August 21, 2022 | Issue 29 FOOL ME ONCE, SHAME ON YOU. FOOL ME TWICE... Residential brokerage is my third professional career. I began as a lawyer and then became a commercial real estate broker. Although my corporate clients hired me to find them office space throughout the US, there was a time when I was focused on a major, multi-year project in NYC. During that time, a main topic of conversation among commercial real estate brokers was WeWork. WeWork appeared to have discovered a new market of tenants and was building out very hip coworking space in NYC and major markets in the US and overseas. The dizzying speed at which they were acquiring space in NYC and filling it with coworking tenants was incomprehensible. WeWork's co-founder Adam Neumann became a celebrity. He graced magazine covers and appeared regularly on TV interviews. My NYC colleagues said WeWork's business model wasn't sustainable. They also shared rumors of cult-like activities of WeWork employees. In 2019, Neumann's grand plan for WeWork failed, along with his IPO. Over the last few years he regained fame when the dark side of WeWork's story was portrayed as entertainment in a documentary and mini-series. This week, Neumann is back in the news because his latest business venture is being underwritten by a highly-respected venture capital firm. It will be interesting to watch how this new venture unfolds. Have a productive week and stay crypto curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. You can find all CNR newsletters here. PSS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me.
CRYPTO NEWS ▸ WeWork Co-Founder Launches Real Estate Venture With a Hint of Crypto Adam Neumann is back after he reinvented co-working space and built WeWork. The company incorporated social community into shared office space and grew its valuation to $47 billion. However, Neumann's poor financial management and overspending prevented the company from going public in 2019 and Neumann was forced to leave the company. His fall from grace was the subject of a Hulu documentary and an Apple TV+ miniseries "WeCrashed." This week, venture capital firm Andreessen Horowitz announced that it invested $350 million in Neumann's new real estate venture, Flow. Flow is operational and has purchased more than 3,000 apartments in Atlanta, Fort Lauderdale, Miami, and Nashville. Venture firm co-founder Marc Andreessen said, “The residential real-estate world needs to address these changing dynamics. And yet virtually no aspect of the modern housing market is ready for these changes... You can pay rent for decades and still own zero equity — nothing.” Flow has not revealed how they are going to help renters, but many commentators suspect that Flow will use cryptocurrency tools to enable renters to acquire an equity interest in the property.
▸ SEC Chair Gensler Proclaims Crypto is Already Regulated – It's a Security Gensler has been criticized for his aggressive stance against crypto companies. He's argued that the SEC has primary jurisdiction against most, if not all, crypto companies.
Gensler wrote a WSJ Opinion piece this week in response to a recent Wall Street Journal Editorial entitled, "Gary Gensler's Bitcoin Regulation Grab –The SEC chief is blocking innovation until he can control crypto markets." Gensler wrote, "We can dispense with the idea that crypto lending isn’t subject to regulation. On the contrary, the rules have been around for decades. The platforms aren’t following them. Noncompliance isn’t the inevitable result of the crypto business model or underlying crypto technology. Rather, it is as if these platforms are saying they have a choice—or even worse, saying “Catch us if you can.”
▸ The Federal Reserve Instructs Banks on Safeguards When Engaging in Crypto Activities & FDIC Sends Out Cease-and-Desist Letters
The Federal Reserve letter begins by stating that the "crypto-asset sector" offers opportunities and risks to banks and customers. The risks include technology challenges, anti-money laundering, consumer protection, and financial stability.
Banks should notify the Federal Reserve before engaging in crypto-asset-related activities and have "systems in place to identify, measure, monitor, and control the risks associated with such activities on an ongoing basis." The FDIC sent cease-and-desist letters to five crypto companies alleging misrepresentation on their websites and social media accounts. Specifically, the FDIC claims that the companies state or suggest that some crypto products or stocks held in brokerage accounts are FDIC-insured.
CRYPTO CLASS – Staking
When you buy something with a credit card or a check, banks and payment process centers are involved in the transaction. Transactions with cryptocurrency are different.
Crypto is built on a decentralized system without banks or payment processors in the middle. Instead, a “consensus mechanism” is used to verify and secure transactions.
One type of consensus mechanism is Proof-of-Stake. Unlike Proof-of-Work which requires miners to solve complex math problems with energy-consuming computers, staking validates transactions with funds provided by the network participants.
Participants use their tokens for a chance to validate new transactions to the blockchain and collect a reward.
There are typically multiple parties pooling together funds for one stake. This lowers the barrier for entry and allows for more participants. Some cryptocurrencies allow crypto holders to pledge or “stake” some of their tokens. In return they are rewarded with additional tokens. It’s similar to a high-yield savings account. According to Staking Rewards, the returns range from 2.3% to 17.9% for the top ten assets, by market cap. The risks of staking crypto include – 1) volatility, during your staking period, the price of the crypto could drop and your staking crypto may be locked-up for a period of time; 2) counterparty risk, if the staking pool operator does not comply with guidelines, there could be penalties; and 3) hackers, staking pools could get hacked.
INFLUENCERS - People to follow
Kristin Smith – @Kristin Smith
Smith is the Executive Director of the Blockchain Association, one of the crypto industry's most powerful trade associations in Washington. In the summer of 2021, crypto companies got a wake up call when it lost a fight in the infrastructure bill. Membership and subsequently lobbying spending increased dramatically.
RESOURCES – Books, websites, podcasts, interviews, articles, videos The Bitcoin and Cryptocurrency Technologies class is a free 11-part video course taught by a Princeton professor. It appears to provide a great foundation on blockchain, crypto, mining, decentralization, altcoins, regulation, and Bitcoin's future. CRYPTO WORD – Genesis Block The first block of cryptocurrency that was mined. OH, ONE MORE THING – A trailer about the inevitable war between Central Bank Digital Currency and Bitcoin. (Turn on the sound)
Thanks for reading! See you next week.