I was excited to see the Apple Vision Pro a few weeks ago. Then my excitement faded when I remembered the movie Ready Player One.
Apple and Facebook are battling to control everything we see and think. It’s dystopian. I was excited to dig into a16z’s thoughts on what’s needed for an open metaverse.
Here’s what we got today:
- What’s Uniswap v4? The largest DEX is leveling up.
- Legos of Open Metaverse. Here’s what a16z is thinking about the metaverse.
- The Road to Global Adoption. The three necessary transformations for Ethereum.
- Around the Web. The ~195m BLUR unlock, Apple delists Damus, Polygon 2.0, and more.
Here’s your Edge 🗡️!
“There is no such thing as no risk. There’s only this choice of what to risk, and when to risk it.” – Nick Murray
🦄 What’s Uniswap v4?
Uniswap released its vision for v4. And it’s 🔥.
What’s Uniswap? It is the largest DEX by trading volume. 55.6% of total trading volume goes through it. That’s more than 3x of its closest competitor. When Uniswap makes a move, the entire industry watches closely.
What’s in the Uniswap V4 update? We’ll share the two categories and make it as simple as possible.
Category #1: Hooks
All the hype is about this feature. It allows devs to innovate on the liquidity pool without dependence on Uniswap. Here’s how it works:
There are many different steps involved in operating a liquidity pool.
- Pool creation
- Users swapping tokens
- LPs modifying positions
All these are key points in the lifecycle of a pool. Hooks can customize the behavior of the pool at these points.
Uniswap doesn’t write these hooks. The pool deployer can decide on the hook smart contracts.
This allows anyone to innovate on pool designs. It will lead to an explosion of AMM pool designs. Uniswap listed some examples of innovations.
- Onchain limit orders
- Customized on-chain oracles
- Dynamic fees based on other inputs
These are just the tips of a much larger iceberg. There are probably tons more innovations in pool design waiting to be unlocked.
Hooks are also great for composability. We may see a flood of new protocols that use hooks to integrate with Uniswap.
Category #2: Architecture & Gas Improvements
There are three major technical changes that come under this category. We’ll mention them without getting too nerdy.
- Singleton contract.
- Flash Accounting System.
- V4 will support native ETH.
For more technical details, you can read the white paper.
Edgy’s Take: Many criticized Uniswap copying features from other protocols. Depositing out-of-range liquidity into lending protocols from Balancer was given as an example. And there are some features from CrocSwap’s design.
However, those criticisms are missing the big picture. Specific features aren’t the innovation that Uniswap makes. Innovation is in how they enable these features.
Hooks allow permissionless innovation on liquidity pools. The aforementioned features are just a few of them.
Another critique is that v4 makes Uniswap even more complicated for liquidity providers. That’s true, but it’s a design tradeoff.
Don’t look for v4 pools yet. The code won’t be ready for a while as they’re looking for bugs.
🧩 The Ingredients of an Open Metaverse
Metaverse is the future of the internet.
It converges many technologies: virtual reality, cloud computing, blockchain, etc. At its core, it’s a shared virtual space that is fully immersive.
Tech giants have already recognized it. Facebook changed its name to Meta. Apple unveiled its Vision Pro. And people are getting excited about it.
However, there’s a big difference between the metaverse that these companies are building and a genuinely open metaverse.
Recently, a16z listed the seven essential ingredients of an open metaverse. Today, we’ll go over them.
#1 Decentralization: This term confuses many people. It means that there shouldn’t be a centralized controller. Facebook and Apple shouldn’t be able to kick us out of the metaverse. Instead, it should be like Bitcoin, where rules are enforced by verifiable code. This property is the backbone of every other element in this list.
#2 Property rights: An example would be helpful here as well. Digital assets like Twitter handles and in-game are bytes on a big-tech server. Ideally, Twitter shouldn’t own your Twitter handle. The rights of that “property” should be enforced by public blockchains.
#3 Self-sovereign identity: Your online identity is your Instagram account + Twitter account + Facebook account + accounts on whatever social media use. This is a problem. You should have control over your online identity, not Facebook. Standards like ENS and ‘Sign-in with Ethereum’ are the beginnings of that.
#4 Composability: You cannot build products on top of Twitter and Facebook.
(Technically, you can. They have APIs. But, it is constrained and unreliable. Also, are you seeing what’s going on with the Reddit Blackout? They can increase the prices anytime!)
Ideally, every software component needs to be written only once. Others should be able to build on top of it. DeFi is excellent for composability.
#5 Open-source / Openness: We don’t know what happens in the Facebook and Apple servers. Private companies should not be in control of our public places. Codebases, algorithms, marketplaces, and protocols should be transparent public goods. Again, DeFi is a good example.
#6 Community ownership: All major digital spaces are private companies: Facebook, Instagram, Twitter, and Reddit. Product managers govern them at their HQs. In the open metaverse, the stakeholders should govern the systems they participate in. DAOs are early experiments in this.
#7 Social immersion: Traditional text-based interfaces like Twitter and Slack aren’t enough. People should be able to interact with others in an immersive manner digitally. AR/VR headsets from Apple and Meta can unlock new potential here.
Edgy’s Take: Vision Pro is a good hype man for the metaverse. However, if we want an open metaverse, crypto has a lot of building left to do.
✍🏼 The Road to Global Adoption
The degens dream about the global adoption of blockchains.
We are nowhere near achieving that dream. But we know the necessary steps to get there. In his latest article, Vitalik laid out three transitions Ethereum must make for global adoption.
Transition #1: Layer 2s
If every transaction had a $5 txn fee, there wouldn’t be global adoption. As more people use Ethereum L1, its fees will keep rising. Layer2s are the solution for that. They make Ethereum block space cheap and scale Ethereum for all use cases.
Right now, Arbitrum and Optimism have the first-mover advantage. We’re waiting to see if Zkrollups can catch up. Top contenders include Polgyon’s zkEVM, Starknet, Scroll, and zkSync.
Transition #2: Smart Contract Wallets
Current wallets (Externally Owned Accounts [EOAs]) are a nightmare, especially for normies. You must read ten articles and go through a 20-step process to maintain one wallet. What a pain in the ass.
This is a significant hurdle for global adoption.
Smart contract wallets are the solution to these UX problems. Now you can program the wallet to do anything you want. Some examples include setting transfer limits and freezing accounts.
Transition #3: Privacy
Nobody wants their financial history to be public data. Sadly, this is the status quo with Ethereum. A sufficiently motivated person can track all your financial activities. Most people won’t sign up for that.
So, achieving personal privacy is the third transition for global adoption.
These transitions aren’t easy. Many deep parts of our stack will be changed.
- We need a sovereign online identity system.
- Remove the “one user = one wallet” model.
- Secondary infrastructure like ENS should be updated.
- And many more.
If you want more details on these challenges and potential solutions, read the original article. It goes more into the technical details.
🚀 DeFi Catalysts
Frax Finance is launching its own Layer2 by the end of the year. frxETH will be used as the gas token in their L2.
Level Finance will launch on Arbitrum today, June 15th, 2023. Incentives, staking, referrals, etc. will be coming later in July.
Polygon teased Polygon 2.0. Their ecosystem has been expanding rapidly and this will clarify how everything fits together. There’ll probably be some major $MATIC updates too.
Synthetix conducted the alpha release of their Spot Market V3. The new version adds asynchronous order functionality and some novel dynamic fees.
Balancer is being deployed on Polygon zkEVM. Chain expansions are usually positive catalysts for protocols. Polygon zkEVM is currently in mainnet beta.
SushiSwap‘s concentrated liquidity is now live on Avalanche. The new integration also includes SushiXSwap for cross-chain swaps and their brand-new DEX aggregator
Mars Protocol governance is voting to deploy on the Neutron platform. There are other agendas as well, like migrating Oracle implementation to PythNetwork.
Ethereum developers have finalized the scope of the upcoming “Dencun” upgrade. Proto-Danksharding (EIP-4844) is among them – it’s a way for rollups to add cheaper data to blocks.
Stargate Finance announced that stablecoin USDD pools are live. It’ll allow you to bridge $USDD between ETH and BNB chains.
Injective, an L1 blockchain built for finance, launches its Open Liquidity Program. You can easily earn rewards for providing order book liquidity.
🌎 What’s Happening?
📰 Industry News
EigenLayer rolled out its restaking protocol on the Ethereum mainnet. It allows staked Ether to be used to secure other protocols.
CFTC won the case against Ooki DAO. From the perspective of crypto-users, it has set a dangerous precedent for holding DAOs legally accountable.
William Hinman, former SEC director, related documents have been released in SEC’s lawsuit against Ripple Labs. It suggested BTC and ETH weren’t securities.
Apple is going to delist the decentralized social media platform Damus over the Bitcoin tipping feature. The tipping was made possible by integrating Lightning Network.
Ethereum Name Service is set to support a web domain called .box that can be routed on web browsers. It is an independent project by @boxdomains.
Warren Davidson, US Congressman, filed legislation that would restructure the US Securities and Exchange Commission (SEC) and fire its chair, Gary Gensler.
BOCI, a Chinese-state-owned bank, has issued CNH 200 million in fully digital structured notes. This is the first Chinese financial institution to do so.
A16z announced its international expansion to the United Kingdom. Sriram Krishnan, a general partner at a16z, will lead it.
Curve founder Michael Egorov and three VCs are in a legal fight. Egorov is being accused of stealing valuable trade secrets. He denies all charges.
🧠 Twitter Alpha