Macauley Peterson

The Cosmos ecosystem is entering a new chapter with the Interchain Foundation’s (ICF) acquisition of Skip and the establishment of Interchain Inc. The move represents a pivot from the ICF’s historical funding of disparate teams toward a more centralized and cohesive approach.



The new subsidiary, led by Skip co-founders Barry Plunkett and Maghnus Mareneck, will take charge of product development, ecosystem strategy and execution, the ICF <a href="https://blockworks-research.beehiiv.com/p/cosmos-comeback">announced</a> earlier this week. On Thursday, a “community town hall” <a href="https://x.com/cosmos/status/1867226763883172007">X space</a> shed additional light on what to expect in 2025.



<h2 class="wp-block-heading">A unified stack</h2>



<a href="https://blockworks.co/tag/cosmos">Cosmos</a> has long been heralded for its modular technology stack, including Cosmos SDK, IBC, CometBFT, and CosmWasm. However, Plunkett described a lack of coordination in the ecosystem’s growth.



“There wasn’t any cohesive overarching connection,” Plunkett told Blockworks. “Each of them was going off in their own direction.”



Read more: <a href="https://blockworks.co/news/cosmos-ethan-buchman-blockchain-convergence">Uniting the blockchain ecosystems: Q&amp;A with Cosmos founder Ethan Buchman</a>



Interchain Inc. aims to bridge these silos, including major “version 2” upgrades to both IBC — known as Eureka — and the Cosmos SDK. The SDK upgrade promises a 10–25x performance boost, while IBC Eureka simplifies the Interchain interop protocol to enable faster integration with non-Cosmos chains like Ethereum, EVM rollups and Solana.



“It’s a massive simplification of the IBC protocol that’s really going to allow the ecosystem to connect to other chains beyond [Cosmos]&#8230;in days or weeks,” Plunkett said during the X space.



In other words, Eureka “is like if ‘IBC Classic’ and Hyperlane had a baby,” as Cosmos-veteran builder Zaki Manian put it on the latest edition of the <a href="https://blockworks.co/podcast/bellcurve">Bell Curve podcast</a>.



Another cornerstone of the new strategy is expanding virtual machine (VM) support. An open-source EVM is in the works, with the team in discussions with projects like Injective and Cronos to consider adapting their <a href="https://blockworks.co/tag/evm">EVM</a> implementations.



“Most Cosmos chains want a simple, reliable and free path to add EVM functionality,” Plunkett said, emphasizing that Solidity contracts will be able to interact seamlessly with Cosmos SDK modules and vice versa.



Cosmos chains will also gain the flexibility to run any VM. “Users shouldn’t have to say, ‘If I’m going to build a Cosmos chain, then I can’t use whatever VM I want,’” Plunkett added.



<h2 class="wp-block-heading">The role of the Cosmos Hub</h2>



Addressing liquidity fragmentation across chains is a major priority for the Interchain Inc. team. Cosmos’ architecture, which empowers individual chains to operate independently, has inadvertently led to isolated liquidity pools. This hurts the overall ecosystem and discourages developers.



Read more: <a href="https://blockworks.co/news/devcon-panelists-talk-fragmentation">Unified Ethereum? Devcon panelists take on fragmentation challenges</a>



Liquidity gets stuck on one chain and isn’t accessible from other chains, Mareneck said on X, adding, “One of the things we want to do is really unite that liquidity so that it’s more accessible from more applications, so we can use the full weight of Cosmos liquidity.”



The Cosmos Hub is central to this strategy. By providing liquidity services and reducing friction for developers, the Hub could position itself as the ecosystem’s growth engine.



Permissionless Interchain Security (ICS) will make it easier for projects to onboard to the Hub. Whereas initially chains had to apply to Hub governance to make use of ICS, that’s no longer the case.



Interchain Inc. is also focused on simplifying the developer experience, ensuring the Cosmos Hub provides essential services.



“We need to make it easier for builders and ensure the Hub provides services to grow and scale chains,” Plunkett said.



Read more: <a href="https://blockworks.co/news/electric-capital-report-solana-developers">Solana gained highest share of new devs in 2024: Electric Capital</a>



The Skip team’s reputation for collaboration is going to be key for realizing this new Hub vision.



“We have relationships at Skip with a lot of different projects…we want to continue to do that, working from the platform of the Cosmos Hub,” Mareneck said.



Skip has focused on providing services for builders and useful products for users, such as Skip Go, which now powers over half of all IBC volume, Plunkett said on Bell Curve.



Rather than enforcing participation, the team will offer “carrots, not sticks,” to align incentives and foster growth.



By consolidating development and focusing on liquidity and accessibility, the ICF hopes to create a more unified and dynamic ecosystem, reigniting the vision of Cosmos as the “Internet of Blockchains.”



Outgoing ICF board member Ethan Buchman, a co-founder of Cosmos, sees this move as a chance to reinvigorate the ecosystem and bring fragmented pieces together.



“We’ve been struggling with the organizational challenges and fragmentation,” Buchman told Blockworks. This is really the first time I think we’ve taken a kind of revolutionary step to address that.”



“It’s like I’ve been trying to put together the pieces of Humpty Dumpty for so many years and finally, we just went and recruited Batman,” he said.



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What changes for Cosmos after Skip acquisition?

Donovan Choy

Ethereum loves rollups. As of late, “based” rollups are in vogue.



What makes based rollups special? Its sequencer.



Layer-2s today use a trusted centralized sequencer to order users’ transactions before they are posted down to the layer-1 for settlement, but based rollups defer those execution duties to Ethereum layer-1 validators. This is otherwise known as “based sequencing.”



There are two primary reasons this is preferable: censorship resistance and interoperability.&nbsp;



Using the layer-1 as a sequencer ensures the same liveness guarantees as Ethereum layer-1 blocks, and avoids the major complaints of potential censorship surrounding trusted centralized sequencers.



Read more: <a href="https://blockworks.co/news/solana-gaming-startup-open-sources-validator">MagicBlock open sources a16z-backed ‘ephemeral rollup’ tech</a>



The second advantage of based <a href="https://blockworks.co/tag/rollups">rollups</a> is better interoperability. Based rollup proponents such as Justin Drake have in recent months touted this benefit as “<a href="https://www.youtube.com/watch?v=Gd7phVLbIug&amp;list=PLbig0e-vh2_NJFaz52OvMI2sVAH-Ys3cg&amp;index=13">synchronous composability</a>,” where transactions in Ethereum are sequenced (or bridged) across different layer-2s at the same time.&nbsp;



Simply put, smart contracts on based rollups will be able to call any other contract on the layer-1 in near-instant finality within the same block — as if they were all on the same chain.&nbsp;



This composability and “money legos” is not exactly new; it was always one of the core properties sold with the original vision of Ethereum.&nbsp;



Read more: <a href="https://blockworks.co/news/ethereum-consensus-beam-chain">Rethinking Ethereum consensus with Beam Chain</a>



But the fragmented state of rollups today means an Arbitrum transaction is asynchronous with an Optimism transaction, which creates problems of fee uncertainty. Fee uncertainty arises because gas fees are calculated in different slot times, as opposed to within the same 12-second slot time of one Ethereum block.



In addition to making <a href="https://blockworks.co/tag/ethereum">Ethereum</a> seamlessly interoperable again, there are also different kinds of significant cost savings, Ahmad Mazen Bitar, technical product lead at Nethermind and Ethereum ACD developer, explains.



“A user may want to swap his token on the [layer-1] but wants to take advantage of a deep liquidity pool on a [layer-2]. With synchronous composability, they would be able to push a singular transaction from the [layer-1] to the [layer-2], execute it, then bring it back to the [layer-1].”



The first and largest existing based rollup in live production today is Taiko, which recently saw a burst in TVL and <a href="https://www.growthepie.xyz/fundamentals/transaction-count">daily transactions</a> this month.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcSshW_LxuAsTAPdJPBsmFSYCeOK4mvz6jUIPZsiH9BzggfKmL6hFhNyXliEB_vybOQKMrfiRlG4_Pw2ilUqt1tdOBDrJvzxN0L53KzcmihfFc9hZvjNqdYHGZDXhVvZ3aRaAQmDg?key=Rl9_47v-Y4PsPBhkDrDbDXP6" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://defillama.com/chain/Taiko">DefiLlama</a></figcaption></figure>



Other early based rollups are also in early production, such as <a href="https://x.com/NethermindEth/status/1854150431448109155">Surge</a> by the Nethermind team, and <a href="https://docs.puffer.fi/">UniFi</a> by the Puffer Finance team. Both are forks of Taiko.



Based rollups don&#8217;t come without its own drawbacks, however. Since execution (i.e. sequencing duties) is now being relegated back to layer-1 block validators, that means based rollups are constrained by the layer-1’s 12-second block time.



Hence, the purported benefits of based rollups, like synchronous composability, may be easier said than done. Based rollups would require real-time proving within the latency of one 12-second slot, without which based rollups cannot execute composable transactions speedily.



To have that kind of fast proof generation in turn brings another technological dependency into the mix, but Brecht Devos, co-founder and chief technology officer of Taiko, remains confident the tech is catching up.



It’s why Taiko recently <a href="https://x.com/taikoxyz/status/1855990091946295477">enabled</a> two zk proofs on its rollup by Risc Zero and Succinct Labs, on top of Intel’s SGX trusted execution environment (TEE). This made it the first multi-proof based rollup in production without reliance on one trusted party.



“Provers are improving quickly with more TEEs, faster and cheaper zkVMs and AVSs that can be used. We think the zk development is going very well and the sub-slot latency for proving is not far off,” Devos told Blockworks.



One other believed disadvantage of based rollups is a loss of MEV as a key “revenue” stream, due to the lack of a centralized sequencer. Yet there are nifty workarounds available, Devos said.



On Taiko, “MEV can also be captured by auctioning “execution tickets” to layer-1 block proposers,” Devos told Blockworks.



As such, while based rollups by default give up sequencing rights to layer-1 validators, it doesn’t necessarily have to be the case.



Matthew Edelen, co-founder of Spire Labs, a based rollup infrastructure provider, shares a similar view. As he explained on a recent <a href="https://www.youtube.com/watch?v=uI2KSEXhtZc">Bell Curve</a> podcast: “Auctions don’t have to be the only way to distribute sequencing rights. You could distribute 99% of sequencing rights through an auction and give the last 1% to friends or solo stakers to look good on L2Beat.”



Finally, MEV may not even be such a big deal in the long run. This idea centres on a simple cost benefit analysis: Today, the bulk of blockchain revenues are coming from congestion fees, dwarfing a far smaller share of MEV revenues that is diminishing over time due to better MEV solutions.



As such, the smarter rollup revenue model for rollups is one that banks on the greater network effects of congestion fees coming from synchronous composability, rather than MEV fees.



As Justin Drake explained on the <a href="https://youtu.be/yvP39-EOADU">The Rollup</a> podcast:



“Congestion fees against contention fees is roughly at an 80:20 ratio today. 80% of the income on the [layer-1] comes from congestion fees — about 3200 eth per day since EIP-1559. MEV is about 800 ETH daily since the Merge. My thesis is that this ratio is becoming more extreme, going from 80:20 to something like 99:1.”



In conclusion, the benefits of based rollups bring the user experience of Ethereum back full circle.&nbsp;



There’s a sense of irony here, considering that these benefits were what blockchains already had from day one. Synchronous composability and layer-1 sequencing transactions have been the norm for all blockchains since the Bitcoin network’s genesis. 



This deviation of execution layer duties only happened due to the <a href="https://blockworks.co/podcast/bellcurve/461e3780-bbf1-11ee-8474-47deee511578">rollup-centric roadmap</a> (or the multichain path in Polkadot, Cosmos and Avalanche) as of the last few years. Based rollups are ready to run it back.



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Understanding the debate around based rollups

Jack Kubinec

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



The Solana gaming infrastructure startup MagicBlock is making its ephemeral validator — which creates momentary Solana rollups that can process transactions quicker — open source, the team told Lightspeed exclusively.&nbsp;



When MagicBlock <a href="https://blockworks.co/news/lightspeed-newsletter-a16z-solana-gaming">went through a16z’s crypto startup accelerator</a> and began advertising its tech earlier this year, it conceived of itself as infrastructure for building onchain games. But when I spoke with MagicBlock co-founder and CEO Andrea Fortugno recently, he pitched me on a broader vision — that MagicBlock’s ephemeral rollups could let all developers move away from traditional web servers and make apps “unstoppable.”



To be clear, games are still being built with MagicBlock’s architecture. Supersize, which won the Solana-centric Radar hackathon’s gaming track last month, is built on MagicBlock. So is Windfall, Radar’s third-place gaming project. For both games, MagicBlock offers a way to run onchain without sacrificing speed.&nbsp;



MagicBlock does this by running a non-voting Solana validator that runs in parallel with Solana and can momentarily make computing resources “elastic” before a security committee verifies the state and settles it to the layer-1. In other words, Solana’s data is temporarily moved to a rollup (like Optimism on Ethereum) for some time- or resource-sensitive functions that would ordinarily be performed offchain on centralized servers.



This newly open-source tech is initially under a license that will prevent other projects from launching commercial products with the ephemeral validator unless they strike a deal with MagicBlock, Fortugno said. MagicBlock currently charges a protocol-level fee as well.



Despite the new gaming clients, the pivot to other crypto sectors is also clear in MagicBlock’s messaging. I asked Fortugno if this was because crypto gaming outside of a few rare standouts like Off the Grid has so far failed to live up to the hype.



Fortugno disagreed with the assessment that crypto gaming is struggling, and he said other use cases could make use of ephemeral rollups with “zero effort.”



“The tech is already there, and so it would be stupid not to try to tackle the other use cases,” Fortugno said. He also said SocialFi apps and perpetual futures DEXs are looking at building on MagicBlock. DeFi makes sense as a use case here: Solana-based perps DEX Zeta Markets is building a Solana layer-2 of its own to compete with centralized exchange speeds.&nbsp;



Fortugno used the term “unstoppable” frequently in our interview, which is really what’s cool about ephemeral rollups. Many Solana apps have parts run by centralized entities partly because doing everything on a blockchain is not financially viable. If MagicBlock lives up to its billing, it could make these apps a lot more trustless.



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MagicBlock open sources a16z-backed ‘ephemeral rollup’ tech

If developer mindshare is any indication of innovation, then knowing something about developer activity matters.



It’s why the industry pays attention when Electric Capital <a href="https://x.com/MariaShen/status/1851702779946901968">releases</a> its annual developer report.



As of November 2024, crypto had about 23,613 monthly active developers, a sliver (0.0875%) of the 27 million population of global software devs. It’s an impressive 2000% increase over the last decade, but numbers are still down from the industry’s highs of about 31,000 in 2022.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXepqXKXBd2TObTm-o2vAXHI3D8Yvr5SZPqa6Ax0JSYUym5P0NaHiM3Jl6lO_1cvXvmJUCAiT8ol5J8ug-qPqSlhoy2v_u7wgKpGuLmmij-oKcfccrnHp2pKYpgR1kfFQeZDuSJKPw?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/></figure>



One notable trend among crypto developers is the increasingly global distribution of talent today compared to years past. In 2015, 80% of devs worked out of North America and Europe. Today, both continents have seen their share of developers decline to 24% and 31%, respectively, while Asia now leads with 32% of developer mindshare.



Read more: <a href="https://blockworks.co/news/solana-ecosystem-2024-milestones">The Solana ecosystem has a lot to be thankful for this year</a>



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd_X5FSjxGySogfQIJ6S71JiveDGhlhXzyidfaKbZ9wCC6uhZrOA7l08KPtg_qxmtS7hkAcaFTkU7_ZzOKCrayv3lLJXGYu3w6_jJez6_ZVB4eTa_NY6WY6WhpW0l7BAVzeqNo6?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/></figure>



The Ethereum Virtual Machine (<a href="https://blockworks.co/tag/evm">EVM</a>) remains the leading tech stack, boasting a robust network effect with 8,925 developers — roughly 3.6 times the size of the Solana Virtual Machine (SVM) stack, which has 2,499 developers.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXflOQyGqicQ7AHpp75jeLVQ9b7K7FreOndLX54kKxyPQrueQ4JJhCeaxCoGoY4nt93R5LFeZIpV60h_Kycy3aSApvKbQfee6OVK8CNXObC6c65tNcMnZpFreiuVtLOe8gq4oMqs3g?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/></figure>



What stands out however, is Solana coming in as the number one ecosystem for new developers over the past year. This is an impressive lead, especially considering that Ethereum — which is a close second in attracting new developers — is bolstered by an ecosystem that includes dozens of layer-2 rollups.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfdr2eMD3t6sIhGc8G4Ku_4wY19GqHt3SO00PNuTLESsFQ_hUG9-RmYhR26oGYUnGqYEehJs71l8qfF66Y0660zF1ahJ55PkeSP_z_M7wsXinLQDepEAWgRpTz4jdNVPu8M9oBhgA?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/></figure>



Solana developers dominate in India, accounting for approximately 27%. Notably, it is the only country where new developers are joining the Solana ecosystem at a higher rate than they are any other blockchain. India also ranks second in developer share, trailing only the US.



Read more: <a href="https://blockworks.co/news/web3-developers-on-the-rise">Electric Capital finds veteran Web3 devs are on the rise</a>



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdRAfrA-HtaaWJluNDOFlDiU1u0L1CGhI04JU5lzchNvwp38pP6Dj7UceGL29d1xBFLrUrUvGcfDBBPwzERES__nUVmQ-s2fhWO58PAvzegLJMqC-AsrWDFgTvnepSk04USXxS-?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/></figure>



The highest developer activity doesn’t always directly translate to code innovation. For this reason, the Electric Capital developer report also considered which chains have the most new code written.



Ethereum maintains its lead with about 65% of new code written across its layer-1 and layer-2 ecosystems.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcEmT7LKwqCQDDLvA8oEHKCpWprVY8WEW30UzwyByj5Bf3hwBNnG5p7nPR5ywH6yuP-ovp7b6NF0w3MSeXA1TkdcjHar6epW2REHTfZ0s7a9ynLJJ7QcCHqCUm20bvThILz4cXV?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/></figure>



According to the report, liquidity isn’t the only thing <a href="https://blockworks.co/news/devcon-panelists-talk-fragmentation">fragmenting in Ethereum</a> — scarce developer talent is too. Since Ethereum adopted its rollup-centric roadmap, the share of developers working on layer-2s has grown from 25% to 56%.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeL8cTKJgbuYs57xfdjKXWdjgzojn8GXznDfg4N8YddBsAh-u5rnxbqK6BSrhI9wNErpFXUHdX5k1vc4qY9jlLeHqDcAmMBNT6n7PTBGpklqvR7ilq1MTBLfZq25esQwBkB2lDhmg?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/></figure>



Out of all active layer-2s, Base has the largest active developer base of 4,287, followed by Arbitrum (3,450), Starknet (2,548), Optimism (2,416), Scroll (1,517) and zkSync (1,115).&nbsp;



If developer activity is any indication of increased chain activity, Starknet’s developer lead is perhaps somewhat surprising, especially in contrast to an older chain like Optimism. Based on transaction count, Starknet’s activity has languished in comparison over the past year.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd9hNT_1rRQNTNcUbWNkhskfN9WUcTSfowWC7oPiOxNkjYlD0cji538EAcBplG5VT1EPhHtH5BsT5O8LmjaIdVNO1KSDyWHvK0JRuLXC2Ey1rWneTRg1FVUXxvAzvI39r1QovgvuQ?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://www.growthepie.xyz/fundamentals/transaction-count">Growthepie</a></figcaption></figure>



What about Bitcoin?



The Bitcoin network has about 1,200 monthly active developers; a number that has stayed fairly constant over the last 12 months.



Yet with the rise of Bitcoin layer-2s, NFTs and various scaling solutions, at least 42% of bitcoin developers are now dedicating their efforts to those areas.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe0zZJofdwdUKgRsNCs8PiR31HmRWRXkAkxUAu3WySXkJti5pyLac1tHX_e-kSyrSZZ3ueWtXblMis2jwshlEkZbMg95_0mlaBShUJuS7h5aFgAmvuv756wTruLRF7WwL3Nm_9j5w?key=g3vvBQHso2Us0NAx22CIrq--" alt=""/></figure>



Finally, zero-knowledge developers saw a slight reduction. Today, there are 2,054 monthly active developers working in zk. About 823 of them hold full-time positions.



Yet, zk contract deployments grew from a mere 40 in 2020 to 639 in 2024, with the largest share coming from Ethereum, Base and Optimism.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1156" height="674" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=1024&amp;h=1024" alt="" class="wp-image-95305" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=1156 1156w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=448 448w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=376 376w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed.png?w=80 80w" sizes="(max-width: 1156px) 100vw, 1156px" /></figure>



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Solana gained highest share of new devs in 2024: Electric Capital

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Bitcoin enthusiasts often hear terms like “zk rollups” thrown around, but the reality is more nuanced. While Ethereum’s zk rollups rely on zero-knowledge proofs for trustless verification, Bitcoin’s architectural constraints make implementing true zk rollups a distant goal.



Misleading claims around Bitcoin’s layer-2 capabilities and trust assumptions threaten to confuse users, and the Bitcoin builder community is working to clarify these issues.



Ethereum zk rollups leverage the Ethereum mainnet (layer-1) to verify cryptographic proofs directly onchain. Bitcoin, with its 4MB block size and limited scripting capabilities, can’t accommodate these computationally intensive verifiers. As Alexei Zamyatin, a core contributor to BitVM, explains, a zk rollup verifier “simply won’t fit into a block.&#8221;



Projects like BitVM take a <a href="https://blockworks.co/news/bitcoin-rollups-closer-than-expected">different approach</a>, combining SNARK-based compression with optimistic verification. Rather than verifying proofs onchain, BitVM splits a program into smaller chunks, each verifiable sequentially. This method mirrors optimistic rollups like Arbitrum rather than Ethereum’s zk rollups.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2560" height="1440" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg" alt="" class="wp-image-95336" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=2560 2560w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/2024-12-13-Bitcoin-zk-1-scaled.jpg?w=80 80w" sizes="(max-width: 2560px) 100vw, 2560px" /><figcaption class="wp-element-caption">Screenshot</figcaption></figure>



“The zk part stops at the compression stage,” Alexei notes. “Everything else is an optimistic fraud-proof system.”



The broader discussion about Bitcoin L2s goes beyond just rollups. In a recent thread, Janusz Grzegorz, founder of Bitcoin Layers, reflected on the evolving definition of Bitcoin L2s. Initially, Bitcoin layers evaluated projects based on their claim of being a “Bitcoin L2,” but this approach excluded meaningful activity like BTC-backed tokens on Ethereum L2s.



Janusz advocates for a shift in focus to trust assumptions instead of semantics. He proposes evaluating the bridges that underpin these systems regardless of whether they market themselves as an L2. These include protocols like Rootstock, tBTC on Arbitrum and others.



Grzegorz, known online simply as “Janusz,” also has flagged projects like Merlin and BitcoinOS as having contributed to the confusion. Such projects often market themselves as zk rollups on Bitcoin, despite lacking the infrastructure to deliver security guarantees on par with how the term “rollups” is typically used. He cautions users to scrutinize projects for real progress, such as distributed or optimistic bridges, rather than relying on buzzwords.



For Zamyatin, education and transparency are key. By focusing on trust assumptions, clear definitions and robust analyses, the Bitcoin community can better understand what’s feasible — and what’s not. For now, zk rollups on Bitcoin remain a misnomer, but innovations like BitVM demonstrate how Bitcoin can scale within its unique constraints.



To achieve <a href="https://blockworks.co/news/starkware-bitcoin-layer-2-zk-proof">true zk rollups</a>, Bitcoin will require a soft fork to enable building a native zk verifier. Several <a href="https://blockworks.co/news/op-cat-bitcoin-taproot-wizards">new opcodes</a> are currently under consideration amid a recent <a href="https://x.com/post_polar_/status/1865266144304607517">push</a> to clarify Bitcoin’s future roadmap.



An open <a href="https://en.bitcoin.it/wiki/Covenants_support">Wiki-style forum</a> lets interested stakeholders express their preferences and justify their views. Zamyatin’s team at <a href="https://www.gobob.xyz/">Build on Bitcoin</a> (BOB) has yet to weigh in, but expects to soon.



“What’s great about this effort is that it collects rationales in one place — instead of fighting on Twitter or scattered threads, you can see the reasoning for each individual’s stance,” Zamyatin said. “It makes it easier to evaluate proposals, summarize pros and cons, and have meaningful discussions.”



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The ZK rollup debate: Why Bitcoin isn’t there yet

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It seems like conversations about sandwich attacks on Solana — where advanced traders front-run and back-run trades to extract value at the expense of unsophisticated traders — come and go every few weeks with little resolution. Most people agree sandwiching is bad, but there’s not yet consensus on how the problem can be solved.



The discourse flared up again this week after the Solana researcher Ben Coverston <a href="https://x.com/HypoNyms/status/1866584138054242683">posted</a> on social media that the network’s top sandwich bot, dubbed arsc, was pocketing millions of dollars-worth of tokens per day from sandwich attacks. Coverston predicted that if current trends hold, arsc would become Solana’s largest staker within 1-2 years. Interestingly, one of the researcher’s proposed fixes included the reintroduction of a “mempool” staging area for transactions — which Jito got rid of earlier this year in hopes of preventing sandwiching.



Sandwich attackers exploit slippage — the gap between a trade&#8217;s expected and executed price. They front-run the target transaction by placing their own trade first, which shifts the price in their favor. Then, they back-run the same transaction by placing another trade immediately after, locking in a financial win off of the manipulated price movement. As a result, the original trader often ends up with a worse execution price, effectively subsidizing the attacker&#8217;s profit.



This is a form of maximal extractible value (MEV) where sandwichers extract value from Solana blocks at the expense of less sophisticated users. Solana has taken a number of actions meant to prevent sandwiching in recent months. In March, Solana infrastructure company Jito Labs <a href="https://blockworks.co/news/jito-labs-suspends-mempool-functionality">got rid of its public mempool</a>, which was a staging area where transactions could be arranged to create MEV revenue for validators.



Sandwiching validators then set up their own private mempools, and the attacks continued. Two months later, the Solana Foundation <a href="https://blockworks.co/news/lightspeed-newsletter-sandwich-attacks">stopped offering financial help</a> to validators who were participating in private mempools. In September, Jito blacklisted a group of private mempool validators from participating in its stake pool, which is a large pile of staked SOL Jito’s software delegates.



The criticism of the Solana Foundation and Jito’s blacklist-the-bad-guys strategy is that it’s essentially playing whack-a-mole: Blacklisted validators can always spin up a new validator and resume sandwiching.&nbsp;



That’s what’s interesting about Coverston’s proposal, which he expanded upon in a blog <a href="https://tempxyz.substack.com/p/solanas-largest-existential-risk">post</a>. The privatization of mempools has reduced the number of validators executing sandwich attacks, but the few who remain, like arsc, are staking their substantial profits back into their own operations. This has led to a concerning centralization of staked Solana within a handful of nefarious validators.



To counter this, Coverston suggests re-enabling a public mempool. While this move might make sandwiching more widespread, it could also foster competition among validators executing these strategies. The increased competition would help distribute MEV profits more evenly, preventing a single group of validators from disproportionately accumulating stake — and power — on the network.



This would essentially be a reversal from Solana’s anti-sandwiching strategy over the past nine months.



To put this all in perspective though, sandwiching may not really matter in the long run. High-frequency trading strategies that are ascendent in the US equities market are basically meant to sandwich attack other traders, Blockworks Research’s Ryan Connor <a href="https://x.com/_ryanrconnor/status/1860319636883181873">pointed out</a>. That hasn’t stopped equities trading volumes from climbing to all-time highs.



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Solana should reintroduce a public mempool, researcher says

Extended, formerly X10, is ramping up its hybrid derivatives exchange to provide open access to all users today. An invite-only launch saw $300 million in trading volume, according to the <a href="https://docs.extended.exchange/about-extended/team">team</a>.



Key to its offering will be unified portfolio margining, which enables users to trade both spot and perpetuals with a single collateral pool, thus enhancing capital efficiency for traders. While commonplace in traditional finance, unified margining is still rare in DeFi. Extended further boasts ultra-low latency (10-20ms), comparable to centralized exchanges, achieved through centralized order processing with trustless onchain settlement.



This system is supported by StarkWare&#8217;s StarkEx technology, the same platform <a href="https://blockworks.co/tag/dydx">dYdX</a> v3 employed prior to launching its own chain.



Read more: <a href="https://blockworks.co/news/dydx-staking-goes-live">dYdX tokenomics scrutinized as staking goes live</a>



The trust-minimized architecture includes permissionless withdrawals, and Extended has plans to migrate to Starknet, according to CEO Ruslan Fakhrutdinov.



&#8220;Based on our reviews and assessments, [<a href="https://blockworks.co/tag/starkware">StarkWare</a> is] at least years ahead of anyone else, technologically,” Fakhrutdinov, the former head of crypto operations at Revolut, told Blockworks.



“For us, blockchain is just a settlement layer,” Fakhrutdinov said, emphasizing the platform’s chain-agnostic approach. “As long as it has the infrastructure for trustless settlement, we can always settle and migrate if necessary,” he said.



One novel feature of Extended is that user collateral is fully segregated and never comingled, even within its planned liquidity vaults launching in early 2025. Funds are held in individual sub-accounts tied directly to their contributions, with onchain settlements reflecting this separation. Unlike other platforms that offer vaults, such as Hyperliquid, which pool funds under a central manager, Extended’s approach mitigates legal risks and maintains transparency.



The vaults are nevertheless treated as a single user for efficiency during centralized processing, and splits transactions during settlement.



Fakhrutdinov credits “asynchronous, parallelized settlement,” as the key to achieving such low latency, “on par with any centralized exchange.



Extended has no token, but <a href="https://blockworks.co/news/a16z-90m-bid-optimism">raised $6.5 million</a> earlier this year and plans to launch a points program soon.



Correction Dec. 11, 2024, at 3:06 pm ET: Extended doesn&#8217;t yet offer unified margining in the current open beta.



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A Binance-like experience with decentralized settlement

Building an application or a rollup today isn&#8217;t difficult. Whether it’s the OP Stack or Arbitrum Orbit, there are a variety of blockchain technology frameworks to choose from.



These tech stacks are tremendously useful for builders to go to market quickly, but they’re also constraining in practice.&nbsp;



Crypto is still a young industry, and businesses seek increasingly differentiated architectures to suit their unique use cases.



As such, most applications do not fit into an existing technology stack framework. For instance, an application builder may want to change what happens in a block, or introduce custom cryptography, rather than being tied to the rules of how an L1 blockchain’s state is governed.



So developers frequently fork and customize to get what they need. Cosmos’ CometBFT consensus layer (itself a fork of Tendermint Core) for instance, is one of the most frequently forked consensus mechanisms by projects such as <a href="https://blockworks.co/tag/sei-network">Sei</a>, Celestia, <a href="https://blockworks.co/tag/dydx">dYdX</a>, Penumbra and more.



For a thousand chains or dapps to bloom, builders want even more modularity than simply choosing between data availability layers or consensus mechanisms. That’s the bet middleware blockchain infrastructure platform Commonware is making.



Commonware is an open-source “anti-framework” set of primitives that developers can use to build and reassemble their applications without resorting to a complicated fork.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Today, I&#39;m excited to share <a href="https://twitter.com/commonwarexyz?ref_src=twsrc%5Etfw">@commonwarexyz</a> raised $9M from <a href="https://twitter.com/HaunVentures?ref_src=twsrc%5Etfw">@HaunVentures</a>, <a href="https://twitter.com/dragonfly_xyz?ref_src=twsrc%5Etfw">@dragonfly_xyz</a>, and an experienced group of builders to rethink the way blockchains are built for the decade ahead. Unveiling Commonware: the Anti-Framework <a href="https://t.co/C5EbpHZ76b">pic.twitter.com/C5EbpHZ76b</a>&mdash; patrickogrady.xyz (@_patrickogrady) <a href="https://twitter.com/_patrickogrady/status/1866866850107363582?ref_src=twsrc%5Etfw">December 11, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Led by a $9 million fundraise backed by Haun Ventures and Dragonfly Capital, Commonware wants to break the existing “one-size-fits-all” mold that comes with today’s technology stacks.



“Frameworks today like the Cosmos SDK and CometBFT is open and flexible in a few specific ways, but I argue that you get stuck eventually,” said Commonware founder Patrick O’Grady. “You have to redo and fork and rebuild a lot of stuff, and builders end up spending too much time dealing with the abstractions rather than focusing on the product.”



Existing frameworks prescribe a standard way to build an app. In contrast, Commonware does not tie developers into any specific security configurations, hardcoded block formats, mempool policies or execution rules.



Developers building with Commonware can custom design their own mempool configurations, or introduce their own execution environments, rather than having to comply with prescribed block formats. On the consensus layer, they can determine how validators are rewarded.



“We want builders to be able to use Commonware to couple their existing applications with their own custom capabilities,” O’Grady said. “Developers shouldn’t have to decide which ecosystem’s religion they want to be part of first, then build their application as a second step.”&nbsp;



For that reason, Commonware’s set of architectural primitives is best thought of as an optimized, architectural way to build in Web3.



One such primitive is the <a href="https://docs.rs/commonware-consensus/latest/commonware_consensus/">consensus::simplex</a>, a minimalistic consensus primitive that provides Byzantine Fault Tolerant (BFT) agreements.



For Commonware chains to communicate with one another, the team plans to incorporate an optional <a href="https://commonware.xyz/blogs/commonware-cryptography.html">threshold signature</a> primitive into its consensus construction.



The threshold signature would enable any chain to generate a static public key and verify outputs from other chains, thereby enabling efficient point-to-point communication without chains sharing any similar overlapping trust assumptions.



Commonware is not striving to create another “chain of chains” architecture such as the <a href="https://blockworks.co/news/optimism-interoperability-layer-superchain">OP Superchain</a>, which binds you into preset execution rules, O’Grady explains. It further extends the modular evolution of blockchains that Ethereum’s rollup-centric roadmap kickstarted and augments existing virtual machines, rather than completely replacing them.



For more, tap into the <a href="https://youtu.be/S_4_ob-KyMA">Bell Curve podcast</a> with Commonware.



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Commonware unveils ‘anti-framework’ for optimized blockchain development

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I was on a Google Meet with Benedikt Schuppli when the co-founder and CEO of Obligate began screen-sharing his email inbox.&nbsp;



“Can you see this?,” he asked, pulling up an email from a Swiss bank with a large graphic advertising a 175% participation rate for a financial product. “If this wasn’t a Swiss bank you’d be thinking, ‘Well, that’s obviously some type of scam. Someone’s trying to sell me 175% yield.’”



The Swiss bank was offering Schuppli a structured product, a financial instrument that the CEO called the “degen products of TradFi” — and he’s now trying to bring it to crypto with his new startup Margarita Finance.



The basic premise of Margarita is that users can easily mix their yield appetite and risk tolerance like a cocktail. Schuppli hopes the project’s blockchain backing can cut out intermediaries that drive up costs and let a new market segment tap into structured products, which offer the sort of risk curve that DeFi users tend to like.



Structured products are pre-packaged investments that involve a bond and a call option typically on a basket of assets or an index. Structured products don’t lose their principal investment if the optioned assets fall in value because of the bond’s appreciation in value, so they theoretically present less risk than just trading options.



Traditional structured products have lots of middlemen that charge fees, and these fees are passed onto investors, Schuppli said. With Margarita, he said, his team has created a “fully programmable digital asset” that makes fee structures less opaque.&nbsp;



Margarita currently lets users invest a minimum of 10 USDC with an option on the price of SOL. Investors can set their preferred yield and maturity date, and they’re then offered a structured product, the return of which depends on if SOL’s price falls below a given barrier. The options are priced by Bermuda-based STS digital and come with a “whole-ass legal documentation” that Schuppli, a lawyer by training, pointed out to me.&nbsp;



Margarita Finance is being developed within Obligate, an on-chain bond platform built on Polygon. The goal is to spin Margarita into a DAO once its network and token are launched. Of Obligate’s 15 employees, five are currently working on Margarita. Building Margarita on Solana was much easier than in an Ethereum-compatible environment due to Solana’s token-2022 standard, Schuppli said.&nbsp;



Margarita announced $1 million in pre-seed funding two weeks ago, and it is in the process of raising seed funding, Schuppli said. The project also received a grant from the Solana Foundation.&nbsp;



Margarita isn’t the first crypto outfit to try out structured products, but it does think it can be the most straightforward to use.&nbsp;



“They’ve been very clunky and very technical,” Schuppli said of some other structured product implementations. “DeFi and financial products oftentimes are created by people with a technical bias.”



We’ll see if that’s enough of an improvement for Margarita to make onchain structured products a thing — and whether the degen products of TradFi are degen enough for DeFi.



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Meet the project bringing TradFi’s ‘degen products’ to Solana

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After announcing its ME token back in August, Magic Eden finally launched the token today, alongside an impressive number of listings across several tier one and two centralized exchanges.



About 10 minutes before launch, ME saw a 47% spike from $6.04 to a high of $8.9 on its pre-launch perps on <a href="https://app.aevo.xyz/perpetual/me">Aevo</a>. Two hours after launch, however, ME has cratered to a $581 million market cap, down 60% from $1.48 billion.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcm5Eqhy-Q5NOlHJwY9TEplLoNEDYHWYwQRhfqRQ5devtzlNteOkTvDXVhbeguQeDJDHoW9OT9PrX72b27Bc1qroT5mHQjAOa6U7ANCBQY5uU3RI6SdGdUNVnLnZ-Pt6xuDxwXy8Q?key=tMqbuyp0Co6UjV-kx_GiQ3m8" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://www.okx.com/trade-spot/me-usdt?channelid=43776722">OKX</a></figcaption></figure>



Users are reporting technical <a href="https://x.com/TheCryptoLif7/status/1866486622231068732">difficulties</a> <a href="https://x.com/punk9059/status/1866489409790681538">trying</a> to claim the airdrop on the Magic Eden wallet. As part of Magic Eden’s criteria, users had to <a href="https://blockworks.co/news/magic-eden-confirms-token-expansion-beyond-nfts">install its mobile walle</a>t and link their other wallets to prove eligibility for claiming.



Magic Eden originally launched as a NFT trading platform <a href="https://blockworks.co/news/solana-marketplace-magic-eden-to-offer-ethereum-nfts">on Solana</a> in 2021, and later also deployed on Polygon and Base.



Magic Eden successfully capitalized on the <a href="https://blockworks.co/news/runes-bitcoin-token-standard-ordinals">Bitcoin NFT</a> craze in early 2024, processing about <a href="https://www.nftpulse.org/marketplaces?chain=bitcoin">83%</a> ($1.7 billion) of all Ordinals and Runes NFTs trading volumes in the past year.



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NFT marketplace Magic Eden airdrops ME

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One of the more hotly anticipated airdrops is happening today, with the MOVE Token Generation Event (TGE). Movement Labs’ Movement mainnet beta went live on Dec. 5 ahead of today’s “MoveDrop.”



The Movement chain’s big idea is to provide the MoveVM execution environment, but settle to Ethereum, with a focus on the scalability and security sides of the typical blockchain trilemma.



Movement’s approach parallels the Eclipse chain’s use of the Solana Virtual Machine (SVM) to extend <a href="https://blockworks.co/news/eclipse-svm-ethereum-mainnet">Ethereum&#8217;s capabilities</a>. Just as Eclipse allows Solana developers to interact seamlessly with Ethereum without abandoning the SVM&#8217;s advantages, Movement Labs enables Move developers to branch out from <a href="https://blockworks.co/tag/sui">Sui</a> and <a href="https://blockworks.co/tag/aptos">Aptos</a>, while still taking advantage of Move’s safety-focus and a high-throughput environment, according to Rushi Manche, co-founder of Movement Labs.



“We are the first and only Move-based Ethereum scaling solution,” Manche, who comes from an Aptos background, told Blockworks. “So, if you think of it, all the benefits of Move combined with Ethereum’s liquidity.”



The TGE distributes up to 10% of the MOVE token supply, designed to reward community contributions and participation. On the first day of trading, MOVE is seeing an $8 billion fully diluted valuation (FDV) down from a high of about $9 billion. That puts it in the vicinity of Celestia (<a href="https://blockworks.co/price/tia">TIA</a>) and Mantle Network (<a href="https://blockworks.co/price/mnt">MNT</a>) on an FDV basis.



Movement’s token plays a role in the network operations, as “attestants” must stake MOVE tokens to offer finality guarantees for transactions.



Movement Labs has undergone significant architectural changes during its development. Initially, the project was designed as a standard optimistic rollup on Ethereum. However, optimistic rollups typically have a seven-day period to fully settle on Ethereum.



Unlike rollups, Movement does not need to wait for Ethereum finality, thanks to its &#8220;<a href="https://blog.movementlabs.xyz/article/postconfirmations-L2s-rollups-blockchain-movement">post-confirmation</a>&#8221; mechanism. This system, akin to a <a href="https://blockworks.co/podcast/bellcurve/0345b516-eb15-11ee-854f-cbb5ba1433a1">pre-confirmation</a>, provides a better user experience given a one-second finality, though at the expense of some security guarantees. While Movement does not inherit Ethereum’s security, the economic collateral from stakers is subject to slashing — closer to the Polygon PoS sidechain than to a zk-rollup.



“We need to have an economic stake built up ahead of time, such that if someone’s malicious or transactions go wrong, we have something to slash,” Manche said, in justifying the launch of the token before the production version of the Movement mainnet.



Developers stand to benefit from Movement’s architecture. A high-throughput execution environment and improvements to <a href="https://blockworks.co/tag/smart-contracts">smart contract</a> security are at the core of the Move programming language, which is widely regarded as being safer than <a href="https://app.blockworksresearch.com/glossary/#solidity-programming-language-ethereum">Solidity</a>. Some examples of applications already building on the network include the Meridian DEX, lending market Echelon, and Bracket, which offers innovative prediction market tools.&nbsp;



Movement’s competitive strategy is focused on community and developer engagement.



“The moat is in each community, which is something that you can&#8217;t fork,” Manche said, noting their approach avoids unsustainable practices like incentivized liquidity programs.



Manche says Movement is more closely-aligned with other Move-based chains than it is to Ethereum.



“Obviously, we’re an odd duck in the EVM and Ethereum community, given the fact that we&#8217;re doing alternative VMs, we have an alternative rollup framework and the architecture of the token design as well,” Manche said.



But there’s room for the full-range of experimentation in the Ethereum design space to compete with high-throughput chains like Solana, he said.



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MOVE drops following Movement mainnet beta

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The team behind the memecoin launchpad pump.fun began restricting UK users this morning.



The move came days after the UK’s Financial Conduct Authority tagged pump.fun as unauthorized. Most firms need the regulator’s approval to do finance-related business in the country. It&#8217;s apparently the platform&#8217;s first public restriction, despite facing past criticism for its fast-and-loose approach to moderation.



Notably, pump.fun — which allows users to launch Solana-based tokens for around $2 — <a href="https://blockworks.co/news/pumpdotfun-suspends-livestream-feature">took down</a> its livestreaming feature last week after a number of violent and disturbing streams went viral.



The site’s UK block doesn’t represent a ban per se, Shardspace co-founder Avaunt <a href="https://t.me/c/2346547958/380">said</a> in the Lightspeed Telegram chat. Rather, pump.fun likely never properly registered and complied with the UK’s crypto guidelines, and the regulator is just now holding it accountable.



Pump.fun has some apparent links to the UK. When the then-nascent platform was exploited by former contractor Jarett Dunn in May, he was <a href="https://blockworks.co/news/pump-dot-fun-exploiter-arrest-london">arrested in London</a>. Dunn, a notorious online troll, did make a seemingly-serious <a href="https://x.com/jarettdunn/status/1792219540060864549">claim</a> that pump.fun is linked to a UK-based entity called Baton Corporation.&nbsp;



“Pump is not legally based in the UK,” the platform’s pseudonymous founder alon told me in a text, but they declined to elaborate further.



Zooming out for a second though, it’s somewhat surprising a pump.fun restriction took this long in the first place. The UK is no crypto libertarian paradise — for example, prediction market favorite Polymarket is already unavailable there. The UK’s financial regulator <a href="https://www.fca.org.uk/news/press-releases/fca-finds-crypto-ownership-continues-rise-it-delivers-plans-regulate-crypto#:~:text=In%20the%20first%20year%20of,websites%20and%20over%2050%20apps.">claims</a> to have taken down “over 900 scam crypto websites and over 50 apps” since October 2023.



“Thought IP [address] restrictions were pretty common in this industry lol not quite sure why [everyone is] freaking out,” Tom, anonymous contributor to Raydium, told me in a text.



Pump.fun has been the most popular app on Solana — and at times in all of crypto — for much of this year. With that popularity will inevitably come scrutiny, especially when users are beheading chickens on livestream in hopes of making a token’s price go up. If Gary Gensler’s SEC tenure were to continue past this year, it’s hard to imagine the SEC wouldn’t have taken some sort of action against pump.fun, too.



How the fallout from pump.fun’s livestream snafu settles will be something to watch. Perhaps regulators will be able to do what criticism or backlash never could — slow down a startup that has already <a href="https://dune.com/adam_tehc/pumpfun">generated</a> $283 million in revenue in its first year of existence.



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Pump.fun restricts access for UK users

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One of crypto’s biggest go-to market strengths are tokens.



The ability to spin up billions of dollars worth of digital tokens with a click, then use them as lucrative grants to attract users and developers has very much become part of the standard Web3 growth playbook.&nbsp;



It works, but the tangible benefits of this spending is hard to measure.



Grant money invites extractive rent-seekers, creating a cycle of fleeting capital that rapidly shifts between projects in search of quick gains.



As such, DAO grant spending has largely been bogged with inefficiencies.



Since November 2023, Arbitrum has distributed 71 million ARB ($81 million) to ecosystem projects through the Short-Term Incentive Program (STIP) <a href="https://blockworks.co/news/arbitrum-dao-grant-program">grant program</a>. This was a significant expenditure at about 3-4% of Arbitrum’s entire <a href="https://www.tally.xyz/gov/arbitrum/treasury">treasury</a>.



Treasure DAO co-founder Karel Vuong, who eventually did not participate in STIP due to the grant’s<a href="https://x.com/karelvuong/status/1709315736483569768"> misalignment</a> with gaming applications, called the grant a “double-edged sword.”&nbsp;



“While it led to some degree of ecosystem growth and usage as well as learnings to inform a longer-term DAO-led program for incentives, this also came at the cost of increased sell pressure of ARB, poor mitigation of sybilling and decreased value capture resulting from the lower sequencer margin post-ArbOS Atlas upgrade,” Vuong told Blockworks.



As part of the Arbitrum Research &amp; Development Committee (ARDC), Blockworks Research <a href="https://forum.arbitrum.foundation/t/stip-analysis-ardc-research-deliverables/23438?u=blockworksresearch">conducted</a> a study of STIP’s impact on 17 Arbitrum projects across the verticals of perpetual exchanges, AMM exchanges and yield aggregators.



An econometric method known as a “synthetic control” was used to compare real-world Arbitrum to a simulated version that received no grants. In terms of ROI, STIP generated $15.2 million in sequencer revenue for Arbitrum against a $85.2 million marketing spend between November 2023 to March 2024.



In sum, Arbitrum’s sequencer revenues would have generated 43% less without STIP.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcVBvuyxSXOYhT86z8EvagEdXIHl_sydMHkZRQq3oJsk2BIqvjWgp1WcjqeLNQbEa5u4x_oeu_TKyU3ppS5YbJtDg2-LSzST3lGbII-664MLZ7tBWwPv7zwPcaFiHYZCWAWGhrtRw?key=AerOXhPGRPbLAf1X5pU_So3u" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://x.com/blockworksres/status/1820523798543917252/photo/1">Blockworks Research</a></figcaption></figure>



A subsequent second grant program, the <a href="https://forum.arbitrum.foundation/t/ardc-research-deliverables/23438/14">Long-Term Incentive Pilot Program</a> (LTIPP), has to date distributed another 22.87 million ARB ($26 million) to users over 12 weeks.



To better track its impact, the metric of “volume-adjusted TVL” was used to better reflect growing TVL numbers that were actually translating into real activity. Simply put, volume-adjusted TVL gives more weight to protocols only when trading volumes are growing faster than TVL.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf-MZ_2ausEmFdEMQWknnH04z0I4crm-P07WRr9VVbILB-VT9Qnqb6SWZVR76ZCSY3rS7Cy9ObK4gaXFYDmaRmTjnPfApcza0dD448GvlxDCpSfMR14WVFmmEzxV1ViumVp9yZYfQ?key=AerOXhPGRPbLAf1X5pU_So3u" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://app.blockworksresearch.com/unlocked/arbitrum-ltipp-analysis">Blockworks Research</a></figcaption></figure>



Based on Blockworks Research <a href="https://forum.arbitrum.foundation/t/ardc-research-deliverables/23438/14">studies</a>, LTIPP had a positive impact on sequencer revenues and Arbitrum’s DEX and lending markets, but not its perps markets:



We find that, for lending, DEXs, and perps, TVL market share grew by 25%, 17%, and -5% respectively. We find that volume market share grew by 7%, 21%, and -11.38%, respectively. And finally, sequencer revenue market share grew by 6.54%. As one can see, while incentives have a positive impact on DEX, lending and sequencer revenues, they do not have a positive impact on perps.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdyFOsEyJlJdXlmQQaNSi32_pYJJCqsbG9o9BBW0Rq2w2AT782vqXXLoyPoYPNfiVms38H8IusOpHPnDYFkEwpsocT8a_4AUqfzgbq05JBu5VjxtNJfcUfTRYU_2NHDOhVpYBEzIg?key=AerOXhPGRPbLAf1X5pU_So3u" alt=""/></figure>



For more, see Blockworks Research’s latest <a href="https://x.com/BlockworksAdv/status/1864407444069470254">report</a>, Meta-Analysis on Incentive Programs.



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Do DAO grants really work to stimulate growth?

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Solana Foundation’s head of strategy Austin Federa announced he would be departing the nonprofit to found DoubleZero, a network of fiber and subsea cables meant to establish a faster and more performant “new internet.”



Federa had been at Solana Labs and Foundation for nearly four years, becoming one of Solana’s more recognizable public figures. He’s now founding DoubleZero — which will start by supporting Solana — alongside cofounders Mateo Ward and Andrew McConnell. Jito CEO Lucas Bruder called the startup “the most interesting experiment in crypto.”



DoubleZero is an ambitious and potentially category-defining project, but I think it could be thought of for now as decentralized physical infrastructure (DePIN) for the internet. Individuals in the DoubleZero network contribute fiber optic links, which are basically cables that transmit data with light pulses, to a network that can filter out data before it gets to blockchain validators and RPCs. This all seems like it will be incentivized with a native token and enforced with proof-of-stake slashing, but DoubleZero’s <a href="https://doublezero.xyz/whitepaper.pdf">white paper</a> does not explicitly mention what form its “rewards” might take.



Where will DoubleZero find all this unused fiberoptic cable, you might ask? The project’s white paper argues that there is “substantial” spare fiber in the world. This comes from the hundreds of terabits per second modern fiber can handle, “dark fiber” that has been installed but sits unused, and enterprises purchasing more fiber capacity than they need to prepare for doomsday scenarios.&nbsp;



If all this unused fiber joined DoubleZero’s rewards-based network, it could build a faster new internet just with existing real-world infrastructure.&nbsp;



Part of the impetus to create DoubleZero is that fast blockchains like Solana aren’t slowed down by how nice of hardware the blockchain’s software is being run on — they’re kneecapped by the fact that blockchain data is sent over the public internet where it is mixed with web traffic that doesn’t need to run as fast as a blockchain.



As things stand, blockchain validators have to use some of their computing resources to filter out spam and deduplicate transactions. DoubleZero and its network of fiberoptic links will look to be a “common shield” for local validators, so all of their resources can go toward building and verifying blocks.



DoubleZero’s white paper says layer-1 blockchains are the best use case for the network, but outside of blockchain, content delivery networks, games, large language models, and enterprises could all benefit.&nbsp;



In recent weeks, Solana’s community has taken up that mantra of increasing bandwidth and reducing latency. To paraphrase Michael Jordan, Federa and his cofounders took that personally.



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Solana Foundation exec departs for ‘the most interesting experiment in crypto’

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M^0, a decentralized stablecoin infrastructure layer, is setting a new standard for stablecoin design with its innovative modular architecture, revenue and distribution model. Its first distributor, Noble, is pulling back the curtain on the Noble dollar, USDN, in a bid to shake up the market and disrupt entrenched players.



For the entire history of stablecoin issuance, Tether has been the dominant issuer. Its market share on Ethereum dipped to 30% in 2022 — following growth in Circle’s USDC and Binance’s BUSD — but thanks to its near monopoly on the <a href="https://blockworks.co/tag/tron">Tron</a> blockchain, Tether’s market cap has reigned supreme in the stablecoin space.



With <a href="https://blockworks.co/tag/tether">Tether</a> ostensibly healthier than ever, it maintains a significant moat — but maybe not an insurmountable one. Robbie Petersen of Delphi Digital noted the importance of M^0’s approach in August, writing that “[M^0] could be best positioned to challenge the <a href="https://blockworks.co/news/tether-competes-stablecoin-project-increase">Tether monopoly</a>.”&nbsp;



<h2 class="wp-block-heading">A new framework</h2>



Unlike traditional stablecoin issuers, M^0 operates a multi-issuer protocol, creating a decentralized system where issuers follow protocol rules rather than centralized mandates. Its canonical stablecoin, M, serves as a core building block for custom-branded stablecoins. Known as M-extensions, the Noble dollar is its first.



This system offers issuers full programmability, allowing these branded M-extensions to distribute yield as they see fit — whether to liquidity pools, users or other stakeholders. According to Greg Di Prisco, co-founder of M^0, this structure provides scalability, safety and liquidity unmatched by traditional issuance models.



“We don&#8217;t believe that [a centralized issuer model] can possibly scale. You can&#8217;t have one company controlling the entire world&#8217;s money supply as stablecoins continue to grow. So, we built a protocol that enables a multi-issuer process,” Di Prisco told Blockworks.



Petersen noted the core issue in stablecoins today is that dapps “capture none of the value they create on behalf of stablecoin issuers.” Under M^0’s model, US Treasury yield can become “not only a meaningful source of revenue for apps, but possibly even the principal source.” This transformative potential could lead to a new business model, he argues: “Selling stablecoin distribution as a service (SDaaS).”



Noble intends to pass on 100% of the USDN native yield to holders of the token — at least initially — according to Jelena Djuric, co-founder and CEO of Noble.



&#8220;Our entire growth strategy has been keeping things as frictionless as possible,” Djuric told Blockworks, noting that Noble has no transaction fees to use any of its stablecoins. “We want to keep it like that, and the beauty [of] Cosmos and <a href="https://blockworks.co/tag/ibc">IBC</a> is that it’s low fee and it’s fast — we wouldn’t want to compromise that in any way,” she said.



Noble has <a href="https://blockworks.co/news/circle-moves-usdc-to-cosmos">previously been known</a> for bringing USDC to IBC-connected chains, and generally improving the cross-chain routing of Circle’s stablecoins. But Djuric said USDN will complement USDC on the Noble chain, describing M^0 as “if <a href="https://blockworks.co/tag/circle">Circle</a> and <a href="https://blockworks.co/tag/makerdao">MakerDAO</a> [<a href="https://blockworks.co/news/maker-rebrands-as-sky-dai-will-be-changed-to-usds">now Sky</a>] joined forces and had a baby.”



<h2 class="wp-block-heading">Modularity meets interoperability</h2>



M^0 aims to meet the needs of appchains and fintech providers that want to launch their own branded stablecoins without worrying about the collateral backing, or interoperability — both are baked into the protocol underpinning M.



“All of the collateral management is done for them,” Di Prisco said. “The big difference here between other [issuers] like <a href="https://blockworks.co/tag/paxos">Paxos</a>…is that with Paxos, you’re going through months of negotiations, paperwork, legal documents, lawyers — [but] because we’re a protocol and fully onchain, [we] can give you your own branded stablecoin in minutes,” he said.



Issuers maintain bankruptcy-remote <a href="https://www.investopedia.com/terms/s/spv.asp">SPVs</a>, and are only allowed to hold 0-to-180-day T-bills that are marked to market. Their actual collateral balance is also checked daily.&nbsp; “They effectively can&#8217;t cheat as long as we maintain the right incentives in the ecosystem,” Di Prisco said.



All M-extensions will be fungible by default, although brand partners have some leeway about exchanges with other distributors.



For Noble, this modular design allows them to maintain a focus on ecosystem expansion. With the anticipated IBC Eureka upgrade — facilitating connections with non-Cosmos-based chains — plus integration into wormhole-supported chains, USDN will benefit from a large addressable market.



“You want to go between <a href="https://blockworks.co/tag/osmosis">Osmosis</a> and dYdX in one click with two separate tokens? You can do that on Noble,” Djuric explained.



The Noble Dollar will launch with a points campaign tied to a future Noble token, further bootstrapping adoption.



But the launch of multiple stablecoins <a href="https://blockworks.co/news/new-stablecoin-entrants-payments-focus">like Agora</a> and M^0, which provide inherent yield, cements the idea that in the future, all stablecoin applications will start with a base yield. Whether this model will truly topple the non-yield bearing incumbents remains to be seen.



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M^0 and Noble set sights on Tether’s $136B empire

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In an open-source industry where applications can and are easily forked, “aggregation theory” — the investor thesis that the winner should build on top of and integrate as many applications as possible — caught on as a promising idea during <a href="https://blockworks.co/news/will-defi-summer-return">DeFi summer</a>.



Middleware DeFi aggregators like 1inch, Matcha, Summer.fi (previously Oasis) and Instadapp have all pursued this idea to the fullest, but aggregation theory largely hasn’t panned out (<a href="https://blockworks.co/news/solana-venue-jupiter-released-mobile-app">Jupiter</a> in Solana world is an exception).



Ethereum DEX aggregators have not outcompeted Uniswap, even though in theory they should.



Instadapp was one such DeFi aggregator that built aggressively on top of blue-chip DeFi protocols like Uniswap, Maker, Aave, Compound and Curve.



After two years in development, Instadapp has reinvented itself. From being the builders of a classic aggregator product, Instadapp has evolved into a platform with a full-fledged DeFi product: <a href="https://blog.instadapp.io/fluid/">Fluid</a>, while the original Instadapp sits separately as a yield aggregator product.



Instadapp’s pivot has been quite successful: Fluid currently has <a href="https://defillama.com/protocol/fluid#information">$1.2 billion</a> in TVL across its money market, while the Fluid DEX on Ethereum is seeing about $428 million in 7-day <a href="https://fluid.instadapp.io/stats/1/dex">trading volumes</a> — currently the third-largest DEX behind Curve and Uniswap.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcMZiKJga7OqGcEVy2KUHp2AMk6sToemt9B_ZZKVFUAbk9mAxaCh6bEIGJgLh2wte33w4BJuDJqLBBMSjqPEJtLy37X3Kr1ZXsAyoiGrJBoTj_EXPQVZtvMjs0lwNX6XMBto1LXXQ?key=FNOYQp3t0h1phfdaGMWESlwr" alt=""/></figure>



Let’s backtrack for a minute. What is Fluid?



The first thing to know is that Fluid is not one app, but a superapp ecosystem. Fluid’s pooled liquidity layer forms the foundation of the protocol, on top of which sits its own DEX (<a href="https://blog.instadapp.io/fluid-dex/">launched</a> in early November), money market and other vault applications.



Fluid’s suite of applications borrows aggressively from many of DeFi’s market-tested primitives such as Uni v1’s auto rebalancing, Uni v3 concentrated liquidity, Aave’s utilization rate curves, Maker vault’s debt ceilings and more.



But it also brings to the table a slew of original DeFi innovations — namely more capital-efficient ways of liquidity provision — through its “smart collateral” and “smart debt” features.&nbsp;



For instance, smart debt lets borrowers denominate their debt into trading pairs as liquidity for a Fluid DEX trading pool.



By doing so, traders on Fluid DEX can trade between assets on somebody else’s debt. From the borrower’s perspective, you can maintain an active loan while simultaneously earning fees from traders to offset your original debt, thereby making debt a productive asset.



In sum, “smart debt” creates liquidity in an entirely opposite direction by which LPs seed liquidity in an AMM pool (i.e., deposit liquidity in two tokens and receive an LP token).



Smart debt has allowed trading pools like <a href="https://fluid.instadapp.io/stats/1/dex">USDC-USDT</a> with $20 million of liquidity to emerge on Fluid DEX, while technically being worth $0 in TVL.



“Smart collateral” on the other hand allows LPs to take their LP positions from lending, and rehypothecate them as collateral for AMM liquidity on the Fluid DEX. This allows LPs to earn DEX trading fees on top of lending fees.



This is not technically new — DEXs in the past, such as Cream Finance, have experimented with enabling the use of LP tokens as collateral — but Fluid is managing to execute it more efficiently.



“In Fluid DEX v2, we plan to allow users to select their ranges on both collateral and debt, which will be a breakthrough,” Instadapp chief operating officer DMH told Blockworks.



Fluid’s governance is governed by the INST token. The token has historically languished as a dead token, until a recent 4x pump in the last month.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXepfbvmvMtnZYT2o6qDYzL-mDQyyu9IochNVZcSYvv8-AF4lgbMazYIkJ5l4JFk1_4BOKT3zQ2h_ibGRDbYG7Mlnjo9nmOmwOIohMIG0REJ7jpmFYzNJ47BIO98RPh-qqIFvlIW?key=FNOYQp3t0h1phfdaGMWESlwr" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://coinmarketcap.com/currencies/instadapp/">Coinmarketcap</a></figcaption></figure>



A new governance proposal <a href="https://gov.instadapp.io/t/rebranding-and-growth-plan-for-fluid-protocol/985">published</a> yesterday is seeking to convert INST to FLUID at a 1:1 ratio without any dilution or total supply changes.



Upon hitting a target of $10 million in annualized revenues, Fluid will commence a token buyback program to create value accrual for the token.



Finally, the proposal also wants to spend 12% of tokens to fund growth initiatives like pursuing CEX listings, market making and fundraising and seeding an additional 5% of tokens for FLUID liquidity across DEXs.



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DeFi superapp Fluid is coming for Aave and Uniswap’s lunch

Squid has unwrapped a decentralized intent-based liquidity protocol that promises cheaper, faster, and more efficient cross-chain swaps.



The Cross-Chain Order Routing and Auction Layer (CORAL), which went live today, uses a request-for-quote (RFQ) system, enabling users to execute swaps across chains with minimal costs and near-instant finality.&nbsp;



CORAL’s intents handle swaps natively, unlocking market maker order book pricing similar to CoWSwap. This approach eliminates slippage and ensures optimal execution by directly engaging with liquidity providers during the transaction process.



“With CORAL, we’ve removed the borders between chains [to] allow liquidity to flow with minimal friction,” said Fig, Squid’s co-founder.



The new protocol builds on the successful Squid 2.0 upgrade, which focused on abstracting away complex cross-chain transaction flows with multiple hops.



Read more: <a href="https://blockworks.co/news/squid-upgrade-cross-chain-abstraction?utm_source=blockworks-research.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=solving-multichain-pain-points">Squid sinks its tentacles into cross-chain abstraction</a>



One interesting property of the design is that <a href="https://blockworks.co/news/zk-rollups-cheaper-with-scale?utm_source=blockworks-research.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=solving-multichain-pain-points">like a zk rollup</a>, the more transactions come through, the cheaper it becomes for the end user.



That’s because the architecture allows for batching intents, which &#8220;saves a significant amount of gas and delivers users the best execution possible for their swaps,&#8221; Fig said.&nbsp;



This makes it “the cheapest decentralized intent protocol” on the market, even edging out market leaders like Across Protocol, he said. By reducing the per-order gas overhead, “as you scale, it becomes basically free.”



Across Protocol uses more complex <a href="https://app.blockworksresearch.com/unlocked/across-protocol-based-on-intents">cryptographic batching processes</a>, while CORAL leverages Axelar’s secure general message-passing protocol. Like Across, this approach pushes all bridge and routing risks to market makers, who handle the backend complexities of asset transfers. Users receive native assets on their destination chain, eliminating the need for wrapped tokens or trust in external validators.



CORAL’s flexibility goes beyond swaps. It allows developers to build complex DeFi applications using pre- and post-hooks, enabling actions like depositing cross-chain-swapped assets into yield farms with one click.



“I think we’re on a trajectory to have all the assets on one or two chains,” Fig said. “This tech allows you to hold native assets and not really have to bridge them.”



The protocol is now live on major chains including Ethereum, Arbitrum and Base. Plans to integrate Solana, Sui and Aptos are slated for January, and Cosmos-based chains through <a href="https://blockworks.co/tag/ibc?utm_source=blockworks-research.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=solving-multichain-pain-points">IBC</a> later in 2025.



Also on the road map: the ability to aggregate multiple messaging protocols, such as Hyperlane, which will add support for another 40-50 EVM-compatible blockchains. These additions will create a “network of networks,” significantly enhancing interoperability.



Altogether, Squid is positioned as a front-runner in <a href="https://blockworks.co/newsletter/research/issue/post_07a45426-69f7-4e72-9bb6-c84e92857ebd">achieving true chain abstraction</a>, where users interact with assets seamlessly, regardless of their originating chains.



“Cross-chain swaps are now as cheap as single-chain swaps, so we can really move toward full chain abstraction, where users don’t need to think about which chain their assets are on,” Fig said.



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Squid greases cross-chain liquidity

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Coinbase is <a href="https://blockworks.co/news/binance-coinbase-transaction-revenue-sol">making a lot of money</a> from Solana traders these days, but the influx of demand is also causing some headaches for America’s largest crypto exchange.



Coinbase is receiving more Solana send and receive requests “than ever before,” according to an employee, and so-called dusting attacks have become commonplace, causing Coinbase to take longer than usual to show SOL transactions on users’ accounts. This gets at an interesting problem Solana faces: While the blockchain processes data very quickly, the venues that need to make use of that data sometimes struggle to keep up.



Coinbase’s struggle is with data indexing, which is the process of taking blockchain transaction data — which comes as a jumble of bits — and putting it in a format that things like crypto exchanges can read.&nbsp;



When a blockchain produces as much data as Solana does, this can get demanding and pricey.&nbsp;



To contextualize how much data Solana produces, Blockworks Research data lead Dan Smith pointed to an experiment run by Eigen Labs to show the capacity of its EigenDA data product. Eigen Labs posted every block from 19 blockchains for a period of time in September, representing roughly 20 terabytes of data, and Solana accounted for a staggering 97% of the total. Coinbase’s indexers currently “can’t keep up” with Solana demand, a protocol specialist at the exchange <a href="https://x.com/ann_droo/status/1863432918590181788">wrote</a> on X.



Making matters worse, dusting has become “constant” on Coinbase, the protocol specialist <a href="https://x.com/ann_droo/status/1863789971913494981">wrote</a>.&nbsp;



Dusting refers to sending tiny amounts of crypto to many wallet addresses in hopes of tracking them. I moved SOL around on Coinbase while writing this article, and my wallet received two different dust transactions. This “dust” is trivial to the sender, but it can become a big strain for Coinbase’s data load.



And Solana’s indexing challenges run deeper than just volume.



Solana indexing is particularly difficult compared to Ethereum because the former lacks a uniform interface for smart contracts, which are the computer programs that run on the blockchain.&nbsp;



“[W]hen you look at your transactions across many of these [Solana] programs, the data is just a jumble of bytes which are not human readable,” Tristan Frizza, founder of Zeta Markets, said.



Since there’s no established way to read the data, it becomes difficult for indexers, block explorers, or data platforms like Dune to break down what different Solana transactions are actually doing.&nbsp;



Helius CEO Mert Mumtaz said the Solana development platform will be rolling out three new features in the next two months that he estimated could solve 80% of Solana’s “read layer issues.”



But until then, exchanges will keep having to index a blockchain that is seeing record demand.



Time to man the battle stations, Coinbase.



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Coinbase indexers buckle under SOL demand, ‘dusting’ attacks

New cross-chain solutions are tackling persistent challenges presented by Ethereum’s rollup-centric roadmap.



Safe’s Safenet, planned for release in 2025, aims to operate as a transaction processor network atop existing blockchains, offering execution guarantees for cross-chain transactions.



Safenet’s design — announced today — introduces a set of capabilities targeting longstanding issues in DeFi, such as speed, security and liquidity fragmentation. It reimagines transaction processing by unbundling execution and settlement, akin to VisaNet’s architecture.



At its core, Safenet aims to dramatically improve transaction efficiency, processing transactions in under one second thanks to <a href="https://blockworks.co/podcast/bellcurve/8dcb7122-c486-11ee-9d5a-1f6f0a61552c">an intents-based solver network</a>. This level of performance would bring cross-chain operations closer to real-time usability, allowing users to move assets or execute transactions between different blockchains almost instantaneously.



Read more from our opinion section: <a href="https://blockworks.co/news/drop-traditional-bridges-for-interoperability">Want cheaper and safer interoperability? Drop traditional bridges</a>



Whether transferring tokens or interacting with dapps, delays in moving across chains have traditionally hindered such activity, leading to a siloed user experience.



“Safenet addresses DeFi’s biggest challenges: fragmentation, latency and complexity,” Lukas Schor, co-founder of Safe, <a href="https://safe.global/blog/introducing-safenet">said</a>.



By leveraging Safenet Processors, users gain access to instant liquidity and secure, composable transactions that span onchain and offchain networks.



The network is secured by user-defined policies and a decentralized validator network — staking the <a href="https://blockworks.co/price/safe">SAFE</a> token — and the system is geared towards providing robust protection against risks like address poisoning and other vulnerabilities.



Validators actively oversee processor activity, and can flag any malicious behavior. This oversight, combined with user-set transaction rules, creates a <a href="https://csrc.nist.gov/glossary/term/defense_in_depth">defense-in-depth</a> security layer that reduces exposure to common threats.



On the <a href="https://blockworks.co/newsletter/research/issue/post_07a45426-69f7-4e72-9bb6-c84e92857ebd">chain abstraction</a> front, Safenet’s ability to unify balances across chains represents a major step forward in usability. Instead of requiring users to manage separate wallets or bridge assets manually, Safenet plans to present a single, consolidated view of their holdings.



Current Safe wallets secure $112 billion in assets, 75% of which is on Ethereum. They already allow for switching between multiple networks, deploying the same Ethereum address across many chains, but Safenet extends the abstraction beyond EVM-based networks to incorporate non-EVM-compatible chains like Solana, according to the <a href="https://blockworks.co/tag/safe">Safe</a> team.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcH_ATJ03yGo39ncHv_5kkcAXpLj8tXs4oKIOst6h1Z8AGiqpZGy-3nFNVDr2_2MV9ERAyLvXyN6yDKCr65FVi6mtw9OHFeUdZ4S4nFBrFJvNjqlYIJ1lU3vZhBdul9F9gz72FOmQ?key=qOrp2o31eFStOc0xGp5HJ-YP" alt=""/><figcaption class="wp-element-caption">Safe TVL over time | Source: <a href="https://dune.com/safe/all">Dune / Safe</a></figcaption></figure>



Safe expects to bridge the gap between onchain and off-chain ecosystems as well, for example by enabling users to interact with centralized exchanges and payment systems using the same unified asset balance. This flexibility simplifies asset management while expanding the ways users can engage with their holdings.



DEX activity accounts for about 5% of the Total Volume Processed (TVP) on Ethereum mainnet by Safe accounts, according to Richard Meissner, co-founder of Safe.



“The remaining volume is a mix of asset transfers, treasury management, DAO governance actions and complex DeFi operations like liquidity provisioning,” Meissner told Blockworks.



He notes that what differentiates Safe’s wallet from other solutions is its focus on <a href="https://blockworks.co/news/safe-whitepaper-smart-accounts">providing smart accounts</a>.



“By advancing smart accounts, we offer features not possible with traditional EOA accounts like multisig, private key recovery [and] automation,” Meissner said.



Safe is betting that features like these will make it appealing for businesses to move more of their operations onchain.



A key component of Safenet&#8217;s functionality is its integration with <a href="https://erc7579.com/">ERC-7579</a>, a standard that defines interfaces and behaviors for modular smart accounts to ensure interoperability across different implementations or “modules.”



By adopting ERC-7579, Safenet can facilitate the unbundling of transaction execution and settlement, similar to how VisaNet operates in traditional finance.



To do so, Safe, in collaboration with Rhinestone, developed the <a href="https://docs.safe.global/advanced/erc-7579/7579-safe">Safe7579 Adapter</a>, which enables Safe accounts to comply with the ERC-7579 standard.



Such standards are crucial for interoperability. For instance, modules such as spending limits, role-based account access and recovery can be incorporated into Safe accounts.



Safenet is set for alpha release in Q1 2025, initially supporting cross-chain accounts and basic liquidity functions. By mid-2025, Safenet will introduce third-party processors and compatibility with the Safe Apps SDK, enabling new use cases such as off-exchange settlement and subscription services.



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Safenet is Safe’s bid for an ‘onchain VisaNet’

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Over the weekend, the anonymous founder of Jupiter <a href="https://x.com/weremeow/status/1863331338662851026">used</a> a racial slur multiple times in an X post — and the Solana DeFi giant’s competitors perceived an opportunity.&nbsp;



The post came in response to another anonymous account asking whether a memecoin containing the slur could be verified on Jupiter. Meow, Jupiter’s founder, left the post up for roughly a day, arguing that he didn’t have malicious intent when making the post. He also reposted an “n-word pass” and wrote that he “didn’t know that there is such a big difference between r &amp; a” in reference to the slur.



Some <a href="https://x.com/punktaveira/status/1862920449849475296">pointed</a> out that meow is not American and “sees everyone using” the term online, so he may not have grasped the word’s potential hurtfulness.



Still, the crypto community’s response was swift and mostly negative, with Solana ecosystem leaders calling out the behavior and multiple posters pledging to sell Jupiter’s native token. Meow eventually issued an apology for the post, saying, “Racism is obviously completely unacceptable and I love you all.”



The market didn’t seem to care much about the incident, however: JUP slid 7.7% over the past 24 hours, but multiple major Solana DeFi tokens drew back 5-10% over that time frame, and JUP’s fall occurred several hours after meow’s racist remark. JUP traded relatively flat on Saturday, and seemingly even saw its price <a href="https://x.com/NFTDoctor33/status/1863271689901007037">increase</a> relative to other Solana DeFi tokens immediately after the post.



Jupiter’s killer feature is a so-called aggregator that automatically routes user swaps across multiple venues to achieve the best possible price for users. In short, you get more value per dollar when swapping on Jupiter than on Phantom or Coinbase, for instance.&nbsp;



Jupiter has a pretty big moat with this feature, <a href="https://blockworks.co/news/lightspeed-newsletter-solana-top-swap-venue">as we’ve written before</a>, but would-be competitors spied an opportunity after meow’s snafu.&nbsp;



Solana-compatible swap app DFlow essentially came out of stealth after the faux pas, posting instructions for how developers could switch their APIs away from Jupiter. DFlow’s founder wrote “crypto needs a massive change culturally,” citing meow’s post as evidence.&nbsp;



“After the Meow posts on the weekend, I think [it’s] becoming clear to everyone that a reasonable competitor for their swap product has to come in,” Chris Chung, CEO of the Solana-based aggregator Titan, told me in a text.&nbsp;



However, Chung added that “value is everything,” and any Jupiter competitors would have to significantly outperform Jupiter to convince users to switch.



I think another part of this story, if it winds up being much of a story at all, could be the institutional side of things. Risk-averse institutions moving into crypto will likely look to do business with professional-seeming founders, and posting racial slurs on social media probably won’t fit the bill.



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Competitors circle after Jupiter founder posts slur

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As some of you may know, I host the Lightspeed podcast in addition to writing this newsletter. The conversations on that show often inspire some of the things we cover here, and I want to bring Lightspeed readers in on some of those threads.



So to cap off this holiday week, here are a few recent moments from the show that have been on my mind while writing these newsletters:



<ol class="wp-block-list">
<li>“Execution is the only moat, always.” — <a href="https://www.youtube.com/watch?v=OLsSUqQc-N8">Anatoly Yakovenko</a>, co-founder of Solana</li>
</ol>



My co-host Mert Mumtaz recently grilled Solana’s chief architect on looming questions and problems the network could face in the future. It’s <a href="https://www.youtube.com/watch?v=OLsSUqQc-N8">worth a listen</a>.&nbsp;



At one point in the episode, Mert asked Yakovenko what Solana’s moat could be in a world where new layer-1s and layer-2s come to market that make blockchains fast and blockspace cheap, slimming Solana’s current edge.&nbsp;



Yakovenko’s answer pretty much boils down to: Keep executing. He also talks about hiring at Solana for tech people rather than academics, because the former are better able to work in a pressure cooker and ship features fast.&nbsp;



<ol start="2" class="wp-block-list">
<li>“We want to understand the causal connection to things, it’s in our nature to do that. But in a market there is no causal connection it’s literally like, ‘Are there more buyers than sellers?’” — <a href="https://www.youtube.com/watch?v=mnQI0KTcxPY">Joe McCann</a>, CEO and CIO at Asymmetric Capital</li>
</ol>



McCann said this while disagreeing with me about the impact of memecoins on SOL’s price, but since I am eminently humble, I’m including it here anyways.&nbsp;



I like what McCann is saying here because despite all the endless market analysis and tea leaves reading you’ll see in the media and online, sometimes it’s ultimately indecipherable why markets do what they do.



When the price goes up, it’s because the market has more buy volume than sell volume. Identifying the buyers and sellers and their motivations are an inexact science at best.



<ol start="3" class="wp-block-list">
<li>“Issuance is a cost to non-stakers. They do not receive that [issuance]. Stakers do … there is a value transfer from non-stakers to stakers.” — <a href="https://www.youtube.com/watch?v=FES9-WXxfHc">Dan Smith</a>, data lead at Blockworks Research</li>
</ol>



I’ve been growing increasingly interested in how value flows around the Solana ecosystem. When the price of SOL goes up, and as time passes, different stakeholders are rewarded differently.



Many Solana watchers, <a href="https://blockworks.co/news/lightspeed-newsletter-solana-economics">including this newsletter</a>, have debated if SOL’s inflation should be brought down. Inflation is dilutive, and disinflation can be bullish for an asset’s price, the thinking goes — likely influenced by the Bitcoin halving.



But in Solana, issuance only dilutes non-stakers, because newly minted SOL goes to validators, and validators pass it on to stakers.&nbsp;



<ol start="4" class="wp-block-list">
<li>“I always like that framing which is just create a new category and go after a small market that you think will grow” — <a href="https://www.youtube.com/watch?v=__zw8Z7jqyA">Mert Mumtaz</a>, CEO of Helius</li>
</ol>



The layer-1 wars and endless debates about which blockchain is best become very tiresome after a while. I liked the point Mert made on a recent episode though: To compete in crypto, you need to go after a meaningfully new market or use case.



SOL shouldn’t be cast as an ETH killer. It’s a different blockchain that makes different tradeoffs. And Monad, Berachain, MegaETH, and the rest of them shouldn’t try to be SOL killers. They should pick a different axis upon which they can meaningfully outperform Solana.



<ol start="5" class="wp-block-list">
<li> “I don’t think it’s really workable, sadly.” — <a href="https://www.youtube.com/watch?v=vwh7tg3WwV4">Rune Christensen</a>, co-founder of Sky</li>
</ol>



Christensen, the co-founder of Sky (formerly Maker), is referring to futarchy here, which is a buzzy new governance concept in the Solana world.&nbsp;



<a href="https://blockworks.co/news/metadao-is-making-markets-into-its-government">Futarchy</a> has markets, rather than voters, decide what a DAO should do. I was curious to get Christensen’s take on it because DAO governance has always been a struggle, and MakerDAO is one of the oldest examples.&nbsp;



Christensen is basically bearish on futarchy because he thinks collective wisdom is wrong, and DAOs need someone smart who can decipher the difference between a good marketing initiative and a ponzi scheme, for instance.&nbsp;



This sounded a bit like a pitch for traditional corporate governance to me, but what do I know?



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Solana co-founder: Execution is the only moat

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Hyperliquid, the largest perpetuals DEX by trading volume, launched its HYPE token today to (nearly) wide acclaim.



The HYPE airdrop stands out for two reasons.&nbsp;



For one, 31% (310 million) of the HYPE token supply is being airdropped, far higher than the average airdrop of a 5% to 15% token supply range. Secondly, Hyperliquid is unique as a non-venture-backed team, which means there are no private investor <a href="https://tokenomist.ai/hyperliquid">allocations</a>.



In what seems to be the most <a href="https://x.com/0xLouisT/status/1862418001275806197">successful</a> airdrop of the year thus far, HYPE is currently trading at a $1.7 billion market cap, and a $5.1 billion FDV. For comparison, <a href="https://blockworks.co/tag/dydx">dYdX</a>, which was early to the dedicated DEX chain game, has a valuation of $1.1 billion.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdpr9PeMe5RHdWqz86iHM4CGZhLIVqnuLklZSsB19o0N76uxkQRvMdOBsfrYX5N4Z5Z-9h3BLCcaautn9oe6C2x4QodRKgcGmF4-oqa8V5zBsA4rVUoQkt-hAlciCvh54mO9618PQ?key=SaHG6bDaGsysdI5462wPIXxn" alt=""/><figcaption class="wp-element-caption">Not everyone is happy about the airdrop, which required signing up to Terms and Conditions in advance. Source: Hyperliquid Discord</figcaption></figure>



Thanks to seamless onboarding, gas-free trading, a sleek user interface and lightning-fast token listings, Hyperliquid has cemented its reputation as the premier perps DEX of 2024.



But Hyperliquid’s success comes from more than product innovations around its orderbook exchange.



Though Hyperliquid was originally a perps application on Arbitrum, it subsequently introduced a spot orderbook exchange and migrated its DEX onto a proof-of-stake layer-1 in March 2024.



The Hyperliquid L1 chain is powered by the HyperBFT consensus protocol and claims to support about <a href="https://hyperliquid.gitbook.io/hyperliquid-docs/hyperliquid-l1/l1-overview">100K</a> TPS. Unlike most other perps DEXs, Hyperliquid’s orderbook is fully onchain, earning a nickname of “<a href="https://x.com/CC2Ventures/status/1850973371938312470">onchain Binance</a>” among its community. Others, <a href="https://blockworks.co/news/synthetix-new-dex-proposal">such as Aevo</a>, use an offchain or hybrid approach.



HYPE will likely be used for L1 staking and <a href="https://x.com/basicker_eth/status/1857389120449839227">governance</a>, adding to its positive perception as a “utility” token.



Since then, Hyperliquid has sought to leverage its DEX liquidity to bootstrap an entire financial ecosystem around its prized perps product.



Hyperliquid L1 features a general purpose parallelized EVM that is secured by the same consensus protocol as the L1, letting applications interact and build off the liquidity pools in its flagship perps and spot order books (this is still in testnet).



To let developers on Hyperliquid chain tap into its $2 billion+ in DEX liquidity, the team introduced “<a href="https://hyperliquid.gitbook.io/hyperliquid-docs/trading/builder-codes">builder codes</a>”, an onchain identifier that “lends” liquidity to applications under a fee-sharing agreement.



Taking a page out of Ethena’s book, Hyperliquid also introduced its own <a href="https://hyperliquid.xyz/blog/hyperliquidity-provider-hlp-democratizing-market-making/">Hyperliquid Liquidity Provider (HLP) vaults</a> that allowed users to participate in market making by depositing USDC and earn trading fees. As of November 2024, Hyperliquid’s HLP vaults have net a <a href="https://hypurrscan.io/stats">25%</a> annualized return. dYdX launched a similar <a href="https://www.dydx.foundation/blog/how-to-deposit-into-megavault">MegaVault</a> earlier this month.



In the past few years, dozens of perps DEXs have come and gone, but no one player since dYdX in 2022 has monopolized the sector. The perps crown subsequently rotated to GMX to Vertex and Hyperliquid today, who controls the largest market share but still fairly low at less than 30%. 



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeW5ClGduHRe7yN0-BqcD6-HTAFf8ctg2q0Toy4DYDmljYymcqeXPNYhSOdxh8UI1V6TOVjhh1hwLjFTSIKY90PEOqcdlZnEb9gff9SGRW68MRFdUteQnub85bFu6ARs6y7MUUYSg?key=SaHG6bDaGsysdI5462wPIXxn" alt=""/><figcaption class="wp-element-caption">Perp dex dominance | Source: <a href="https://defillama.com/derivatives">DefiLlama</a></figcaption></figure>



The chart illustrates the shifting dominance among perpetual decentralized exchanges (perp DEXs) throughout the past 12 months.



SynFutures V3 (which does not yet have a token) and Jupiter Perpetual Exchange (<a href="https://blockworks.co/price/jup">JUP</a>) followed, with 12.17% and 9.09% respectively, reflecting growing diversity in user preferences. Apex Omni and edgeX maintained notable shares, though smaller, at 6.1% and 5.71% respectively.



No doubt some of the ebb and flow in volumes is attributable to incentives for airdrop hunters seeking to maximize their future token allocations.



The decline in dominance of early players like dYdX (V4 now at 4.61%) — which conducted an airdrop in August 2021, a year before announcing the pivot <a href="https://blockworks.co/news/decentralized-exchange-dydx-to-build-its-own-blockchain">to its own chain</a> — highlights increasing competition. Newer entrants like Vertex Perps, Aark Digital, and Apex Pro captured smaller but meaningful shares, while &#8220;Others&#8221; persistently occupied between 20-30%, signifying continued fragmentation.



The reigns are short-lived, and usually comes due to fall in interest post-airdrop, yet Hyperliquid has managed to sustain usage since the <a href="https://x.com/HyperliquidX/status/1785452418173706721">conclusion</a> of its primary six-month points campaign on May 1.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd22VhED4d2WW5u6AbwRToZp5wbuwdy2nKSUhDxRW01kL5PS0iSFRrSPkP3nNilNiZquF-V3NhwoJEoLM9JWyn_18CX7HEKJiJUurfeRpedgUwdVWcgE6fKEGuRR5LVMvCuTRZUyA?key=SaHG6bDaGsysdI5462wPIXxn" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://stats.hyperliquid.xyz/">Hyperliquid</a></figcaption></figure>



Despite being one of DeFi’s most cutthroat competitive sub sectors, crypto derivatives trading is still largely dominated by centralized exchanges like Binance, with only about 3-5% of trading volumes in onchain DEXs.



For more on Hyperliquid, tap into <a href="https://blockworks.co/podcast/0xresearch/acdae332-291b-11ef-964c-6fdcb21a019c">0x Research</a> podcast’s episode with Hyperliquid co-founder Jeff Yan.



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Hyperliquid’s HYPE airdrop breaks the mold

Jeff Albus

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Here’s a look back at all of the innovations, milestones, and wins that made Solana&#8217;s 2024 unforgettable. Grab a glass of your favorite holiday cheer, and let’s raise a toast to another year of SOLid progress.



<h2 class="wp-block-heading">Resilient market performance</h2>



Talk about the comeback! SOL didn’t just bounce back in 2024 — it took flight from the ashes, <a href="https://blockworks.co/news/solana-sets-all-time-high-of-263">soaring</a> from around $40 a year ago to an all-time high of over $260 in recent days. Critics who doubted the network’s reliability? Silenced. Solana proved its chops, <a href="https://status.solana.com">clocking</a> near-perfect uptime and showing the world it can scale without breaking a sweat. And boy did the market notice. DEX trading volume on Solana has <a href="https://defillama.com/dexs/chains">shot past</a> $100 billion monthly, while futures open interest <a href="https://www.coinglass.com/currencies/SOL">hit</a> an all-time high of $4.54 billion. Numbers like these don’t lie—this isn’t just a recovery; it’s a victory lap.



<h2 class="wp-block-heading">Developer-driven growth</h2>



Behind every great blockchain is a legion of builders, and Solana’s community of developers has been crushing it. The Colosseum Radar Hackathon, held from Sept. 2 to Oct. 8, 2024, <a href="https://solana.com/news/solana-radar-winners">attracted</a> over 13,600 participants — a 63% increase from its predecessor, Renaissance. On top of that, 2024 saw some serious <a href="https://blog.colosseum.org/steel-v2-state-of-crypto-report-realms">upgrades</a> to developer tools. Governance tooling from Realms? Check. Rollup-like technology to make the network even more scalable? Double check. With these resources in play, Solana’s developers are building faster and smarter than ever.



<h2 class="wp-block-heading">Ecosystem expansion and adoption</h2>



The network <a href="https://messari.io/report/state-of-solana-q3-2024">processed</a> an impressive 62 million daily non-vote transactions in Q3 2024, supported by 1.9 million unique fee payers every single day. Not too bad, right? NFTs have been thriving, too. Platforms like Magic Eden and Tensor led the charge, with Solana’s total NFT sales volume <a href="https://www.coingecko.com/en/nft/chains/solana">surpassing</a> $5 billion early this year. And let’s not forget stablecoins. A 151% year-over-year market cap <a href="https://solana.com/news/state-of-solana-breakpoint-2024">increase</a> brought Solana’s stablecoin total to $3.8 billion. With Circle doubling down on USDC support, Solana is staking its claim as DeFi’s main stage.



<h2 class="wp-block-heading">Community spirit and decentralization</h2>



But you know what really sets Solana apart? The people — and this year, the network has demonstrated how a vibrant community can be a cornerstone for long-term success. Solana Breakpoint heralded a slew of new initiatives on the network. IRL hubs like The Shipyard in Bangalore and The Port in Miami <a href="https://blog.colosseum.org/steel-v2-state-of-crypto-report-realms/">became</a> go-to spots for innovation, collaboration, and <a href="https://solana.com/news/artists-in-residence-2024-solana-art-basel-miami-beach">maybe</a> the occasional Solana-branded latte. Initiatives aimed at <a href="https://docs.anza.xyz/operations/validator-initiatives">supporting</a> validators have helped maintain a healthy and distributed network. Meanwhile, grassroots campaigns and community-led marketing efforts have amplified Solana’s cultural presence, from <a href="https://blockworks.co/news/lightspeed-newsletter-ai-bot-goat-memecoin">engaging</a> memes to viral initiatives that reflect the humor and creativity of the community. If 2024 taught us anything, it’s that a blockchain is only as good as its believers — and Solana’s community is second to none.



<h2 class="wp-block-heading">Sustainability and energy efficiency</h2>



As of September 2024, the network <a href="https://solana.com/news/energy-use-report-september-2024">cut</a> its carbon footprint by a whopping 69%, going from nearly 8,800 tons of CO₂ in 2023 to just 2,671 tons this year, according to data from the Solana Foundation. To put that in perspective, that’s like taking 167 average Americans’ yearly emissions off the map. Solana’s efficiency per transaction? Just 0.00412 watt-hours. Solana is setting a benchmark for the industry, demonstrating how technology can be leveraged to support environmental goals.



<h2 class="wp-block-heading">Innovative use cases and cross-chain growth</h2>



Interoperability? Solana’s got it in spades. Bridges like Wormhole have made moving assets across blockchains as easy as pie, while <a href="https://solana.com/news/state-of-solana-breakpoint-2024">tools</a> like Dialect have taken private, wallet-based messaging to the next level. Then there’s Mantis, a shiny new layer-2 solution unveiled at Breakpoint 2024, promising seamless cross-chain transactions and user-centric trading. And Blinks? They’ve changed the game for crypto on social media, <a href="https://solana.com/solutions/actions">integrating</a> functionalities like tipping content creators and minting custom NFTs directly into platforms like X (formerly Twitter). Innovations like these have significantly lowered the barrier to entry for newcomers while providing seamless access for experienced users. Not too shabby.



<h2 class="wp-block-heading">Looking forward</h2>



2024 is winding down, but Solana’s momentum shows no signs of slowing. Institutional interest continues to grow, with multiple spot ETFs <a href="https://blockworks.co/news/canary-capital-sol-etf-filing">filed</a> this year, signaling a maturing market and increased confidence in the ecosystem. The focus on decentralized identity, with tools like Solana Mobile Stack (SMS) and advancements in governance systems, lays the <a href="https://docs.solanamobile.com/getting-started/overview">groundwork</a> for a more interconnected and user-focused blockchain future. Whether you’re <a href="https://blockworks.co/news/vaneck-begins-sol-staking">staking</a> SOL, <a href="https://blockworks.co/news/lightspeed-newsletter-drip-seed-raise-nfts">minting</a> NFTs, or just here for the <a href="https://blockworks.co/news/lightspeed-newsletter-memecoin-lawsuits">memes</a>, it seems clear that Solana’s brightest days are ahead. From its rock-solid tech to its vibrant community, Solana has given us all plenty to celebrate.



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The Solana ecosystem has a lot to be thankful for this year

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/research">subscribe</a>.



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Blockchains sell blocks. A complex market of actors are paid to assemble those blocks, but a part of that market — specifically block builders — is a duopoly between two players (Beaverbuild and Titan).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdYSLF4ZyYORtvnS4zThXRvtT0NKPihLT-8CgQrDyZqvWfOe1q7Di2c9BWU8Iws4iiPGoNWOQn8jwnk4Zwfd0TEy_XPgIQuTwvNxZx_rzUUe3xQiuHuJxdcRugYumm5xNYIF0Ay?key=fIUkGPUKPRfUqNNxn9KytrYg" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://mevboost.pics/">Mevboost.pics</a></figcaption></figure>



This duopoly is bad for various reasons, but chiefly in regard to maximal-extractable value (MEV).



MEV is believed to be monetary value that the end user creates, so returning it to them is ethically preferable. But when a few block builders dominate block building, that creates maximal value extraction that is suboptimal for the Ethereum end user.



To mitigate this, the Flashbots team announced today <a href="https://x.com/SheaKetsdever/status/1861480598000304148">BuilderNet</a>, a new block building network designed to return more MEV and gas fees to users.



Operating alongside Nethermind and the same Beaverbuild, BuilderNet looks to split up the presently “monolithic process” of block building.



This division of labor would allow existing stakeholders such as block builders, searchers and dapps to join a “multioperator network” and concurrently run the same block builder together. When blocks are assembled, rewards are then <a href="https://docs.flashbots.net/flashbots-auction/advanced/gas-fee-refunds#how-are-refunds-calculated">refunded</a> back to stakeholders based on the amount of market value they’ve contributed to a block.



With BuilderNet, any application can permissionlessly and privately submit transaction order flow to a block builder and be paid for it on a pro rata basis.



Transactions stay private since the BuilderNet network will run in a “<a href="https://blockworks-research.beehiiv.com/p/wtf-is-a-tee">trusted execution environment</a>” (TEE), an encrypted secure enclave that allows data to be processed without revealing order flow data.



Operators will also be able to permissionlessly deploy a block builder in BuilderNet.



According to official <a href="https://buildernet.org/blog/introducing-buildernet">docs</a>, this will enable an “even playing field where independent searchers can receive the same financial outcomes and privacy that integrated searcher-builders do today.”



BuilderNet in effect looks to thwart current industry practices in the block builder market that have sought to internalize MEV from end users. These include exclusive MEV revenue-sharing agreements <a href="https://blockworks.co/news/battle-for-wallet-supremacy">between</a> apps/wallets and block builders or other forms of vertical integration within the MEV supply chain between searchers and block builders.



Though BuilderNet will primarily benefit the Ethereum L1 today, it eventually plans to be available for decentralized sequencing on L2s through <a href="https://writings.flashbots.net/introducing-rollup-boost">Rollup-Boost</a>, the block building platform that will be used on Unichain.



Updated Dec. 11, 2024 at 3:51 pm ET: A previous version of this article incorrectly stated that Titan’s relayer accepted blocks exclusively from its own block builder, when in fact it <a href="https://relayscan.io/overview?t=7d">accepts</a> blocks permissionlessly from any block builder.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



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