🟣 All Hail Toly - Blockworks Newsletter

GM - especially to Anatoly.

Our Soviet-ruled, modern-day Ukrainian US immigrant, or as I like to call him, the Single Shard Maxi, was featured in a Fortune article yesterday where he described the entrepreneurial spirit of the US when he moved here at the age of 11. He said the spirit that once trickled throughout the US is fizzling out, with the number of open-source blockchain developers in the US dropping from 42% in 2018 to 29% in 2022.

Anatoly goes on to ask, “Many of us are here because we want to create real value–and we want American values at the foundation of the world’s most impactful companies. Imagine if Google had been founded in Russia, or Reddit had been founded in China. How different would the internet look today?”

I, for one, commend the Single Shard Maxi for taking to a mainstream media outlet practically begging for regulatory clarity. These are the places we need to be spreading the gospel of crypto in order to educate the masses after such a brutal year, reputationally speaking.

In other news (and there’s a lot of it), Mastercard announced a program with protocol partnerships to expand web3’s reach, Fuel introduced a hybrid proving mechanism that utilizes both ZK and Optimistic tech, and Eclipse announced it will be launching its SVM Ethereum/Celestium L2 on mainnet soon.

If that wasn’t enough for you, you are in luck because we have a few more. Injective unveiled its inEVM which apparently supports composability between Cosmos, Solana, and other VMs. Last but not least, Canto announced it will be migrating to a ZK-powered L2 on Ethereum, built with the recently released Polygon CDK.

I can’t believe it’s only Tuesday.

– Sam Martin

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Last week we flagged a governance proposal in the Abracadabra forums that started a “market making” deal between DWF and Abracadabra. Early this morning, Abracadabra’s treasury sent $1.5M worth of SPELL to DWF to begin market making activities. Since DWF first appeared in the forums, SPELL has rallied ~50%. How is this newsletter still free?

DWF’s playbook is ethically ambiguous. First, they buy up discounted tokens from dying projects to the point where they control a large amount of circulating supply. Then they begin pumping the corresponding perps on a CEX. Once they fill enough of their perp position they start buying spot tokens. Traders come in to short the rally after spotting a massive anomaly in open interest, adding further fuel to the fire and skyward pressure on the perp price.

This pressure brings DWF’s perp position into further profit which they can then use to continue buying spot. Keep in mind, DWF begins unloading perps into this new spot buying pressure before finally opening a short and then dumping the spot. The “market making” firm profits on the way up and on the way down. If you ever spot a crazy divergence in perp/spot prices and an OI anomaly, it is safe to assume that DWF is probably playing around in the books.

ARB holders have voted to create a 50M ARB token incentive program to distribute to active Arbitrum protocols until Jan. 31, 2024. This proposal should escalate Arbitrum network activity, and it is likely that recipients will redistribute their ARB to active users of their protocols. An example of this effect was seen on Optimism via OP rewards for Kwenta traders. If similar activity happens on our favorite Arbitrum perp platforms, such as GMX or Vertex, we could be well on our way to a mini Arbitrum season. Let’s check back in on this over the coming weeks as protocol applications are reviewed. Remember who told you first.

Pendle: The Intersection of Yield Trading and RWAs

Pendle is the market leader in DeFi yield trading and could be poised for significant growth through domination in LST interest rate derivatives and RWA integrations.

Base: Signs of Early Success

Base has doubled-down on its commitment to the Superchain vision, has shown early signs of success with nearly $400M in TVL, and has become home to novel dapps such as friend.tech which has seen significant traction.

Centrifuge to meet demand for Real World Assets with liquidity pools

Centrifuge liquidity pool testnets have launched on Arbitrum and Base, with plans to release on other networks in the future

FTX Trading pursues damage claim against SBF’s parents

Joseph Bankman and Barbara Fried are accused of turning a blind eye to problems at FTX while enriching themselves and family members

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.

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