Everything you need to know about the crypto crash – Protocol

From layoffs to bankruptcies, the blockchain economy is facing a reckoning.
Here’s how the crash has affected consumers, employees and investors.
The crypto market has shed $2 trillion over the past seven months, a stunning meltdown that has upended the once fast-growing industry. The crash has triggered layoffs at exchanges and lenders, account freezes that have left customers in the cold and even bankruptcies at some overleveraged firms.
Here’s how the crash has affected consumers, employees and investors, and gave new energy to efforts by regulators to rein in a digital-assets market that SEC Chair Gary Gensler has called the Wild West.

As crypto prices continued to fall, some companies limited or froze withdrawals and trades, citing conditions they compared to bank runs. Critics and regulators pounced on these moves, saying they showed a lack of protections for investors and a surfeit of risk by some companies that lent out customer assets and promised sky-high rewards.
June 12: Celsius halted withdrawals, swaps and transfers after facing a liquidity crisis. The firm was hurt badly by the Terra collapse and a drop in the value of staked ether, or stETH.
June 13: Binance, the world’s largest crypto exchange, halted bitcoin withdrawals for several hours. The exchange blamed a “stuck transaction.”
June 17: Babel Finance, another cryptocurrency lender, froze withdrawals. The firm blamed the pause on “unusual liquidity pressures.” Also, Finblox tightened withdrawal limits and paused reward distributions. The staking platform is backed by Three Arrows Capital and was impacted by the hedge fund’s liquidity crisis.
June 23: Coinflex, a crypto lender and futures platform, paused withdrawals, citing “extreme market conditions.”
July 1: Crypto lender Voyager suspended withdrawals, deposits and trading. The firm received a $200 million revolving line of credit and 15,000 bitcoins from FTX CEO Sam Bankman-Fried’s firm Alameda Research.
July 4: Vauld, a crypto lender particularly popular in Southeast Asia and India, paused withdrawals. Nexo offered to acquire the company on July 5, saying it would prioritize restarting withdrawal capabilities post-acquisition.
Crypto hiring spiked 73% from 2019 to 2021, according to LinkedIn, and well into 2022, some companies maintained aggressive hiring plans. But Coinbase reversed plans to triple its workforce this year, rapidly retrenching and ultimately resorting to layoffs. Not everyone is cutting back: Binance, Kraken and Ripple are among the firms that are still hiring.
June 1: Brazilian crypto exchange 2TM laid off more than 80 employees, blaming “rising interest rates and inflation.”
June 2: Gemini, the crypto exchange run by brothers Cameron and Tyler Winklevoss, laid off 10% of its staff. In a letter to employees, the brothers said the cuts were due to “turbulent market conditions that are likely to persist.”
June 10: Crypto.com cut 5% of its staff, or 260 people. CEO Kris Marszalek said in a tweet that the company needed to “ensure continued and sustainable growth.”
June 13: BlockFi said it would cut 20% of its staff, blaming the “dramatic shift in macroeconomic conditions.”
June 14: Coinbase announced it would lay off 18% of its workforce to ensure that it stays “healthy during this economic downturn.” The company had previously halted hiring and rescinded job offers.
July 3: Celsius cut around 150 employees, or a quarter of its staff. The cuts came three weeks after the lender paused all withdrawals from its platform.
July 5: Institutional crypto trading platform Bullish.com cut around 30 staff members. A spokesperson told the Block the company is still hiring for “strategic roles.” Also, eToro slashed 6% of its employees, or around 100 workers. The company also officially called off its SPAC merger with blank-check company FinTech Acquisition Corp.
July 14: NFT marketplace OpenSea laid off 20% of its workforce, promising generous severance and benefits.
The crypto crash forced a wave of consolidation on the industry, with rapid-fire dealmaking aimed at salvaging weaker firms.
The meltdown of Terraform Labs’ UST and luna tokens sent shockwaves through the industry, affecting big firms which had bet on the tokens, including Three Arrows Capital, one of the largest crypto hedge funds.
Soon after, stETH, a token on the Lido network that was once considered a safe bet on the new version of Ethereum 2.0, started to lose its peg. That caused further distress in the market. Firms that had reportedly invested in stETH included Three Arrows, Celsius and Alameda Research.
After those two events, Three Arrows had a liquidity crunch and stopped answering margin calls. That sent further ripple effects throughout the industry. Three Arrows had borrowed from a number of large players in the crypto industry — and it’s unclear to what extent that borrowing was collateralized.
Counterparties of 3AC such as Voyager, prime broker Genesis Trading and BlockFi took heavy losses as a result of working with Three Arrows, just when those firms needed cash the most. Many in the industry are wondering if other crypto lenders, hedge funds or brokerages will be next.
Sam Bankman-Fried’s firms, FTX and Alameda, moved to support companies like BlockFi and Voyager. In some cases the infusions weren’t enough: Voyager filed for bankruptcy despite FTX’s support.
June 22: Voyager obtained a revolving credit line from Sam Bankman-Fried’s Alameda group of $200 million and 15,000 bitcoin.
June 29: Officials in the British Virgin Islands reportedly ordered crypto hedge fund Three Arrows Capital, which Voyager Digital said defaulted on loans worth more than $600 million, to liquidate.
July 1: BlockFi agreed to a deal with FTX that gave the exchange an option to buy the remaining shares of the company for up to $240 million. The crypto lender was once valued by investors at around $5 billion.
July 2: Three Arrows filed for Chapter 15 bankruptcy in New York.
July 4: CoinShares said it would acquire Napoleon Asset Management for an undisclosed sum. CoinShares acquired Napoleon Group in December.
July 5: Crypto lender Nexo agreed to buy fellow lender Vauld after Vauld users withdrew nearly $200 million, causing a liquidity crisis. Nexo hired Citi in June to advise on acquisitions. Also, Uprise reportedly lost 99% of funds shorting luna during its price crash. The firm uses AI-enabled automatic trading strategies, and was hurt by short-lived pumps to luna’s price.
July 6: Michael Moro, CEO of Genesis Trading, confirmed the company took major losses after Three Arrows Capital was unable to meet a margin call. The loans had a weighted average margin requirement of more than 80%, and Genesis had to immediately sell collateral. Also, Voyager Digital filed for bankruptcy. FTX is a major creditor.

July 14: In a bankruptcy court filing, Celsius revealed its liabilities outweighed its assets by $1.2 billion.
Regulation is coming down the pike globally, seemingly sooner rather than later.
June 7: The highly anticipated Responsible Financial Innovation Act was introduced by U.S. Sens. Cynthia Lummis and Kirsten Gillibrand; it carved out definitions of various digital assets, contained tax provision clarifications and proposed dividing oversight between the CFTC and SEC.
June 8: New York’s Department of Financial Services issued new guidelines requiring stablecoins to be backed by reserves.
June 16: Multiple states opened investigations into Celsius’ move to freeze withdrawals.
June 30: The EU Parliament and Council reached a provisional agreement on the Markets in Crypto-Assets bill, another move toward finalizing it. The bill, known as MiCA, would introduce a clearer regulatory framework for crypto companies, including sustainability disclosures and stablecoin regulation. The EU’s new transfer-of-funds rules are also set to enforce anti-money laundering and know-your-customer requirements, where crypto companies will have to collect information and personal data for all transactions.
July 4: Tharman Shanmugaratnam, chair of the Monetary Authority of Singapore, said that the financial watchdog is “carefully considering” some additional safeguards for consumer protection, including “placing limits on retail participation, and rules on the use of leverage when transacting in cryptocurrencies.”
July 8: Federal Reserve Vice Chair Lael Brainard urged in a speech in London that the “regulatory perimeter” be extended to include crypto, citing recent market turbulence.
July 12: Vermont financial regulators warned Celsius customers that the crypto lender was likely to be “deeply insolvent.” Also, California regulators said they were investigating “crypto-interest account” providers and urged consumers to file complaints.
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Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.
Celsius and Voyager Digital’s bankruptcies could force courts to weigh difficult questions about how to prioritize customers and value digital assets.
The Bitcoin Foundation provided information to federal prosecutors this week that aided a probe into Mt. Gox, a shuttered exchange in Tokyo.
The first day in bankruptcy court for crypto lender Voyager Digital came with a warning, from the company’s own attorney, that this could get tricky.
“I think for many of us, this is unchartered territory,” said Joshua Sussberg, an attorney with Kirkland & Ellis. “There will be many potential legal issues of first impression.”
The U.S. bankruptcy courts have never dealt with an insolvency proceeding of a crypto company on the scale of Voyager Digital or Celsius. Both companies, which operate lending businesses, are entering Chapter 11 bankruptcy with billions in both assets and liabilities. The filings came just a week apart: Voyager on July 6 and Celsius on July 13.
The uncharted nature of the proceedings means they will be watched closely by policymakers and within the industry, and especially by customers seeking their crypto back.
There are established rules and insurance for customer funds if a broker-dealer or bank goes under that have not been established for crypto. And that type of bankruptcy is relatively rare, said Nizan Geslevich Packin, a professor of law at the Baruch College Zicklin School of Business.

“We don’t really have any precedent for crypto firms in the U.S.,” Packin said. “We have an international case from almost a decade ago. But that was early on: a different continent, different rules, with the size of the market significantly smaller.”
Packin was referring to Mt. Gox, the most infamous crypto bankruptcy. Mt. Gox customers, along with those who purchased creditor claims, are just now preparing to get some of their crypto back, eight years after the exchange collapsed into bankruptcy and lost 850,000 bitcoins total, valued at $500 million at the time. While the bitcoin that customers receive back will be worth significantly more than when it was stolen, creditors are receiving only a fraction of their initial claims.
Both Voyager and Celsius have offered plans to restart their businesses and are not in “free fall,” as Voyager’s filing described it. Still, bankruptcies can be years-long proceedings, said Packin, who specialized in Chapter 11 cases at Skadden, Arps, Slate, Meagher & Flom.
One major question, Packin said, is the priority of the creditors: who gets paid back, how much and in what order.
Voyager, for instance, has promised to pay back customers with a combination of their crypto, Voyager’s token, stock in the company and proceeds from its efforts to recover a loan to the bankrupt hedge fund Three Arrows Capital. But that plan would require court approval.
Coinbase sent a scare into the crypto world in May by warning in an SEC filing that customers could be considered unsecured creditors if the exchange went bankrupt. That would mean customer funds are considered part of the bankruptcy estate and those customers are the lowest priority as far as getting paid back.
CEO Brian Armstrong quickly assured customers that Coinbase was not at risk of bankruptcy and the company was only following new federal guidance with the disclosure. But he acknowledged that a court could pool customers’ funds as part of the bankruptcy estate, whereas customer accounts have to be kept separate in a stockbroker bankruptcy.

In a smaller-scale crypto bankruptcy case, the lending platform Cred classified its customers as unsecured creditors in its November 2020 Chapter 11 filing, where it reported liabilities in excess of $160 million. The court approved a liquidation plan for the company that started last year amid allegations of fraud and mismanagement. Frederick Hyman, a partner with Crowell & Moring, told Protocol that the small size of the company meant the case did not garner nearly the attention of the Coinbase disclosure, but nonetheless offered a cautionary tale.
“I would expect that many of the customers dealing with Cred probably didn’t recognize that they will be entitled to nothing more than a general unsecured claim [in bankruptcy],” Hyman said.
There is also the question of valuing volatile digital assets. Bankruptcy proceedings take time, and crypto prices change quickly.
In 2016, nearly two years into the bankruptcy of crypto miner HashFast, a trustee sought to claw back payments to a promoter of about 3,000 bitcoin, paid three years earlier. The value of bitcoin had climbed from about $360,000 to more than $1 million in that time. This caused a dispute: The promoter said the courts should consider bitcoin a currency, which would leave HashFast on the hook for only the value of the bitcoin at the time of the transaction. The trustee, meanwhile, contended that bitcoin is a commodity and therefore must be returned at its current market value, according to bankruptcy laws. Ultimately, the case was settled before the court came down in either direction.
The same questions of classification for crypto could come up in the Voyager or Celsius cases. Robert Honeywell, a restructuring partner at K&L Gates, questioned in an interview with Axios whether crypto customers could claim to be securities holders to improve the priority of their claims.
“The real question is even if they filed as a Chapter 11, will customers who have yield-bearing accounts with Voyager say, ‘I’m not just a normal unsecured creditor, I’m a securities holder,’ even though no regulator has said they are that,” Honeywell said, acknowledging that it is an untested proposition.

The crypto regulation bill from Sens. Cynthia Lummis and Kirsten Gillibrand includes a section that aims to safeguard customer assets in the case of a crypto bankruptcy and treat digital assets similar to commodities in proceedings. But it remains to be seen whether that legislation can garner the support to become law.
In the meantime, the bankruptcies are just the latest fallout from crypto’s crash, one that experts say is prompting even greater urgency for regulation. SEC Chair Gary Gensler indicated on Thursday in an interview with Yahoo Finance that the agency has authority to tailor parts of securities law to help bring crypto companies into compliance, potentially increasing investor protections in the process.
Gensler, who has been accused by some in the industry of regulating only by enforcement, said he has said to “the industry, to the lending platforms, to the trading platforms: ‘Come in, talk to us.’”
The current crash should leave more crypto companies open to accepting stronger oversight and regulation, said Diogo Mónica, co-founder and president of Anchorage Digital, the first federally chartered crypto bank.
“People are going to remember this: What happens if the company fails? How are you running risk management?” Mónica said. “All of a sudden those questions are being asked again that, to some extent, get forgotten during bull markets.”
Many people might think of the Google Play Store when they want to download a new app. But the Google Play Store is much more than that: It creates revenue for small businesses and provides jobs for many employees at those businesses. Google Play connects developers with over 2.5 billion monthly active users around the globe, helping to generate over $120 billion in revenues for developers, to date.
Purnima Kochikar, Vice President, Google Play Partnerships
As part of an exclusive fireside chat, Purnima Kochikar, Vice President, Google Play Partnerships, sat down with Protocol to discuss how Google helps developers succeed by giving them the tools to turn ideas into apps, build an audience to receive those apps and get feedback needed to create the best possible app to change people’s lives.
What do you find most gratifying about your role overseeing all aspects of the Google Play app ecosystem?
We started as a very tiny team, and over the past 10 years that I’ve been at Google, we’ve generated over $120 billion in revenue for developers, many who are entrepreneurs or work at small businesses.
I have the best job in the world – it is a huge responsibility and incredibly humbling. It’s also inspirational to provide business and technical consulting to help developers build apps that change people’s lives.
Because we sit on a large platform, we can look at best practices and guide developers to the best tools and technologies. We also have generated 2.5 billion monthly active users, which creates a ready-made global audience for the amazing creativity of app developers.
I’ve always said that Android and Google Play are blank canvases, and developers are the artists who paint on them. I love seeing how developers turn ideas into reality.
What have you learned while leading the Google Play Store?
One of the most important things that I’ve learned is that imagination and creativity are not constrained to the places where we think they are. You always think about Silicon Valley. We think about New York. We think about London and the big cities. But our developers come from everywhere — most are also small businesses, like the brick-and-mortar companies you see in your town or neighborhood. You can have a great idea sitting in Nashville, Tennessee, or San Diego, or New York, or San Francisco. But when you offer those ideas through Google Play, you have a global audience waiting for you.
One of my favorite examples is GoNoodle, which is a small business in Nashville. A creative entrepreneur there saw joy when people get together and get healthy. Now, 95% of elementary schools in the U.S. use the app, which shares interesting ways for kids to get moving and focus on their health. This level of reach would have been unthinkable in the past, but now the app builder has the platform and distribution model to give all schools access to the app.
You mentioned developer creativity. Let’s talk about the role that creativity plays in the app development process.
Small businesses have amazing ideas. And they really understand their customers. They want to create truly amazing apps and really focus on their uses. But some stumble with the practical reality. We give developers the tools and technology to turn their creative ideas into apps that users can download and then use to change both their lives and their users’ lives.
One of the ways that we help small businesses succeed is Google Play Academy, which is a self-serve education platform. A developer anywhere in the world can access our videos, blogs and tips to understand how to both build and publish a great app. Because small companies don’t have lengthy testing times like bigger companies do, we also created the alpha-beta program where a developer can invite users to test their apps. We also provide tools and templates, such as pre-registration, to help generate an audience for their app before it’s even published.
The statistic that I’m most proud of is that in 2021, more than 2 million jobs existed in the United States, thanks to Android and Google Play. These aren’t jobs at Google, these are jobs that exist because developers grew their small businesses after publishing apps on the Play Store.
Many small businesses were hit especially hard during the pandemic – did you see any effects of that for the Google Play ecosystem?
During the past two years there has been a big debate between life and livelihood. A lot of people had to make a choice between the two. Those who could work from home didn’t have to make that hard choice because we could have both life and livelihood — and tech was the reason people could have both.
Mobile apps let small businesses digitize, pretty much overnight. We saw small restaurants use apps to make food delivery possible so people could stay home and order food. The apps helped them stay open and even created new jobs, especially in delivery. During the pandemic, most of the delivery apps in the Play Store hit 10-year KPIs – meaning that they saw engagement in just two years that most apps take 10 years to hit. It’s been truly fascinating — and truly humbling — to see what apps made possible in the middle of some of the worst times of our lives.
You’ve shared several differences in the apps and developers — location, size, ideas. Is there something that most apps have in common?
Each app developer truly focuses on a problem that’s near and dear to their heart, something that sparked their imagination, or something they feel deeply about. They each truly believe that they have a solution to make their community, their country, or the world better – and they aspire for their app to be used by a lot of people – they want to succeed.
Interestingly, most app developers with apps in the Play Store are actually small businesses, and they’re experiencing the benefits and challenges that come with starting out — even today’s big businesses started as small businesses.
People often ask me if they can succeed, because they don’t see other successful people who look like themselves. We need more women starting companies. We need more underrepresented groups starting companies. So, we are investing in this area. We want to make sure there are more people and companies like each of us on Google Play — so that the next kid who has a dream believes that they can be successful with their app.
I’m super excited about a program we launched in 2017 called Change the Game. Many people are surprised to learn that in 2020, 41% of people playing digital games were women. We still need more people to build apps for women. We want women and girls to know that they can create games, and so with Change the Game, we’re helping them build game apps – helping to support and empower women as game players and creators. We want to help developers succeed, and this is one of the many ways we are doing that.
When researching for this article, I was surprised that 97% of developers do not pay any fees to Google Play. What are some other things that people get wrong about Google?
Many people don’t realize the many ways developers benefit from Google Play and that the core DNA of Android is open. From the minute that developers get a creative idea, they have every tool they need to build the app, understand the security policies, launch the app and gain a global audience.
Another common misconception is that apps must be downloaded from a single location. But there are alternative app stores that are available on Android — and developers can distribute their apps through a website, meaning their creativity is not constrained. Developers have choices about where to distribute.
Most importantly, I truly want people to get to know the developers and the value that they’re finding on Play. You can read their amazing stories on our We Are Play site. Take a few minutes and download their apps to see firsthand how they can help you change your own life.
Protocol caught up with Twilio CEO Jeff Lawson to discuss Twilio’s outlook, the path to profitability and the company’s approach to compensation.
“When you start a company in 2008 in the midst of the financial crisis, you really do treat every dollar as precious.”
Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She’s based in Los Angeles and can be reached at acounts@protocol.com.
Joe Williams is a writer-at-large at Protocol. He previously covered enterprise software for Protocol, Bloomberg and Business Insider. Joe can be reached at JoeWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.
When the stock market is tanking, an oft-cited refrain is that Wall Street activity is not necessarily reflective of the state of the U.S. economy. Many technology vendors are now extending that same thinking to their own businesses.
Amid falling share prices, software CEOs are on the defensive, arguing that company valuations don’t measure the actual results they are posting. And the leaders of SaaS companies that have yet to post a profit after over a decade of operations are steadfast in the belief that, while net income and cash-on-hand are now more significant metrics, growth remains important.
Of course, such a phenomenon is not unique to the industry. For example, it wasn’t until 2001 that Amazon began posting a profit, seven years after it launched and four years after the IPO. That is perhaps why Twilio CEO Jeff Lawson — a former employee of the ecommerce giant and avid fan of Jeff Bezos — is so bullish on his company’s future.

“On the business side, we are performing very well,” he told Protocol. But “now the environment is clearly rewarding profitability.”
Twilio is one of a handful of established IT vendors that are stuck in the enterprise doldrums. Not yet profitable, but working towards it, the company posted 48% year-over-year revenue growth last quarter. Many analysts remain bullish on the opportunity ahead, given Twilio’s prevalence among developers and expansion into first-party data. Still, its stock is down 69% this year.
That’s not only bad news for investors. Employees who have their compensation tied to Twilio’s share performance might also be feeling a little grumpy. But Lawson remains hesitant to pursue any option that could further dilute Twilio’s stock or put the company in a position where it is constantly reacting to Wall Street’s wild fluctuations.
In other words, if you’re a Twilio employee, don’t expect the company to rescue you from the realities of the stock market.
“You can’t make people whole in the same way that, when the stock price goes up, you don’t ask employees to give it back. When it goes down, the company can’t make employees whole. To me, that’s not how it works,” said Lawson.
In a conversation with Protocol, Lawson discussed Twilio’s outlook, the path to profitability and the company’s approach to compensation.
The following interview has been edited and condensed for clarity.
Most analysts say the companies that are going to be in the rougher spot are those that are in the growth stage but remain unprofitable. Twilio does fall into that camp. How do you think about your path forward with the backdrop of what’s happening from the macro environment?
Let’s separate out two things. One is the business and two is the stock price. Right? The two are separate from each other. And on the business side, we are performing very well. We’ve committed guidance of 30% annual growth through 2024, that we remain committed to … profitability in 2023.
The environment used to reward growth. And now the environment is clearly rewarding profitability, which is fine. I understand all the fundamental reasons why higher interest rates basically changed the reward function for investors. Makes sense. So I understand why from a stock perspective, we are treated the way we are, which is unfortunate for us.

But we remain committed to the goals that we have for ourselves, that balance growth and profitability. And I think that’s the right way to run the company.
In economic hard times, one of the first areas that companies usually look to cut has been marketing. Do you see it as different this time around?
No, I think that is happening, right? I mean, look at what Facebook’s been saying. They’ve all but told us that companies are cutting their marketing budgets. We’re not tightly coupled to the marketing arena, per se, but you are correct. Our data products make our customers’ marketing more efficient.
Why do you think marketing budgets are often the first to get cut? Two reasons. No. 1: they’re kind of discretionary. They’re easy to cut, as opposed to salaries of employees. Those are painful and they affect humans, whereas cutting a marketing budget is easy.
Second is: In this world where I have no idea which half of my marketing is wasted, it’s easy to cut it off. The downsides of the business are probably going to be you know less. I don’t think most businesses take their marketing spend to zero, but they moderate it.
Well, what if I can actually try to solve that equation for you: Which half is waste? We can actually start to help you pull out the waste, because you’re using better data to buy more effective ads. That is a really compelling value proposition for customers in a time like this. You’re spending less on marketing, but you still have the goals you’re trying to meet in terms of sales. If you spend less, and then you make less, you sort of spiral.
You’ve talked about this path to profitability. What are you actually going to do to get there?
The reward function for our employees historically has been growth. And now we’re changing that to be profitability. It puts a closer eye on a lot of the ROI of the investments we’re making and tightening up execution in a lot of places.

You think about a company that’s in high-growth mode. You’re optimizing the company for top-line growth to capture a big opportunity. And that’s really the mode the company has been in for the first decade or so of its life.
At some point, you get to a certain amount of scale. With the scale that we’re at, we can be — and we should be — much more efficient. And we should be really focused on the ROI of every investment more. It’s not that we weren’t in the past, but just more so. And that’s the transformation that companies go through when they go from optimizing for growth to also optimizing for profitability.
It is a difficult one, but it is not impossible.
Are there specific areas you’re looking at? I know some companies are pausing hiring, or they’re looking at internal travel or employee perks, or maybe they’re trying to get out of real estate.
Those are all areas that make sense. We have slowed down our hiring plans this year. We’ve cut back on some of our travel. We have announced that we’re closing several of our offices.
When you start a company in 2008 in the midst of the financial crisis, you really do treat every dollar as precious. As you grow bigger, it does get harder to do that, but actually becomes more important. Frugality is one of our principles.
How are you thinking about compensation? And has Twilio made any changes to make sure employees who are underwater right now with their stock are made healthy?
You can’t make people whole in the same way that, when the stock price goes up, you don’t ask employees to give it back. When it goes down, the company can’t make employees whole. To me, that’s not how it works.
But what you can do is take employees, and based on our performance-based approach, our highest performing employees every year do get grants. And we will give grants at the now-market price to those employees based on their performance.

When you take a long view, it’s sort of noise. If you take a short view and this week or this month my compensation feels less than I want it to be, sure, that’s a bummer. And there’s very real impact for folks. But you can’t look at equity investment on a short-term basis. It’s like trying to time the stock market. Buy-and-hold is the only proven approach.
That’s what we tell our employees. And employees who aren’t on board with that, I guess some of them leave. And that’s a shame. But I think that the right way to use equity compensation for employees is to build that long-term view.
There are a lot of employees who do take that short-term view. And many can now switch to another company and get in on a very low stock price. Are you expecting to see retention go down?
We continue to grant equity at lower prices. We definitely skew that towards our highest-performing employees. Are there going to be folks who hop? Sure. In fact, our attrition went up in the last year, beginning of this year.
People were actually jumping to startups because the money that got pumped into the economy, so much of it went into venture capital. That went into sky-high valuations and huge rounds in the private market. Well, guess what’s happened? You’re gonna see down rounds, you’re gonna see repricing. A bunch of those companies aren’t going to make it.
And so what people thought was, “Great, I’m gonna bounce and go get low-priced private company equity pre-IPO.” Well, that’s not going to necessarily work out either.
Are one-time cash bonuses something you are looking at?
We did. That’s a bit different. Inflation is very real. And inflation tends to be permanent; not the rate, but unless you have a deflationary environment, inflation compounds over time. So we did an outsized cash adjustment this year. If in a typical year you do 2-3% for inflation, this year was a multiple of that, which obviously makes the goal of profitability harder to obtain but it’s the right thing to do for our employees. That’s different to responding to some startup out there that gave a junior engineer $10 million in equity.

Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She’s based in Los Angeles and can be reached at acounts@protocol.com.
House leadership said they weren’t open to a backup plan on the United States Innovation and Competition Act, which includes $52 billion in subsidies for domestic manufacturing of semiconductors.
Nancy Pelosi wants to force Republicans to negotiate a compromise between the bipartisan Senate version and Democrats’ preferred House version of USICA.
Hirsh Chitkara ( @HirshChitkara) is a reporter at Protocol focused on the intersection of politics, technology and society. Before joining Protocol, he helped write a daily newsletter at Insider that covered all things Big Tech. He’s based in New York and can be reached at hchitkara@protocol.com.
If reconciliation efforts were to fail, Congressional Democrats had a straightforward path to pass the United States Innovation and Competition Act: Send the bipartisan Senate version through to the House. That option was particularly favorable to House Democrats facing tight reelection races, as it would have allowed them to point constituents to a much-needed legislative victory.
But on Wednesday, reports arrived that House Speaker Nancy Pelosi and House Majority Leader Steny Hoyer were not open to that option.
So why rule out the backup plan? It’s not that they want to kill a chips bill outright. Instead, Pelosi and Hoyer want to force Republicans to negotiate a compromise between the bipartisan Senate version and their preferred House version.
The House version passed with only one Republican vote in February. It includes key legislative priorities for the Democrats such as immigration reform and trade adjustment assistance programs.
“I think it’s an arrogant, unreasonable demand,” Hoyer said in a press briefing on Wednesday, responding to questions about the possibility of just passing the Senate version of USICA. He reiterated wanting the bill to pass by the beginning of August.

“Their way or the highway is not Democracy — Democracy is about what can we agree on,” Hoyer said. “I don’t believe that there aren’t 10 [Republican] Senators who can’t agree on some of the additions that we made in the House bill.”
Meanwhile, Republicans have assumed a hard-line stance of their own. At the end of June, Senate Minority Leader Mitch McConnell said Republicans would only pass a bipartisan USICA bill if Democrats give up on their other top legislative priorities. That threat was aimed squarely at Senate Democratic Leader Chuck Schumer’s plan to reintroduce a new version of the Build Back Better bill, which is expected to include some tax hikes, green energy subsidies and an extension of Affordable Care Act funding.
“The policies that are being floated are ruinous,” McConnell said on the Senate floor Monday. He went on to describe the policies as “the worst possible mix to thrust onto a country that’s already teetering on the brink of recession.”
“As Congress returns to DC this week, we should be finalizing my bipartisan USICA bill to invest in critical national security technologies and shore up the supply chain for semiconductors,” Republican Sen. Todd Young of Indiana tweeted on Monday. “Instead, Democrats are working on a proposal to increase taxes by $1 trillion.”
Leadership for both parties share the common goal for USICA to pass with $52 billion in subsidies for the domestic chip industry. Schumer held a classified Senate briefing on Wednesday that attempted to underscore the urgency of subsidies in the context of the geopolitical threat posed by China. That briefing included appearances from Commerce Secretary Gina Raimondo, Deputy Secretary of Defense Kathleen Hicks and Director of National Intelligence Avril Haines.
The semiconductor industry has promoted its own backup-backup plan of stripping the $52 billion in subsidies out of USICA and passing them on their own. Raimondo told Axios on Wednesday that she also supports a stripped-out subsidies plan given the urgency and political stalemate. That would be a tough pill for Democrats to swallow, as it would mean giving up a key point of leverage going into midterms that are expected to swing both the House and Senate to the Republicans.

Hirsh Chitkara ( @HirshChitkara) is a reporter at Protocol focused on the intersection of politics, technology and society. Before joining Protocol, he helped write a daily newsletter at Insider that covered all things Big Tech. He’s based in New York and can be reached at hchitkara@protocol.com.
The leading metaverse theorist shares his thoughts on the sudden rise of the concept, its utility for the enterprise and what we still get wrong about the metaverse.
Matthew Ball has become the leading theorist for the next version of the internet.
Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety’s first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.
“Read Matthew Ball.”
Talk to anyone in AR, VR or immersive entertainment about the metaverse, and they’ll sooner or later drop his name. Ball’s work has been hailed by Mark Zuckerberg, Tim Sweeney and Reed Hastings, just to name a few of his better-known fans, and his work has been called a must-read for anyone who wants to know about the next big thing.
The former Amazon Video executive-turned-VC began writing essays about the metaverse in early 2019. He has since become the leading theorist for the next version of the internet. His book, “The Metaverse And How It Will Revolutionize Everything,” is coming out this month, and Ball sat down with Protocol this week for a chat about all things metaverse.
This interview has been edited and condensed for clarity.
When you published your first essay about the metaverse in early 2019, it was still a pretty obscure concept. Two years later, Facebook changed its name to Meta, and everyone was talking about the metaverse. Did this pace of change surprise you?

Yes and no. I have never experienced a buzzword become as dominant as rapidly as the metaverse did. Seven of the 11 largest companies on earth have either renamed themselves, made the largest acquisitions in Big Tech history, reorganized or prepped their largest and most significant product launches in decades around this field. I think that’s unprecedented. We’ve never seen a shift this enormous.
But the overall transition of investments and corporate strategy doesn’t surprise me. When I started writing the piece based on my experiences in Fortnite and Roblox in 2018, you could feel that transformation happening. We know that in 2018, [Facebook gaming executive] Jason Rubin wrote an internal memo saying that the metaverse was theirs to lose. We know that in 2015, [Facebook] looked at buying Unity.
In 2015, Tim Sweeney was talking about the metaverse, and in 2016, he was warning of its extraordinary significance to civilization. This has been actively in investment for at least half a decade. The rise, though surprising, reflects how much was happening behind the scenes up until that moment.
How much did it matter that Facebook changed its name to Meta, and Zuckerberg identified the metaverse as the future of the company?
Having what was at the time the seventh largest company on earth say “this is our future” — and warning investors, signaling to partners, telling employees, telling prospective employees this was their future — was pretty extraordinary and forced everyone else to take it seriously.
At the same time, I think historical context is helpful. We had in 1995, and then reiterated in 1998, the internet tidal wave memo at Microsoft. This was Bill Gates telling everyone, “The internet is the most significant transformation in the history of computing.” They didn’t rename themselves, but the articulation was nevertheless as significant. So we have had examples of that before.
What are the biggest misconceptions about the metaverse?
First, the idea that the metaverse is immersive virtual reality, such as an Oculus or Meta Quest. That’s an access device. It would be akin to saying the mobile internet is a smartphone. In addition, we know that virtual reality headsets, at least as mainstream devices, are quite a ways off. They may ultimately become the best, most popular preferred way to access the metaverse. But they’re not the metaverse. They’re not a requirement.

We also hear a conflation with video games, virtual worlds. This makes sense, given the best examples of interconnected virtual worlds of extraordinary diversity are in Roblox and Minecraft. But it would be a lot like saying that the consumer-facing AOL portal is the internet, and reflective of the enormity of the internet’s opportunity.
The last is a belief that the metaverse replaces everything. We’re in the mobile era, but we’re still using personal computers. I have a hard line into my household network, and all of the data transmission is on fixed-line infrastructure running on TCP/IP.
We should think of the metaverse as perhaps changing the devices we use, the experiences, business models, protocols and behaviors that we enjoy online. But we’ll keep using smartphones, keyboards. We don’t need to do all video conferences or all calls in 3D. It’s supplements and complements, doesn’t replace everything.
Still, your book claims that the metaverse will “revolutionize everything.” It’s easy to see it have a massive impact on gaming and Hollywood, but a lot of industrial applications aren’t quite as obvious. Sure, using VR and 3D may make sense for construction and manufacturing, but do they really need avatars and an interoperable metaverse?
Many of the leading use cases for the industry are more focused on single-instance simulation. XR surgery, or a building simulation. But when you have the ability to daisy-chain simulations to communicate and exchange information, utility increases.
We always knew that network effects were important with communication technology. We’ve known that since cell phones, since the postal system. And yet we nevertheless underestimated the importance of network effects in the interim, and [weren’t able to predict] that just having a common identity system à la Facebook would produce one of the world’s most powerful companies.

And so you’re right to say that some of these applications don’t strictly require interoperability, but we have certainly learned that there’s extraordinary value from doing so. We can identify some of the instances in which the use cases are advantaged by it, i.e., rather than just you doing one enterprise simulation, we connect all of ours for collaboration. But lastly, we’ve learned not to underestimate what we can’t yet predict.
Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety’s first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.
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