Crypto Legions V3

Jack Kubinec

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



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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

Ben Strack

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



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Grayscale-related headlines have been aplenty this year, from GBTC’s <a href="https://blockworks.co/news/grayscale-fee-higher-bitcoin-etf">conversion</a> to an ETF, its <a href="https://blockworks.co/news/gbtc-outflows-curb-asset-advantage">outflows</a>, the product’s <a href="https://blockworks.co/news/grayscales-spin-off-etf-launches-crypto-outlook">spin-off</a>, more <a href="https://blockworks.co/news/grayscale-sol-etf-filing">filings</a> and <a href="https://x.com/Grayscale/status/1867214822066332108">trust launches</a>, yada yada.&nbsp;&nbsp;



A tangential update (also surfacing today) is that <a href="https://blockworks.co/news/grayscale-michael-sonnenshein-stepping-down">Grayscale’s former CEO</a>, Michael Sonnenshein, joined Securitize as its chief operating officer.&nbsp;



So the ex-leader of one of the largest crypto asset managers shifts his focus to bringing real-world assets (RWA) onchain — “which candidly I think is one of the most exciting frontiers in the broader blockchain and digital assets space,” Sonnenshein told me this morning.  



While at Grayscale, Sonnenshein worked on bringing digital assets into more traditional wrappers. At Securitize, he acknowledged, it’ll pretty much be the other way around.&nbsp;&nbsp;&nbsp;



The tokenized RWA market has lots of room to run before some <a href="https://www.sc.com/en/press-release/trade-finance-to-play-substantial-role-in-usd-30-1-trillion-tokenised-real-world-assets-market-by-2034/">lofty projections</a> are met. One point of agreement at <a href="https://blockworks.co/news/tokenization-updates-rwa-summit">Brooklyn’s RWA Summit</a> I attended in October was that the specific <a href="https://blockworks.co/news/tokenization-depends-on-use-cases-benefits">utility and benefits</a> (and the economics behind that) will be what drives tokenization forward.&nbsp;



Tokenized fiat currencies (aka stablecoins, a roughly $200 billion market) are well-established. Securitize helped BlackRock tokenize its USD Institutional Digital Liquidity Fund (BUIDL) in March, which has helped spotlight <a href="https://blockworks.co/news/securitize-ceo-on-tokenized-treasurys-growth">another use case</a>.&nbsp;&nbsp;&nbsp;



After all, US Treasurys (which BUIDL is backed by) are the collateral serving as the “substrate” for many capital markets transactions, Sonnenshein said.&nbsp;



He added: “Continuing to build products that can address some of the inefficiencies and … move into offerings where the underlying assets are not dollars, but instead yield-bearing assets, I think is a very, very attractive value proposition.”



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Ex-Grayscale CEO shifts focus to tokenization

Casey Wagner

Next year, the Securities and Exchange Commission could become entirely Republican-controlled. At least for a little while.



The Senate Banking Committee on Wednesday delayed its vote to confirm SEC Caroline Crenshaw, whose term ended in June. After the vote — which was scheduled to take place Wednesday morning — was pushed to later in the afternoon, Senate Republicans were able to block it as late-in-the-day votes require unanimous approval. The vote has not yet been rescheduled. 



Should Crenshaw not be confirmed before the Senate adjourns for the session next week, President-elect Donald Trump will have the opportunity to nominate a replacement, although no more than three commissioners may be of the same political party. Trump appointed Crenshaw in 2020 and President Biden renominated her earlier this year.&nbsp;



Read more: <a href="https://blockworks.co/news/industry-opinions-on-sec-commissioner-crenshaw">Crypto industry sounds off on SEC’s Crenshaw ahead of vote</a>



Crenshaw is permitted to serve on the commission through January 2026 if no successor is confirmed.



Chair Gary Gensler and Commissioner Jaime Lizárraga, both Democrats, last month announced they would be <a href="https://blockworks.co/news/gary-gensler-resigning">resigning from the agency</a> in January.&nbsp;



Trump earlier this month announced he would be <a href="https://blockworks.co/news/trump-nominates-new-sec-chair">nominating Republican Paul Atkins</a> to chair the agency. Upon Gensler’s departure, Trump is expected to name either Hester Peirce or Mark Uyeda, both sitting Republican commissioners, as acting chair while the Senate completes Atkins’s confirmation process.&nbsp;



Wednesday’s vote delay comes as pro-crypto lobbying efforts heat up in Washington DC.&nbsp;



Stand With Crypto, a non-profit launched by crypto exchange Coinbase, said Thursday that it opposes Crenshaw’s nomination.&nbsp;



“Anti-crypto regulators must not be confirmed,” the non-profit added.&nbsp;



Read more: <a href="https://blockworks.co/news/sec-chair-nominee-crypto-past">What SEC chair nominee Paul Atkins has previously said about crypto</a>



Democratic Rep. Shri Thanedar, who will not participate in a vote to confirm Crenshaw, said Thursday he’s “glad to see the Senate delay the vote.”



“Voters just delivered Congress a crypto mandate this November,” Thanedar added in a <a href="https://x.com/ShriThanedar/status/1867223111138955509">post</a> on X. “We should make sure the leaders we nominate support crypto as well.”



Other advocacy groups are pushing Senators to finalize Crenshaw’s second term. 



“At stake is the reality of a bipartisan SEC,” Public Citizen and 39 other organizations wrote in a Thursday <a href="https://www.citizen.org/article/support-comm-crenshaw/">letter</a> to Senators. “The incoming Trump Administration has signaled they are considering breaking from the tradition that provides for the opposition party to select candidates for the two minority seats.”



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Delayed Crenshaw vote increases odds of all-Republican SEC early next year 

Felix Jauvin

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



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For those who don’t know, I’m Canadian. However, I spent nearly every hour of the day thinking about macro from a US perspective. In the world of markets, the US is at the center and everything else is secondary.&nbsp;



Reflecting on the two worlds I live in poses an interesting vignette as to why it feels like the Fed keeps stopping and starting on its approach to monetary policy with respect to the economy.&nbsp;



The Canadian unemployment rate just hit a cycle high of 6.8% and looks to be climbing even higher, whereas the US’s unemployment rate seems to be flatlining. Yes, both economies were affected by an increase in labor supply caused by immigration, but the Canadian labor market is worse across the board.&nbsp;



Canada has managed to get its inflation rate back to 2% on a year-over-year basis, while the US remains stubbornly above target:



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="1000" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=1024&amp;h=1024" alt="" class="wp-image-95314" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=411 411w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=418 418w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=350 350w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/unnamed-1.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /></figure>



The Bank of Canada just surprised markets this week by going for another 50-basis point rate cut vs. the recent 25bps cuts they’ve been doing. The US is expected to squeeze in one more rate cut next week before pausing for a while as the economy continues to surprise to the upside.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeqFP1tqE1VxaXixeRKPJA2ECZJSaT3gP6DLsjd1A9TnjqdWwCJf91Ntw8EBI6FomHskcfWCx8brM0tz6c2BdewrQ9gAuBB_Jikpil5clnwClYhqKfgJQoCqVZ4aLnILkAfM9TG?key=jjGgS32kIzyDfOnvZtUTULS5" alt=""/></figure>



So what gives? What’s driving the discrepancy between two similar economies that trade quite closely?



Simply put, the US financial system is much less sensitive to changes in short-term interest rates than Canada’s. Here are two examples:



<h2 class="wp-block-heading">Corporations </h2>



US companies have access to the largest debt markets in the world and can issue fixed-rate bonds at tight spreads, whereas Canadian companies (as is normal in non-US countries) are more inclined to issue floating-rate debt, which changes instantly with changes in central bank policy rate.&nbsp;



<h2 class="wp-block-heading">Households</h2>



In the US, homeowners can sit on a 30-year fixed-rate mortgage and as long as they don’t move, the Fed could hike rates to 50% and it still wouldn’t affect them. The rate they’ve locked in is the one for the entire mortgage. Considering how many households refinanced their mortgages at the Covid lows (sub-3%), as long as they don’t move, they’re unabated by increasing interest rates. This is very different in Canada and most other countries, where even on a 25-year fixed-rate mortgage, the rate gets reset every five years. Therefore, even if homeowners stay put, they will eventually be affected by the increase in rates.&nbsp;



These two examples showcase why the Fed is having so much trouble getting into a consistent policy path — its main tool cannot impact large swaths of the economy like it can in other countries. And so here we are instead, with increasing dispersion in economies between the US and everybody else. Oh, sweet US exceptionalism.



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Why rate changes impact the US, Canadian economies differently

Donovan Choy

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

Macauley Peterson

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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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.



“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

David Canellis

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



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When Cobie was <a href="https://x.com/kaspotz/status/1673747128215302144/photo/1">tweeting</a> about his pyramid-shaped philosophy on building the perfect crypto portfolio — you listened.



Maybe you even saw the benefit of spreading your capital across bitcoin, ether and solana in a <a href="https://blockworks.co/news/coinbase-asset-management-allocations">50/35/15 split</a>. Depending on the execution, those strategies would’ve easily paid off during the bull market to date.&nbsp;



It still probably hurts to know that they&#8217;ve been blown out of the water by Milady and Pudgy NFTs.



USD-denominated floor prices for both NFT collections have now gone more than 20x since December 2022.



The cheapest Miladys went for the ETH equivalent of $890 back then — today they go for $22,570.&nbsp;



At the same time, Pudgys have exploded from $5,070 to $106,900. Floor Pudgys are now technically more expensive than bitcoin, although with far less supply.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdz6erw2t8b5oynreDcW3S5D0Ws9dPn_0BH0xhtlNogwJjOixN1Ynm4H0YoihRurq7qnyM_--kvVUudlMyz-UrsrgzAYoPaUZZZ7-JFkGTXHE8fxMCZnw_W1fm8qMQFqax5g14ljA?key=0dY8Vwgs6Q5PYpW1fuk_Wp9R" alt=""/></figure>



BTC has meanwhile managed around 6x and ETH 3x, while SOL is currently at 18.5x.&nbsp;



Then again, you can’t buy <a href="https://www.walmart.com/browse/toys/pudgy-penguin-toys/4171_3438149_1343175">stuffed collectible</a> bitcoins at Walmart.



Of course, NFT markets are far smaller and less liquid than major coins. They tend to undergo outsized pumps when volume suddenly picks up.&nbsp;



Most of the gains have come in the past month or so: There were only about 1,000 Pudgy <a href="https://nftpricefloor.com/pudgy-penguins">trades</a> in the past week and 1,900 in the past month. 400 and 1,240 for <a href="https://nftpricefloor.com/milady">Miladys</a>.



In any case, there’s no denying that floor Miladys and Pudgys are now two of the best-performing crypto assets in this bull market.&nbsp;



Only one top-25 coin has outperformed them: PEPE.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcodBIdBPX424WAcjvqVJyEEBR1QlCP92WvlWzBpPxDFi8o_QRiNIEYm7FonmuMhDT0sVICgR7a8r0HmgL66B6eFa51jAlOnir3xsyJcN0bW-jS4lRGzHnX_kFBXkYwijz0zekrww?key=0dY8Vwgs6Q5PYpW1fuk_Wp9R" alt=""/><figcaption class="wp-element-caption">As you can see, Miladys and Pudgys are outliers</figcaption></figure>



Floor prices for Azuki, Doodles and CryptoPunks have still more than doubled, but that’s less than most major coins excluding LTC and DOT.&nbsp;



Bored Apes and Nouns have even lost value against the US dollar.



Still, if you were searching for indicators of how silly the next bull market phase could get, look no further.



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Pudgys and Miladys pump even as overall liquidity drops

Katherine Ross

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



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We’ve been on a bit of a <a href="https://blockworks.co/news/hope-for-altcoin-santa-rally">markets spree this week</a>, and it’s not over yet. At the very least, we should be glad that nothing’s ever truly boring in crypto land, right?&nbsp;



Anyway, I caught up with Kraken’s head of strategy Thomas Perfumo to pick his brain on the markets given the volatility we’ve seen.



For Perfumo, the pullback has been in line with what he calls the “new normal” after bitcoin topped $100k.&nbsp;



“We’ve seen a couple of pullbacks corresponding with large liquidations of leveraged positions. This is typical consolidation behavior,” he told me.&nbsp;



“From observations during the past two cycles, a rally in altcoins takes hold after a run-up in bitcoin. This sparks a rotation into altcoins as investors seek to outperform in the next phase of the bull market. In the prior two bitcoin-led cycles, the market cycle peak corresponded with bitcoin market cap dominance, which is currently in the mid-50s, falling closer to 40%,” Perfumo added, backing up what we’ve been <a href="https://blockworks.co/news/altcoin-season-when-bitcoin-dominance-hits-60">discussing here on Empire</a>.&nbsp;



If we continue to see altcoins outperform, Perfumo thinks there’ll be a “pick-up in interest”



“People are on the lookout for signs that crypto services are experiencing mainstream adoption. Stablecoins have already broken prior records in terms of circulating supply and DeFi total value locked (TVL) is inching closer to peak 2021 levels. We think the combination of significant improvements to scalability this past cycle and a line of sight towards a more favorable, pro-growth agenda for crypto innovation will lead to an environment that’s ripe for crypto services to catalyze a new wave of adoption.”



But, as I wrote yesterday, it might be time to start prepping your bags for lower liquidity in the next few weeks, which is typical for this holiday period. Perfumo suggested that some of the selling might be put off till the new year as folks in the US specifically base their moves on the potential tax consequences.&nbsp;



“It’s certainly possible that shortfalls in liquidity could lead to higher price volatility, both to the upside or to the downside,” he said.&nbsp;



Speaking of next year, Perfumo’s in agreement with Canary Capital’s Steven McClurg that the <a href="https://blockworks.co/news/bitcoin-120k-by-christmas">cycle still has plenty of legs</a>.&nbsp;



It’s not just bitcoin posting wins, he noted that DEXs and some infrastructure plays — which have received <a href="https://blockworks.co/news/crypto-fundraising-capital-allocation">plenty of support from venture capital</a> — are ready to post wins on the year.&nbsp;



However, some of the other sectors, like web3, gaming and the metaverse aren’t quite there yet. Or, if we’re being honest, are nowhere near being ready for mainstream attention outside of some exceptions (looking at you <a href="https://blockworks.co/podcast/empire/6558f55c-a09f-11ef-aae9-2b3740fcea67">Off the Grid</a>).&nbsp;



That’s not to say that there can’t be dark horses among projects yet to find mainstream attention, Perfumo said.&nbsp;



Either way, he’s bullish on the environment, telling me that this is the perfect recipe for innovation within the space.



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Crypto market could see ‘pullbacks’ ahead of the holidays: Analyst

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



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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

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



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The Chinese yuan fell against the US dollar Wednesday morning after Reuters <a href="https://www.reuters.com/markets/currencies/chinese-authorities-are-considering-weaker-yuan-trump-trade-risks-loom-sources-2024-12-11/">reported</a> Chinese officials may opt to move away from their “stable currency” policy in response to <a href="https://blockworks.co/news/unpacking-trump-potential-tariff-policies">tariffs</a> under President-elect Donald Trump.&nbsp;



The key words here are “stable currency policy.” That’s not to be confused with “stablecoin policy,” which China also has (but that’s a topic for another newsletter). China’s central bank is notorious for its commitments to keep the yuan <a href="https://blockworks.co/news/on-the-margin-newsletter-china-stimulus-stagnation">stable</a>, but a strategic currency devaluation does have some historical precedent.&nbsp;



It’s a tool China used back in 2018 and 2019 during Trump’s first term. Allowing the yuan to lose value against the dollar makes exports less expensive, potentially offsetting the 10% tariff Trump has said he’d impose during his second stint in Washington; but devaluation also poses risks to the local economy. Hypothetically, foreign buyers may be paying less for Chinese goods, but Chinese consumers would be paying more.&nbsp;



The Chinese yuan slid around 0.2% Wednesday, dropping to 7.26 per dollar. Year to date, the yuan has lost 2.4% against the dollar.&nbsp;



The move comes as President Joe Biden plans to increase Section 301 tariffs designed to <a href="https://blockworks.co/news/key-inflation-data-week">target</a> China’s cleantech industry during his final weeks in office.&nbsp;



“Many countries, when they&#8217;re faced with unilateral actions of that sort, look for ways to retaliate,” US Treasury Secretary Janet Yellen told Bloomberg today when asked about Trump’s broad tariff plans for China. “My guess would be that [China] would do that.”&nbsp;



We’re 40 days out from the inauguration, so this story is just getting started. Keep an eye on your inbox.



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Chinese yuan dips on reports government may resort to using old tricks 

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



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It’s been 11 months since US spot bitcoin ETFs went live on Jan. 11.&nbsp;



To mark the occasion, here are 11 facts about those products:



<ol class="wp-block-list">
<li>Combined net inflows now stand at $34.3 billion, according to Farside Investors <a href="https://farside.co.uk/bitcoin-etf-flow-all-data/">data</a>. BlackRock’s iShares Bitcoin Trust (IBIT) alone has <a href="https://x.com/strack_ben/status/1844096306492637199">welcomed $35 billion</a> to its coffers, while Fidelity’s product is the runner-up with flows of $12.1 billion.</li>



<li>Since Nov. 6 (the day Donald Trump was <a href="https://blockworks.co/news/donald-trump-declared-president-2024-election">named</a> the election winner, removing crypto’s remaining <a href="https://blockworks.co/news/matt-hougan-crypto-reputational-risk">reputational risk</a> for many), the bitcoin ETF category has reeled in $10.8 billion of new capital. </li>



<li>The segment has collectively notched net inflows on 158 of 231 trading days (68% of the time). The best day (nearly $1.4 billion) came on Nov. 7. The <a href="https://blockworks.co/news/unprecedented-us-spot-bitcoin-etf-outflows">most outflows</a> ($564 million, on May 1) were attributed in part to a profit-taking-fueled <a href="https://blockworks.co/news/btc-record-monthly-growth-streak-jeopardized">BTC dip</a>. </li>



<li>BlackRock’s IBIT had $50.8 billion in assets, as of Dec. 10. That’s about $17 billion more than the firm’s Gold Trust (IAU), which launched in 2005; but it’s about $24 billion less than the assets in State Street’s SPDR Gold Shares (GLD), which hit the market in 2004.</li>



<li>While IBIT’s average daily inflows are $152 million, that figure for the WisdomTree Bitcoin Fund (BTCW) stands at less than $1 million.</li>



<li>On the point of varying flow success, nearly $21 billion has left the Grayscale Bitcoin Trust (GBTC) — a result <a href="https://blockworks.co/news/grayscale-fee-higher-bitcoin-etf">largely anticipated</a>. The firm’s cheaper <a href="https://blockworks.co/news/grayscales-spin-off-etf-launches-crypto-outlook">Bitcoin Mini Trust</a> (BTC), launched on July 31, has captured almost $900 million of new money.  </li>



<li>As for volumes, an average of 44.5 million IBIT shares <a href="https://finance.yahoo.com/quote/IBIT/">trade</a> per day (worth roughly $2.6 billion at IBIT’s current price). The BlackRock product <a href="https://etfdb.com/compare/volume/">ranks</a> eighth in that category (by shares) across all ETFs in the trailing three months — slightly behind the <a href="https://etfdb.com/etf/SPY/">SPDR S&amp;P 500 ETF Trust</a> (SPY).   </li>



<li>Since spot ether ETFs <a href="https://blockworks.co/news/ether-etfs-approved-for-us-exchange-july-23">hit</a> US markets on July 23, capital entering the BTC products ($16.8 billion) is roughly nine times more than the net flows ($1.9 billion) going into their ETH counterparts. So ETH ETF net inflows over that span is roughly 11% that of bitcoin ETFs — below Bloomberg Intelligence <a href="https://blockworks.co/news/sizing-up-demand-for-us-eth-etfs">estimates</a> that fell between 15% and 25%.</li>



<li>Institutional buyers of these ETFs have included hedge funds, <a href="https://blockworks.co/news/advisers-bitcoin-etfs-client-portfolios">advisers</a> and even <a href="https://blockworks.co/news/btc-exposure-pensions-endowments">pension funds</a>. Jersey City officials told Blockworks the city’s pension fund planned to <a href="https://blockworks.co/news/jersey-city-pension-funds-btc-exposure">buy bitcoin ETFs</a> this month.</li>



<li>Data <a href="https://x.com/EricBalchunas/status/1865012801997087105">shared</a> by Bloomberg Intelligence suggests bitcoin ETFs now hold more bitcoin than the estimated 1.1 million BTC held by Satoshi Nakamoto. Put another way, this is about 5% of the overall bitcoin supply.</li>



<li>Lastly, the value of each fund’s BTC stash — compared to how much they paid for the coins — may not be what you think. Blockworks’ David Canellis <a href="https://blockworks.co/news/bitcoin-etf-performance-comparison">wrote</a> about this recently.</li>
</ol>



Bitwise executives <a href="https://bitwiseinvestments.com/crypto-market-insights/the-year-ahead-10-crypto-predictions-for-2025">predicted</a> Tuesday that bitcoin ETFs will attract more flows next year than they did in 2024. Let’s see what happens in the next few weeks and go from there.



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11 bitcoin ETF facts 11 months after US listings

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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Brutal week so far for altcoins.&nbsp;



In the stock market, you generally look for a Santa Claus rally at the end of December into early January as a nice, green way to close out the year and welcome a new chapter.&nbsp;



Whether we could see a similar thing in crypto is still up in the air. Right now it’s looking iffy.



On the upside, altcoin leverage managed to hold through Dec. 5, but Monday saw the biggest daily long liquidation event since May 2021, as K33 analysts noted. Ouch.&nbsp;



“Ever since the election, long bets have been rewarded. This dynamic allowed open interest to accumulate with a steadily growing long concentration. This growth is evident by looking at total open interest in altcoins relative to the total altcoin market cap,” they wrote.&nbsp;



“This metric grew from 3.57% to 4.42% from the election until December 9, amidst a very high funding rate environment in December. [Monday’s] liquidation cascade saw altcoin leverage plunge by $12.8bn, reducing the relative altcoin leverage to 3.96%.”



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc6JmswNJEd0xTGKvFzom7c2fKBXUuUIFDcpxfVf3U0AIWhO4iecXpnZFQGTLoOqoSfmApoQ2IR4yMzPZaCpbEmDlBxWnTMdX_wJAH8dZsJa1XiYSlKGKxfANYHYIcGLpob19ik?key=3EbJpl66pmtt39sBTheYnS8N" alt=""/><figcaption class="wp-element-caption">A look at open interest in altcoins</figcaption></figure>



To put those metrics into perspective, altcoin open interest marked the “biggest relative decline in altcoin leverage since the FTX collapse.”



BitOoda analysts, following Monday’s sell-off, said that they expect more “sideways trading through year-end marked by periods of low liquidity and choppy price action.” And we very well may see that given the highly leveraged products and “exaggerated” price action moves.&nbsp;



The good news, however, is that while this is a decently sized bump in the road, it doesn’t sound like it’s impacting the bullish 2025 outlook shared lately by many.&nbsp;



Perhaps there’s still hope for a Santa rally.



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Santa rally? Altcoins could use a Christmas miracle

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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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If a thriving blockchain ecosystem were a recipe, the ingredients would go something like this:



<ul class="wp-block-list">
<li>One consensus mechanism</li>



<li>Four DeFi apps*</li>



<li>A driven founder/figurehead</li>



<li>One native stablecoin (at least)</li>



<li>Two legal entities (dev studio and foundation)</li>



<li>One token bridge (minimum)</li>



<li>Three terminally online reply guys</li>
</ul>



The secret ingredient would be one or more of the following: funding rounds, mid-cap memecoins, NFT collections, active VC funds and third-party validator clients.



*Minimum required DeFi apps: DEX w/ token launchpads, lending/collateralized debt, liquid staking, oracle



So, while there are now hundreds of smart contract platforms with halfway decent market capitalizations, not all are buzzing to quite the same degree as the majors — Ethereum, Solana and BNB.



Case in point: XRPL, which has all but $63 million <a href="https://defillama.com/chain/XRPL">TVL</a> in its onchain apps. Ripple Labs is right now working hard on finishing its own recipe, more than 12 years after its launch.



Starting easy, XRPL does have the consensus mechanism, albeit without the usual staking or mining, instead relying on trusted validators. And it already has a few token bridges.



There are also two legal entities: the San Francisco-headquartered Ripple Labs and the Estonian non-profit XRP Ledger Foundation, which was recently <a href="https://xrpl.org/blog/2024/evolving-the-xrp-ledger">rebranded</a> to the Inclusive Financial Technology Foundation.



Ripple Labs CEO Brad Garlinghouse obviously ticks the box for driven founder-slash-figurehead.



As for the reply guys, David Schwartz, Ripple Labs’ long-serving CTO, has built a following on solid <a href="https://x.com/JoelKatz/with_replies">reply</a> guy energy (check).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcjHp4yM7YokZsMXlYr7xqLGcxzwWDssl8W-bNLlnUo36AzSf-FdkUXxBaK46uiE-Gx6KuuraefqfKPb5Gk0ZGZaNk7ZUg_dq2WQro1mR39myFjtvfWE4mzHVdJ6jwox5aF11FNuA?key=3EbJpl66pmtt39sBTheYnS8N" alt=""/><figcaption class="wp-element-caption">Every major blockchain could do with a David Schwartz</figcaption></figure>



And anyone who has ever tweeted anything remotely critique-adjacent has likely been visited by the XRP Army — which together truly harnesses the power of much more than just two reply guys (check check).



That leaves the four DeFi apps and a native stablecoin.&nbsp;



XRPL currently has <a href="https://dappradar.com/rankings/protocol/xrpl">four</a> DeFi apps with 100 unique active wallets interacting with them daily right now — but three of them are DEXs and one is an NFT marketplace. As of last month, it does have a <a href="https://xrpl.org/docs/concepts/decentralized-storage/price-oracles">native</a> oracle, which should help to attract builders.



And conveniently, XRPL is the exception to the rule (with no direct staking XRP as part of consensus), so it can do without the liquid staking app in any case.



The only ingredients then left are a bustling lending protocol and a native stablecoin.



Luckily, a stablecoin is very much on the way: Ripple USD (RLUSD), which the New York State Department of Financial Services just <a href="https://x.com/bgarlinghouse/status/1866571228464460215">approved</a> for offering.



It’ll be structured similarly to Circle’s USDT and Tether’s USDT, backed by cash and equivalents (mostly short-dated US Treasurys).



With XRPL so close to acquiring all the necessary ingredients to really pop, it’s no surprise then that DeFi veteran Robert Leshner is now <a href="https://www.dlnews.com/articles/defi/robert-leshner-is-looking-to-back-defi-projects-on-ripple/">open</a> to backing projects building out the Ripple ecosystem via his fund (VC bonus point get!).



The pièce de résistance for XRPL would then be a roster of its own mid-cap memecoins, as is traditional fare.&nbsp;



Like it or not, those are <a href="https://dexscreener.com/xrpl?rankBy=trendingScoreH24&amp;order=desc">cooking</a> too, although the biggest of which is an XRP Army-themed coin with a $45 million market cap (still too small).&nbsp;



The bright side: Only $15 million in tokens were <a href="https://dexscreener.com/xrpl?rankBy=trendingScoreH24&amp;order=desc">traded</a> on XRPL in the past day. Should RLUSD find decent traction, watch that number only go up from here to fully round out the recipe.&nbsp;



Bellisimo!



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