Weekly Recap – May 11, 2022

Elon Musk & Twitter buyout: how’s the story going?

Twitter, Inc announced on April 25 that it has entered into a definitive agreement to be acquired by Elon Musk – CEO of Tesla (TSLA) and SpaceX, for about $43B in cash. Upon completion of the transaction, Twitter will become a privately held company

After a few days, Mr. Musk revealed that he had raised around $7B from 18 entities to help fund his blockbuster $44 billion acquisition of Twitter, including Binance, a16z, etc.

With $500M committed by Binance, CZ expected to bring crypto and blockchain technology to mass adoption through social media and web3. Without a doubt, the acquisition of Twitter – top social media sites for crypto enthusiasts, from Elon Musk – crypto’s top influencer, and the participation of Binance, a16z, Sequoia, etc., will create a significant influence on the adoption of crypto.

Dogecoin is the most apparent evidence of the impact of this acquisition by causing Dogecoin (DOGE) price to surge. There are two main reasons behind:

As we’ve all witnessed clearly in the past, Musk has taken advantage of his influence to create value for DOGE. Because the number of individuals Musk-fan is huge, leading to the more significant number of people who believe and hold Doge. Thus, brands (Tesla, Gucci, etc.) that accept payment in Doge partially based on the credibility of Elon Musk.

Furthermore, Elon Musk changed his profile picture recently on Twitter to a collage of Bored Ape Yacht Club images, then discredited NFT by tweeting a common comment from NFT (non-fungible token) critics, writing, “I dunno … seems kinda fungible.”

After realizing the recent vital growth of NFT, Musk, with his current influence on the crypto market, does not seem to ignore this very potential niche. But why BAYC? Well, this NFT collection has become a legend in the NFT market, as it now ranks first in terms of floor price, surpassing CryptoPunks, the 2017 OG from Larva Labs with more than $1.2B traded in the first quarter of 2022. Adding another good reason for Elon Musk’s choice of this collection, Bored Ape Yacht Club has been making headlines over the week by launching its Otherside metaverse.

Given the influence of Elon Musk and Twitter on the decentralize world, will this acquisition benefit the entire industry? Will Twitter different from Facebook, YouTube, and other social media sites that prioritize profits over the benefits of all users when its revenue currently depends heavily on advertising? Twitter has reported losses for 8 years from 2012, except 2018 & 2019. Therefore, it is very likely that Twitter and its board team will have to prioritize strategies to bring profits to the business. The approach that Twitter will use to meet this goal while also ensuring the decentralization property for this social media platform is still uncertain. 

The only obvious thing we see here in this acquisition of Twitter is that it strengthens the influence of Musk and his followers even more, thus making the market more susceptible to manipulation.

Another question for Twitter is how it can improve the ownership of NFTs under Elon’s watch. Even if Twitter allows users to set NFTs as PFPs, it may not completely solve the ownership problem. Over 80% of NFTs Minted for Free on OpenSea Were Fake or Stolen. Besides, on-chain and off-chain transmissions are not frictionless, and the artists are still not getting the real value of what the NFT is committed to. In short, this movement may further exacerbate the NFT thefts, which have been a major pain point in this market.

Otherdeed & BAYC: The Apes that cost us $157M

The drama around BAYC does not just stop with Elon Musk. Let’s rewind back to a week ago.

Otherside, a gaming metaverse project of BAYC, has launched their land sale called Otherdeed on April 30. The sale was chaotic: Etherscan, the explorer of Ethereum blockchain went down, an unprecedented event; gas price spiked and remained at 10,000 gwei for 10 minutes.

Some investors reported they had to pay more than twice of the mint price of 305 $APE (~ $5,800) and some had their transactions fail but were still charged for the gas fees.

Roughly $157M worth of ETH was burnt just for this land sale. About a week after the sale, Yuga Labs has announced to repay gas fees for the failed transactions:

Nevertheless, the community has been irritated by the fact that Yuga Labs did not optimize their smart contracts so as to mitigate the gas war and deemed that this was just an excuse for them to launch a new chain for the sake of new funding:

Vitalik thinks that such gas optimization tricks would not help, since gas price would still be rising until it reached the equilibrium of supply and demand.

But that was not the point of the community. The point is, they could have done better, but they did not.

From our perspective, given the congestion on Ethereum, it is reasonable for a huge metaverse project such as BAYC’s Otherdeed to run their project on another chain for a more seamless user experience, specifically by deploying it on an L2 to first estimate the demand and then decide how to build their own chain if necessary. Even if they build their own side chain and (perhaps) establish their own token, it will look like the ApeChain is a parasite of Ethereum, and this may further trigger the anger in one of the largest crypto communities in the world.

Currently, only time can decide whether this is a good decision made by Yuga Labs but surely, Yuga Labs themselves must do a lot more to reclaim the trust of their community.

Solana Gas War: To bribe or not to bribe, that is the question

Superficially, NFTs may just seem like jpegs, but their popularity have proved to be burdensome in many cases. The booming demand have the underlying ability to shut down an entire blockchain for many hours. 

This time, that blockchain is Solana.

Unlike Ethereum, there is no bidding blockspace market on Solana; instead, the network accepts transactions “indiscriminately” on an orderly basis. This has helped reduce the transaction fees on Solana substantially compared to Ethereum but in exchange, they suffer from transaction spamming  which puts a burden on validators.

Evidently, on May 1, Solana blockchain was shut down for more than 8 hours, mostly due to the rising NFT transactions on this chain, primarily because of the Candy Machine, a tool for users to mint NFTs fairly.

Specifically, bots have been used to exploit this mechanism as they are able to spam a huge amount of transactions to the network to get a chance of successfully minting an NFT. While this incident negatively affects SOL price, it seems to leave no impacts on NFT investors on Solana as the NFT transaction count has quickly recovered after the outage.
After the network shutdown, the Solana team has offered three solutions to mitigate such outage in the future: 

  • Implementation of QUIC, a Google-developed protocol to enable faster network communication while simultaneously identifying the IP address of each transaction sent, thereby limiting the bot spamming 
  • Deployment of state-weighting which allows validators to process more transactions given that their stake is higher
  • Application of fees to prioritize transactions; however, to alleviate the probability of gas war, there is a limit for an account to have their transactions to be prioritized in each block

Besides, other solutions being suggested include Dutch auctions or dynamic mint which can reduce the incentive for NFT buyers/bots to spam the network at the start (as prices can go lower)


On May 8, when the price of $BTC started declining and pulling the entire market down, including $LUNA, $UST lost its peg and dropped to $0.9857. 

There was a panic sell of $UST on Curve, leading to the disproportion of this stablecoin in the Curve 4pool. Shortly after that, there was a buying force that brought back the balance by purchasing $UST with $USDT. 

Until May 9, Luna Foundation Guard announced that they would “loan” $750M worth of $BTC to an OTC trading firm and 750M $UST to the market to stabilize the peg, i.e.the 750M $UST will be borrowed to buy $BTC. However, this seemed to exacerbate the problem by triggering a further oversupply shock for $UST, diverging the ratio of $UST on the 4Pool of Curve.

On May 10, $UST declined substantially to $0.6. The total reserve balance of LFG plunged to $188,066,798, down by more than 90% since its all-time high at roughly $3.9B. 

Also, the $BTC reserve balance of LFG was down to zero from nearly $1.4B within 24 hours. Thus, LFG has spent more than $3B in the effort to bring back $UST to the peg, but this stablecoin was still hovering around $0.75.

Meanwhile, LUNA saw a massive drop to $26.54, losing nearly 60% value. The amount of $UST deposited to Anchor also “vaporizes” 48% because of massive withdrawals that send the APY of Anchor back to 20%. This event also affects the Terra ecosystem; the TVL has quickly diminished down to $13B, losing 45% within one day.

This event of Luna has been predicted by many investors before because UST’s model of providing APY up to 20% is unsustainable. It looks like a Ponzi scheme.

Now it will be interesting to see what Do Kwon and the Luna team will do next to save the project. If $UST can repeg back to $1, will the trust of users in $UST remain? Time will tell.