Is Coinbase Based? $50B L2 Network 🔵

GM folks 👋🏻 - Happy Friday.

MakerDAO, the biggest stablecoin protocol, is playing with fire. Seems like we haven’t learned from all of the death spirals in the past cycle. In other news, Coinbase launched its layer 2 network built on Optimism, called Base.

Well, Brian Armstrong is certainly based 👨🏻‍🦲

In Today's Email:

• What Matters: Coinbase launches Base, its layer 2 network 🔵

• Founders-Investors Highlight: Mia Deng, Venture Partner at Amber Group 👩‍💼

• Deal Flows: Ex-Binance Exec $100M Crypto Fund 📈

WHAT MATTERS

Coinbase Launches a Layer 2 Network 🔵

State of play: Coinbase, the largest US-based and the only publicly listed crypto exchange has launched its own Ethereum L2 network, built on top of Optimism’s technology stack. The L2 chain is called Base.

• Coinbase doesn’t plan to issue a new network token for Base, ETH will be used as the native gas token.

• Base is currently in testnet, with mainnet coming soon. It will be permissionless from day one, without any KYC requirements (at least no details of such process yet).

• Currently, Coinbase is the only sequencer, but it plans to decentralize down the road. 20% of the sequencer’s revenue will be allocated to fund public goods.

The key takeaway: Coinbase is continuously vertically integrating by launching more on-chain products. They’re also extremely thoughtful about regulatory repercussions of its products 👩‍⚖️

• Binance decided to do a Layer 1 network and an exchange tokens. Coinbase pursued liquid staking products (cbETH) and an L2 instead. These initiatives are not without deliberate regulatory strategies.

Here’s a fun idea.

Why it matters: This move by Coinbase will unlock enormous value for the exchange. Coinbase is taking a page out of Binance’s playbook. Binance launched its own chain and were able to use its BNB exchange token to bootstrap growth. Coinbase is valued at ~$15 billion, and Binance Coin’s fully diluted valuation alone (whether you think it makes sense or not), is ~$50 billion.

• However, it’s also not without any potential negative repercussions. Some lawyers have argued that the move might be a massive miscalculation.

For builders: Make sure that you’re building a product, not a feature. Apple killed the Buy-Now-Pay-Later startups by simply implementing that feature on its Apple Pay. Don’t let Coinbase does the same thing to you. Regulators aren’t going to go against Coinbase for antitrust practices anytime soon.

For investors: Investing in layer 2 ecosystems will be the trend in the next few years. The liquidity flywheel that Ethereum provides for these chains mean that it’s much easier to bootstrap growth. Retail traders can catch ecosystem altcoin narratives while institutions can help bolster the ecosystems via incubation and ecosystem fund.

BUILDER-INVESTOR HIGHLIGHT

Mia Deng, Venture Partner of Amber Group

Mia Deng is an Investor and Venture Partner at Amber Group. She was previously also a partner at Dragonfly, a juggernaut crypto VC firm. Other than her investing career, Mia was also the Co-Founder of TR Lab, a platform to discover and collect NFTs from the world’s leading artists.

• Mia was the first hire at Dragonfly Capital, and helped scale the firm to one of the world largest crypto VC with $4B+ in AUM.

• Mia was included in the Forbes 30 Under 30 Asia, Finance and Venture Capital, 2022 edition.

Previous backgrounds:

• Mia started her career as a Product Manager at Mobike, a China-based stationsless bike sharing startup.

• Post Mobike, she went straight into the web3 space by joining Amber Group as the Head of Business Development.

The big idea: Mia is a prime example of a crypto professional that understands both the Eastern and Western markets. For a truly global asset class like crypto, this is a critical skillset that not many people have.

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DEAL FLOWS

Cypher Capital $100M Crypto Fund

🤝 Deal flows remain strong. This week we saw $420M+ in deals, excluding multiple undisclosed amount of strategic rounds being done.

Cypher Capital $100M Crypto Fund: The Dubai-based VC firm has launched a $100M fund aimed towards digital assets. The firm was founded and financed by Bijan Alizadeh. It has also recruited Bill Qian, Binance’s former head of VC investments as its Chairman. Qian left Binance in June 2022 and aims to target Asian technology tycoons for further fundraising.

• Cypher focuses on investments that can attract 5 billion internet users to the web3 ecosystem.

• Cypher currently has a team of 10, including a former Executive at Tencent, Elaine Liu, to ramp up its expansion efforts in the UAE 👩‍💼

• Cypher’s notable investments include Mysten Labs, which was founded by executives at Facebook’s defunct stablecoin project.

Deal flows in the past week:

• PaperMeme, $3M Unknown Round

• Strider, $5.5M Unknown Round

• Zion, $6M Unknown Round

• IMGNAI, $7.5M Unknown Round

• BCB Group, $20M Unknown Round

• Factor, $4M ICO

• Intu, $2M Pre-Seed Round

• Polybase, $2M Pre-Seed Round

• Salsa, $2M Pre-Seed Round

• Phi, $2M Seed Round

• Den, $2.8M Seed Round

• Curio, $2.9M Seed Round

• 3RM, $3M Seed Round

• Renegade, $3.4M Seed Round

• GloryFinance, $3.5M Seed Round

• Million on Mars, $3.5M Seed Round

• Superchain, $4M Seed Round

• Gateway, $4.6M Seed Round

• Nefta, $5M Seed Round

• Unagi, $5M Seed Round

• Kaito, $5.3M Seed Round

• Cysic, $6M Seed Round

• Stelo, $6M Seed Round

• TipLink, $6M Seed Round

• Sentio, $6.4M Seed Round

• Azra Games, $10M Seed Round

• Sending Labs, $12.5M Seed Round

• Chaos Labs, $20M Seed Round

• Kratos Studio, $20M Seed Round

• Blocto, Undisclosed Series A

• Sei Network, Undisclosed Series A

• Onekey, Undisclosed Series A+

• YGG, $13.8M Token Purchase Round

• Botto Project, Undisclosed $ Strategic Round

• EthSign, Undisclosed $ Strategic Round

• Ordinal Hub, Undisclosed $ Strategic Round

• Rocket Pool, Undisclosed $ Strategic Round

• 0N1, Undisclosed $ Strategic Round

• PolyHedra, $10M Strategic Round

• HAL, Undisclosed $ Acquisition

• GK8, $44M Acquisition

• YGG, $75M Venture Fund I

• Cypher Capital, $100M Crypto Fund I

QUICK BITES

• Coinbase launches a layer 2 network.

• Federal Bank Regulators warn crypto liquidity risks.

• SEC objects Binance US $1B Voyager deal.

• IMF calls for coordinated action over crypto.

• Binance closes Australia derivatives trading.

• NBA NFT faces securities lawsuit.

• Spotify tests token-enabled music.

• NYAG sues CoinEx, alleges 4 tokens as securities.

• Self-hosted wallet avoids EU crypto AML bill.

• Frax votes to fully collateralize its stablecoin.

• Cash App reports -25% drop in BTC profit.

• Dapper Labs cuts staff by 20%.

• Sushi plans derivatives exchange on Sei Network.

MEME & NOTEWORTHY READS

• CMS Holdings’ article on dYdx and the future of decentralized perpetuals.

• Jason Yanowitz’s thread on Coinbase layer 2 network.

• DataFinnovation’s article on USDT: a bridge too few.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.