Which came first, the Chicken or the Rug? • CEO Letter #79

Taylor Culbertson -

Did you miss me? I haven't written to you since last year 😉 It isn't the new year until you're sick of hearing that joke. This is Taylor, CEO of Hedgehog, the platform that makes it easy to track and manage your crypto portfolio.

About that crypto portfolio… Last week I sent you Hedgehog's annual review, and the week before that we discussed the past and future of banking. So we haven't dipped into the crypto headlines for a minute! Before we rev up, a reminder: There's a giveaway at the end of every newsletter.

Ethereum on the move

Staked ETH should be withdrawable soon. It really shows the goodwill that Ethereum devs have garnered with the community, that people were willing to pledge ETH to help the Merge go through — lowkey still can't believe that finally happened — without a mechanism for getting their ETH back out. Those loyal souls will be able to claim their earned rewards when the next upgrade goes live, currently projected for March.

Also on the menu for Ethereum this year: "proto-danksharding," which is a funny name, which is why I'm mentioning it. "Danksharding takes this same principle of splitting a network into shards," the article explains, "but instead of providing more space for transactions, it provides more space for 'blobs' of data, allowing Ethereum to process more data."

Tldr: Beam me up, Scotty, I must dankshard the blobs.

FTX fallout continues

You may recall that the FTX game of dominoes knocked over crypto lender Genesis, which was a problem for the exchange Gemini, because Genesis powered Gemini's Earn program, and customers were no longer able to withdraw their balances. This made customers very unhappy, and made Gemini look bad, so Gemini wasn't pleased either.

And still isn't: "Gemini co-founder Cameron Winklevoss blasted DCG CEO Barry Silbert for 'bad faith stall tactics.'" DCG (Digital Currency Group) is the parent company of Genesis. Winklevoss' impatience is understandable, since $900 million of his customers' funds remains inaccessible.

In an open letter posted on Twitter, Winklevoss had some choice words for Silbert:

The idea in your head that you can quietly hide in your ivory tower and that this will all just magically go away, or that this is someone else's problem, is pure fantasy. To be clear, this mess is entirely of your own making. Digital Currency Group (DCG) — of which you are the founder and CEO — owes Genesis (its wholly owned subsidiary) ~$1.675 billion. This is money that Genesis owes to Earn users and other creditors. You took this money — the money of schoolteachers — to fuel greedy share buybacks, illiquid venture investments, and kamikaze Grayscale NAV trades that ballooned the fee-generating AUM of your Trust; all at the expense of creditors and all for your own personal gain. It is now time for you to take responsibility for this and do the right thing.

It's not lost on us that you started your career as a bankruptcy restructuring associate. And it's not lost on us that you've been working desperately to try and firewall DC from the problems that you created at Genesis. You should dispense with this fiction because we all know what you know — that DCG and Genesis are beyond commingled. Everyone takes orders from you and always has. And anything you have done after the fact to pretend otherwise, won't hold up. If instead, you had put all of this energy towards finding a resolution, we would have been done by now. Everyone would be in a better place, including you.

The money of schoolteachers! Hoo boy, Winklevoss is playing hardball. Silbert responded:

DCG did not borrow $1.675 billion from Genesis

DCG has never missed an interest payment to Genesis and is current on all loans outstanding; next loan maturity is May 2023

DCG delivered to Genesis and your advisors a proposal on December 29th and has not received any response

Then Winklevoss replied angrily, and although the exchange ended there, presumably all the lawyers involved put their heads in their hands. Unless — maybe the lawyers orchestrated this public sparring? Heck if I know. It does feel like an "only in crypto" moment.

Interim Genesis CEO Derar Islim calmly claims "this is a very complex process that will take some additional time," which is actually quite believable. But Genesis did sound a lot more optimistic about wrapping things up quickly about a month ago.

Meanwhile, Sam Bankman-Fried pled not guilty to stealing from his customers. Prosecutor Danielle Sassoon "asked the court to modify the conditions of Bankman-Fried's bail conditions, requesting that he be prohibited from accessing or transferring any assets tied to FTX or its affiliated entities. She referenced last week's discovery that several Alameda Research wallets had begun moving thousands of dollars' worth of crypto into other wallets."

The defense said hey, that wasn't Bankman-Fried — but the prosecutor had this great rejoinder: "Sassoon also said that while Bankman-Fried had tweeted that he wasn't involved in those transactions, he had 'tweeted false statements' before." If you're a lying liar who lies, people will have a hard time believing you under any circumstances!

Tldr: When a business negotiation turns into a Twitter beef, something has gone wrong.

DeFi shenanigans

Just a couple of links to interesting retrospectives on DeFi in 2022:

From the second one: "Chicken Bonds allow users to deposit LUSD in exchange for a token called bLUSD, which accrues a higher yield than is otherwise available to its sister token. The boosted yield comes from automating strategies available to depositors in Liquity's Stability Pool, which profits from ETH liquidations on the protocol."

Hmmmm. Sounds like it might not be stable long-term, but DeFi's capacity for novel financial engineering remains impressive.

Tldr: One thing I can tell you about chickens, there are feathers on both ends. What does that mean? I'm not sure, but doesn't it sound like folksy wisdom?

And now — drumroll please — it's giveaway time! Answer my question for the chance to win a real live chicken, shipped straight to your front door. Just kidding, the prize is Hedgehog swag.

Question of the week: Be honest, have you actually started on your New Year's resolutions?

Reply to this email with your answer for the chance to win three sweet prizes:

  • insulated stainless steel water bottle with Hedgehog logo
  • official Hedgehog team baseball cap
  • snazzy Hedgehog socks
  • cozy Hedgehog hoodie
  • comfy Hedgehog baseball tee

Cockadoodledoo,
— Taylor

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