Howdy!

Microsoft shareholders passed on buying bitcoin today, meaning it will leave the bitcoin buying to Microstrategy which will, in turn, leave the running of a real software company to Microsoft. Ooh burn.

Today, we’ve got a new onchain finance protocol, Magic Eden’s airdrop, and quantum computing worries.

Meet the project bringing TradFi’s ‘degen products’ to Solana

I was on a Google Meet with Benedikt Schuppli when the co-founder and CEO of Obligate began screen-sharing his email inbox. 

“Can you see this?,” he asked, pulling up an email from a Swiss bank with a large graphic advertising a 175% participation rate for a financial product. “If this wasn’t a Swiss bank you’d be thinking, ‘Well, that’s obviously some type of scam. Someone’s trying to sell me 175% yield.’”

The Swiss bank was offering Schuppli a structured product, a financial instrument that the CEO called the “degen products of TradFi” — and he’s now trying to bring it to crypto with his new startup Margarita Finance.

The basic premise of Margarita is that users can easily mix their yield appetite and risk tolerance like a cocktail. Schuppli hopes the project’s blockchain backing can cut out intermediaries that drive up costs and let a new market segment tap into structured products, which offer the sort of risk curve that DeFi users tend to like.

Structured products are pre-packaged investments that involve a bond and a call option typically on a basket of assets or an index. Structured products don’t lose their principal investment if the optioned assets fall in value because of the bond’s appreciation in value, so they theoretically present less risk than just trading options.

Traditional structured products have lots of middlemen that charge fees, and these fees are passed onto investors, Schuppli said. With Margarita, he said, his team has created a “fully programmable digital asset” that makes fee structures less opaque. 

Margarita currently lets users invest a minimum of 10 USDC with an option on the price of SOL. Investors can set their preferred yield and maturity date, and they’re then offered a structured product, the return of which depends on if SOL’s price falls below a given barrier. The options are priced by Bermuda-based STS digital and come with a “whole-ass legal documentation” that Schuppli, a lawyer by training, pointed out to me. 

Margarita Finance is being developed within Obligate, an on-chain bond platform built on Polygon. The goal is to spin Margarita into a DAO once its network and token are launched. Of Obligate’s 15 employees, five are currently working on Margarita. Building Margarita on Solana was much easier than in an Ethereum-compatible environment due to Solana’s token-2022 standard, Schuppli said. 

Margarita announced $1 million in pre-seed funding two weeks ago, and it is in the process of raising seed funding, Schuppli said. The project also received a grant from the Solana Foundation. 

Margarita isn’t the first crypto outfit to try out structured products, but it does think it can be the most straightforward to use. 

“They’ve been very clunky and very technical,” Schuppli said of some other structured product implementations. “DeFi and financial products oftentimes are created by people with a technical bias.”

We’ll see if that’s enough of an improvement for Margarita to make onchain structured products a thing — and whether the degen products of TradFi are degen enough for DeFi.

— Jack Kubinec

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Oh ME oh my:

The NFT platform Magic Eden debuted its token today, and the price action has looked pretty brutal so far. 

Some users reported difficulty claiming the airdrop in their Magic Eden wallets following the launch. For those lucky enough to nab their tokens early, the goal seemed to be sell, and sell fast.

— Jack Kubinec

Yesterday, Google Quantum AI announced Willow—a next-gen quantum chip with unprecedented breakthroughs in error correction and qubit stability. According to Google, Willow cracked problems in minutes that would take classical systems longer than the age of the universe to solve. Following the news, some in the Web3 community began to brace for impact, fearing quantum computing’s potential to undermine blockchain security and render cryptographic systems obsolete. Concerns over these implications, compounded by speculative panic, sent a ripple through the market, with the total crypto market cap falling by $260 billion— a 6.7% drop—on the day.

BEAR TAKE:

Certain segments of crypto twitter wasted no time spiraling into various doomsday scenarios. “Well… Bitcoin is dead. Fun while it lasted. All of your passwords too,” tweeted @Geiger_Capital. “Google announces a super quantum computer. A few hours later, $1.5B in crypto liquidations. Somebody knows something?” asked @Satsyxbt. “Simply put, now Bitcoin is no longer as secure as you thought. Now, there's something that can brute force its way in,” responded @jaytee_er. @ag_trader tapped into concerns about proof-of-work’s resilience, querying “Wouldn't this chip be able to mine all of the remaining BTC ridiculously fast?” Others, like @haboussef, worried about historical vulnerabilities: “My only concern is about Satoshi’s wallet and lost P2PK wallets.” @6mintr declared, “It will be the biggest financial crisis in history. Literally every system collapses unless we somehow figure out post-quantum encryption before that.” For skeptics like @JeromeJaccard, the mere existence of Willow and other quantum innovations is reason enough to walk: “This is genuinely the sole reason I’m not touching [crypto] anymore. I’m 98% confident it could be worth a lot, but the 2% that could make it worthless keeps me away.”

BULL TAKE:

Solana co-founder Anatoly Yakovenko dismissed the panic with a hint of humor: “If someone builds a general-purpose quantum computer to crack Solana, then Solana has created tremendous value for the world.” @francispouliot_ took a similarly sarcastic jab at the doomsayers: “Pack it up boys, the guys that can crack Bitcoin private keys decided to tweet about it instead of stealing billions of dollars.” @JamesNo435705 explained, “It will take another 20-30 years at this rate before quantum can do any significant damage to Bitcoin’s SHA-256.” @TylerDurden added, “Willow has 105 Qubits. To crack Bitcoin you need between 200-400 million Qubits. It can also be forked at any time and upgraded.” Helius CEO Mert Mumtaz wasn’t buying the apocalyptic narrative either, stating “If quantum computing breaks encryption, I guarantee your magical internet money would be the least of your worries.” Elaborating on this, @MikeOnTheTwits assured followers that crypto wouldn’t be the first casualty: “People don't understand that the security of the "old" internet would go first. They could control bank accounts far sooner than crypto wallets. Power grids, military...there's far more to worry about than your wallet. It's still a long way away though.”

— Jeffrey Albus

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