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January 10, 2023

BaFin; Mastercard; LSDs;

Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founders, Philipp Pieper and Timo Lehes, on key industry news that has caught our eye, plus our own developments.  

Comments available on the following news items:

  • BaFin warns on crypto scam
  • Mastercard encourages creative Web3 ownership
  • Lido continues strong run, beating the market 


BaFin scam warning is a timely reminder of what good regulation can do 


Germany’s regulator BaFin has warned over “Godfather” malware attacks which affect crypto, according to a report in Reuters. The malware records user input and has been used to attack 400 crypto and banking apps. It is a timely reminder of why sectoral oversight is so  crucial for the future security of market participants. 


It is easy to get bogged down in discussions over the right measures, standards and procedures a regulatory framework should adopt. But while getting the mix right is important, the debate does sometimes detract from the overarching reason why regulation should be in place at all – to protect participants in the market. This is a great example of just that – oversight of problems that affect participants at a sector-wide level. 


We’ve seen a big increase in the discussions over what good regulation looks like, but this is one of the tangible benefits to users, institutions and investors that good regulation will provide. It is critical now more than ever that crypto looks to take a regulatory-first approach to growth and innovation. We’re at an inflection point where users – both institutional and private – need reassurance that regulatory compliance is in place to protect their interests. 


Mastercard creative blockchain initiative underscores value of digitising real-world assets 


Mastercard has launched a new Web3 initiative with Polygon to promote the value of blockchain tools for creative artists. At the heart of the proposition is allowing artists that create their own content take ownership of that content using digital blockchain technology. 


While just one example of the opportunities that blockchain can offer, it does illustrate a wider possible application and potential for value creation that Swarm is working toward with its own innovations. By enabling artists to own, earn and manage their creative assets using blockchain, it unleashes the potential of those assets while removing middlemen that take a significant cut of the value proposition. 


The application of this kind of idea has much broader potential than just creative assets, which NFTs have largely been categorised under in the past year as they’ve come to public consciousness. The digitisation of real world assets (RWAs) has enormous potential applications and will be a groundbreaking shift in the way in which we own, exchange and verify ownership of assets from bonds and equities, to property and artwork. 


Property rights are one of the more fundamental cornerstones of the global economy, and still function largely in an analogue way. But this is beginning to change as the technology that helps digitise and store these assets moves ever closer to becoming a mainstream reality. Artists will be just one beneficiary of this shift. 


Lido staking token continues strong run for a good reason


Last week we looked at Lido overtaking MakerDAO in terms of TVL. The associated token, LDO, has continued to soar ahead of other cryptos even after a broadly positive week for the market as a whole, with over 73% in market cap growth over seven days, per CoinGecko data.


There is a significant value proposition driving this outperformance at the moment. Liquid staking and access to the benefits of said staking without complex processes is perhaps one of the most exciting areas of the market right now, with around 13% of tokens (and growing) currently locked up according to the Bankless podcast.


The Ethereum Shanghai upgrade is coming in the next few months. This will enable withdrawals from the staking protocol and will most likely be welcomed by investors looking for more flexibility.  


With that in mind, if we see the market begin to settle some of the more stomach-churning developments of 2022, then these innovations can offer true differentiators in the market. With that possibility, we might start to see some green shoots of the next bull market appearing.