GM. This is Layer3's weekly newsletter, helping you stay updated on all things web3. We pay attention to Crypto Twitter so you don't have to.

This week, we cover:

• Another in a string of CeFi disasters, Voyager Digital files for bankruptcy

• Ethereum's Sepolia testnet merges to proof-of-stake

• What is "The Merge" and how should I prepare?

• Product Update: Everything we've done in the last quarter

Sarah at Layer3

Your Web3 Briefing 📝

A roundup of the biggest Web3 headlines over the last week

Crypto broker Voyager Digital has filed for bankruptcy

Trouble continues in the land of "CeFi," or what many are now starting to call the contagion that has plagued over-leveraged crypto firms such as 3AC, Celsius, BlockFi and more.

Voyager Digital, a crypto firm with more than 100,000 creditors and between $1 and $10 billion in assets, has filed for Chapter 11 Bankruptcy in the Southern District of New York. Its stock price dropped by nearly 11.93% as the news broke.

Like Celsius, Voyager also paused trading, deposits, and withdrawals right before filing for bankruptcy.

Some have noted that we're currently seeing what is the equivalent of the 2008 crisis in crypto—and Sam Bankman-Fried of FTX is the one that's bailing us all out. He did, after all, offer a $500m line of credit to Voyager before its bankruptcy filing, in addition to bailing out BlockFi (as covered in our newsletter 2 weeks ago).

Meanwhile, truly decentralized protocols such as Aave, MakerDAO, and Compound have been doing relatively well in comparison, which makes us even more bullish on DeFi...

Ethereum's Sepolia testnet merges to proof-of-stake

We're another step closer to the merge. On July 6th, Ethereum's Sepolia testnet merged its consensus mechanism from proof-of-work to proof-of-stake, after node operators on both the POW and POS chains collaboratively upgraded their software.

What does this mean for a typical Ethereum user? It means that Ethereum mainnet is merging to proof-of-stake soon. After Sepolia, Goerli will be the last remaining testnet to undergo the merge before it becomes live on mainnet.

To distill it into even simpler terms: Ethereum is about to become much more efficient in terms of both energy and transaction speed if the merge works. If it doesn't...well, that could spell trouble for ETH validators and the network as a whole.

Read here for a more detailed explanation of proof-of-work vs. proof-of-stake!

What else you should know

• 3AC's co-founders not cooperating with liquidators, whereabouts unknown

• Cross-chain protocol Li.Fi raises $5.5m

• Reddit to launch Polygon-compatible NFT avatars

• A16z on the potential for democratic governance in web3

What we've been BUIDLing 🏗️

Our Q2 report is now live! We've spent the past few months launching several new features for our users, which we've also summed up in a neat little report for our readers.

Here are just a few things worth a mention...

• Shipped a bounty builder & daily instant bounties

• Processed over 307,000+ on-chain conversions

• Launched partnerships with OpenSea, 1inch, Synthetix

• Created the Builders Lounge for our best contributors

• Backend improvements, upgraded database architecture

• Launched in-platform email notifications

For all the Layer3 alpha and what to expect from us in the coming few months, check out our full quarterly report here:

🛣️ Stay up to speed on what we're building: Take a look at our roadmap to see what we've been cooking at Layer3, and a preview of what’s to come.

🚢 And if you want to help decide what we ship next: You can submit a feature request here and vote on your favorites! Some top community requests have already made it onto our roadmap.

Web3 101: The Merge💡

Each week we’ll cover an essential web3 concept in simple terms. This week we’re looking at the Ethereum "Merge" ✨

What is a consensus mechanism?

In order to understand "The Merge," you'll need to understand what a consensus mechanism is. This refers to when a network of computers validates entries in a distributed database. With cryptocurrency, these distributed databases are also known as blockchains.

Consensus mechanisms incentivize good actors and disincentivize bad actors. Proof-of-work and proof-of-stake are therefore consensus mechanisms that secure the blockchain, allowing for trustless systems where users can securely transact with each other, without the fear of bad actors corrupting the network.

What is "The Merge"?

The Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive proof-of-stake mining and instead secures the network using staked ETH.

How will I be affected by The Merge?

As a user, you do not need to do anything to protect your funds entering The Merge, and no action is required on your part. If you are a validator or node operator, however, you can take a look at some official resources here!

Layer3 is preparing for The Merge by making our EVM-compatible bounties lightning fast. You can check them out here:

Disclaimer: Cryptocurrencies are inherently volatile assets. We recommend you do your research into each protocol and platform before proceeding. This newsletter is not sponsored and does not contain financial advice.

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That's all for today!