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The U.S. Treasury is being sued by a crypto advocacy group over its Tornado Cash sanctions. The battle between industry and regulators is just getting started.

Today, we take a look at the declining volumes on the leading NFT marketplace, and our Research team takes a look into an Ethereum layer-2 optimized for crypto games.

This is the Delphi Daily. Let’s dive in.

🚨 In Case You Missed It

Coin Center sues the U.S. Treasury over Tornado Cash sanctions.
Uniswap Labs raises $165 million in Series B funding led by Polychain Capital.
Stablecoin issuer, Tether replaces commercial paper holdings with U.S. treasury bills.
Coinsquare becomes first Canadian crypto exchange to receive IIROC registration.
21Shares launches a physical bitcoin ETP that will be listed on the Nasdaq Dubai.

📊 OpenSea Weekly Volume Hits New 2022 Low

OpenSea is down bad this week as the NFT marketplace has done only $70M of trading volume over the previous seven days. OpenSea saw just $6.2M of trading volume yesterday, represeting the lowest daily volume in 2022 so far.
According to Google Trends, search interest for the term “NFT” peaked in Jan. 2022 and has seen a steady decline ever since. This week, search interest for “NFT” declined to just 11% of what it was during the Jan. 2022 peak.
While the loss of interest in NFTs has been a major factor in the declining volume on OpenSea, the rise of other NFT marketplaces such as LooksRare and X2Y2 is also a contributing factor.
Specifically, X2Y2 has introduced token incentives and optional royalty payments on certain NFT collections. This allows X2Y2 to compete against other marketplaces and divert some trading volume away from OpenSea.
To be sure, OpenSea is still a major player in this space. The marketplace has introduced additional analytical features for traders and expanded to Solana in March, Arbitrum in September, and Avalanche this month.

⚡ Exploring the Utility of IMX

Immutable X is an Ethereum layer 2 for NFTs and a popular scaling solution for what many consider to be the next generation of crypto games such as Illuvium, Ember Sword, and Guild of Guardians.
The Immutable ecosystem is underpinned by the IMX token, for which the dominant use cases are to bootstrap and govern the network and serve as a medium of exchange.

Since IMX is not used for gas fees, the token’s value accrual is heavily dependent on volume and user acquisition.
Immutable plans to facilitate this by eliminating order book fragmentation, incentivizing usage, and aggressively pursuing up-and-coming blockchain games.
This is undoubtedly beneficial for the end user, who isn’t bogged down by exorbitant transaction fees and can interact with many games within the same ecosystem.
However, it presents a tenuous value accrual mechanism for the token, which is extremely reliant on heavy volume.
So far, IMX has achieved $257M in total volume and has 33.5K holders. This is no small feat. However, a long-term token holder can do three things: (i) Stake IMX to earn more IMX, (ii) Pay for NFTs with IMX, and (iii) Participate in governance.
However, you can pay for NFTs with many different currencies on the IMX marketplace — there is no need to hold the IMX token specifically.
Additionally, governance is highly underutilized for many crypto projects, and this is no different for IMX where governance proposals rarely involve over 30 participants.
So that leaves us with staking. IMX has a total volume of $263M. With 0.4% (20% of 2%) of volume over 1.5 years, stakers have received a proportionate share of ~$1M.
Here, it’s worth noting that staking is currently being supplemented by ecosystem tokens to incentivize users. This comparison is also a little unfair. After all, Immutable X is a fledgling network that has been steadily proliferating since its inception.
On the upside, it has marquee crypto games such as Illuvium, Guild of Guardians, and Ember Sword building on its platform and are planning to launch their games within the following year.
For more IMX, Delphi members can read our Delphi Pro report here.

🐣 Notable Tweets

On DAO Treasury Management

One funny thing about DAO governance is that it makes it hard to manage assets held by a collective (why vote to sell the asset you’re voting with?) — but for many collectives, asset management is more than pure yield optimization

Can we do better with a return to futarchy?

— Tarun Chitra (@tarunchitra) Oct 12, 2022

Liquidity Incentive Protocol for NFT AMMs

1/10 We’re excited to launch http://Collection.xyz 🎨 today!

The first liquidity incentive protocol built to simplify the incentivization process for NFT AMMs like
@Sudoswap
.

Buckle up and let’s dive in! 🤿

— 🎨 Collection.xyz (@CollectionWeb3) Oct 10, 2022