Breaking Bad Habits - Decentralized Science and the Chemistry of Collaboration
Executive Summary
- Market trading color: Recent $BTC price breakout, ETF holder update, $ETH underperformance/$SOL outperformance, increase in longer dated OTM $BTC calls
- Theme of the week – Decentralized Science (DeSci) is a new approach compared to traditional scientific practices through transparency, funding innovations, collaboration, and blockchain technology
- Sector commentary: Bitcoin and Ethereum face varied market trends, while DeFi grapples with decentralization concerns. AI and NFTs continue to innovate, alongside developments in RWA
Market Trading Color (Nolan Aibel)
$BTC rose more than 8.5% over the course of the week with the bulk of this move coming over the past 24 hours. $BTC has reclaimed the $66,000 level on the back of yesterday’s cooler than expected headline CPI print and soft retail sales. On the move, over $1B in open interest was added with total OI around $5.3B, lower than yearly highs of $6.7B seen in early March. Despite the rise in OI, funding rates remain extremely low and even negative on some exchanges. This leads to believe this leg up was largely driven by spot buyers. We view breaking through the resistance around $68,800 as key to maintaining upward momentum.
$BTC US Spot ETFs took in $373.5M of net inflow during the past five market trading days. The bulk of this coming from yesterday’s $303M of inflows. After yesterday’s 2024 Q1 13F filings were released with nearly 1,500 entries reported, 929 institutes own at least 1 $BTC ETF. Many different institutions were represented as holders. When looking at the $IBIT breakdown, to no surprise, the large majority of current holders are hedge fund managers at 68.57%. Investment advisors followed behind at 22.13%. Private equity, pension funds, and banks combined made up 7.26%. We expect to see this number continue to rise as due diligence plays out. With ETFs continuing to scoop up Bitcoin, balances on exchanges shown below continues to plummet. There is less than 12% of supply currently available on exchanges.
Source: Glassnode
As $BTC rallied over 8.5% over the past week, $ETH continues to be stuck in the mud and significantly underperform. The token saw a meager +0.88% rise over the same time frame. With this, the ETHBTC ratio is at a 3 year low of 0.04529. The ratio has declined 16.06% year to date and 32.85% over the course of 1 year. Next week’s spot ETF decisions are likely a major overhang here. While the ETFs are largely expected to be rejected this time around, seeing that in print and moving forward may actually be a positive. $SOL on the other hand continues its outperforms as it rose over 14.50% the past week. $ETH has lost over 30% to $SOL over the past two weeks. While this only included $ETH Mainnet and did not account for $ETHs value as a payment method and fuel for transactions for the L2 networks, Solana generated more daily total economic value than Ethereum on May 12th for the first time in history.
In accordance with this latest price action there has been a significant uptick in longer dated OTM $BTC calls. Most notably at a strike of 100k. Below showcases over $255M of notional for Dec 100k calls.
Source: Deribit
Understanding DeSci (Decentralized Science)
By leveraging decentralized funding models such as Decentralized Autonomous Organizations (DAOs) and crowdfunding platforms, DeSci eliminates the barriers posed by limited funding sources, enabling researchers to access diverse financial resources and accelerate scientific breakthroughs. A notable example is VitaDAO, a decentralized autonomous organization focused on funding longevity research and fostering collaboration among researchers in the field of aging and longevity. VitaDAO has raised $4.1 million, backed by Pfizer and former Coinbase CTO Balaji Srinivasan, demonstrating the growing interest and support for decentralized scientific initiatives.
Moreover, DeSci addresses the issue of restricted information access by providing a transparent public infrastructure powered by blockchain technology. This ensures secure storage, sharing, and verification of scientific data, fostering collaboration and driving innovation. For instance, GenomesDAO is built on the belief that every individual should own their genome, aiming to build the world's largest user-owned genomics database and share it with the public, organizations, and researchers. This initiative highlights the potential of DeSci in promoting data sovereignty and accessibility in scientific research.
The potential impact of DeSci is significant in the context of the global R&D landscape. In 2022, the top 500 companies globally invested approximately $962 billion in R&D, with U.S. companies leading the surge by contributing around $515 billion. This represents a 14% increase from the previous year, driven primarily by tech giants like Amazon, Alphabet, and Microsoft, with Amazon alone spending over $42 billion. Additionally, small businesses and the U.S. government play crucial roles, with U.S. microbusinesses investing $5.6 billion in R&D in 2020, and the government budgeting approximately $204.9 billion for R&D in FY 2023 across various federal agencies. If DeSci captures just 2% of the global R&D market, it could push its market cap value to nearly $19.2 billion from the current $509 million according to CoinMarketCap. This highlights DeSci's transformative potential in disrupting traditional scientific funding and collaboration models.
Challenges in Traditional Science
The traditional scientific landscape faces several challenges hindering scientific progress and collaboration. Peer review limitations, intellectual property complexities, gatekeeping by scientific journals, high publication fees, and the reproducibility crisis are among the key challenges. For example, the reproducibility crisis refers to the concern that many published research findings may not be replicable or accurate, questioning the reliability of scientific research. John Ioannidis's paper "Why Most Published Research Findings Are False" discusses the challenges of false positives and the pressures that can lead to them, such as publication bias and the pursuit of statistically significant results.
Benefits of DeSci
DeSci offers a variety of benefits to the scientific community:
- Advanced Funding Opportunities: By embracing blockchain technology, DeSci opens new avenues for funding through DAOs and crowdfunding, promoting inclusivity and democratization in scientific research. Decentralized funding models facilitate direct, bias-free funding for research projects, overcoming traditional funding constraints.
- Secure Data Storage: Blockchain-based databases ensure the secure storage and integrity of scientific data, enhancing research reproducibility and transparency. The use of non-fungible tokens (NFTs) for intellectual property rights protection further strengthens data security and ownership.
- Enhanced Collaboration: Decentralized platforms enable global collaboration among scientists, transcending geographical and institutional boundaries. ResearchHub, a platform for scientific collaboration and incentivization, leverages token rewards to encourage active engagement and accelerate scientific breakthroughs.
- Innovative IP Solutions: DeSci introduces novel approaches like NFTs to protect and monetize intellectual property in a decentralized ecosystem. IP-NFTs serve as key assets in decentralized data repositories, enabling transparent value attribution and rewarding scientific contributors.
DeSci Projects and Growth
Noteworthy projects in the DeSci realm include Molecule, VitaDAO, GenomesDAO, and ResearchHub. Molecule has accumulated over $30 million in ecosystem funds, funded 12 research projects with a total of $1.95 million, and boasts a community of over 15.7K members. VitaDAO continues to make significant strides in funding longevity research and extending healthy human life. With over $4.2 million deployed in funding, support for 22 research projects, more than $6 million in liquid funds, and a community of over 10,000 members, VitaDAO shows the growing interest and support for decentralized scientific initiatives. GenomesDAO is working towards building the world's largest user-owned genomics database, promoting data sovereignty and privacy. ResearchHub incentivizes scientific discussions and contributions, accelerating scientific progress and innovation.
Source: ResearchHub, StoneX Digital
We should note that of the $509 million market cap of DeSci projects on CoinMarketCap, the largest is OriginTrail ($TRAC) with a market cap of $315 million. We have chosen not to emphasize this project as it has shifted its focus to AI and knowledge graphs, contributing to its 165% growth over the past year. These knowledge graphs could support DeSci down the road and potentially open synergies between AI and DeSci, which is likely why it was still included in the categorization
Challenges and Solutions
DeSci faces several challenges despite its potential, including ensuring scientific quality assurance, promoting understanding and adoption of Web3 tools, addressing investment costs and financial sustainability, and navigating regulatory uncertainties. Overcoming these hurdles demands concerted efforts from the scientific community, policymakers, and innovators to establish a sustainable decentralized scientific ecosystem.
Scientific quality assurance stands as the foundation in traditional research. However, DeSci's decentralized nature presents challenges in maintaining this standard without centralized authorities. Establishing effective mechanisms to evaluate and verify the credibility and reliability of research projects becomes critical. Simultaneously, the adoption of Web3 tools and technologies is essential for DeSci's success, requiring initiatives to bridge the knowledge gap among researchers and maximize the potential of decentralized scientific research. Collaborative endeavors in education and training are pivotal in empowering researchers to leverage decentralized technologies effectively.
Bridging the 'Valley of Death'
The 'valley of death' metaphor in traditional science highlights the gap between fundamental research and its translation into tangible innovations while securing resources from 3rd parties. DeSci hopes to bridge this gap and foster a reliable ecosystem of research, funding, and innovation. By leveraging blockchain technology, DeSci offers potential solutions to longstanding challenges in scientific research and accelerates the translation of research findings into impactful innovations.
Source: Coingecko
DeSci represents a unique opportunity in scientific research, offering solutions to longstanding challenges while fostering collaboration, transparency, and inclusivity. Embracing DeSci requires navigating challenges, leveraging emerging technologies, and embracing a paradigm shift towards a decentralized, democratized scientific landscape. As leading projects continue to innovate and collaborate, DeSci’s potential to drive scientific progress and bridge the 'valley of death' becomes increasingly evident, paving the way for a future of impactful and accessible scientific research and innovation.
Sources: Ethereum Foundation, CoinGecko, National Science Foundation, EY Building World, CRS Reports
Sector Commentary
- Layer One / Altcoins
- Bitcoin ($BTC): Bitcoin slides amid hotter-than-expected US wholesale inflation (link)
- Bitcoin ($BTC): Bitcoin miners poised to offload BTC as mining revenue plunges: Kaiko data (link)
- Bitcoin ($BTC): Bitcoin Market Activity Suggests Looming U.S. Inflation Data May Be Non-Event (link)
- Bitcoin ($BTC): CPI meets $60K BTC price battle — 5 things to know in Bitcoin this week (link)
- Bitcoin ($BTC): Bitcoin braces for Fed's Powell as trader says $65K key BTC price level (link)
- Bitcoin ($BTC): Bitcoin ‘guardrail’ gets stronger at $60K as bulls brace for macro data (link)
- Ethereum ($ETH): Ether options traders eye calls above $3,600 for June expiry (link)
- Ethereum ($ETH): Vitalik Buterin proposes Ethereum gas model overhaul (link)
- Solana ($SOL): Solana memecoin GME pumps 460% in a day as 'Roaring Kitty' reappears (link)
- Altcoins: GameStop Rally Sends Meme Coins Skywards; PEPE, FLOKI, MOG Surge (link)
- Altcoins: Pre-launch token trading 20 times more volatile than post-launch trading — Keyrock (link)
- DeFi
- Bitcoin Runes Protocol Sees Traction Waning After Much-Hyped Introduction (link)
- Paradigm Unveils 'Block Trading' Facility for MATIC, SOL, XRP Options (link)
- DeFi Lender Liquity Unveils New Stablecoin With User-Set Borrowing Rates in White Paper (link)
- DeFi may struggle to stay decentralized after new EU law (link)
- Op-Ed: ‘Open-source’ CBDCs aren’t going to protect you from government (link)
- AI / NFTs / Web3
- Protocol Village: Polkadot Debuts 'Asynchronous Backing' (link)
- Here's how crypto's crowded venture market could lead to a resurgence in liquid investing (link)
- Peter Thiel's Founders Fund, Vitalik Buterin Back $45M Investment in Polymarket (link)
- 'Liquid Vesting' Is Oxymoronic Blockchain Feature That Lets Early Investors Sell Without Waiting (link)
- ‘Sic AIs on each other’ to prevent AI apocalypse: David Brin, sci-fi author (link)
- RWA / Tokenization / Metaverse / Gaming
- Pantera Capital: TON, Our Largest Investment Ever (link)
- RWA Platform Re Debuts Tokenized Reinsurance Fund on Avalanche with $15M Commitment from Nexus Mutual (link)
- Fantasy Top Volume Jumps as Crypto Twitter NFT Game Adds 40 New Heroes (link)
- Deutsche Bank joins Singapore's asset tokenization project (link)
- Tokenized funds could chip away at stablecoin market, Polygon exec says (link)
- Digital Infrastructure: Capital Markets / Exchanges / DAOs / Mining
- Led by FBTC, spot bitcoin ETFs see net inflows of nearly $66 million (link)
- VanEck's spot bitcoin ETF HODL reports $109 million net increase in Q1, $620 million in BTC: filing (link)
- Bitcoin ETF Bonanza: Largest Holder of BlackRock, Ark Funds Revealed (link)
- State of Wisconsin’s investment board discloses nearly $100M of BlackRock’s bitcoin ETF (link)
- Hong Kong’s spot bitcoin and ether ETFs experience largest net daily outflows since debut (link)
- CoinShares reports record quarterly results amid acquisition of Valkyrie's ETF business (link)
- ‘Very Important’—The Bitcoin Price Is Suddenly Braced For A ‘Massive’ China ETF Crypto Flip (link)
- JPM Coin to act as settlement mechanism for Broadridge's Distributed Ledger Repo platform (link)
- Galaxy Digital Holdings’ revenue, profit grow, buoyed by record mining revenue (link)
- ‘Beyond’ $20 Trillion By 2030—Jack Dorsey’s Plan To Turbocharge The Bitcoin Price (link)
- Coinbase reports system-wide outage, ensures 'funds are safe' (link)
- U.S. orders Chinese-backed crypto miner to sell land near nuclear missile base (link)
- Brazil leads LATAM crypto trading with $6B volume in 2024 (link)
- FalconX Settles With CFTC for $1.8M Over Failure to Register as Futures Commission Merchant (link)
- Industry Stakeholders Believe a UK Election Won't Derail Crypto Plans (link)
- Tether CEO riled up by suggestion USDT is a target of US government (link)
- Why FTX is different from other crypto bankruptcies (link)
- U.S. Senators Question Justice Department's Pursuit of Crypto Mixers (link)
- Tornado Cash Developer Found Guilty of Laundering $1.2 Billion of Crypto (link)
