🗳 Sham Votes and Unicorns

GM Defiers, we have a DEX and “Layer” heavy newsletter today. The main piece of DeFi drama rippling through the community’s town hall (aka Twitter) is Arbitrum’s first governance vote. Amid that Layer 2 controversy comes the LayerZero raise at a staggering $3B valuation. Meanwhile, Layer 2s are enabling next-gen DEXs, and also on the DEXs front, Uniswap continues to “inspire” competitors.

✍️ In today’s newsletter:

• Arbitrum accused of “decentralization theatre”
• PancakeSwap is first major DEX to copy Uni V3
• Next-gen DEXs are order book-based
• LayerZero is latest crypto unicorn

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📈 Markets in last 24 hrs:

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🎬 WATCH

Watch our video on Arbitrum $10M ARB sale, and our podcast with Carl and Trent of the Ethereum Foundation

DAOs

Arbitrum Botches First Steps Toward Decentralization

TLDR ARB holders were asked to ratify the creation of the Arbitrum Foundation in their first governance vote. Buried within the proposal was a request that the DAO gift the Foundation more than $1B worth of ARB. Meanwhile, 750M ARB had already been disbursed. Backlash ensued and the proposal failed. An amended proposal will now be put to a vote. Re: the 750M ARB, a new proposal will specify that the tokens will be subject to a four-year vesting period and will not be used to vote on proposals that come before the DAO.

• 50M ARB of the 750 had been sent to crypto exchange Binance the very first day that ARB started trading. 10M have been sold to fund the Foundation’s current operating expenses. The remaining 40M tokens were loaned to crypto market maker Wintermute.
• The Foundation called the controversy a “blunder of communication” and confirmed it had already started using the funds.

SO WHAT The controversy has taken a toll on the nascent Layer 2 ecosystem, with its ARB sliding since Friday. It’s also called to question whether Arbitrum DAO participants actually have a say, and if they don’t, then whether the token holds value at all.

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Unicorns Exist

LayerZero Valued At $3B In Series B

TLDR LayerZero Labs raised $120M from 33 investors, including a16z crypto, Sequoia Capital, OKX Ventures, Circle Ventures, Samsung Next and OpenSea Ventures. The company has raised almost $300M in total, according to CrunchBase.

SO WHAT Investors have bought into LayerZero Labs’ vision of an internet of interoperable blockchains. The LayerZero protocol allows for messaging between blockchains.

Copy Pasta

PancakeSwap V3 Launches On BNB Chain and Ethereum

TLDR PancakeSwap becomes the first major protocol to copy the codebase of leading DEX Uniswap V3, with the release coming just two days after the expiry of Uniswap V3’s Business Source License (BSL), which prohibited unauthorized use of its code.

SO WHAT Despite its “copy pasta,” PancakeSwap has cemented its position as the dominant DEX in the BNB chain ecosystem. With Uniswap deploying V3 on BNB as well, the two DEXs will continue the battle for supremacy on one of the most active smart contract chains.

DEX Wars

New Generation Of Order Book DEXs Aim To Disrupt On-Chain Trading

TLDR Ethereum’s growing Layer 2 ecosystem wants to disrupt the DEX sector, with Base and Matter Labs looking to host a new generation of decentralized exchanges powered by the limit order books familiar to traditional exchanges.

SO WHAT The push to bring LOB-based trading on-chain comes as confidence in centralized exchanges is at a low following the spectacular failure of CeFi institutions during the 2022 bear market. Assets that users entrusted to third-party exchanges are now tied up in complex legal proceedings, with many investors realizing significant losses.

🌍 ELSEWHERE

• Gem V2 is now OpenSea Pro (Twitter)
• POAPs won’t be free anymore (Discourse)
• Delphi Labs Raises $13.5M for Web3 Accelerator (CoinDesk)