Welcome to the Block & Mortar newsletter! Every week, I bring you the top stories and my analysis on where business meets web3: blockchain, cryptocurrencies, NFTs, and metaverse. Brought to you by Q McCallum.

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Next week I’m doing another month-end media roundup. Do let me know of any interesting web3 podcasts or videos I should check out!

The search for the killer app

I’ve had at least one foot in the tech sector since the Dot-Com era. I’ve seen the business impacts of the early-day internet, cloud computing, the mobile web, and the field we currently call AI. One thing I’ve learned is that I enjoy sussing out use cases for emerging technology.

So that’s why it’s both weird and not weird that I’m interested in web3. Weird, because I came to this field a skeptic. (In no small part because of my experience with all of the hype in ML/AI.) Not weird, because I wanted to sort out: “What’s this web3 thing even good for? What can it do for businesses?”

After almost two years of exploring web3, including the last ten months of publishing this newsletter, I’ve reached some thoughts on the interesting use cases. For details, check out my latest piece for O’Reilly Radar: “What’s the killer app for web3?”

(What’s the difference between my work on Block & Mortar and Radar? Here, I focus on web3. My Radar articles mostly cover ML/AI and marketplaces, with a splash of risk on the side.)

A Stablecoin soap opera

One web3 use case that didn’t make it into the Radar article: drama.

Lawsuits, rampant theft, catastrophic losses of money, key figures who disappear and then reappear to turn on each other… Crypto has more characters and intrigue than a Dostoevsky novel.

And I’m here for it.

The latest crypto drama involves stablecoins. These are crypto proxies for government tender, and they mostly live up to their name of being, well, stable. Good stablecoin issuers maintain that one-to-one ratio (the “peg”) by squirreling away one unit of fiat currency for each token they mint. (Bad issuers use black magic fancy code to maintain the peg, and that ends in tears. See newsletters #3 and #8.)

Tether runs a popular stablecoin called USDT, but that’s about all they’ll tell you about it. If you ask them for details, they turn into every drama’s obligatory Mysterious Character With A Dark Past:

“USDT? Yeh it’s backed by stable stuff.”

“So, like, cash? Government bonds? Something else?”

“Stable stuff.”

“Can we see?”

“You just have to believe me.”

“Can you even tell us who is managing the assets? And who works here?”

[silence]

Being this vague usually guarantees that people will skip past due diligence and just hand you money. (See: US mortgages before 2009; Bernie Madoff’s investment firm; biotech company Theranos; and fallen fintech darling Frank.) But for some reason, people have been very eager to know what’s supporting USDT.

And now, we do. Last week, The Wall Street Journal found that old, staid financial services firm Cantor Fitzgerald has been handling at least $39 billion of Tether’s bond assets. That’s roughly 60% of the total portfolio.

Before we could breathe a sigh of relief that “OK Tether’s USDT is indeed backed by something,” the conversation quickly turned to Paxos and Binance. Paxos offers stablecoins as a service. Binance had given Paxos money to issue BUSD, a US-based flavor of its stablecoin. This had been going well until last week. That’s when the SEC decided that BUSD was now a security, an ordered Paxos to stop minting.

(Vague laws and seemingly random enforcement drive a lot of drama in crypto. They’re like side-villains the writers can toss into the story when they’re short on ideas.)

But why would the feds want to poke at Binance, via Paxos? Because – cue the suspenseful music – Circle snitched. That’s why. Apparently Binance wasn’t properly maintaining reserves to support BUSD. So they told the New York State Department of Financial Services.

All of which strikes a chord of irony, when you consider that Binance pointed the finger at FTX (remember them?) not that long ago. That triggered a liquidity crisis for FTX, which exposed their internal shenanigans, which then led to the spin-off soap opera called Why Does This Guy Keep Talking To The Media?

That’s why we all thought that Binance would be The Last Crypto King Standing. Circle has been out of the spotlight for so long, we’d forgotten that Binance had another rival. Beware the quiet ones.

For a case of plot whiplash, that brings us all the way back to Tether. Since it does not fall under US jurisdiction, and since people now know that it does indeed have real money in its reserves, USDT has suddenly become the token of choice for folks who don’t want the feds to spoil the party.

(All of which makes me wonder whether Tether “leaked” the info about its relationship with Cantor, in order to show “hey look I’m super secretive but also very very stable and conveniently based far from Washington, DC.”)

Like I said: drama.

I can’t wait for the slate of documentaries on all of this.

Perhaps 007’s next mission?

Crypto dama isn’t just about backstabbing and money grabs.

There’s also the occasional tale of a so-called “biohacking” company, allegedly conducting clinical trials with minimal oversight.

No, seriously:

The advertisement—posted on Mirror, a Web3 publishing platform, in March last year—outlined an eye-catching if perhaps confusing proposal: “Access NFTs for a follistatin plasmid phase I clinical trial in Prospera ZEDE, Honduras.”

The ad had been posted by a biotech startup called Minicircle, which was recruiting participants for a clinical trial of gene therapy. But several details made it unusual. For one, it instructed would-be guinea pigs to purchase an NFT to take part. Upon completing the study, it promised, they would receive payment in cryptocurrency. And while it notes the geographical location of the trial, test subjects may not have immediately understood that it would get underway in what is essentially an experimental crypto city—Próspera, Honduras.

Is this the start of an article in MIT Technology Review? Or the opening scene of a spy thriller?

The answer is: yes.

Closing out with a little romance

You can’t have drama without the occasional romance. As crypto researcher Molly White pointed out:

binance has produced a survey that found that buying crypto will totally help you get girls

No, this is real. Even Binance says so:

This month, we put out a #Binance survey to the community, and 2,600 of you responded! According to the results, your dating potential is influenced by your interest in crypto and Web3 👀 Read more ⤵️

Is this dating potential “influenced” in the positive or negative direction? I’ll leave that as an exercise for the reader.

The wrap-up

This was an issue of Block & Mortar.

Who’s behind Block & Mortar? I'm Q McCallum. I've spent the past two decades in the emerging-tech space. And I'm very interested in web3 use cases.

Credit where it's due. Big thanks to Shane Glynn for reviewing early drafts. Any mistakes that remain are mine.

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