SCS: What's Happening on November 23, 2021
Vitalik Buterin thinks Bitcoiners shouldn't be embracing what's happening in El Salvador. Jay Lutz does a Deep Dive on Tokens.com and is left with more questions than answers.
El Salvador plans to build the world’s first Bitcoin City. The city which is assumed to cost around US$17.7B to build, will be powered by volcanoes and not levy any taxes except for value-added tax (VAT).
“Invest here and make all the money you want,” says President Nayib Bukele.
The plan to build the city? Bitcoin-backed bonds.
How the Bitcoin Bonds Work
El Salvador’s 10-year bonds trade around 13%.
These bitcoin bonds will offer a 6.5% yield.
And starting in year six, the bond will begin paying out coupons from the bitcoin holdings.
In other words, you are buying a 50/50 blend of 10 year El Salvador bonds mixed with Bitcoin.
Blockstream’s Chief Strategy Officer Is Now an Institutional Bond Salesman?
Why would people buy it? Because there is a bitcoin component, says Samsom Mow, Blockstream’s Chief Strategy Officer. He tells Bloomberg TV this bond will be popular with institutional bond investors who want a blended bitcoin and El Salvador sovereign debt security.
I don’t know this world well enough to know if there is any truth to that. But if there actually is demand, like real demand, then this could be that moment in the Big Short, where bankers manage to squeeze subprime bonds into AAA-rated bonds and pension funds go nuts.
Samsom tells Bloomberg that if at the end of 10 years the price of Bitcoin is $1M/coin, the bonds will yield 96.5% annually. Under these assumptions, he says, it’s ‘a pretty attractive bond by any measure.’
Anyways, he implies there is already more than $1B of demand for this offering.
Oh ya, the bond offering will be executed by Bitfinex. A totally credible exchange with the same principles as Tether. In case you have been ignoring this whole thing, take some time to read the case the NY Attorney General’s Office made against these guys.
Vitalk Thinks the Whole Thing is Dumb
Vitalik Buterin recently said in a Reddit Thread:
Making it mandatory for businesses to accept a specific cryptocurrency is contrary to the ideals of freedom that are supposed to be so important to the crypto space. Additionally, this tactic of pushing BTC to millions of people in El Salvador at the same time with almost no attempt at prior education is reckless, and risks a large number of innocent people getting hacked or scammed. Shame on everyone (ok, fine, I'll call out the main people responsible: shame on Bitcoin maximalists) who are uncritically praising him.
He’s not wrong. Forcing people who can barely afford a phone or internet, to use an app that can track their purchases, is kind of the whole opposite of what Bitcoin originally tried to solve.
But don’t worry folks. I’m sure an organization as credible as Bitfinex, which is linked to Tether, that is issuing bonds for a 40-year-old technocrat will end blissfully.
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Canadian Small Caps With Jay Lutz
Earlier today, Tokens.com (NEO: COIN) had something that I would refer to as a landmark announcement. While it was not earth-shattering by any stretch, it certainly caught me off guard, to the point that I had to call Steve to discuss the matter.
What had happened, is Tokens.com announced perhaps one of the largest land purchases in the metaverse to date, or so they claim. The firm acquired 116 parcels of “land” in a metaverse referred to as Decentraland, the so-called first “decentralized virtual world.” What caught me off guard, quite simply, is the price paid.
You see, the company paid a total of 618,000 MANA for the property. MANA is an Ethereum-based token, that at the time of writing this morning, traded for about US$4.10 per each – making the transaction valued at approximately US$2.52 million as of the time of writing this morning.
The “land” is undeveloped. After spending far more time trying to understand this virtual world than I care to admit, I finally managed to stumble upon the parcels in question that were acquired, which are effectively blank space on the map. The land is located on what is labeled as the “Fashion Street District”, despite the fact that there is literally nothing at this location to suggest anything even exists here yet. The “estate” has simply been labeled this.
The company claims that it intends to develop the virtual property into an area that will “facilitate fashion shows and commerce within the exploding digital fashion industry.” The firm will then obtain sponsors to drive revenue generation in this digital realm.
But here’s the problem.
First, its unclear exactly whom the company even purchased the “land” from. Yes, it’s on the blockchain so allegedly its traceable. I spent the better part of an hour this afternoon trying to understand tracing such blockchains, and the short of it, is that unless you’re an expert in the stuff, you’re wasting your time. The search just leads to more random letters and numbers that doesn’t actually tell you anything.
For what it’s worth, the land was acquired by ETH address 0xd539e935c56ad662f33b27b1546fdc325fd2a1d1 from ETH address 0x5cb6f3299374cf1ddc268c9336573aa7fe64d485 which may or may not be the main account for Decentraland. It’s entirely unclear. Using EtherScan.io lead me down a rabbit hole of trying to understand things that ultimately saw me come up empty. NonFungible.com meanwhile indicates that the land has had four unique owners, but is short on further details. At this point, I’m uncertain what to believe.
Second, its unclear if the firm paid “fair market value” for the asset by any means. Coincidentally (or not) the transaction is the top sale in the last 7 days – by nearly a factor of ten. It’s also the largest transaction on the platform in its history in terms of dollar value by a factor of 2.64x. That being said, it’s one of the larger “parcel” purchases, but still. The single transaction alone accounts for 43.75% of all sales volume in the last seven days as well – another red flag.
Third, the asset was allegedly purchased by Metaverse Group, whom also claims to own land in the virtual world where they are building a “Tokens.com Tower.” Yet the asset announced today was acquired by an account whose only landholdings consist of what was announced this morning.
And the final issue I take with the matter – is who is actually playing in this virtual world? The graphics are outdated, the world itself appears to be rather sparse, and from what I can see, is that there is rolling advertisements everywhere you look. Quite frankly, outside of twelve-year-olds, I’m not certain who the addressable market consists of. Personally, there’s a thousand ways I’d rather spend my time before spending it on this platform.
Maybe I just don’t get it. Or it’s too early to judge the tech. The execs at Tokens.com will surely be either geniuses for acquiring this “property” or failures for doing so. But from this vantage point, I know what my bet is on.