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👨🏻‍⚖️ CFTC Action Against DAO Outrages Crypto and One of Its Own Commissioners

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DeFi Regulation

👨🏻‍⚖️ CFTC Action Against DAO Outrages Crypto and One of Its Own Commissioners

Agency Alleges Ooki DAO Offered Derivatives Without a License

By Owen Fernau

DISSENT In a case that has roiled the crypto community and triggered a dissent from one its own officials, the U.S. Commodity Futures Trading Commission (CFTC) brought an enforcement action yesterday that challenges fundamental tenets of decentralized finance.

👉READ THE FULL STORY IN THE DEFIANT.IO👈

NFT Blockchains

📈 NFT Volumes Surge on Solana

Transactions Crossed 1M For The First Time This Month

By Aleksandar Gilbert

ALL-TIME HIGH NFT transactions on the Solana network are at an all-time high, surpassing 1M in the week ending Sept. 12 for the first time ever and 900,000 in the week ending Sept. 19. A blockchain created to address Ethereum’s high transaction costs and slow speeds, Solana has been having a moment.

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Ethereum Staking

🏦 Korean Crypto Bank Inks Deal to Offer Ethereum Staking to Investors

Institutions Moving into Ethereum Staking Post-Merge

By Samuel Haig

TEAMED UP n a deal that indicated Ethereum staking may rapidly industrialize, Delio Bank, South Korea’s largest Virtual Asset Service Provider, teamed up on Sept. 22 with blockchain infrastructure firm, Blackdaemon, to offer the service to retail users. 

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DeFi Upgrades

👀 Cardano Deploys ‘Vasil’ Upgrade

Performance Improvements Are Expected To Benefit DeFi Apps

By Aleksandar Gilbert

UPGRADE Cardano, the world’s fifth-largest blockchain with a market capitalization of $15B, successfully deployed a highly-anticipated upgrade Thursday that aims to improve smart contract performance and network throughput.

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NFT Roundup

⚽️ FIFA Releases Genesis NFTs on Eve of World Cup

Sports NFTs and ApeCoinStaking Hit the News This week

By yyctrader

FOOTBALL More than half the world’s population watched the 2018 FIFA World Cup, and with the 2022 edition in Qatar just two months away, football’s governing body is throwing NFTs into the mix.

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DeFi Research

🗺 Exploring Ethereum’s On-Chain Activity After The Merge

Mechanics of Ethereum’s Blockchain Are Changing in a Proof of Stake World

By IntoTheBlock

On-Chain Markets Update by Juan Pellicer, IntoTheBlock

PROOF OF STAKE On September 15, 2022 Ethereum completed its transition to Proof of Stake consensus from the Proof of Work. This allowed Ethereum to reduce the network’s energy consumption by 99.8%. It also eliminated Ethereum’s dependency on energy-intensive mining and enabled the network to be secured using staked ETH. 

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DeFi Beginniners

❄️ What Is Avalanche?

A Step-by-Step Guide to the Layer 2 Blockchain Network

By Rahul Nambiampurath

Avalanche is a third-generation Proof-of-Stake blockchain network. Unlike Ethereum, which relies on Layer 2 scalability networks to increase traffic capacity, Avalanche relies on its main chain for scalability. 

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Elsewhere

🔗 How BlockFi Went From Tech Unicorn to Crypto Burnout: Blockworks

Just 12 months ago, BlockFi was going places. Fast.

🔗 Coinbase Rejects Proprietary Trading and Crypto ‘Market Maker’ Allegations: Decrypt

Coinbase vociferously denies that it engages in proprietary trading—but asserts that some of its competitors do.  

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🍱 SushiSwap’s Search for ‘Head Chef’ Expands to Five Amid Restructuring

DEX’s Community Also Voting on New Multisig Signers

By Samuel Haig

CONTEST And then there were five. In what began as a straightforward process to name a new “head chef” of its venture, SushiSwap, the troubled decentralized crypto exchange, has now launched a five-way contest for the job. 

CANDIDATE And Jonathan Howard, the sole candidate just a couple of months ago, is no longer in the running. 

To read the full story subscribe to The Defiant newsletter.

The Sushi community plans to begin voting on the candidates on Sept. 26 following weeks of extensive community vetting.

This is the latest twist in a drama that’s been playing out for months at SushiSwap, the troubled decentralized exchange with $833M in TVL. Its token, SUSHI, has lost more than 85% of its value this year compared to a 66% drop in UNI, the coin issued Uniswap, its archrival. Sushi’s protocol revenue is also down 92.5% since the year began.

Reorganization

Even as SushiSwap’s community labors to pick a new chief its also undertaking an ambitious and closely watched reorganization. The DAO is striving to strike a balance between establishing a legal structure that complies with traditional business norms and preserving the democratic ethos at the heart of DeFi. 

On Sept. 22, the community began voting on preliminary polls to update its multisig signers and establish a legal structure for its DAO, a major change in Sushi’s composition.

Meanwhile, the five finalists for head chef are: 

  • Jared Grey, the former CEO of Bitfineon and web3 technology incubator EONS. 
  • Jared Cohen, a member of the web3 legal collective LexDAO and founder of the blockchain-based credential verification platform Incred. 
  • Kenneth Hurley — a technical consultant at Google and previous startup founder.
  • Andy Forman, a dApp developer and consultant working with DeFi hedge funds.
  • Pauly Walton — the former CMO of the Telos Foundation who previously worked with the London Stock Exchange.

True to form, Sushi’s community voted in April to search for a new head chef as part of its Sushi 2.0 roadmap. The proposal sought to bring the community together and end months of infighting and turmoil. 

Separate Governance Processes

In July, Sushi’s compensation committee nominated Jonathan Howard, the founder of NFT studio, Big Head Club, for the position. But the community pushed back over what many believed was an exorbitant pay package and opaque selection process, leading to separate governance processes for the position’s compensation package and candidates.

On Aug. 27, the community voted to reduce annual compensation to 500,000 USDC from $800,000. The package will also come with a six month severance package, compared to the severance worth 24 months pay minus each month served that was originally proposed.

Backlash

The backlash and revised compensation appear to have deterred Howard, who has not posted on Sushi’s governance forum since Aug. 12, and didn’t put his hand up to be considered as part of the new selection process. 

At the same time, the Sushi community is wrestling with one of the thorniest issues confronting DAOs — their legal structures.

Neil Bhasin, one of two current members of SushiSwap’s Compensation Committee, posted a governance poll outlining advice it received from lawyers on how to structure a legal entity for the project’s DAO. Fenwick & West, a multinational law firm and Silicon Valley stalwart that represented Apple at its founding, is handling the legal work.

Maximum Flexbitility

“The purpose of the entity structure & framework is to provide maximum flexibility for Sushi to proceed in whichever direction the DAO or governance takes it, while also mitigating risk,” said Bhasin.

Fenwick & West recommended that Sushi establish a Cayman Islands foundation for its DAO. The foundation would be able to administer the project’s treasury, grants, and on-chain governance including proposals and voting.

Sushi’s legal counsel also recommended it set up a Panamanian Foundation to administer the Sushi protocol including its smart contracts, and launch a Panamanian Corporation subsidiary to operate the project’s front-end. The two entities would enter into services agreements with providers to help develop Sushi’s protocol and user interface respectively.

Less Than Ideal

Bhasin noted that Sushi also considered Swiss-based entities, which are popular in the crypto sector, but determined that Switzerland’s stance towards Sushi’s operations is “less than ideal” and that its taxation model is not favorable for growth companies. 

Establishing the entities would take approximately four weeks to complete.

The proposal received support from some prominent figures in the Sushi community, with five of the six votes cast so far backing its implementation.

Tangle, a SushiSwap community lead, vouched for taking Fenwick’s advice onboard, noting the firm has been engaged by several web3 projects and has been involved in the crypto sector for some time. “Following their lead towards structure makes sense,” they said. “Glad to see this all coming to fruition.”

Governance Polls

“This is promising and in line with what my previous CEX counsel recommended for Sushi,” said Jared Grey, the former CEO of the centralized exchange Bitfineon and a candidate for the position of head chef.

But others believe more time should be allotted to consider the proposal than the typical week-long duration given to governance polls.

“Quite a bit to chew on,” said Mountain_goat, a ‘community tomodachi’. “I suggest adapting the timeline to allow more time for discussion. Not one to rush.”

“This isn’t enough information to make a decision on,” hamletmachine added. They asserted that further information should be provided regarding recourse and protections against possible regulatory actions targeting Sushi in the respective jurisdictions.

Multisig Signers

On the same day, Tangle launched a governance poll proposing a new group of multisig signers tasked with administering the project’s treasury. 

The poll also asks whether multisig signers should be compensated with 2,500, 5,000, 7,500, or 10,000 SUSHI annually, or receive no compensation at all.

“Currently some of the users on the Multisig have become busy with other projects, or no longer have the bandwidth or interest to contribute,” Tangle said. “As the signing and execution of the multisig is absolutely crucial to the DAO, it is proposed to replace others with new signers who can be actively engaged.”

The proposed signers are:

  • Maki, Sushi’s previous head chef and current contributor to LayerZeo.
  • 0xSami, the founder of Redacted Cartel.
  • Mable Jiang, the chief revenue officer of Stepn. 
  • ChopChop, a core contributor at NFTX. 
  • Tom Lombardi, the former director of digital asset management firm 3iQ. 
  • Nick Rishwain,the founder of LegalTechLIVE. 
  • DeFiTed, a founder of ParagonsDAO and PleasrDAO.

The nominated multisig signers have received unanimous support after 12 votes. No community members voted against compensating, with two-thirds of votes supporting 2,500 SUSHI in annual compensation (currently worth $1,650).

Zero Comp

“If all the job entailed was clicking the confirm button, I might vote zero comp,” said Maka, a SushiSwap contributor. “But signers actively need to be simulating transactions, double checking what they are signing and where it is going to. The signers need to be of a certain tier to retain trust, and their time is of value.” 

“I think it is terribly important for us to have multi-sig signers who are incentivized and care about Sushi’s future,” said Nick Rishwain, one of the proposed signers and a prominent community member. “Those individuals should be compensated for their time.”

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