Good Morning. Markets got a nice bump yesterday when the Fed announced that they are not raising interest rates and their 3 planned cuts are still expected to take place this year. This pushed numerous stocks to hit new all time-highs.
Bitcoin also seemed to enjoy the news as it popped back up after taking quite the dip on Tuesday to $61,000. In fact, most of crypto saw some pullback this week, which some argue is healthy.
Today, we cover the latest SEC fight against crypto, and it seems the SEC got a little taste of its own medicine after it was found that they had “committed a gross abuse of power.” Read more on that below.
And has anyone noticed the severe push towards premium subscriptions even among social media companies? Scroll down to read more on why blockchain may be able to get us out of this subscription-based society that we find ourselves in. And don’t forget today’s media of the week where we highlight a few current and former CEOs who sold some major stocks.
Crypto News You Can’t Miss: SEC Gets Sanctioned
A twist of fate has hit the SEC this week when a federal judge ruled heavily in favor of the defendants. As we’ve covered numerous times, the SEC has been on somewhat of a rampage when it comes to sueing crypto companies despite the industry’s pleas for any sort of guidelines or recommendations.
Last year, the SEC sued the crypto project DEBT Box, a Utah-based company. The SEC alleged fraud and secured a temporary asset freeze and restraining order against the company. DEBT Box immediately filed to get the restraining order removed by claiming the SEC had “misled the court about the company moving its funds and closing its bank accounts.”
It seems Chief Judge Robert Shelby from the District of Utah agrees with the defendants as he wrote in an order on Monday that the SEC’s attorneys misled the court twice, once when applying for the temporary restraining order and again when DEBT Box had filed to dissolve the order.
The judge called out the regulator noting that they had committed a “gross abuse of power” in their efforts to secure the TRO and maintain it, and noted that each piece of support “proved to be some combination of false, mischaracterized, and misleading.”
The order also saw the judge enact sanctions on the regulator, including paying the attorneys’ fees and legal costs of DEBT Box. This slap on the wrist for the regulator has nothing to do with the underlying suit and accusations made by the SEC against DEBT Box, only the evidence provided to secure the emergency TRO and the continued defense of the TRO.
For example, a YouTube video posted by the company that discussed the benefits of possibly operating a business in the UAE due to regulatory uncertainty in the US was highlighted by the regulator as proof that DEBT Box was trying to move its assets overseas to evade US securities laws.
Weirdly, it is somewhat heartening to see that not even a regulatory agency is above the law. In fact, it seems a number of companies are trying to fight back against the SEC. Also on Monday, Coinbase filed suit against the SEC accusing them of “behaving arbitrarily and capriciously in its refusal to tailor rules to clarify oversight of the industry.”
Coinbase has previously entered a formal petition for crypto rules that was ‘rebuffed’ by the agency. Coinbase is now asking the federal circuit to throw out the SEC’s previous answer and denial of their petition and start either making crypto rules or fully explain their petition.
Op-Ed: Attract & Extract - A Network’s Relationship With Its Users
Anyone who has been using a platform like Linkedin has likely noticed that there are a growing number of limits being placed on users who are not premium customers. Sending a Linkedin connection request was how the platform originally grew, but recently users are being limited to how many connection requests they can send out each month. Social media companies have perfected the art of attracting users to build their networks and then extracting revenues once they have established a dominant position. This strategy, often referred to as the "attract and extract" model, is a masterful play on leveraging network effects to create value and then capitalizing on that value through various monetization strategies.
In the initial stages, social media platforms focus on attracting users by offering a compelling and often free service. The value proposition is simple: connect with friends, share content, and engage with a vibrant community. This phase is all about building a critical mass of users, as the true value of a social network lies in its size and engagement. Companies employ various tactics, such as viral marketing, gamification, and leveraging existing social connections, to rapidly grow their user base.
Once the network has reached a significant scale, the extraction phase begins. Social media companies leverage their dominant position and the stickiness of their platforms to introduce monetization strategies. This can take various forms, such as targeted advertising, premium features, data monetization, and even privileged access for businesses and influencers.
The fundamental premise of the "attract and extract" model is that users become increasingly dependent on the network as it grows, making it difficult for them to switch to alternative platforms. This dependence, combined with the network effects, creates a powerful lock-in that allows social media companies to extract revenues while offering a decreasing utility to users. Check out this extract from Chris Dixon’s book, Read Write Own, where he explains this model.
In contrast, blockchain-based applications offer a different paradigm, one that emphasizes transparency, decentralization, and equitable value distribution. The concept of blockchain governance is built on the principles of open-source collaboration, shared decision-making, and incentive alignment.
Blockchain applications often operate on a tokenized economy, where users, developers, and stakeholders are incentivized through the distribution of tokens or cryptocurrencies. This model promotes a more equitable revenue-sharing mechanism, as the value created within the ecosystem is distributed among contributors and participants, rather than being concentrated in the hands of a centralized entity.
Furthermore, blockchain governance models often involve decentralized autonomous organizations (DAOs) or other forms of community-driven decision-making processes. These mechanisms ensure that the development and evolution of the ecosystem are guided by the collective wisdom and interests of its stakeholders, rather than being dictated by a centralized authority.
By offering greater transparency and shared ownership, blockchain governance aims to create a more sustainable and user-centric ecosystem. Users are not merely consumers but active participants who have a vested interest in the long-term success and value creation of the platform. This alignment of incentives fosters a collaborative environment where users, developers, and stakeholders work together to enhance the utility and value of the ecosystem.
While social media companies prioritize extracting revenues from their established networks, blockchain-based applications strive to create an ecosystem that continually delivers value to its participants. By embracing decentralization, tokenized incentives, and community governance, blockchain platforms offer an alternative model that could potentially disrupt the traditional "attract and extract" paradigm.
However, it is important to note that the success of blockchain governance models hinges on their ability to overcome challenges such as scalability, user adoption, and effective governance mechanisms. As the technology and ecosystem mature, the true potential of blockchain-based applications in creating sustainable and equitable value distribution will become more apparent.
While social media companies have mastered the art of "attracting" users and then "extracting" revenues, blockchain governance offers a compelling alternative that prioritizes transparency, shared ownership, and long-term value creation for all stakeholders. By aligning incentives and fostering a collaborative ecosystem, blockchain-based applications have the potential to redefine the relationship between platforms and users, creating a more equitable and sustainable model for value distribution in the digital age.
Media of the Week: The Rich Get Richer
Whenever the market hits new all time highs, you can bet that someone is cashing in to take advantage. That’s exactly what Amazon’s Jeff Bezos, JP Morgan’s Jamie Dimon, and Meta’s Mark Zuckerberg did.
In the below picture, you can see just how much each man made so far in 2024. Typically, offloading your own company’s stock can be seen as a lack of faith in the company and usually doesn’t look good to the market. These companies, however, are industry staples and these heavy hitters are expected to offload something whenever the market conditions are excellent. Read more here.