Cash App (NOT Revolut) could become the New PayPal 🚀; Web3 infrastructure is too hot to handle, or how to 4X valuation in 6 mos 🤯; Decentralized Finance has a massive security problem🚨

You're missing out big time... Weekly Recap 🔁

Sep 25, 2022

👋 Hey, Linas here! Welcome back to a 🔓 weekly free edition 🔓 of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.

If you’re not a subscriber, here’s what you missed this week:

As for today, here are the 3 FinTech stories that were making a huge difference this week. This probably was one of the most interesting weeks in the space this month so far, so definitely check out all the above stories.

Cash App (NOT Revolut) could become the New PayPal 🚀

The news 🗞 Amsterdam headquartered 🇳🇱 payment heavyweight Adyen will let its US merchants accept online payments via Cash App Pay, Cash App’s in-house online checkout solution. Adyen will roll out the payment method for brick-and-mortar stores next year.

It’s the first merchant services provider to offer Cash App Pay since Block SQ 0.00%↑ made it available to merchants that don’t use Square (which was a massive move on its one).

More on this 👉 Cash App by the numbers:

Cash App has 47 million active users.
This makes up 30% of Millennial and Gen Z consumers in the US.
By 2026, the user base is projected to reach 63.1 million people.
Since December 2020, Cash App has issued over 1 million loans via its app.

Why is this important? 🤔 Last week I talked about Revolut launching Revolut Pay in a quest to take on PayPal and Apple. Adyen & Cash App Pay partnership is yet another proof that the real threat lies somewhere around the Block. In fact, building on earlier thoughts, we can say that Cash App (NOT Revolut) could become the New PayPal 🚀

Here’s more on that + the takeaway + some juicy bonus reads👇🏼

✈️ THE TAKEAWAY

It’s all about the Ecosystems 🙌🏼 I must repeat again that Block/Square has developed probably the strongest FinTech ecosystem in the world (& their latest earnings prove that perfectly). It’s pretty clear by now that it’s not stopping there and now Block is very aggressively trying to build out the Cash App ecosystem beyond just peer-to-peer (P2P) payments and neobanking. Expanding beyond P2P payments will not make the brand more resilient, but also could help attract new users to the ecosystem. Although the P2P payments volume growth might slow down in the coming years (US P2P payments volume is expected to increase 38.5% year over year (YoY) in 2022 and hit $1 trillion but by 2026, US P2P payments volume gains will slow to 13.4% YoY), Cash App Pay could be the cash cow that will help Block monetize the app. When it comes to the Adyen & Block partnership, it’s a clear win-win: Adyen can help Block expand Cash App Pay to a broader merchant base hence making the payment method more popular & fueling volume, while Cash App Pay can help Adyen tighten merchant loyalty because this payment method is likely to appeal to younger shoppers. Zooming out, all of the above is a massive push for more growth and will definitely help Block to increase online payments revenues and compete more aggressively with PayPal, which has a strong checkout presence globally. If the Block ecosystem continues to develop at the same pace, it’s only a matter of time before Cash App (Pay) could become the next PayPal.

Bonus: Payment Wars: Revolut to take on PayPal & Apple. Here's what everyone is missing 🧠

Too fast, too luxurious: lessons from the failure of Stripe-backed Fast

PayPal's biggest threat is coming from around the Block & it's called Cash Pay 💳

Revolut to battle Square, PayPayl & SumUp with their POS reader 💳

Web3 infrastructure is too hot to handle as Aptos Labs quadruples its valuation in just 6 months 🤯

Following BIG money 💸 Palo Alto-based Aptos Labs has quadrupled its valuation since March, after Binance Labs - the venture capital arm and accelerator of Binance - made a new, undisclosed strategic investment in the Web3 infrastructure firm.

The follow-on investment was announced by Binance Labs in a blog post. It did not disclose the amount of the follow-on investment, but a Bloomberg report said the new money gives Aptos a valuation of more than $4 billion.

The USP 🥊 In short, Aptos is a low latency, high throughput, safe, and reliable L1 solution that has been developed by a team of PhDs using the programming language Move. It reportedly can handle 160,000 TPS (transactions per second) and developers love it.

Aptos, founded by ex-Meta employees, is creating a Layer 1 system blockchain, meaning it will not sit on Ethereum or another network, but be its own decentralized network. The company is looking to build off of key elements of the Diem blockchain and its smart contract language, Meta’s Stablecoin project which was shuttered earlier this year.

✈️ THE TAKEAWAY

Building the infrastructure 🤝 Web3 infrastructure is getting too hot to handle as Layer 1 blockchain startups continue to capture investors’ imagination and a ton of money. In case you missed it, just last week another Palo Alto-based Web3 startup Mysten Labs closed a $300M Series B at a more than $2B valuation. When it comes to Aptos per se, I must repeat myself that it’s one of the most interesting Layer 1 Blockcahins ever. First and foremost, the flexibility, security, and interoperability provided by Move (the programming language) is a huge advantage. If they can deliver on the tech, users and developers should love Aptos, considering their heavy focus on UI. Further, the solid team and A-level backers most certainly can help them win in the long run (the TPS potential alone is super interesting). Watch team Aptos very closely from now on.

Decentralized Finance has a massive security problem🚨

The news 🗞 Cryptocurrency market maker Wintermute has lost $160 million in a hack relating to its decentralized finance (DeFi) operations. The news was confirmed by a tweet from the company's founder and CEO, Evgeny Gaevoy.

Gaevoy insisted that the company remains solvent and that it has "twice over" the amount of equity that was stolen.

Refresh & The hack 👀 For starters, a crypto market maker provides liquidity on crypto exchanges through digital assets. Founded in 2017, Wintermute provides liquidity across over 50 exchanges and trading platforms, including Binance, Coinbase, FTX, Kraken, and decentralized platforms Dydx and Uniswap.

Blockchain cybersecurity company Certik has said a vulnerable private key was attacked in the Wintermute hack. A vulnerability in private keys generated by the Profanity app was likely exploited. The vulnerability has been known since at least January.

Why is this important? 🤔 The Wintermute hack is yet another proof that Decentralized Finance, and crypto as such, has a massive problem and it’s called security (or lack of it). Here's the takeaway + what it’s a huge risk for everyone:

✈️ THE TAKEAWAY

It’s not about the money, money, money… 💸 Wintermute is the latest in a long list of crypto companies to be stung by hacks over the past few months alone. Crypto bridge Nomad had nearly $200M drained in August shortly before DeFi protocol Curve Finance had $570,000 stolen. Looking at the bigger picture, blockchain security firm Certik estimated that more than $1.3B had been lost to DeFi hacks last year. That’s massive! When it comes to Wintermute per se, we have to understand that it’s a top crypto market maker, one of the most active DeFi participants, it has a huge OTC desk, is registered with the FCA, and also is run by crypto natives. If they can get hacked for $160M, pretty much anyone can. Therefore, security is a massive risk in the sector, and in order for DeFi to thrive, real-time threat intelligence and security must be exponentially improved.

🔎 What else I’m watching

OB is struggling? 🤔 London-based open banking unicorn TrueLayer has announced it plans to cut headcount by 10%, according to a blog post published by the company on Friday. The layoffs were announced during an all-hands meeting on Thursday and re-iterated in the blog post on Friday for “transparency to our partners, customers, and wider TrueLayer community,” said Francesco Simoneschi, CEO and co-founder of TrueLayer. “You may understandably ask what has changed in the past twelve months. We are now operating in a very different context and more challenging market conditions,” said Simoneschi in the post. “TrueLayer, while being in a position of strength, is not immune to these broader factors.” When firms are doing layoffs, it’s either because they aren’t doing well, they cannot raise money or they don’t want to raise money (it could be a combining of 2 too). Seems that OB isn’t selling itself these days either.
Coinbase & Lido leadership 👀 Ethereum's new Proof-of-Stake blockchain is facing unwelcome scrutiny after it emerged that staking rewards are being dominated by a small number of centralized players. According to Gnosis co-founder Martin Köppelmann, Lido currently controls 27.5% of staking, while Coinbase is in second place at 14.5%. Overall, he claims the top seven entities control over two-thirds of block verification — a fact that he described as "pretty disappointing." Bitcoin maximalists have been up in arms about these revelations. They argue that this proves Ethereum is becoming more centralized, and censorship resistance is at risk. But Köppelmann argues things are even worse in Bitcoin, as just four entities currently receive 72% of mining rewards. That’s one of the risks you have to be aware of when it comes to ETH, more here - Ethereum post-Merge: what investors need to know 🧠

💸 Following the Money

Italy's largest bank closes its first VC fund of €250M. Neva SGR, the VC arm of Intesa Sanpaolo, will write first cheques of up to €10M. It’s sector agnostic but has a slight leaning towards fintech and deeptech.
FinTech app Portabl raises $2.5M to help consumers securely store financial data.
Sardine, a behavior-based fraud and compliance platform for FinTechs developed by Coinbase, Revolut, and PayPal veterans, has raised $51.5M in a Series B funding round led by Andreessen Horowitz's growth fund.

👋 That’s it for today! Thank you for reading and have a relaxing Sunday! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:

Linas's Newsletter

Discussion about this post