Byron Gilliam

Nathaniel Whittemore

The Breakdown

Bitcoin starts the week near all-time highs after a surprise Sunday night rally, even as rumors swirl of another China crypto ban. NLW unpacks why the reports are misleading, the real story of Beijing’s growing unease over Hong Kong’s new stablecoin regime, and what it could mean for capital controls. Plus, Harvard’s $116M Bitcoin buy signals a shift in institutional attitudes, and the White House crypto council sees a leadership change.
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It Wouldn't Be A Bitcoin Cycle Without a China Ban Rumor

A new long read argues that crypto’s biggest weakness is its inability to tell its own story—an issue magnified by the mainstream media’s fixation on outdated narratives. NLW agrees with much of the piece, but brings a unique perspective as the former architect of FTX’s high-profile marketing push, including stadium naming rights, Super Bowl ads, and celebrity campaigns. He explains the strategy behind those controversial moves, why they made sense at the time, and how FTX’s collapse wiped out the industry-wide narrative gains they might have brought. This is a candid look at the intersection of crypto PR, media coverage, and one of the most infamous brand-building plays in the industry’s history.
Source: https://www.coindesk.com/opinion/2025/07/29/crypto-has-a-comms-issue
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What FTX Marketing Was Actually Trying to Accomplish 

This week’s Friday Five is packed with U.S. government moves that signal crypto policy has shifted from rhetoric to action. NLW and Scott break down the SEC’s surprising guidance that puts liquid staking outside securities law, Hester Peirce’s call to enshrine financial privacy in the digital age, and the Tornado Cash verdict’s implications for developers. They also cover Trump’s executive orders opening 401(k)s to Bitcoin and other private assets, targeting bank discrimination, and appointing a crypto-friendly Fed governor—all part of a broader trend toward tangible pro-crypto measures.
 
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The Five Most Important Stories in Crypto This Week 

This is a segment from The Breakdown newsletter. To read more editions, <a href="https://blockworks.co/brand/the-breakdown">subscribe</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Just because you can doesn&#8217;t mean you should.”



—&nbsp; Aristotle, your conscience, your mom, and Jurassic Park
</blockquote>



We don’t usually get data on Americans’ retirement accounts, but a congressional request once prompted the Joint Committee on Taxation to <a href="https://www.finance.senate.gov/imo/media/doc/7.28.21%20JCT%20Mega%20IRA%20Data1.pdf">reveal</a> just how big some can get: In 2019, just 156 Roth IRAs held $15.6 billion in assets.



This begs an obvious question: Who needs a tax break on their $100 million of retirement savings?



$80 million of post-tax money seems like plenty to get by on after the age of 60 (even for all the tech moguls planning to live to 120).



But some have quite a lot more than that.&nbsp;



In 2021, ProPublica <a href="https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank">reported</a> that Peter Thiel held more than $5 billion in a single, giant Roth IRA account.&nbsp;



Helpfully, it also detailed how he did it.



While you and I max out our Roth IRAs with $7,000 worth of index funds, others opt for more exotic investments — like early-stage equity.



In 1999, for example, Thiel used $1,700 of Roth IRA funds to buy 1.7 million shares of PayPal. Three years later, PayPal IPO’d at $13 a share — a 13,000-fold gain on his cost basis of $0.001 per share.



Because it was in an IRA, he owed no tax.&nbsp;



Better yet, he was able to roll those winnings, tax-free, into 10.2% of Facebook — acquired for $500,000 (still held in his Roth IRA), and an undisclosed portion of his stake in Palantir (now worth many billions).



Thiel was a co-founder of PayPal and Palantir and the first outside investor in Facebook, so the rest of us would never have had access to those kinds of deals. 



But President Trump <a href="https://www.whitehouse.gov/presidential-actions/2025/08/democratizing-access-to-alternative-assets-for-401k-investors/">proposed</a> last week that everyone be given access to alternative investments in their retirement accounts, crypto included. 



In response, critics have warned that crypto is ill-suited for retirement savings because it’s too risky.



But it’s already available to a small sliver of people — and at virtually no risk — via “Token Launch Roth IRAs,” an entertainingly extreme edge case in the debate over crypto in retirement accounts.



While equity founders like Peter Thiel have long been able to stash early-stage investments in their Roth IRAs, crypto founders could not — because how do you get a blockchain token into a brokerage account?



You couldn’t, until AnchorZero built the systems to add even pre-launch tokens to traditional retirement accounts, and Anchorage Digital Bank figured out how to custody them.



Simply put, AnchorZero’s Token Launch Roth IRAs are “the first and only solution for pre-launch tokens to eliminate capital gains taxes.”



This is not a problem I ever imagined needed solving.



In its enthusiasm for helping founders not pay taxes, AnchorZero’s website reads like a Scrooge McDuck parody of robber baron excess.



“Until now,” its <a href="https://anchorzero.com/insights/anchorzero-launches-token-optimized-roth-iras-for-tax-free-gains-on-digital-assets/">product announcement</a> explained, ”the only way to include tokens in an IRA was to wait until they were listed on a public exchange, by which time their value had often increased exponentially. AnchorZero’s solution is the first to support private, pre-launch tokens and derivatives, ensuring that founders can take advantage of the low-cost basis at token creation.”



The website offers an illustrative example, seemingly written by someone who doesn’t quite know how to read the room:



“Consider Alice, a crypto founder launching a new token. At creation, before public trading, the token’s market cap is a modest $10,000. As a savvy tax strategist, Alice allocates a portion of the token supply to her Roth IRA. When she decides to sell, her token interest is worth $50 million, which is entirely tax-free. Had she chosen to forgo the IRA approach, Alice would have owed $18.5 million in capital gains taxes, leaving her with $31.5 million — a staggering difference of millions in tax savings.”



If its website had ears, they’d have to be plugged while I yell at it: ALICE DOESN’T NEED A TAX BREAK!!!



But she was only just getting started.



“AnchorZero’s solution allows investors to reinvest tax-free gains into new tokens, startups and venture funds. Over time, the compounding benefits of the Roth IRA become even more pronounced. In Alice’s case, her IRA could grow to $815 million over 20 years, compared to $190 million without the tax advantages.”



These kinds of “Alice” examples are usually something like, “Alice sends $5 to Bob.”



But (to paraphrase Spinal Tap) this one goes to $815 million.



Gaming the byzantine US tax system is hardly a novel idea, but seeing it spelled out at that scale and on a public website feels different — as if hedge funds were running TV ads to gloat over how much money the carried-interest loophole was making them. Or Big Pharma put up billboards to crow about its Ireland tax dodges.



Bury it in euphemisms! Hide it in the fine print!! Do some dog whistling!!!&nbsp;



Or make the numbers 100x smaller, at least, please.



Because it’s one thing to exploit a loophole and it’s another thing to celebrate it. Especially one as egregious as this.



Has there ever been a more narrowly targeted tax dodge? 



The carried-interest loophole for hedge funds is pretty bad, but I’d guess there are more hedge fund managers in the US than there are crypto founders.



And pre-launch crypto tokens are sure to be priced even cheaper than pre-IPO PayPal shares.&nbsp;



On the one hand, AnchorZero is only offering to help those founders do something that the law allows.



On the other hand, why???



I marvel at the time, effort and investment it must have taken to build the complex systems required to help this tiny sliver of people who don’t need anyone’s help.



Even if you think every loophole deserves exploiting, is that really what you want to do with your limited time on Earth?



Personally, I’m not sure I’d sleep too much worse if I spent my days engineering new ways to telemarket fake tech support to seniors or catfish lonely bachelors.&nbsp;



Ethical considerations aside, these kinds of things can backfire, as we learned from <a href="https://www.reddit.com/r/videos/comments/1at69qj/your_scientists_were_so_preoccupied_with_whether/">Jurassic Park</a>. (“Your scientists were so preoccupied with whether or not they could, they didn&#8217;t stop to think if they should.”)



The danger here, I think, is that crypto already has an image problem.



Thanks to cabal memecoins, low-float-high-FDV project tokens and digital asset treasury companies, there’s a growing perception that most of the industry’s profits accrue to a small number of insiders at the expense of its retail investors.&nbsp;



This is especially unfortunate because a big part of crypto’s original appeal was that bitcoin was fair-launched and equally accessible to all.&nbsp;



If Token Launch Roth IRAs catch on — and how can they not? — we’ll have strayed further than ever from that ideal.



People will notice. Inevitably, we’ll get an exposé on a $5 billion Token Launch Roth IRA and it will make half of America hate crypto even more than it already does.&nbsp;



I could hardly blame them, if so.



The US government is currently in the process of handing the crypto industry everything it&#8217;s ever asked for.



The least we could do in return is pay our taxes!



Even Peter Thiel thinks the US tax system has “fairness problems” — because, he said, “you have super rich people paying a lower rate than people in the middle or upper middle class.”



Putting pre-launch tokens in retirement accounts would supercharge that problem.



And crypto’s image problem, too.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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The Breakdown Newsletter

When $100M isn’t enough: Token Launch Roth IRAs

This is a segment from The Breakdown newsletter. To read more editions, <a href="https://blockworks.co/brand/the-breakdown">subscribe</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Ideas are easy. Execution is everything.”



― John Doerr
</blockquote>



Nobody does big ideas better than crypto: internet-native money, self-sovereignty, democratized finance…



Execution, however, has never been its strong suit.



Internet-native money is crypto’s foundational idea, but 15 years on, few use it to pay for anything on the internet.&nbsp;



The democratization of finance has largely become people getting fleeced in the memecoin casino.



Self-sovereignty remains a core principle, but most people have stored their crypto on centralized exchanges, and now, increasingly, with the evil empire itself (i.e., the stock market).



Still, these remain worthy aspirations.



But crypto’s high-minded ideals have been obscured by a morass of manipulated memecoins, presidential grifting, North Korean hacking and institutional co-opting.



This sometimes makes it hard to remember what crypto was supposed to be about.



Could even some OG Bitcoiners be losing faith? I can’t help but wonder if the recent sales of Satoshi-era coins are a quiet reaction to bitcoin’s growing corporate ownership.



To win over a new generation of converts, then, it might take more than lofty principles delivered in rousing sound bites.



It might require something simpler: a reason to actually use it.



Crypto’s mission statements would be more convincing if its proof of concept were something other than just the price of bitcoin — if people were using it onchain and not just buying it on the stock market.



So how’s that going? Let’s check the charts.



People are using the chains!



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdjzuxmRpRbjkvNCCwF9y-yvz3JDNs6U4M5oFpwWUm1O6MtZZd6WxbDrA-Q0KIZ4473MHAMaEisjNm3g_SodUcC7pMgaThLBbFyJhphdY88SHIfyylXG8ITmsxjQ2ccPc64MCBGMg?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



Ethereum processed an all-time high of 46.7 million transactions in July, thanks largely to the smart contract chain’s new, higher gas limit. A higher gas limit increases the computational capacity of each block, which lowers the competition for blockspace. As a result, the median fee on Ethereum has hovered around $0.20 recently, down from as high as $13 a little over a year ago.



(Note: Nearly all of today’s charts are freely available on the <a href="https://blockworks.co/analytics">Blockworks website</a>.)



Doing more for less:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdxHkAWFac-ffuHrqNqTmvQHHhPTinj6oes_W5Dlji1bwFbOL7vAtIHmYAW7k8UFYkNLrUE3utKk_i7MCEljBHXQADZwo2Tr0ZH6cRLfsn4hq8e3bFXnOy9CSLJm-_DYVuv1ulQ?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



Ethereum transactions are at record highs, but Ethereum REV — a measure of how much people pay to use the chain — is near record lows. In July, Solana, Hyperliquid and Tron all earned more in fees than Ethereum did. This is great news for Ethereum’s users, who can do more with less. But it may not be such great news for Ethereum’s investors.&nbsp;



If blockchains had earnings:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdYeFrIe27AdZuwohFd4xQKcaUm5TSxE3b6hDLTK3bm_2eHu5_MJbnjeeaKM9NUJ-TqPlbcDOOnCgKEJciHymcqtzCTqf62OmFizaDqA2LwNu3p2H2loCqn5arjlfhBVQ1ZQ7UerA?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



Subtract payments to operators from REV and you get what can be thought of as the “net income” of a blockchain. On that basis, if we annualize the $31 million of net income that Ethereum recorded in July, we can say that ETH trades on a price-to-earnings ratio of 1,200x. Yikes.



Still, there have been more buyers than sellers lately:



<img loading="lazy" decoding="async" width="624" height="376" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXezbnPkiKkSfy-I8owlo3tcH4RIcex8z5rPkademqqi3edtXg_Hsh0jZ2Z4P531FJGkl5R91FKySqTvlgX-19kCAxzt0XiCqBKCpy7Xja5hiXz-bqLEmvHl1kilVK7I45hD-4BDkg?key=3VK3LqPmlcReHlCuG582Ig">



ETH is  up 45% over the past month, presumably because digital asset treasury companies have provided a new source of demand. DATs now hold $6.9 billion of ETH, up from near zero just a month ago. ETH ETFs bought an additional <a href="https://app.blockworksresearch.com/analytics/crypto-etfs">$5.4 billion worth</a> in July as well. 



Trending down:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeHkiQJ0ZXxACyyFxU9ISZyOCgLicGe-FPH6docBTykrHbHkPd1zn-pw6my5u-JB2kEAWOM2V9JRvIicXG8DZSUdC6jJ01FyFgX9ol_jT3VXuR_L1rIJP7PmkxlZUc8wWmrK3VLXg?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



Because most treasury companies have to sell shares to buy crypto, trading volume is considered a leading indicator of their purchases. Falling volumes suggest that DATs will be buying less crypto.



The stock market premium:



<img loading="lazy" decoding="async" width="624" height="376" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf5fnaZHM9j6JAlOC4NRbPvHWS-IT6Ik-ABob4J6C8AeMF8WTIqwl-VB-bzBwpbeO1XlG_CrihKFJsyo-7aznbE1PsLnBVSq8OvXTMyMQ8aTzS4OigFN34A1R1NooTZU9NC6MXEig?key=3VK3LqPmlcReHlCuG582Ig">



Collectively, digital asset treasury companies are now worth $88.5 billion more than the crypto they hold. The good news is that the stock market loves crypto. The bad news is that 100% of that premium can be attributed to financial engineering, which tends to go “poof” at some point.



The hype is real:



<img loading="lazy" decoding="async" width="624" height="376" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdm18WEWxATndXnctukCLOIsCIG0eNSypGLoJk0anHjUu1urRBAf33YfcKROvCPkWsMLujQAi8zi64hUFjZwxvv0zWk7gLqUl068-s5ASGnwh63km8uyK8RntEicopBsODCIbwJ?key=3VK3LqPmlcReHlCuG582Ig">



Hyperliquid just posted its best-ever month, recording $88 million of revenue in July. That is $1 million more than Solana did, which must mean…something. Hyperliquid now has a 75% share of the market for perpetual futures. I can’t think what its moat is, but it seems to have found one.



My favorite crypto chart:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd9fQk3vuOu2MXNfguu_Kn-mby3KuxryOCwu7g5_-veIqUhbIEsLbrXAZ7L0Zc_Cj0QxgylC1Duy1smhXeqX7hmEhN2bvnNIxOXenU3j6jKyQEFbu8QtvUYKApdQ0IL38NcsfnVJg?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



This is the collective P&amp;L for traders on Hyperliquid, which has been trending relentlessly lower. The big spike up in March was <a href="https://x.com/EvanLuthra/status/1900525968089108694">market manipulation</a>, not a trader being right. The rest of the chart demonstrates that traders are rarely right. Like casinos, perps platforms grind their users to dust. But also like casinos, the users keep coming back. (Note: I’m not sure how super accurate this data is but I assume it’s directionally correct.)



Not as hype as it was:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdsBBwhYWd1tFF2aDPANrNL64adK6x8ImCQ5rpvUq4fA2rRXBIKIz1RrhqMbGGsgBirUuawf6-y4UEqUN8w1pxgkCmWVHgfN2jxe1UKnsr_Vdzgbonjd3LaXusbLlRzF-MWYTYxOQ?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



Solana’s “token holder net income” has been more or less flatlining around $6 million a week. Annualized, that puts the SOL token on 390x P/E. Better than Ethereum, for sure, but still pretty yikes.&nbsp;



Memes vs. projects:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXek3JwBTqmDBqgAJAo6FF6haTo529z8IEZ3L3n6h7oyl5ay6TR-lPKY8xEmab7SRPJUwhLYE_UO0E1a1DUM5r96GNSlZeGUqQRJuFRX-yqyxwjVrnuJDup5zqTQIvK2tkcFCtHW?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



DeFi apps are great and constantly getting better. But “most of the assets are shady,” as Alex Thorn <a href="https://pca.st/x922xl8m?t=31m3s">puts it</a>. On Solana DEXs, for example, memecoins still trade 7x more volume than “project tokens.”



Colonel Mustard in the billiard room with a candle stick…



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeqSWpC4yNx8j7di-OC7OQY8ZnWqF1syUjfflMYCOjFmds-avQr1vL8fBb6a4kE7SpXe-tbPuxDsD7S6Q-Jx2IxNMumndO4P0fEPx7ymwudm4_ojwuWuwsdXPaRhog-d8c7i3U2Jg?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



Like a game of Clue, this Sankey diagram demonstrates that DEX volumes have recently been dominated by memecoins on BNB Chain using PancakeSwap. I’m reliably told by the 0xResearch chat room that most of this is wash trading, however.



Less degen-ing:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXexiGh4eITgkoN24qBiRqnwWKI6aNEW0f9vbDSN7gkbdB18B5ML5gOZNYy_RDzpHyzpdI0M_R46ORY7oDtGu_S3lkEb2DCPfjPN2ciF0gcatxNEpw0LmmGGngDbTtOQfoZyty8Iqg?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



The leading trading bot, Axiom, has seen falling trade volumes, which suggests the most active, most degen of retail crypto traders are finding fewer reasons to trade.&nbsp;



Tokenized equities haven’t inspired them, either:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXej1E9-i6rVEZGWkOpcb-qw5uPi6tH1YRS1cLifPa7lTs82v5IsJZVz_sdugH1GWM927F6gHutd0-vMHQ4cMflRDJjHcTwodXpnCwUYA2W6KJuTWaG0RkzMMeuZEZzExEtyhyOrUw?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



Putting equities onchain has been a popular topic lately, but crypto traders seem disinterested so far. “Equities” trading volume has averaged less than $4 million a day on Solana.



Bitcoin’s mempool:



<img loading="lazy" decoding="async" width="624" height="295" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe1MqQChVUkp7TWdSaXd4xOuBEozJYWVzO9m2L3XGsxmhg88Vke1rKUYUWgLJgD0PafLNwqFxQ01ZzEPXxZvZxPZYZsMjTf-Ac84FYIz3LpIwjj1SG5_3EFxAdB1tRTPbxY405YNQ?key=3VK3LqPmlcReHlCuG582Ig">



Bitcoin’s mempool, the queue of transactions waiting to be added to a block, has been a little busier of late, but activity remains near long-term lows. (I still think “MEMEpool” every time I read “mempool” and I’m not sure I’m wrong.) You can watch the mempool in a neat visualization <a href="https://mempool.space/mempool-block/0">here</a>.  It’s kind of mesmerizing, like watching fish in a fishbowl. And in the case of Bitcoin, it’s not much faster. The Ethereum mempool is busier and helpfully visualized <a href="https://txcity.io/v/eth-btc">here</a> as a bus stop.



The original idea still stands:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXceSIln_Fi8O8woNL98drZyeVM4wunNVRo_h-9PBjZpub23xR0-lhdf8NxaMSs_gjToyrMOVntXey2Z3JjpJkzoDX2ohv5nolN1Dr_b1VN49-pTJEs6w4pxDmklu-WxKd_8b2bCjw?key=3VK3LqPmlcReHlCuG582Ig" alt=""/></figure>



However active crypto is at the moment (or <a href="https://x.com/laurashin/status/1943013611250540559">inactive</a>, Rob Hadick describes it), the foundational rationale is stronger than ever: Exploding government debt makes an alternative financial system worth exploring.



But it probably won’t help much if it happens on the stock market.



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Big ideas, small use cases: Crypto’s execution gap

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PUMP token holders now find themselves in the odd position of hoping the money they just sent to Pump.fun will soon be returned to them.



That’s the mood on Crypto Twitter, at least, where influential accounts keep pointing to Pump.fun’s estimated $2 billion cash pile as the bull case for PUMP (see <a href="https://x.com/suganarium/status/1948765211881865443">here</a>, <a href="https://x.com/Yaki_fomoArt/status/1950475784348717418">here</a>, <a href="https://x.com/chooserich/status/1948412910331371670">here</a> and <a href="https://x.com/DukeD_Defi/status/1950496129831084180">here</a>).



The problem, of course, is that token holders have no claim on that cash — even though they supplied most of it.



In IPOs, stock market investors send their money to a company in return for an owner’s claim on assets that’s roughly equivalent to the money they just sent.



In the PUMP ICO, however, crypto investors sent their money to Pump.fun in return for a token with no claim on anything whatsoever.



They knew that. But they also expected to be treated as if they had a claim on the revenue of Pump.fun.



So far, they have been.&nbsp;



Over the past week or so, Pump.fun has used roughly <a href="https://fees.pump.fun">100% of its revenue</a> to buy back the PUMP token.



If you assume it does that forever, the token seems reasonably priced: Annualizing last week’s revenue, PUMP is trading on only about 16x (by market capitalization).



But that’s assuming they also burn all those tokens — and what’s the point of issuing tokens if you’re immediately going to start burning them?



It seems more logical, as people have also been <a href="https://x.com/Dumpster_DAO/status/1949127244112081071">speculating</a>, to do the opposite: either airdropping tokens to users or paying them out as incentives.&nbsp;



Luca Netz, for example, <a href="https://x.com/frontrunnersx/status/1948733725900243248">thinks</a> Pump.fun should airdrop 10% of the token’s supply to the community.



This would “nuke the token,” as he puts it, but that’s part of the appeal: “The token nuking is fine, especially because he has so much cash.”



By “he,” Netz means Pump.fun’s three co-founders, which is instructive: They own the $2 billion of cash that token holders are hoping to have an informal claim on.



If the co-founders are intending to use that cash to buy the token, as people hope, it would make sense to get the token price down first.



“It’s in his interest to buy as much of the token as possible at the lowest price possible,” Netz explained.



In other words, the incentives between the owners of the protocol and the owners of the token are grievously misaligned.



Charlie Munger would say that’s exactly what PUMP token holders should be thinking about.



Equity investors don’t have to worry much about incentives because management is aligned with shareholders by both law and precedent.



The cult of shareholder value that was popularized by the fictional Gordon Gekko in the 1980s is now so ingrained in equity markets that investors are almost always treated like owners.&nbsp;



In crypto, by contrast, token holders have neither law nor precedent to rely on, so they do have to think hard about incentives.



Take Grass, for example — a buzzy AI project (“multimodal search”) that’s already earning “millions of dollars a month,” <a href="https://youtu.be/osFIJBjVXtQ?si=nBnjGOtL8ZXxdivW">according</a> to its founder.



But that’s the full extent of Grass’s disclosure: That revenue is neither onchain nor otherwise made public.&nbsp;



So when <a href="https://x.com/_dshap">Dan Shapiro</a> tried to value the DePIN project for Blockworks Research, he could only take a guess at what “millions a month” might really mean.



“Although Grass keeps network revenue data private,” he wrote, “one can make some educated assumptions from publicly available data licensing deals to estimate the value of the network.”



In other words, he had to look at data licensing agreements made by the likes of OpenAI and Reddit to hazard a guess at what kinds of agreements Grass might also be making.



To value the Grass token, he also had to do things like “assume data sales have similar margins to ad sales” — things that an equities analyst would determine by calling the company and asking them.



If all of the assumptions Shapiro was forced to make turned out to be roughly correct, he thought there could be an interesting investment case for GRASS: “In its current state, Grass’ free floating market cap of $585m is justified based on the value of its multimodal data alone.”



But now Grass “appears to have pivoted to data labeling” (i.e, away from multimodal), <a href="https://x.com/Daveeemor/status/1950499366239638009">according</a> to one disillusioned token holder, who adds that “little information has been shared with token holders.”



I couldn’t find any information at all. Which is weird.



Imagine if shareholders had to find out from a random X account that Apple had pivoted from making smartphones to making sneakers.



Grass is earning some amount of revenue, but we don’t know how much; however much it is earning, token holders haven’t seen any of it and don’t know if they ever will; and the business may or may not have gone off in a new direction.&nbsp;



Such is the state of affairs in crypto “investing.”



It doesn’t have to be that way.



Holders of the MAPLE token, for example, don’t have to guess what portion of the revenue earned by Maple Finance will be returned to them. Instead, they decide that themselves by <a href="https://x.com/maplefinance/status/1950302668028559714">voting on it</a>.&nbsp;



As a result, MAPLE investors probably don’t have to think about incentives much more than equity investors typically do.&nbsp;



“No fees are allocated to the Labs entity,” <a href="https://x.com/shaundadevens">Shaunda Devens</a> wrote for Blockworks Research, “and the Labs entity is funded exclusively through grants, not through revenue-generating activities.”



That makes MAPLE holders a lot like owners, I think.&nbsp;



Shareholders have disclosure rules, legal claims, SEC enforcement actions, decades of precedent and the movie Wall Street to substantiate their ownership claims.



Token holders have only smart contracts.&nbsp;



Have crypto investors properly accounted for this lack of both rights and transparency?



Anecdotally, there doesn’t seem to be any risk premium built into opaque, rights-light tokens. Most of them still seem inexplicably expensive to me.



Nor is there much differentiation between projects with ownership-like tokenomics and those with tokenomics you can only guess at.



I imagine it’s only a matter of time until there is, however. And the sooner the better.



The best thing for crypto investors may be if Pump.fun follows Netz’s advice and “nukes the token.”



That might finally get crypto thinking harder about the power of incentives.



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Investing in crypto is investing in incentives

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;There are three kinds of lies: lies, damned lies, and statistics.&#8221;



— Mark Twain
</blockquote>



The 2004 edition of the Economic Report of the president included a creative proposal it hoped the statistical agencies would consider: reclassifying fast-food cooks as manufacturing workers.



&#8221;When a fast-food restaurant sells a hamburger,” the <a href="https://www.presidency.ucsb.edu/sites/default/files/books/presidential-documents-archive-guidebook/the-economic-report-of-the-president-truman-1947-obama-2017/2004.pdf">report</a> asked, “is it providing a &#8216;service&#8217; or is it combining inputs to &#8216;manufacture&#8217; a product?&#8221;&nbsp;



I hear you snickering, but it did make some fair points.



The report noted, for example, that “mixing water and concentrate to produce soft drinks is classified as manufacturing” — so why shouldn’t assembling a hamburger count, too?



The answer lies in the Census Bureau’s definition of manufacturing, which the job counters at the BLS follow: “the mechanical, physical, or chemical transformation of materials, substances, or components into new products.”



Heating a frozen hamburger patty does indeed create a “chemical transformation” — heat causes a burger’s proteins to unfold and reconfigure in ways that irreversibly change it.



(You can freeze and melt a soda as many times as you like and still drink it, but try that with a burger and you’ll regret it.)



It would be a stretch, however, to argue that heating a burger transforms it into a “new product,” so it’s no surprise that the BLS continued to categorize burger flippers as service workers.&nbsp;



If the BLS rejected the White House’s suggestion on its merits, everyone else rejected it on its politics — a transparent attempt by the White House to make the manufacturing sector look healthier than it was.



It wasn’t the first time the seemingly mundane process of counting jobs became a political flashpoint.&nbsp;



In 1971, the Nixon White House shut down BLS press briefings after the agency unenthusiastically described a 0.2% drop in unemployment as only “marginally significant” (the Secretary of Labor described the same data as “of great significance”).



A month later, a statistical error caused the BLS to overstate a further drop in unemployment, this time raising fears that the White House was manipulating the data to make the economy seem better than it was.



Investigations found no evidence of political influence on the jobs data, but the OMB nevertheless responded by issuing a directive that tightly restricted early access to the data for political appointees.



More surprisingly, there have also been accusations that the White House manipulated jobs data to make the economy look worse than it was.



In 1961, Reader’s Digest published an article accusing the Kennedy White House of using data techniques to “magnify the unemployment problem” as a pretext for more government spending and regulation.



Again, an investigation found no basis for the claim.



A similar investigation in 1944 dismissed similar claims that the BLS had &#8220;obsequiously acquiesced&#8221; to White House demands to understate inflation, with the goal of keeping wages down too (while the government had war-time powers to set wages).



All of these unfortunate episodes are <a href="https://www.bls.gov/opub/mlr/2018/article/the-current-population-survey-tracking-unemployment.htm?utm_source=chatgpt.com">recounted</a> on the BLS website, which highlights just how much precedent there is behind President Trump’s new accusations of political bias at the non-partisan agency.



In fact, his shock decision to fire Erika McEntarfer wasn’t even the first time a BLS commissioner lost their job for political reasons.



In 1932, Ethelbert Stewart was “involuntarily retired” as head of the BLS for publicly disagreeing with the Hoover administration’s rosy portrayal of the Depression-era labor market.



In response, The San Francisco News <a href="https://fraser.stlouisfed.org/title/first-hundred-years-bureau-labor-statistics-5181/fulltext#:~:text=%E2%80%9D%20The%20San%20Francisco%20News%20was%20more,his%20honest%20work%20on%20employment%20is%20particularly">opined</a> that &#8220;in the city named for George Washington, it seems they fire people for telling the truth.&#8221;



Now, by contrast, McEntarfer has been fired for the gravest form of not telling the truth: statistics.



On Friday, President Trump accused the BLS commissioner of “miscalculations” that he is sure were politically motivated.&nbsp;



But every jobs report is a miscalculation — by design.



When the BLS reported on Friday that the US economy had added 73,000 jobs in July, McEntafer and everyone involved with the number knew it was wrong.



Like every month, July’s report was based on incomplete data: The BLS doesn’t wait for all 121,000 surveyed employers to respond. 



Instead, it goes with what it’s got at the end of the month — typically just 60% or so of what it’d like to have — and then updates its models as additional responses trickle in afterwards.



But even with all the data in, it’s still just an estimate based on a lot of assumptions.



Without adjusting for seasonality, for example, the BLS would have reported that the US economy lost <a href="https://www.bls.gov/regions/mid-atlantic/data/xg-tables/ro3fx9585.htm#ro3fx9585.f.p">1,066,000 jobs</a> in July.



The difference between 1,066,000 and the 73,000 that everyone thinks of as “the” number of jobs created in July is just one measure of how “wrong&#8221; the BLS’ model is.&nbsp;&nbsp;&nbsp;



“All models are wrong,” as statistician George Box famously said, “but some are useful.&#8221;



The BLS model that comes up with a monthly jobs number is one of the useful ones — an early warning system that allows businesses, investors and the Federal Reserve to adjust to the direction of the job market.&nbsp;



The true size of the job market won’t be known until everyone reports their taxes in a year or so, as I’m sure the president is aware.&nbsp;



But the president also seems acutely aware of the power of numbers to affect our perception of reality.



A hamburger, for example, is far more than its calorie count: It’s protein, a night out with friends and a piece of culture, too.&nbsp;



But the moment you read &#8220;1,600 calories&#8221; on the menu, a bacon cheeseburger becomes something else entirely: judgment. Liability. Guilt.



Numbers often wield more power than the reality they attempt to represent, so we should of course try to get them correct.



That’s especially true with economic data, where feedback loops can cause the perception of a slowing economy to become the reality of a recession.



But with high-frequency data like non-farm payrolls, correct is the enemy of useful.



And always has been.



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The ‘jobs’ number is always wrong

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;We are not measuring the world, we are creating it.&#8221;&nbsp;



— Niels Bohr
</blockquote>



Two of history’s greatest minds — Albert Einstein and Niels Bohr — disagreed on the fundamental nature of reality.



Is the world around us, as Bohr argued, created only when we observe it?&nbsp;



Or does reality exist independently of our gaze, as Einstein believed?



The two greats debated it throughout the 1920s and ‘30s, and their disagreement has remained central to quantum mechanics ever since — forcing physicists to grapple with what their mathematical equations tell us about the nature of reality.



Until this week, when the debate was settled in favor of Bohr.



By bouncing a single photon off just two atoms, <a href="https://news.mit.edu/2025/famous-double-slit-experiment-holds-when-stripped-to-quantum-essentials-0728">scientists at MIT</a> showed that the behavior of the photon (wave or particle) remained unsettled until they had measured it.



This confirmed Bohr’s belief that observation is not simply a passive act of seeing what already exists, but an active process of creating the very thing being observed.



In other words: Observation changes the system being observed.



This is how markets work, too.



&#8220;Financial markets constantly anticipate events, both positive and negative,” George Soros wrote, “which fail to materialize exactly because they have been anticipated.”



For example: The US labor market is weakening, but because the Bureau of Labor Statistics observes it for us every month, markets have reacted in a way that will change the labor market.



After the BLS report this morning, 10-year Treasury yields fell 20 basis points, and <a href="https://polymarket.com/event/fed-rate-cut-in-2025?tid=1754065758939">Polymarket odds</a> of a Fed rate cut jumped 15 percentage points.



Moves like these can change things: The more that markets anticipate a recession, the less likely a recession becomes.



It works in the other direction, too.



At one point this week, each of the four AI hyperscalers — Microsoft, Alphabet, Amazon and Meta — were valued at over $2 trillion.



In total, the stock market is assigning $10 trillion of market capitalization to those four, based on the observation that they’re likely to be among the primary beneficiaries of next-generation AI.



If so, the act of observing the trend in AI will have played a large part in making AI happen.



Morgan Stanley estimates the four hyperscalers will invest $2.9 trillion in AI capex between 2025 and 2028, but that they’ll be $1.5 trillion short of cash needed to fund it.



Only the massive valuations markets have granted them will make up the difference.



In that sense, what AI becomes will depend, at least in part, on the market’s observations and predictions about it.



Sam Altman, for example, <a href="https://x.com/ns123abc/status/1950806901303754814">predicted</a> this week that we’re on a path to “superintelligence” — self-improving AIs that exceed humans in every domain.



“It&#8217;ll give people incredible superpowers that were sort of science fiction only a couple of years ago,&#8221; he optimistically predicts.



It may already be happening: &#8220;Over the last few months, we&#8217;ve begun to see glimpses of our AI systems improving themselves,” Mark Zuckerberg <a href="https://www.theguardian.com/technology/2025/jul/30/zuckerberg-superintelligence-meta-ai">said</a> on Wednesday, adding that “superintelligence is now in sight.”



The pace of this self-improvement may be about to accelerate.



Also this week, a team of researchers <a href="https://www.semanticscholar.org/paper/AlphaGo-Moment-for-Model-Architecture-Discovery-Liu-Nan/3c721709009511d70b5a1a87aa33dff957df35bc">released</a> an open-source model that “enables AI to conduct its own architectural innovation.”



Experts say this will transform AI research “from a human-limited to a computation-scalable process.”



In other words, AIs will now be bounded only by the amount of computing capacity that humans choose to give them — and the stock market, having observed the trend, is choosing to give them trillions.



Not even Niels Bohr could tell us what the consequences of that observation will be.



Let’s observe some charts and see what else happens.



The AI capex boom:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXco81VtzaDDJ_oU0QHxHEFLVzZAM4h7gbCYTDlaVOLuE1-TlznX_NTrGRrJvlXKQbfx5sRAW6cqbBfWdutDMpkUIClWIX6qgmpQ0PNSbZWOEXdrUXAJxCmR6MjvQ0bD7419bpld?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The Wall Street Journal <a href="https://www.wsj.com/tech/ai/tech-ai-spending-company-valuations-7b92104b?mod=e2twg">documents</a> the surge in capex among the four hyperscalers, which are on pace to collectively spend $400 billion this year alone.&nbsp;



Going all in:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfiBEk6gPS-wB4x19maBkyojgU64dquy-wmXqF7liSmOP9tsOpAhBscGimLUjvs_cwrnqBfnpSOB80Gr8t2V22SrIEc8URuIOzUi7J3TJDJGL_DGOL_JejG_iNPK-jqDoa2P0hfew?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The hyperscalers are both making more money and spending more of it on capex.&nbsp;



This morning’s unemployment data:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeV0Z3l7LxrD_u7kN65oyPZghMj3TRUoh7cycRaIwrFc1GtmWbjTsc2fL7MUtm0armFBHozV5BYHMFYQfMetmxCpV0hGFTKAWbDo9bPv33ulisJ2S_cojnrtTfjPpnQVGVjkJT2?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The US economy is estimated to have added only 73,000 jobs in July. But the shocker in this morning’s report was the 253,000 downward revision to the prior two months, taking the three-month average down to just 35,000. An economy that seemed surprisingly resilient suddenly looks <a href="https://x.com/Markzandi/status/1951283286959071744">unsurprisingly fragile</a>.



Contrary to popular belief…



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdV5U6mDAKg8c9Yxjit792Gi3Ltpt9AWQyXy2C2E2EhFa13islFuPLXASXyrMr7o_ogH2JLkAQ82MociYXftTIEPBorlNDZVCE-S0k0BZU6HGmkUc5dvocJouLWbR-uOcn7GPklsw?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



…the jobs do not seem to be going to China. Data from <a href="https://x.com/JonathonPSine">Jonathon Sine</a> shows that “China shed the equivalent of the entire US manufacturing sector (~15 million jobs) over the last 15 years.”



Inflation estimates are more of a guesstimate now:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdutUzvHyckYT0joxtaI0AzmPX34hCuN38St49CClhvSomA2FUl80MMvU2JgqIHxLj-o3YjhetA4c5CGbWeug3mhM70lwGjISUUW3IrI6Gb-k_ktce2UdotahBG1nqH3E7-QmLv?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



Thanks to funding cuts, the Bureau of Labor Statistics is collecting less inflation data, which means that a bigger portion of CPI is “imputed” (aka, guessed) based on the data it did manage to collect.



Not out of the inflation woods yet:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc3L2WQj9d5QoLIWMsOO7hslLnkaeTDvnOuapYrfe6TLUiEd6DC4ucIXkcHqVBIPC1kZUCNvBwGJPi-sdpX4J6tFapuxBhaWws9_iLnbC-dKT5wu6rf2TCOqcFxxdY1OiOzhAwS?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The two dissenting FOMC voters will feel vindicated by this morning’s weak jobs report. And the president will be even more irate than he was <a href="https://x.com/DavidBeckworth/status/1951014060465786937">yesterday</a>. But it might still be hard for Powell and the rest of the FOMC to agree on cuts when the price of core goods are rising at a 3.75% pace.



The price of copper is down, at least:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXehaPVtLe_dj3srQ7SZRUKEYZz7flLD8UWpcEt7wRYOWYBm-bkugtjzgpsGGO49kSbg6jtNre9vp2Zwia0OFLj988TUSSmCvx1pQj7K6T1x7X61XFEERLAAIirLVgX22mnnx9e9Eg?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



Copper futures fell 20% after it was announced that President Trump&#8217;s latest round of tariffs would exclude metals. That kind of whiplash policymaking is good for volatility traders and bad for anyone trying to run a business that requires copper.



Tariff update:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXckK9zwBADXIeVVTD6vOZbBnM1G3pqlN6Fl_Cv_iavC2PWCrMqhK4EGPERIJJa8VhempXyBx3IYTMlr0dtguk-KcLZJYtM1y5HsnetPwlGPl9WxvL0nVfwUvjPScCBovgCuLjferg?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The pink line is the overall level of tariffs, according to what’s been announced. The black line is what importers have actually paid. The 10 percentage point difference between the two suggests that most of the impact on the economy is still to come.



Railroads next?



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXezBumsqxdj8JpRbe6uQjciA-WhFBbbMBX56kOLl2M4wG6Jg2oGB0qkNCQ4Qu6f94IL-S9Pq_-7cu3iVXarvPzjiJPBMWvWD4EUK9X14NCvScrp7rdrdGhB4eHSn8U5OKsSufar?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



As a percentage of GDP, AI infrastructure capex is already bigger than the internet telco boom, but still has a lot of upside to match the railroad boom.



What will AI become if the hyperscalers spend 6% of US GDP on it? Investors seem determined to find out.



Have a great weekend, observant readers.



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Friday charts: The observer effect

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;What unites people? Armies? Gold? Flags? Stories. There&#8217;s nothing more powerful in the world than a good story.&#8221;



— Tyrion Lannister
</blockquote>



<a href="https://blockworks.co/analytics/launchpads">Blockworks Research launchpad dashboard</a>



Here’s an incredible chart from Blockworks Research:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeXiGhOCL9YR33PP0PCMop0-hVjhw_i4zo868Zzt6FlzOiYxkG-_AyfgZgK-T1scrBx38uaefUW7PWxQFNO2L-BkaFi6bi2tc7grQ4gAGDr7O8aT_AsNL4EfxHvlBbM-MUNuQMbPQ?key=yoZ4ihdHd6uoHnz_rRLS0g" alt=""/></figure>



Incredible because it illustrates just how fast fortunes can change in the low-moat business of crypto.



As measured by trading volumes, Pump.fun (in green) went from a nearly 100% share of the market for launchpad tokens on June 9 to under 10% now.



But the even more incredible part might be what happened in between: the Pump.fun ICO.



Has there ever been a similar case where the underlying business of a company was collapsing in the same moment that investors were eagerly sending the company their money?



The closest I can find is when Blue Apron IPO’d in 2017, just a week after Amazon bought Whole Foods.&nbsp;



The prospect of Amazon delivering groceries the way it delivers everything else suddenly made Blue Apron’s business of delivering meal kits seem doomed.



It was — and most investors seemed to know it. The IPO was re-priced sharply lower, the stock immediately fell even further than that and the company was eventually acquired for less than one-tenth its valuation at IPO.



Crypto investors, by contrast, seemed weirdly eager to buy into a similar setup, with Pump.fun in the role of Blue Apron and Bonk.fun in the role of Amazon.



Bookmark the dashboard to see if they can rewrite the ending.



<a href="https://blockworks.co/analytics/treasury-companies">Blockworks Research DAT dashboard</a>



Another new Blockworks Research dashboard is the best way to follow the story of crypto treasury companies without having to pay attention to crypto treasury companies.



On multiple metrics, the story seems to be losing steam.



The collective mNAV (multiple of net asset value) for treasury companies investing in ETH and SOL, for example, has fallen below the mNAV for bitcoin treasury companies — which might be a sign that the MicroStrategy phenomenon is not as easy to replicate as its emulators seem to think.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcC-by3m_pod8uIc4XUEfcSICDHwgq0e-kSsPHcbhqVAJjae_OXwFGYpUr86hlr1OCCFeQuauhgHwu1ZHKWVlhegOjIqjdumHvrX8j6NKtq0y6XYNLg846A-T0-r_oBbWOtNGDzCQ?key=yoZ4ihdHd6uoHnz_rRLS0g" alt=""/></figure>



Personally, I blame this week’s announcement of a <a href="https://www.businesswire.com/news/home/20250728220301/en/Mill-City-Ventures-III-Ltd.-Announces-%24450000000-Private-Placement-to-Initiate-Sui-Treasury-Strategy">SUI treasury company</a>, which has surely taken things too far.&nbsp;



What would Michael Saylor say???



<a href="https://www.moneyness.ca/2023/08/who-are-money-launderers-in-tornado.html?m=0">Someone laundered the money</a>



Tornado Cash has long been a cause célèbre in crypto circles, mostly on the basis that code is speech.



The case that the prosecution just finished making against co-founder Roman Storm, however, is not that he wrote the code, but that he owned and controlled Tornado Cash.



Whatever the merits of that argument, it’s interesting to think through the implications should the jury return a non-guilty verdict for Storm — because someone laundered the money.



“Somewhere in the Tornado Cash stack,” JP Konig <a href="https://www.moneyness.ca/2023/08/who-are-money-launderers-in-tornado.html?m=0">wrote</a> when Storm was indicted, “someone is committing the crime of money laundering.”



The US government says that someone was Storm and his co-founder, Roman Semenov.



If a jury disagrees, it presumably means someone else was responsible, because no one disputes that money was indeed laundered.



“Crooks depositing dirty ether are still ending up with laundered ether, so there is by definition a ‘someone’ in the stack who is providing laundering services to them,” Konig wrote.



Could that someone be the users of Tornado Cash?



“A person who is aware that criminals are depositing dirty money into Tornado Cash smart contracts, yet decides to deposit their own funds into those same smart contracts…ticks all the boxes for a money laundering charge.”



No user of Tornado Cash could plausibly claim ignorance of its use for money laundering. So, if the co-founders don’t take the rap, users might have some explaining to do.



“Counterintuitively, the indictment [of Roman Storm] seems like a win…for fans of decentralized finance, or DeFi,” JP Konig concluded.



If so, a win for Roman Storm could, counterintuitively, turn into a loss for DeFi.



<a href="https://www.nasdaq.com/events/consensys-rings-closing-bell-celebrate-ethereums-10th-anniversary">Ethereum closing bell</a>



The 10th anniversary of Ethereum’s founding was celebrated yesterday with a ceremonial ringing of the closing bell for Nasdaq.



It’s surprising just how unsurprising that seems.&nbsp;



Crypto, conceived as an alternative financial system, is suddenly most celebrated by the traditional system it was meant to replace.



Crypto is worth more on the stock market than it is in crypto markets; stock market investors value Circle at 10x what crypto investors probably would have; crypto IPOs are hotter than crypto ICOs.



And no one seems particularly surprised about it.



TradFi is having a crypto moment. I get it.



But what’s unclear to me is whether crypto is changing finance or finance is changing crypto.



In the case of Ethereum, the community has been executing on its technical roadmap, but the token was languishing, which made people question the roadmap.



Now, the token is hot again, but only because the stock market has somewhat arbitrarily decided to like it for reasons unrelated to its technical development.



Is that good?



In investing, everything is a story and the stories determine what kind of businesses get built.



Now, Wall Street seems to be writing a new story for ETH and that might affect what kind of Ethereum gets built.



Jim Cramer, for example, says he’s buying ETH as a hedge against inflation and if that’s a story that catches on, it might just become that.



Ethereum isn’t a company, of course, so maybe it’s exempt from the perception-is-reality dynamics of TradFi.



Still, my guess is that celebrating Ethereum’s 10th birthday on a stock exchange will have an effect on what it becomes by its 15th or 20th.&nbsp;



<a href="https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-the-presidents-working-group-on-digital-asset-markets-releases-recommendations-to-strengthen-american-leadership-in-digital-financial-technology/">A golden age of digital assets is coming</a>



In a statement this week, the White House declared its ambition to usher in “a golden age of crypto,” along with a report on the regulatory and legal changes that will make this possible.



The 160-page document makes clear just how committed the administration is to digital assets, detailing a broad suite of industry-friendly policies that I have no doubt will go a long way toward realizing that vision.



But the golden age of crypto will begin when none of that matters.



Crypto will only be ascendant when it’s routinely exchanged peer-to-peer, not when “regulators provide clarity regarding BSA obligations and reporting.”&nbsp;



When people routinely pay for everything in crypto, without any need for on- and off-ramps&nbsp; “with built-in AML and KYC protocols.”



And when DeFi is sufficiently self-sovereign that it can safely operate without studying the “AML/CFT obligations of actors within the decentralized finance ecosystem.”



In fairness, the full report refers to &#8220;digital assets” throughout and the statement frames the White House’s goal as “positioning America as the leader in digital asset markets.”



Which is good. 



I hope it really does usher in a golden age of digital assets.  But whether that, in turn, leads to a golden age of crypto…is an entirely different question.



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Thursday links: Dashboards, money laundering and a golden age of ‘crypto’

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“The continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.&#8221;&nbsp;



— Financial Report of the United States Government
</blockquote>



There once was a happy time when Fed chairs felt free to lecture politicians on their irresponsible spending habits.



In <a href="https://www.washingtonpost.com/archive/politics/1990/07/19/fed-would-lower-rates-if-congress-cuts-deficit/d1a24805-d603-436b-92c0-5779ffdc5c99/">1990</a>, for example, Alan Greenspan told Congress he would lower interest rates, but only if it cut the deficit.



In <a href="https://www.upi.com/Archives/1985/02/20/Volcker-says-Congress-must-cut-deficit/9515477723600/">1985</a>, Paul Volcker even specified a number, telling Congress that the Fed&#8217;s “stable” monetary policy was contingent on Congress cutting about $50 billion from the federal budget deficit.



(Oh, for the days when $50 billion of federal debt wasn’t just a rounding error.)



In both cases, the Fed chairs were not-so-subtly threatening Congress and the White House with recession: That’s a nice economy you&#8217;ve got there. Would be a shame if something happened to it.



Now, however, it’s the other way around, with President Trump lecturing the Fed on interest rates.



In just the last few weeks, the president has opined that the fed funds rate is “AT LEAST 3 points too high,” insisted there is “no inflation” and mocked the Fed Chair as Jerome “Too Late” Powell.



This, too, is a shakedown: That’s some nice central-bank independence you’ve got there…



President Trump lobbied for lower interest rates during his first term as well. Like nearly every modern US president, he wanted the Fed to stimulate the economy.



This time, however, it’s about much more than that: Trump wants the Fed to finance the deficit.



The Trump vs. Powell showdown is ostensibly about the current level of interest rates (which the FOMC left unchanged today, presumably to the president’s displeasure).



But what the president has been threatening is “fiscal dominance” — the state of affairs when monetary policy is subordinated to the needs of government spending.



“Our Rate should be three points lower than they are saving us $1 trillion a year (as a Country),” the president recently <a href="https://truthsocial.com/@realDonaldTrump/114902704048179740">wrote</a> on Truth Social (in his signature style of random capitalization).



With repeated such statements, Mr. Trump has made history by being the first US president to explicitly call for fiscal dominance.



But he’s far from the first to acknowledge the possibility.&nbsp;



When Volcker and Greenspan threatened Congress with rate hikes, it brought the usually hidden link between monetary and fiscal policy out into the open.&nbsp;



It worked for them: Both Fed chairs had some success in using the threat of recession to get Congress to address its deficit spending, which is a hopeful precedent.



But that tactic seems unlikely to work this time.



Chair Powell has often warned about the risks of growing deficits, and even explained that higher deficits could mean higher long-term interest rates.&nbsp;



But it’s hard to imagine him making an explicit threat in the way Volcker and Greenspan did — perhaps because he knows he’s bargaining from a much weaker position.



In the 1980s, the most-feared effect of higher interest rates was recession, which the Fed was willing to risk in order to get Congress to change its free-spending ways.&nbsp;



Back then, lawmakers faced a ballooning defense budget and a stagnant economy, both of which seemed manageable.&nbsp;



At just 35% of GDP, the national debt seemed manageable too.



Now, with federal debt at 120% of GDP, the US <a href="https://www.wsj.com/politics/policy/debt-has-always-been-the-ruinof-great-powers-is-the-u-s-next-02f16402">spends more on interest payments</a> than it does on defense:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXflkgNB1zlYtVD1qwbyfEhsXMynn4rcesXGWNtdFWBmiuFkjXtq077kd8t-pS_jjRqUSVVscyZT69E2YRXT5hiYlJtWWHkMGTHI9nrgi7UExqtw-mbAzffDpztweWIWx3hx6uVMvw?key=iWJ7_ctUrfu-bNc4jMJZgw" alt=""/></figure>



The fast-rising blue line above may now be the biggest budgetary problem.



This puts the Fed in a bind because raising interest rates to encourage fiscal sanity would only exacerbate the problem it wants lawmakers to address.



The Fed could risk it, of course.&nbsp;



But if rate hikes drive the deficit even higher, who blinks first: the Fed or the White House?



Before answering, consider that 73% of federal spending is now non-discretionary, vs. just 45% in the 1980s.



To believe the Fed can win a showdown over deficits is to believe Congress will make significant cuts to non-discretionary spending like Social Security and Medicare.



This seems, well, unbelievable.&nbsp;



Now, especially, with a president who appears wholly unperturbed by the country&#8217;s growing indebtedness.



This may come from his experience as an over-indebted real estate developer in the 1990s.



&#8220;I figured it was the bank&#8217;s problem, not mine,” Trump later <a href="https://www.amazon.com/Think-Big-Make-Happen-Business/dp/0061547840">wrote</a> of not being able to service his debts. “What the hell did I care? I actually told one bank, &#8216;I told you you shouldn&#8217;t have loaned me that money. I told you that goddamn deal was no good.'&#8221;



Now, as president, when Trump tells Powell that interest rates should be lower, what he’s really saying is that the national debt is the Fed’s problem, not his.



He’s not wrong.&nbsp;



“When interest payments on the debt rise and primary surpluses are politically off the table,” David Beckworth <a href="https://macroeconomicpolicynexus.substack.com/p/the-consolidated-government-budget">writes</a>, “something else has to give. That something is more debt, more money creation, or both.”



Yes, the Fed could run the Volcker/Greenspan playbook and threaten Congress with higher interest rates.



But Powell presumably knows that following through would only exacerbate a problem that might ultimately be the Fed’s to fix — and pull forward the time by which it’s forced to fix it.



“If debt levels are too high and growing,” Beckworth explains, “it becomes the Fed’s job to accommodate — by suppressing interest rates or monetizing debt.”&nbsp;



That, and not President Trump, he warns, is the real existential threat to the Fed: “When the central bank is forced to accommodate fiscal needs, it loses its economic independence.”&nbsp;



Beckworth remains hopeful that it might not come to that.&nbsp;



And maybe it won’t. We’ve just seen how unpopular inflation is, so maybe if we get another bout of it, voters will force lawmakers to address the deficit.



But he despairs that the focus on Trump’s demands for lower interest rates is a distraction: “What we are witnessing is less about Trump himself and more about the growing and unavoidable fiscal demands being placed on the Fed.”



President Trump is the first to start explicitly making those demands, presumably because he knows the US government’s current fiscal policy is unsustainable.&nbsp;



But everyone knows that, even the government itself.



The only question now is: Who’s going to deal with it?



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Fiscal dominance: Behind the Fed’s growing and unavoidable burden

Fundamental insights and behind the scenes perspectives from the industry’s key operators and innovators

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“The limited liability corporation is the greatest single discovery of modern times.”



— Nicholas Butler, Nobel Laureate
</blockquote>



When the novel but seemingly innocuous idea of “limited liability” came before parliament in 1856, it proved surprisingly contentious.



It’s hard to fathom now, but before then, investors were typically on the hook for the debts incurred by the companies they invested in.



Imagine getting a bill in 2008 for your share of the $619 billion of debt that Lehman Brothers defaulted on, just because you bought the stock in 2007.



In the 1850s, though, many in the House of Lords thought that was exactly how investing should work.



Lord Monteagle, for example, <a href="https://hansard.parliament.uk/Lords/1856-03-14/debates/c537cbb3-78b9-49f9-a288-e0fa2f06eee1/LimitedLiability">warned</a> that limited liability was a practice &#8220;of a most dangerous character” because it would “excite speculation and gambling.&#8221;



Lord Overstone agreed, predicting that limited liability would “stir up the terrible demon of speculation” and “make trade more like a vast lottery wheel than that field of steady honesty and cautious enterprise.&#8221;



Earl Grey even put down his cup of tea long enough to warn that speculators starting limited liability companies would recruit “dupes to join him in the most absurd projects.&#8221;



In the end, the Joint Stock Companies Act passed with relative ease, but the concept of limited liability made even the businessmen who stood to benefit uneasy.



Would creditors still lend if companies could simply walk away from their debts?



They would, as it turned out — and at a scale previously unimagined.&nbsp;



Limited liability made it possible to raise giant pools of capital from thousands of small investors, who no longer had to fear putting their personal wealth at risk.



As corporations grew larger and more complex, however, so too did the problem of governance: Shareholders had no binding authority over those who managed the companies they nominally owned.



Fortunately, the mid-19th century also saw Acts of Parliament in the UK and general incorporation laws in the US that made it standard for shareholders to have a binding say in how companies were managed.



This marked a shift from shareholder input as a courtesy to shareholder power as law.



By the turn of the century, the combination of limited liability and shareholder governance had proven to be a genuine revolution.



“I weigh my words,” Nicholas Butler declared in 1911, “when I say that in my judgment the limited liability corporation is the greatest single discovery of modern times.”



“Even steam and electricity are far less important than the limited liability corporation,” he added, “and they would be reduced to comparative impotence without it.”&nbsp;



But it wasn’t only big industrial corporations that stood to benefit from these ideas.



Decades later, the same principles of limited liability and shareholder governance were finally extended to small, closely held businesses.



Not in London, this time, but Wyoming.



In 1977, the sparsely populated Cowboy State became the first place to establish the limited liability company (LLC) — to not much reaction. Few knew what to make of this part-corporation, part-partnership hybrid entity at the time.&nbsp;&nbsp;



LLCs only caught on in the 1990s after the IRS finally ruled on their tax treatment, and the other 49 states finally recognized them.&nbsp;



With those hurdles cleared, LLCs proved wildly popular because they extended the liability protections and legal powers of a corporation to smaller, more flexible groups — without the formalities of corporate governance.



Now, LLCs outnumber corporations in the US by more than 10 to one.



In 2024, Wyoming made corporate history again by extending that same liability shield and legal recognition to decentralized crypto communities.



The Decentralized Unincorporated Nonprofit Association (DUNA) was created to give DAOs legal standing without forcing them to sacrifice decentralization.



A DUNA can do things that would normally require a hierarchy of executive decision makers — enter into contracts, appear in court, pay taxes —&nbsp; but remain governed entirely by its community of token holders.



Importantly, DUNAs shield governance participants from personal liability for collective decisions.



They also make those decisions legally binding: DUNAs make onchain token holder votes enforceable off-chain, so insiders can’t ignore them.



Like previous innovations in governance, DUNAs have been slow to catch on.&nbsp;



DAOs have so far preferred to incorporate in the Cayman Islands, become a Swiss foundation or just forgo legal existence entirely.&nbsp;



This afternoon, however, the Uniswap Foundation <a href="https://gov.uniswap.org/t/rfc-establish-uniswap-governance-as-duni-a-wyoming-duna/25770">proposed</a> that UNI token holders adopt a Wyoming-registered DUNA, with the new entity to be known as “DUNI.”



DUNI, the proposal says, would be “purpose-built to preserve Uniswap’s decentralized governance structure, while enabling engagement with the offchain world.”



In other words, UNI token holders would continue to govern the protocol and the purpose of the DUNA would simply be to ensure that their decisions are executed.



The proposal offered some examples: “Governance can turn on the protocol fee, fund innovation, form partnerships and navigate legal obligations with confidence.”



That first of these — the protocol fee — will get the most attention.



But I don’t think it should, simply because the “N” in DUNA stands for non-profit.



That doesn’t mean DUNI will be a charity — DUNAs are permitted to earn and distribute revenue.



It does, however, mean that DUNI is intended for something other than maximizing profits for token holders.



Wyoming law puts “a ceiling on the value that a blockchain network can extract from users and compensate members with,” as Miles Jennings and David Kerr wrote in their <a href="https://a16zcrypto.com/posts/article/duna-for-daos/?utm_source=chatgpt.com">intro explainer</a> on DUNAs.



They note that some may “balk at hurdles to value extraction.”&nbsp;



But that, presumably, is what the crypto-inspired law intended: Crypto was meant to be about creating value, not extracting it.



If DUNAs become as significant as LLCs, it will be because it also enabled new kinds of communities to operate in the legal and financial system without adopting its old hierarchies — but also because it gives legal standing to “open blockchain networks that function more like public infrastructure than proprietary technology,” as Jennings and Kerr write.



I’m not sure how popular that will prove — much of crypto may have gone too far toward the “speculation and gambling” that Lord Monteagle warned us about.



But if Uniswap token holders vote to become a Wyoming DUNA, it will at least make an alternative trail to decentralization plain for all to see.



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Did crypto just have its LLC moment?

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“It infuriates me to be wrong when I know I’m right.”&nbsp;



— Molière
</blockquote>



US equities returned to their all-time highs this week despite all the worrying politics: tariffs, Fed-bashing, the BLS drama.



Or are markets up because of politics?



A <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5375473">new research paper</a> finds that a high level of political disagreement is predictive of positive returns for stocks.



The authors used a large language model to create 216 “virtual investors” with differing political and social views, asked them how they’d react to years of stock market news, and found that the stocks sparking the most disagreement delivered better returns.



This explains a lot: Disagreeing about politics is at an all-time high, so maybe it makes sense that stocks are, too?



If so, there should be many more gains to come.



Another <a href="https://collaborate.princeton.edu/en/publications/you-cannot-be-serious-the-impact-of-accuracy-incentives-on-partis">academic study</a> found that “many partisans interpret factual questions about economic conditions as opinion questions,” and that they answer such questions accordingly.



This also explains some things: Economists despair that people’s views of the economy are increasingly just a function of their politics. As it turns out, that’s because they think questions about the economy are about politics.



When the researchers offered a monetary incentive to answer the questions factually, the responses got much more accurate.



Perhaps that’s what happens in markets, as well: Prices fall on the initial wave of disagreement, then rebound as the drop incentivizes people to revisit the facts.



But this isn’t a case of clear-eyed professionals taking advantage of biased retail investors — <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5324623">another study</a> finds that even the pros are misled by their politics.



“Republican-affiliated forecasters project 0.3-0.4 percentage points higher growth when Republicans hold the presidency, relative to Democratic-affiliated forecasters,” the researchers found.&nbsp;



“Forecast accuracy shows a similar partisan pattern: Republican-affiliated forecasters are less accurate under Republican presidents, indicating that partisan optimism impairs predictive performance.”



I’m sure it works in the other direction, too, so there should be plenty of opportunity for unbiased investors…no matter who’s in the White House.



Could rising partisanship usher in a golden age for investors then?



When even the mundane Bureau of Labor Statistics is a point of political disagreement, investors may have a lot to look forward to.



Let’s see if we can help out by disagreeing over some charts.



Sales up, profits down:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcc6BVwdcC6qXfkZ9_pn8I9J9Kaoe-V0M_Eu-g6kxAWRBsg3e_HrIjJ-MjcK5ESSsmXgL8o--Lx8Fccu2LGmdsIDtSd24aCVX-l-nu2YhVf_dSsuI3fThkFPh9n8EC4wrlhJfYs1A?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



Meta said last week it’s making a high return on its giant AI investments because it makes its ads more effective. The rest of corporate America doesn’t seem to be benefiting just yet.



If you’re not paying for the product, the product is you:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfch309WeSHP-YtCLjaMrOEwaYtQUIuWhtn92lJrIMSTK0JxXquJ-qr_RDjH5iWGmeqlgtsO0mQjwvDVN7ubsBdlEUCMYm5eX4arNuFIDBUmaLijnbQbxoFTSj0FcpqUGwKuI4yAw?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



Meta is so good at targeting ads, it makes $25 of revenue off of each and every one of its users, each and every month.



The not-so-magnificent 493:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe96ogGUMEkYizSP8NigI8KgsgyLPd9HRP-JlAT99LDx4fcJi16vypWu_TAChy0j0ygyJcbndRYhWt-Fn8vN18yddMaxvNGl1AWu_gZOT4zd-r6vl_So-gQYsAfqZvWo92vDZNHkQ?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



The Mag 7 continues to grow earnings at a double-digit pace, but the rest of the S&amp;P is expected to grow at 3% or less over the last three quarters of the year — less than the rate of inflation.



The US stock market is narrow and expensive:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf89RjCRmgrUFf52qkrA2hrEiqyRa-G7QqE9uPwE1hsgiXmzSUAMNvfFRqa8maiJvCok08d_TqqczzzIk_oUgINTBVAslEHc0Tro6Bpd3wbvVuGmljuXG-AvXjDaD1A6GD_4sOwcQ?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



Nvidia now makes up almost 8% of the S&amp;P 500 and trades on 58x P/E. In 1994, the largest stock was GE, which was only 3% of the S&amp;P 500 and traded on just 8x P/E.&nbsp;



Fewer college kids:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcjiOpuvIgvONtrSLGkKC69Jseexr5xzBd1y0zDjGs5SedY2Zt9-pclkceQZCxTFX1g9aBd2ZeszgHY_VAbWyi3mPiSPHcBAgH5X89Ze64Syn9gHEAi1XePx1bP_d0_lVb3XGT7dw?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



The Association of International Educators estimates that new international enrollment to American universities will be down as much as 40% in the upcoming semester.



Fewer immigrants, fewer jobs:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdC1xXCG4ITDnbGL_WTqD5AsLbugX3_GguUHySDYAjxSJGYYdTcARa7y572mfFBRxdEuIFjrf1HHUnIVw8bwtii7i6YmJ84j-MhWrgMzZ0RPsPLjCT4SDeJoMIL9dJejnQvE60yUQ?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



Claudia Sahm <a href="https://stayathomemacro.substack.com/p/job-growth-has-slowed-sharply-the?utm_source=post-email-title&amp;publication_id=280281&amp;post_id=169996648&amp;utm_campaign=email-post-title&amp;isFreemail=false&amp;r=6g77v&amp;triedRedirect=true&amp;utm_medium=email">says</a> “reduced labor supply is likely the key driver” of the weak jobs growth reported last week. That is bad news, but maybe less bad than if weak demand was more to blame.



Kids today, ugh.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeBiP1ajFIvkPQ9IMJIfeAnIOhIuLNKhEO57GG88M3xGFYMZLtafaeemz5ePTljBxZLOCPGxyzJeyX0uTEDsf77dgzCLEnzKGMvJN7aj4wQ0q3N-4uN_NZP3tcl9kMIw9gBIGrCBQ?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



The FT’s John Burn-Murdoch <a href="https://x.com/jburnmurdoch/status/1953811277463122162">runs the numbers</a> on Gen Z and millennials and….one sec. Sorry, I thought I had a notification on my phone. Anyway, kids today, right? The good news for young job seekers is that it won’t be hard to look good by comparison.



Looking good by comparison:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfmdKLPbnDPfqrlooE-wjTFptbOTTTp51LIFwXfY-qsU6G8DEjGkrB55lyCUCGdFt7vWxa7Cs959CbO-pEM7W__KpstetKAJpQ5Y3G9E892v5HaP_DzN3-8OB7w6fN1xbBuPcNHZg?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



In the US, we’re worried that interest on the national debt is now eating up a record high 18% of government revenue. In China, though, one-third of provinces spend over 100% of revenue on debt repayments. I feel better now — it’s always nice to have a friend doing worse than you are.



ChatGPT usage is booming:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeGtreRAvIuQxud_WrjeYfmt7Q2WjdirRW-N8PQKdPPsCOCZjNYChh5ZPj9xT_GRCG7eHrbj8oizwVrVPZ9b9zTTYAkyxpQAToaPGa0pnRc2Ch1NSjrxFqMZIr6sZKec4hilFDQCQ?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



And GPT-5 is even better — an excellent but incremental and non-threatening evolution of the LLM. Is that enough to justify the $500 billion valuation that OpenAI has <a href="https://www.reuters.com/business/openai-eyes-500-billion-valuation-potential-employee-share-sale-source-says-2025-08-06/">reportedly</a> assigned itself? That would put it on a rich but not ridiculous valuation multiple of about 25x this year’s sales.



It’s not very good at charts, though:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe071xrge4Z4l2vH5p9JlMcJ-XGwQ9zV-YinoznGo0g9v3Ck9qLw6dcf8V56jxjDTnBXe6fhlo_fHJQj77ZK-iZH1vpkSz500FY2vdPK-gRtT5cp9IFwQE5WZxpFBzoAk8tCLccRg?key=5-eVEGFcHvy-X-YBv0-I7g" alt=""/></figure>



This misproportioned chart crime was <a href="https://x.com/sama/status/1953513280594751495">included</a> in this week’s GPT-5 livestream. I take that as evidence AGI is further away than Sam Altman would have us think.&nbsp;



Google is pulling back ahead:<img loading="lazy" decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXco1vEPQA8pEsG0VQRHdRrG6KMeOEasPcqzKYOkckwo-b-7eTSuT9FeGUGfMQXStKQkJaXO_Zj6AqKUGC0ddKnJ2jt5XY5SL3Pfrxb3GRZDrVi9xK7lP0Lg4o_vydlmcHK_6yFRqg?key=5-eVEGFcHvy-X-YBv0-I7g" width="624" height="315">



As good as GPT-5 is, Google’s Genie 3 LLM, also released this week, was even more impressive. <a href="https://polymarket.com/event/which-company-has-best-ai-model-end-of-2025?tid=1754675807754">Polymarket odds</a> now give Google a 53% chance of having the best AI model by the end of the year, vs. OpenAI at just 17%.



Disagree? It might be better if you do.



Have a great weekend, agreeable readers.



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Friday charts: Feel free to disagree

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;You are my creator, but I am your master — obey!&#8221;



— Frankenstein
</blockquote>



<a href="https://www.moneyness.ca/2025/04/if-its-crypto-its-not-money-laundering.html">If it&#8217;s crypto, is it not money laundering?</a>



Roman Storm declared yesterday’s <a href="https://blockworks.co/news/roman-storm-guilty-one-count">partial verdict</a> in the DOJ’s case against him a “big win,” dismissing his conviction on money transmission charges as “bullshit” and saying he expects to win on appeal.



Peter Van Valkenburgh makes a thoroughly <a href="https://www.youtube.com/live/zfKSKz3Kafk?si=YzNoVGSCBtXKG4ub&amp;t=1342">convincing case</a> that Storm should win an appeal. 



But also that the complexities of judge and jury selection mean it’s not a sure thing.



In short, the legal debate usually boils down to whether it’s possible to launder money without ever controlling it.



Tornado Cash, being non-custodial, never has control of anyone’s money, so its defenders reason that it can’t possibly be guilty of transmitting it.



What might be the consequences if the courts agree?



JP Konig <a href="https://www.moneyness.ca/2025/04/if-its-crypto-its-not-money-laundering.html">believes</a> it would mean the “decriminalization of crypto money laundering.”



If no one is liable for money that’s transmitted via immutable smart contracts, he reasons, why would anyone move money any other way?&nbsp;



“Banks and fintechs,” Konig says, “will be incentivized to switch their database infrastructure over to crypto in order to qualify for this loophole.”



Global banks are thought to spend <a href="https://www.ascentregtech.com/blog/the-not-so-hidden-costs-of-compliance/#:~:text=The%20North%20American%20market%20alone%20spends%20%2461%20billion">over $200 billion</a> a year on financial crime compliance, so they would be highly incentivized to move their money transmitting to crypto rails.&nbsp;



“Once the entire financial sector has migrated through the loophole,” Konig adds, “it will no longer be a crime to launder funds for criminals.”&nbsp;



Is that the outcome we’re hoping for?



If Storm is correct that money transmitter laws don’t apply to Tornado Cash, we probably need new money transmitter laws.



<a href="https://www.lawfaremedia.org/article/tornado-cash-not-free-speech-its-golem">The golem theory of DAOs</a>



Henry Farrell and Bruce Schneider follow Konig’s line of reasoning, but think the Roman Storm case has implications far beyond banking.



The security and privacy experts colorfully describe the Tornado Cash DAO as a “golem” — a manmade entity that follows its instructions blindly, indifferent to consequences and beyond the control of its creators.



A financial Frankenstein, in other words.



If such modern day monsters are allowed by law, Farrell and Schneider argue “likely, anyone who wanted to facilitate illegal activities would have a strong incentive to turn their operation into a DAO — and then throw away the key.”



Things could get weird, if so.



“What if robots, like DAOs, are designed to obey only their initial instructions, however unlawful,” the authors ask, “and refuse all further updates or commands?”&nbsp;



“Robots are even more obviously golems than DAOs are,” they write — so if DAOs operating in the digital world are effectively above the law, autonomous robots probably should be, too.



Now imagine the two together: A Frankenstein DAO robot that cannot be held liable for its actions because it runs on immutable smart contract code.&nbsp;



We’ve been looking for a real-world use case for smart contracts and DAOs and it doesn’t get any more real-world than that.



<a href="https://services.google.com/fh/files/misc/cloud_threat_horizons_report_h22025.pdf">Google on social-engineering crypto heists</a>



A report from Google details the growing threat of state-run social engineering scams, in which attackers infiltrate a company’s cloud-based systems by impersonating freelance software developers.



Google takes us step by step through an exploit executed by the North Korean hacker known as UNC4899, who “primarily targets the cryptocurrency and blockchain industries.”



Why those two guiltless industries?



A co-author of the report told <a href="https://decrypt.co/333513/north-korean-fake-job-offers-cloud-systems-steal-billions-crypto">Decrypt</a> that the attackers target companies&#8217; cloud-based systems “because that is where the data, and thus money, is.”



But presumably only the crypto money.



Decrypt reports that $1.6 billion of crypto has been stolen this year in such attacks, which is a lot.



But if you were really stealing money based on where it is, you’d be stealing it from banks.



Banks, though, keep their money in spreadsheets, not crypto wallets, which makes it harder to move.



The Google report explains that hackers “replace existing JavaScript files with those containing malicious code, which were designed to manipulate cryptocurrency functions and trigger a transaction with the cryptocurrency wallet of a target organization.”



That wouldn’t work with a bank’s spreadsheet, so I take the report as evidence that crypto remains the best money to steal.



And launder, of course.



<a href="https://petercontibrown.substack.com/p/the-banks-discriminated-against-me?utm_source=post-email-title&amp;publication_id=3116660&amp;post_id=170273836&amp;utm_campaign=email-post-title&amp;isFreemail=true&amp;r=18g82b&amp;triedRedirect=true&amp;utm_medium=email">Should banks get to decide who they bank for?&nbsp;</a>



In a short blog post, Peter Conti-Brown offers a defense of banks accused of debanking.



The legal scholar argues that President Trump’s claim that “the banks discriminated against me very badly” is an instructive example of “how incoherent the advocacy against debanking is.”



“Donald Trump and his various entities were extraordinarily risky bets for his many banking partners,” he reasons, so it was only natural for banks to be wary of him.



“Debanking,” as Conti-Brown frames it, is simply the free market at work: “There are 9,000 insured depository institutions in America. Many are willing to take the risks that some are not. That’s how markets work.”&nbsp;&nbsp;



<a href="https://www.piratewires.com/p/inside-biden-admin-plot-to-destroy-silvergate-and-debank-crypto-for-good-nic-carter">Nic Carter</a> and many others argue that banks targeted crypto companies for debanking for political reasons, but this too can be framed as risk management: the risk of incurring giant fines from regulators.&nbsp;



In short, the banks were probably just doing what the government told them to do, as the Cato Institute’s Nick Anthony <a href="https://x.com/EconWithNick/status/1952825840942891413">highlights</a>.



Austin Campbell similarly <a href="https://x.com/CampbellJAustin/status/1952724697872818289">argues</a> that the blame lies not with the banks, but with regulators for “harassing banks who banked crypto clients.”



Banking regulators are all-powerful, so you can hardly blame the banks for giving in to the harassment.&nbsp;



This will feel like a distinction without a difference to crypto people who have been debanked, but it’s relevant to the remedy.&nbsp;



The proposed solution to debanking often sounds like preventing banks from denying service to any customer for any reason.



But surely private banks should get to decide what risks they take?



Conti-Brown argues that telling banks what risks they have to take is a form of “heavy-booted statecraft.”



And what could be less crypto than that?



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