocating 1% of the city's treasury reserve to cryptocurrencies and exploring other ways to incentivize economic activity with crypto. It's a move that I think (and so does Fidelity) others will follow whether its at the local or national level.

4. Burnt Finance raises $8M led by Animoca Brands, launches DeFi-oriented NFT marketplace
Burnt Finance, the company best known for purchasing a $95,000 piece by the artist Banksy, filming the incineration of said piece, and then subsequently selling the NFT they minted of the piece for $380,000, is now launching an NFT marketplace. The company has raised an $8 million Series A funding round led by Animoca Brands and is building the platform on the Solana blockchain in an attempt provide lower feeds and faster speeds than competitors. The new marketplace will also integrate DeFi capabilities like "NFT lending, liquidity mining with staking incentives, fractionalization, and GameFi." Burnt claims to have processed over $100 million in trading activity over a seven day period on its testnet and to have over 160,000 users on its waiting list.

SSS: Burnt Finance is entering the NFT marketplace fray. The company aims to provide faster transaction speeds and lower costs for users while also integrating DeFi functionality like NFT lending and staking.

5. An NFT restaurant opening in New York will serve up status with a side of seafood
A new dining club in New York is limiting access by selling NFTs that grant members entry to the club. The restaurant, Flyfish Club, sold 1,501 tokens this month for ~$15 million. I will admit when I first heard about this story I thought the whole concept was pretentious and destined to fail. And while I haven't fully backed off from that stance, I do think the experiment presents some interesting use cases for NFTs:

Several quotes from the founder and CEO on status and identity:
1) "Social currency is a big part of this"
2) "People are communicating digitally about what they like and who they are"
3) "Now we’re looking at LinkedIn, but in five years we’re going to be looking at      someone’s digital wallet to see who they are"

Membership as a revenue generating asset:
1) First, a successful club depends on people using it regularly, but not all 1,500
   members will be there every night
2) So, tokenholders can lease (or sell) their tokens to others that might just want    to dine for a special night out or while on vacation in New York
3) "The power of NFTs is authentication — they facilitate the transition of               ownership"

The few points above don't fully convince me that this operation will be successful, but I can see where NFTs being used as proof of authentication to access certain events or clubs could become more commonplace. As for the "social currency" aspect, I'm sure that's helping sell the tokens, but staying power depends on the success of the club itself.

Top Sharers of the Crypto Top 5:
1. Donna Y. - Nashville, TN
2. Jake Y. - Greenville, SC
3. Cameron S. - New York, NY

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

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.