September Overview

Your Monthly Brief into the World of Digital Assets

JKL Group
10 min readOct 3, 2022

Article by Sixte CP and Lesia M





  • Wintermute hack


  • The merge: Proof of Work vs Proof of Stake




Macro Overview

Closing week of Q3 2022 was very volatile in traditional financial markets as the Bank of England was forced to step in to rescue the UK bond market and stabilise the pound after a catastrophic budget. Markets saw a collapse in the UK Gilt Bonds and this put upward pressure on interest rates around the world and pushed the US and European stock markets to new YTD lows. On Wednesday 28th of September, the Bank of England finally stepped in and bought Gilts to stabilise the market.

GBPUSD has now fallen to 1985 lows. Let this be a cautionary tale of poor fiscal discipline within a legacy DM market. But maybe the key takeaway here is that central banks hiking rates is putting immense pressure on financial markets across stocks, credit, lending and mortgages. Something is going to break. In the UK the Bank of England broke rank and intervened to stop the collapse, but we are unlikely to get this from the FED.

Therefore overall, the big picture narrative still remains very bearish for risk assets, hawkish Central Banks seem backed into corner and will not turn until we see real declines in inflation. Oil has collapsed below $80, nominal rates are rising, real yields are helping tighten financial conditions considerably.

JKL Research on GameFi

2021 was the beginning of a strong and lasting hype over the metaverse and blockchain gaming. GameFi rapidly raised awareness among venture capitalists and game developers. But what about the gamers? Will the 2.7 billion gamers worldwide transit to a gaming experience based on asset ownership, in-game tokenomics and decentralised governance? The potential growth is colossal, however we are yet to understand how the underlying blockchain technology can revolutionise the gaming industry.

GameFi is now out of the media spotlight and developers are silently building new value. The objective of our research is to identify the major actors of the GameFi ecosystem and how they interact with each other. Guilds, games, developers, metaverses, the entire GameFi ecosystem is combed through, no stone are left unturned. We also try to understand the limits of GameFi and what might hamper it from going mainstream.

We reach the conclusion that as long as gamers will be incentivized to play blockchain games by unsustainable tokenomics instead of appealing gameplays, the GameFi ecosystem will struggle to rise from its foundations. The first blockchain game that will catch traditional gamers’ attention will be built in such a way that players won’t even know they are using NFTs minted on a blockchain. To do so, in addition to offering engaging gameplays, developers must build a transparent front-end that will seamlessly incorporate NFTs.

GameFi decentralization ethos could be divided in 3 pillars: fair consensus mechanism, true ownership and in game self-governance by players. To build a coherent, healthy and growth-worthy GameFi ecosystem it shall be built on truly decentralized networks.

Looking at the traditional gaming market, never-ending sequels signal a lasting creativity shortage. As the space grows older, offering innovative games becomes more and more a financial risk that cannot be made up for. The same way the console war in the 2000’s fostered creativity to capture all these new gamers, GameFi might be the new lease of life gaming greatly needs today.

Read the full GameFi research on our Medium.


Token2049 conference went ahead with a blast in Singapore last week, bringing together executives in the global crypto ecosystem to exchange their views on the market. Token2049 was marked as the largest in-person global crypto event to be rolled out in Asia since the beginning of the pandemic, with over 7K attendees flying in from all over the world.

JKL Team had a chance to connect with many of our clients and partners during the conference and we’ve summed up the highlights of Token2049 here for you.

A number of panel topics revolved around ongoing macro uncertainty and the bear market. However, the underlying sentiment remained optimistic with industry experts concentrating on how to overcome the current downturn and drive mass adoption. Zaheer Ebtikar, a portfolio manager at digital asset quant firm LedgerPrime, told attendees that risks and returns were being mispriced.

“Whenever you have a perpetual stream of just negative news for the last nine months, it’s really hard to constantly wind up that negative string… I think we have a much more compelling case to imagine why crypto has probably bottomed and why traditional markets may be uncertain… I think positioning should still be cautious, generally speaking, but I think you’re getting to the tail end of this really peak bearishness.” (Read More) Other speakers at the conference sided with this thought, highlighting blockchain’s strong positioning over the medium to long term.

In addition, a number of announcements were made at the conference.

· Prominent Cardano developer Emurgo revealed the plan to allocate $200 million into the Cardano ecosystem.

· Ethereum project Ribbon finance announced the launch of crypto options exchange.

· Crypto futures and spot exchange BitMEX is planning on launching its exchange token by the end of the year.

· Wemade introduced the WEMIX3.0 ecosystem, planned to be rolled out in October.

Financial institutions

Wintermute Hack

Wintermute is an algorithmic market maker in the digital asset ecosystem. It trades billions of dollars on a large panel of exchanges to provide liquidity to partnered crypto projects’ tokens. Liquidity is one of project’s top priorities to ensure users can trade the native token without affecting its price. It reduces investment risk. End of May 2022, Wintermute suffered its first multi-million dollar hack. The market maker lost 20 million OP token. Optimism, a L2 built for Ethereum, handed out these tokens to Wintermute to provide liquidity as the token started trading on centralised exchanges. The reason the project got hacked is simply because Wintermute provided an Ethereum address instead of an Optimism address. Such a big mistake had in the end minor consequences as the hacker decided to wear the white hat and gave back most of the funds.

On the 20th of September, Wintermute was hacked again but for a significantly bigger amount. The hacker stole $160 million by compromising Wintermute’s hot DeFi wallet. Back in January, $3.3 million were stolen from a project due to a vulnerability in Profanity, a wallet address generator. 5 days before the hack, on the 15th of September, 1inch, a DEX aggregator, warned the crypto community about the risk of generating a key on Profanity. Still, despite a multi-million hack and broad awareness of Profanity vulnerabilities, Wintermute decided to keep their multi-million-dollar hot wallet generated with Profanity tool. This mistake is most probably the reason why Wintermute wallet has been compromised. Wintermute is hoping once again for a white hat hacker but will most probably be disappointed as the funds have not been recovered yet. “Compromised keys” is the number 1 reason protocols are regularly hacked. Latest to date being the Harmony protocol, which got exploited for $97 million in June.

According to Wintermute CEO, the company is solvent with twice over the hacked amount in equity and OTC services are not affected. However, Wintermute has a $200 million DeFi debt involving a $92 million loan to TrueFi maturing on October 15th. It is safe to say the hack has weakened Wintermute’s balance sheet and might spread out to other services. When black swan events occur in the crypto ecosystem, we often witness contagion to other actors of the space (e.g. Terra crash and 3AC). Market makers are the backbone of every exchange and crypto project. Without them the crypto market would be subject to much higher volatility and crashes would happen significantly more often. In the current market conditions, an event like this one shouldn’t be taken lightly. In crypto, we never know how far the dominos can fall.

Read More

· BlackRock to Use Kraken Subsidiary for Crypto Offering (Read More)

· Binance, Issuer of Third-Biggest Stablecoin, to Stop Supporting Larger Rival USDC (Read More)

· Hong Kong’s HashKey Receives Approval to Manage 100% Crypto Portfolio, joining the first batch of Hong Kong’s few licensed virtual asset managers (Read More)

Crypto projects

The merge: PoW vs PoS

On September 15, at 6:43 UTC the Beacon Chain merged with Ethereum Mainnet, switching its consensus mechanism from Proof of Work to Proof of Stake. Earning protocol rewards for securing the network now only requires committing staked ETH instead of energy intensive GPU hash power. 20 to 30% of ETH miners migrated to alternative GPU chains like Ethereum classic and Ravencoin, plummeting mining profitability. The rest went offline. The merge effectively reduced Ethereum network energy consumption by more than 99%. However, it is often misconstrued that the merge decreased gas fees by increasing scalability. Ethereum developers consider transition to PoS a necessary step in scaling the network but the merge itself had no impact on the transaction throughput.

The Merge turned out to be a “buy the rumour, sell the news event”. Ethereum price rose by 24% prior the merge in September to tumble back below end of August level with a 22% decrease in price. Since the macroeconomic environment has not significantly worsened or improved a month prior the merge, one might conclude that traders are just not valuing higher a Proof of Stake Ethereum network. Transition to Proof of Stake might not have been the most optimal path to take. Proof of Work is after all argued to be the only consensus mechanism that safeguards the decentralised blockchain ethos.

There’s a notion that Proof of Stake transition made Ethereum more centralised for 3 reasons. First, staked ETH ownership, used to secure the network, is highly centralised. Lido, a protocol where 9 wallets control 46% of governance power, holds 30% of all staked ETH. Coinbase, a centralised exchange, owns approximately another 17%. Second, almost half of the nodes operators validating transaction on the Ethereum network use the same web hosting service AWS. The centralised cloud service provider constitutes one point of failure that could disrupt transaction flow and weaken Ethereum mainnet security, and is exactly the problem decentralized blockchain technology is trying to solve. Third, almost half of all Ethereum nodes are concentrated in the US. Following SEC Chair’s, Garry Gensler, comment, it seems US governmental regulation could very much impact Ethereum integrity. What’s more, decentralisation is the only weapon cryptocurrencies have to slip through the Howey test. Centralisation is the first criteria regulators go over to decide if a cryptocurrency should be considered as a security or not. In addition to regulatory concerns, the move to centralisation is also a threat to the blockchain security.

We believe concentrating efforts to reduce PoW carbon footprint instead of running away from it is the most optimal solution. This is why JKL Mining has joined Bitcoin Mining Council in September to promote transparency around Bitcoin energy usage, share best practices and educate the public on Bitcoin mining. For more information visit

Read More

· Cardano’s Vasil Upgrade Marks an Important Milestone in the Blockchain’s Evolution (Read More)

· XRP price breaks out of range with a 25% rally, following trial evolution (Read More)


· Nigeria, Binance in Talks for Digital City to Develop Blockchain (Read More)

· Saudi Central Bank Hires Crypto Chief to Boost Digital Ambitions (Read More)

· Singapore Mulls Making It Harder for People to Trade Crypto (Read More)

· IMF report states crypto is no longer niched and regulators must be pressured to act (Read More)

· With New Prime Minister, UK Still Wants to Be Crypto Hub: Treasury Official (Read More)

· Bank of Russia agrees to legalize crypto for cross-border payments (Read More)

· SEC Chair Gary Gensler reaffirms in a speech most cryptos are securities and hints it is safe to say BTC is a non-security token (Read More)


· Poolin, One of the Largest Bitcoin Mining Pools, Suspends Withdrawals From Wallet Service, due to transition from PPLNS to FPPS (Read More)

· Bitcoin Miner Marathon Digital Downgraded at BTIG on Headwinds From Compute North’s Bankruptcy (Read More)

· Binance Starts Ethereum Proof-of-Work Mining Pool, Initially With No Fee (Read More)

· Compute North Files for Bankruptcy as Crypto-Mining Data Center Owes up to $500M (Read More)


· LG Picks Lesser-Known Hedera Blockchain for Television NFTs (Read More)

· Starbucks to Offer NFT-Based Loyalty Program Using Polygon’s Blockchain Technology (Read More)

· Ubisoft cools off on NFTs and blockchain, says it’s in ‘research mode’ (Read More)

· GameStop partners with FTX to collaborate in crypto marketing and gaming initiatives (Read More)


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JKL Group

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