CherrySwap

Amanda Tuminelli

The Securities and Exchange Commission has finally admitted what we’ve known all along: “Crypto asset security” was a made-up term with no legal basis. After years of misleading the courts and the public, the agency’s quiet abandonment of the term signals a major retreat in its regulation by enforcement campaign against the digital asset industry.



Rather than putting out proactive or helpful guidance in recent years, the SEC has been suing industry participants in a thinly veiled attempt to kill crypto. So far, it isn’t going well. If there was any doubt that the SEC’s approach is destined for failure, the recent shattering of the myth behind “crypto asset security” should put it to rest.



Read more: <a href="https://blockworks.co/news/lawmakers-frustrated-with-sec-crypto-approach">Rep. Torres: SEC invented ‘crypto asset security’ out of thin air</a>



Last year, the SEC filed enforcement actions against many of the major centralized exchanges, and is currently fighting in different courts against Binance, Coinbase and Kraken. Two weeks ago, the SEC <a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.273.1.pdf">moved to amend its complaint</a> in the Binance case. Buried in a footnote on page 24 of the motion, the SEC gave a stunning apology:



“As this Court noted and as the SEC reiterates, with its use of the term ‘crypto asset securities,’ the SEC is not referring to the crypto asset itself as the security; rather, as the SEC has consistently maintained since [Telegram], the term is a shorthand…. Nevertheless, to avoid any confusion, the [amended complaint] no longer uses the shorthand term, and the SEC regrets any confusion it may have invited in this regard.”



Rarely in history has a single footnote scrambled the minds of so many expert lawyers at once. Coinbase Chief Legal Officer Paul Grewal <a href="https://x.com/iampaulgrewal/status/1834455724631736428">described it</a> as “shameless.” Uniswap Labs CLO Katherine Minarik <a href="https://x.com/MinarikLaw/status/1834630275008963022">said</a> “no government agency should work this way.” Ripple Labs CLO Stuart Alderoty <a href="https://x.com/s_alderoty/status/1834464168399044842">suggested</a> the SEC “admit it has become a twisted pretzel of contradictions.”



Why react so strongly? There are at least three reasons.



First, the footnote is demonstrably false. Far from having “consistently maintained” that it “is not referring to the crypto asset itself as the security,” the SEC has relentlessly propagated the myth that tokens themselves are securities.



The SEC declared that view as early as 2017 in its <a href="https://www.sec.gov/files/litigation/admin/2017/33-10445.pdf">settlement with Munchee</a>, where it said that “digital assets may be securities” and that “MUN tokens were securities…because they were investment contracts.” The SEC has consistently reiterated that view in the years since. For example, in its 2018 <a href="https://www.sec.gov/files/dlt-framework.pdf">ICO framework</a>, the SEC analyzed “whether a digital asset is offered or sold as an investment contract and, therefore, is a security.” In its 2020 <a href="https://www.courtlistener.com/docket/19857399/4/securities-and-exchange-commission-v-ripple-labs-inc/">complaint against Ripple Labs</a>, the SEC alleged that “XRP was an investment contract and therefore a security[.]” And in its 2023 <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.599908/gov.uscourts.nysd.599908.1.0_1.pdf">complaint against Coinbase</a>, the SEC accused Coinbase of making “available for trading crypto assets that are investment contracts under the Howey test[.]”



Even the SEC’s reference to Telegram in its footnote seems insincere. The SEC cites the Telegram case as if to show through its own statements that it has a history of “consistently maintaining” that tokens themselves are not securities. But the citation itself doesn’t reference a statement by the SEC — it quotes the court holding that tokens are “little more than alphanumeric cryptographic sequence[.]” In reality, the SEC alleged in its 2019 <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.524448/gov.uscourts.nysd.524448.1.0_3.pdf">complaint against Telegram</a> that “Grams are securities” because “Grams are investment contracts.”



This isn’t even the first time the SEC has made misrepresentations to the court this year. In an enforcement action against Debt Box, where the SEC lied to the court in order to get the relief it was seeking against defendants, the court took the rare step of imposing <a href="https://assets.ctfassets.net/c5bd0wqjc7v0/1u6cDaFa3REg8wHUc6onZ8/e1257f64a80ca440d887f67821f872fe/Debt_Box_Order.pdf">sanctions</a> against the SEC because its “pervasive misconduct…demonstrate[d] a pattern of organizational bad faith and broadly implicate[d] the Commission itself—not just isolated individuals.” In an 80-page opinion using the term “bad faith” 46 times, the court stated that the SEC’s conduct “constitute[d] a gross abuse of the power entrusted to it by Congress and substantially undermined the integrity of [the] proceedings and the judicial process.”



Read more: <a href="https://blockworks.co/news/sec-commissioner-hearing-debt-box">Gensler says DEBT Box case ‘not well handled’ by SEC</a>



Second, the footnote signals an SEC in disarray. As a federal agency with extraordinary power to regulate the US economy, we expect — and administrative law requires — that the SEC will maintain consistent positions within and across its divisions. In other words, the left hand ought to know what the right hand is doing.



Yet, on the exact same day that the enforcement division half-heartedly apologized in the Binance case for the confusion it caused by using the term “crypto asset securities,” the same division used that term eight times in its <a href="https://www.sec.gov/files/litigation/admin/2024/34-101001.pdf">settlement with eToro</a>, and the SEC’s X account posted an <a href="https://x.com/SECGov/status/1834340017897979934">investor alert</a> from the Office of Investor Education and Advocacy using the term five times. These blatant inconsistencies call into question how entrepreneurs and investors are supposed to understand the law, or the SEC’s interpretation of the law, when the agency itself can’t even decide what language to use in describing it.



Third, the footnote betrays the SEC knowing its view of the law is wrong and how it’s taking different advocacy positions simply to win its enforcement cases. The argument that tokens themselves are securities is central to the SEC’s enforcement actions against centralized exchanges — the SEC hung its hat on that argument in the Binance case, claiming that tokens are “the embodiment of the investment contract” and therefore subject to the securities laws as they trade in secondary markets. The court explicitly called out the SEC’s inconsistency in its use of the term “crypto asset securities” and <a href="https://www.courtlistener.com/docket/67474542/248/securities-and-exchange-commission-v-binance-holdings-limited/">rejected that argument</a>, holding that it “is not enough, standing alone, to bring secondary sales” of specific tokens under the SEC’s jurisdiction.



As a neutral regulator meant to serve the interests of justice, the SEC isn’t supposed to take different positions in different cases just because it wants to win them. Instead, the SEC should be presenting a consistent view of the law — assuming it has one. This footnote proves it does not. And that means defendants will have a renewed opportunity to assert a fair notice defense against SEC enforcement, arguing that the law is so vague, a person of “common intelligence” can’t determine its meaning.



The SEC’s sudden abandonment of the term “crypto asset securities” isn’t just semantics, much as they would like to handwave and say so. If the SEC can’t characterize tokens as securities, it will have a hard time convincing courts that it has authority over secondary markets for digital assets. The crux of the securities laws is a registration regime for securities — but if the tokens themselves aren’t securities, then it’s unclear what exactly should be registered in the first place.



Crypto lawyers aren’t the only ones to notice the SEC’s retreat from the term “crypto asset securities.” In recent Congress hearings, members on both sides of the aisle — from <a href="https://x.com/RepRitchie/status/1836814099394764934">Ritchie Torres</a> to <a href="https://x.com/GOPMajorityWhip/status/1838616037945716999">Tom Emmer</a> — remarked on how the SEC made up the term despite having no basis in federal law, only to later retract it and apologize for its use. Now that the myth of “crypto asset security” has been exposed, the SEC will have to confront the reality of its weakness in both the courts and Congress.



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The SEC has been wrong about ‘crypto asset securities’ all along

Katherine Ross

David Canellis

Today, enjoy the Empire newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. Subscribe to the Empire newsletter.



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Happy day two of Permissionless!



Catch Katherine’s colorful writeup of day one below. And those not in Salt Lake City can soon find recordings of panels, firesides and <a href="https://blockworks.co/event/permissionless-iii/recordings">other discussions here</a>, once they’ve been uploaded over the next week or so.



<h2 class="wp-block-heading">The kids are alright&nbsp;</h2>



There are three words I need you to keep in mind: axes, wizards and climbing.



All three of which are present at Permissionless III this year. If you’re around Salt Lake City, you can test your axe-throwing skills and then immediately try to climb a wall. Then, after a restful break, you can find yourself watching a wizard go off about bitcoin.&nbsp;



Crypto really is magic sometimes.&nbsp;



Anyway, there truly is excitement in the air as folks sit in on sessions focused on a variety of topics, from investing in private markets to a fireside chat with BlackRock’s Samara Cohen (we’ll get to that in a bit).&nbsp;



But despite the fun oddities, people seem pretty pumped to descend on Salt Lake City.&nbsp;



Though — while many attendees noted that the overall vibes were good — Lumida Wealth CEO <a href="https://x.com/ramahluwalia">Ram Ahluwalia</a> remarked that he felt the vibes were “malaise.”&nbsp;



For Ahluwalia, one question lingered above his head like a rainy cloud: Will the latecomers — who bought in as prices rose — HODL or dip once we carve out a new all-time high?



Blockworks Chief Operating Officer Sid Viswanath noted he’d received a lot of positive feedback, with some even remarking that they prefer the quality of the event, which is smaller than last year.&nbsp;



As for the panels themselves, there was a lot of positive chatter amongst attendees as they flitted in between talks.



A16z crypto’s Chris Dixon was one of the first to speak on the main stage.



Dixon pushed for bipartisan legislation, noting that there’s a current “chill” on crypto due to the overall environment.&nbsp;



<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">“An erratic regulatory regime is holding back founders from building what they want. There’s a political movement trying to shut down crypto by targeting good actors like Coinbase while letting bad actors like FTX off the hook. It’s a deliberate strategy to chill the space, which… <a href="https://t.co/La3rCzBlJy">pic.twitter.com/La3rCzBlJy</a>&mdash; rahilla (@rahilla) <a href="https://twitter.com/rahilla/status/1844041737595240705?ref_src=twsrc%5Etfw">October 9, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The regulatory environment — a very popular topic for crypto — was mentioned heavily throughout many of the panels, especially the ones that took place on the main stage.&nbsp;



But there’s an undertone of bullishness rippling through the attendees and the speakers at this year’s event. Or perhaps it’s just a lot of optimism. Either way, I’m not just writing that as a Blockworks staffer.&nbsp;



<a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s Samara Cohen gave some insight into IBIT’s investors and the appetite that the world’s largest asset manager has seen since launching its bitcoin ETF in January of this year.&nbsp;



Cohen said that roughly 75% of buyers of IBIT were first-time iShare buyers, showing that the majority of the investors were crypto natives.&nbsp;



Looking at 13F filings, she noted roughly 85% of the investors were direct buyers.&nbsp;



“What we have actually seen is an appetite” for <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETFs</a>, Cohen said.&nbsp;



After her talk, one attendee commented that Cohen was “badass.”



Other talks had some more…well, eccentric…vibes.



For example, a wizard — Taproots Wizard co-founder Eric Wall — sat next to Galaxy’s Alex Thorn as the two discussed bitcoin with Bankless co-founder David Hoffman.&nbsp;



And, mind you, that’s the same Hoffman who’ll enter the ring on Friday to take on Kain Warwick in a Karate Combat match.



So, yeah, Permissionless might look a little different from last year but it still embodies that tenacious yet positive spirit that we all know and love.



— Katherine Ross



<h2 class="wp-block-heading">The Works</h2>



<ul class="wp-block-list">
<li>Stripe has enabled USDC payments for US businesses on Ethereum, Solana and Polygon, The Block <a href="https://www.theblock.co/post/320404/stripe-crypto-payments">reports</a>. The payments giant stopped supporting bitcoin payments in 2018.</li>



<li><a href="https://blockworks.co/news/on-the-margin-newsletter-trump-family-defi-venture">Trump-linked</a> DeFi project World Liberty Financial <a href="https://x.com/lemiscate/status/1844121149934010857">wants</a> to work with Aave.</li>



<li>BTC fell below $60,300 for the first time in a week overnight. It has since rebounded to $61,000, down 1.7% in the past day. ETH is still working on holding $2,400.</li>



<li>A historic first: the FBI <a href="https://www.justice.gov/usao-ma/pr/eighteen-individuals-and-entities-charged-international-operation-targeting-widespread">created</a> its own cryptocurrency to bust dodgy “market makers” for wash trading and market manipulation.</li>



<li>Total SOL staked in Solana DeFi is at its highest <a href="https://defillama.com/chain/Solana?currency=USD">point</a> since July 2022: 46.25 million SOL ($6.4 billion). By US dollar value, Solana’s TVL is still slightly under where it was in March.</li>
</ul>



<h2 class="wp-block-heading">The Riff</h2>



Q: What doesn’t Joe Rogan get about crypto?



If you’re after a temp check on mass mainstream adoption, check this recent <a href="https://youtu.be/oXMQQbmrBvM?feature=shared&amp;t=8273">exchange</a> between Rogan and jungle keeper Paul Rosolie about crypto, the rat race and giving back once you make a certain amount of cash.



Even someone who finally makes their first $5 million, for example, might not be willing to give back to their community: inflation might devalue that net worth, or the hedge fund they piled the cash into might go under.



“Or, you’re an idiot and you invest in NFTs or bitcoin,” Rogan said. “Like you get nutty, you think it&#8217;s free money — no. It&#8217;s some kind of crazy thing, that&#8217;s still going on, where you got fake money, some weird, created money, and you just spent a lot of real money to buy some of this weird fucking imaginary money.”



Rosolie, a conservationist who lives in and helps protect parts of the Amazon, added that he’d almost “got got” by “the NFT people,” who’d suggested that he sell NFTs to help raise money for the rainforest.&nbsp;



Rogan had similar experiences but could never commit. He didn’t get how NFTs work — similar to Warren Buffett’s advice about not investing in anything that you don’t understand.



“Jamie [Rogan’s producer] has tried to explain it to me like six or seven times and I was like, ok, but you have it [the NFT] on your phone, right? So I can take a screenshot and I have it on my phone too.”



“No, but you don&#8217;t own it.”



“Ok. What does that mean?”



Jamie then tries for the eighth time. He does a decent job: you can replicate the NFT by taking a screenshot, but that doesn’t give the same experience as actually owning it — just like how owning the Mona Lisa would offer a different feeling than just looking at it in the Louvre.



“You don’t just own it on your phone, is the thought… the phone is the access point to where you do own it. That’s like saying your bank account [exists] only on your phone,” Jamie said.



Rogan and Rosolie then drift to unpacking how difficult it must have been for ancient humans to craft arrowheads and arrow shafts — little pieces of history that have real value, unlike Bored Apes.



At least Beeple’s NFTs get a pass, per Rogan. “When he has a gallery and you go there and there’s this giant digital art. Those kinds of NFTs make sense. This thing [a Bored Ape] is like a shit cartoon.”



The deeper you are in crypto, the louder the echo chamber, which can make it quite hard to gauge what parts of crypto have bled through to the normies.



Turns out, digital art NFTs might be just about the only thing that has, going by the state of this yapping heard millions of times this week.



— David Canellis



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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>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



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A16z’s Chris Dixon pushes for bipartisan legislation at Permissionless III

Wizards on stage. Rock climbing. And don’t forget the axe throwing.&nbsp;



These things and more helped set the tone during Permissionless III’s first day as thousands of crypto denizens descended on Salt Lake City.&nbsp;



There’s excitement in the air as folks sit in on sessions focused on a variety of topics, from investing in private markets to a fireside chat with BlackRock’s Samara Cohen (we’ll get to that in a bit).&nbsp;



One attendee remarked that they preferred Permissionless over other popular crypto events, remarking that it was “less of a zoo.”


<div class="wp-block-image">
<figure class="alignright size-medium is-resized"><img loading="lazy" decoding="async" width="1200" height="800" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=300&amp;h=300" alt="" class="wp-image-92914" style="width:461px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=1200 1200w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=392 392w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=329 329w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_862.jpg?w=80 80w" sizes="(max-width: 1200px) 100vw, 1200px" /><figcaption class="wp-element-caption">Source: Mike Lawrence for Blockworks</figcaption></figure></div>


While many attendees noted that the overall vibes were good, Ram Ahluwalia told me that he felt the vibes were “malaise.”&nbsp;



For Ahluwalia, one question lingered above his head like a rainy cloud: Will the latecomers — who bought in as prices rose — HODL or dip once we carve out a new all-time high?



Blockworks Chief Operating Officer Sid Viswanath noted he’d received a lot of positive feedback from attendees, with some even remarking that they prefer the quality of the event, which is smaller than last year.&nbsp;



As for the main stage, a16z crypto’s Chris Dixon was one of the first folks to speak at the conference on Wednesday.&nbsp;



Dixon, appearing on the main stage, pushed for bipartisan legislation, noting that there’s a current “chill” on crypto due to the overall environment.&nbsp;



<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">“An erratic regulatory regime is holding back founders from building what they want. There’s a political movement trying to shut down crypto by targeting good actors like Coinbase while letting bad actors like FTX off the hook. It’s a deliberate strategy to chill the space, which… <a href="https://t.co/La3rCzBlJy">pic.twitter.com/La3rCzBlJy</a>&mdash; rahilla (@rahilla) <a href="https://twitter.com/rahilla/status/1844041737595240705?ref_src=twsrc%5Etfw">October 9, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The regulatory environment — which has become one of the most popular topics for crypto — was mentioned heavily throughout many of the panels, especially the ones that took place on the main stage.&nbsp;



But there’s an undertone of bullishness rippling through the attendees and the speakers at this year’s event. And I’m not just writing that as a Blockworks staffer.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/political-candidates-cannot-ignore-crypto-voters">Political candidates can no longer ignore crypto voters</a>



<a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s Samara Cohen gave some insight into IBIT’s investors and the appetite that the world’s largest asset manager has seen since launching its bitcoin ETF in January of this year.&nbsp;



Cohen said that roughly 75% of buyers of IBIT were first-time iShare buyers, showing that the majority of the investors were crypto natives.&nbsp;



Looking at 13F filings, she noted roughly 85% of the investors were direct buyers.&nbsp;



“What we have actually seen is an appetite” for <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETFs</a>, Cohen said.&nbsp;



After her talk, one attendee commented that Cohen was “badass.”



Off the main stage, attendees filled up the so-called breakout tracks, or smaller panels, which began in the afternoon.&nbsp;


<div class="wp-block-image">
<figure class="alignright size-large is-resized"><img loading="lazy" decoding="async" width="1200" height="800" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=1024&amp;h=1024" alt="" class="wp-image-92922" style="width:532px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=1200 1200w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=392 392w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=329 329w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/20241009_Permissionless_1044-3.jpg?w=80 80w" sizes="(max-width: 1200px) 100vw, 1200px" /><figcaption class="wp-element-caption">Source: Mike Lawrence for Blockworks</figcaption></figure></div>


In one such panel, a wizard — Taproots Wizard co-founder Eric Wall — sat next to Galaxy’s Alex Thorn as the two discussed bitcoin with Bankless co-founder David Hoffman.&nbsp;



Hoffman will not only take the stage at Permissionless but will also be in the ring on Friday to take on Kain Warwick in a Karate Combat match.



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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>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Axe throws and crypto wizards: Permissionless III is underway

Ben Strack

Casey Wagner

Today, enjoy the Forward Guidance newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/forwardguidance">Subscribe to the Forward Guidance newsletter</a>.



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



<h2 class="wp-block-heading">VanEck goes into venture</h2>



An asset manager with a crypto bent is doubling/tripling/quadrupling down — whatever you want to call it — on the sector.&nbsp;



VanEck brought to market a bitcoin futures ETF in late 2021, following that up with a similar ETH offering in October 2023. It later chose to <a href="https://blockworks.co/news/vaneck-closing-ether-futures-etf">shutter both those funds</a> once the SEC approved products that would hold BTC and ETH directly.



To that point, it was among the firms that debuted spot bitcoin and ether ETFs in the US in January and July, respectively.



VanEck (managing about $108 billion in assets) said today that it will now try its hand at venture capital via a $30 million fund focused on crypto, fintech and AI startups.&nbsp;



Known for its interaction with other X users and its witty one-liners, the VanEck account got real with us:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdwFFLjlc0dvhctBtdM1EMTdKYruCZbNBNTDfKL32a7UIThRHNB-YVJ2XRC_hw4KdjRMC6QiyOY_DXX5MS2-YIxUI47WoV8gVQXg2NDku3vPEes01bSvGgctQEW3ykrmuxiTrUHo2LejrNVl3tNNyUncx_-?key=5uwD7y2AfBzqD_ucUUgfYw" alt=""/></figure>



It’s worth mentioning that leading the fund will be Wyatt Lonergan and Juan Lopez, who formerly led the venture division of USDC issuer Circle.



Stablecoins could be “the ChatGPT moment” for crypto and act as the so-called killer app that brings blockchain to the masses, Lonergan told me in an email. Put another way, he added, the innovations spurred by stablecoins could lead to a “Cambrian explosion” of onchain fintech products across payments and capital markets.



“The infrastructure is battle-tested and ready — as an example, stablecoins will settle $24 trillion in volume this year,” Lonergan said. “And therefore we want to invest in the middleware and applications that enable that volume and capture the most value in the long term.”



Then there are tokenized asset platforms proliferating, noted Lopez.&nbsp;



Just look at <a href="https://blockworks.co/news/visa-to-help-banks-test-tokenized-assets-smart-contracts">Visa’s recent bid to help institutions</a> issue fiat-backed tokens and test out their use cases. Spain-based BBVA has been working with the payments giant to do just that (on a testnet blockchain) and looks to launch a pilot with select customers on Ethereum in 2025.



“These types of applications and marketplaces will enable new demand for blockchain technology and capture the most value over the next five to 10 years,” Lopez said.



From ETFs to venture funding, VanEck will no doubt be a firm to watch as the segment evolves. It wouldn’t be surprising to see other similar firms widen the ways they get involved in crypto and adjacent industries. 



— Ben Strack



<h3 class="wp-block-heading">75%</h3>



The percentage of buyers of BlackRock’s iShares Bitcoin Trust (IBIT) that never owned an iShares ETF before.



Samara Cohen, BlackRock’s CIO of ETF and index investments, shared this figure during a Wednesday panel at Blockworks’ <a href="https://blockworks.co/event/permissionless-iii">Permissionless</a> conference in Salt Lake City.&nbsp;



“We went into this journey with the expectation that we needed to educate ETF investors on crypto, and on bitcoin specifically,” Cohen said. “As it turns out, we’ve done a lot of education for crypto investors on the benefits of the ETP wrapper.”



Roughly $21.7 billion of <a href="https://farside.co.uk/bitcoin-etf-flow-all-data/">net flows</a> have entered IBIT since the fund’s January launch — more than double the second-best inflow-gatherer in the segment (Fidelity, at $9.9 billion).



<h2 class="wp-block-heading">Hello from Permissionless III!&nbsp;</h2>



Casey sat down with House Majority Whip Tom Emmer to discuss what’s next in crypto policy, why the rep says it’s not too late to see meaningful progress this session, and what things could look like under the next presidential administration.&nbsp;



Emmer said he’s been encouraged by the recent bipartisan support crypto policy has received. <a href="https://blockworks.co/news/house-passes-act-fit21-with-bipartisan-support">Seventy-one House Dems voted to pass FIT21</a>, the market structure bill that advanced to the Senate last spring.&nbsp;



“The dam started to break,” Emmer said, referring to the hold Maxine Waters (ranking member of the House Financial Services Committee) has historically had on the party.&nbsp;



He also said he’s confident crypto will remain part of the discussion through the end of the year. <a href="https://blockworks.co/news/political-candidates-cannot-ignore-crypto-voters">Once the election is over</a>, Emmer said it will take a few weeks for “the dust to settle.” But once we know who’s in control of each Chamber and the White House, lawmakers will have a better <a href="https://blockworks.co/news/forward-guidance-newsletter-crypto-survey-data">understanding</a> of their “negotiating leverage” and can get to work.&nbsp;



Another thing he’s confident in? A second term for Donald Trump.&nbsp;



“He’s <a href="https://blockworks.co/news/world-liberty-financial-kyc-starts">evolved on this issue</a> to the point where he’s going to advocate for it,” Emmer said of Trump’s crypto stance and the <a href="https://blockworks.co/news/donald-trump-talks-bitcoin">about-face he’s done</a> in recent months.&nbsp;



As for Kamala Harris? “She doesn’t know what she’s talking about,” he said.&nbsp;



Keep an eye on Blockworks.co for a full recap of our conversation with Emmer.&nbsp;



Tune in <a href="https://blockworks.co/event/permissionless-iii/recordings">here</a> to watch our livestream of Permissionless content. It’s not too late to buy a ticket either, come see us at registration. 



— Casey Wagner



<h2 class="wp-block-heading">Bulletin Board&nbsp;</h2>



<ul class="wp-block-list">
<li>Fed <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20240918.pdf">minutes</a> released today <a href="https://blockworks.co/news/on-the-margin-newsletter-fomc-meeting-takeaways">from last month’s meeting</a> showed that all committee members supported an interest rate cut. A “substantial majority” were in favor of a 50-basis point cut while some voted for 25bps. </li>



<li>The Atlanta Fed’s <a href="https://www.atlantafed.org/cqer/research/gdpnow?item=12610244-da58-4a4a-9762-36045adb4a3e">GDPNow</a> report showed that it expects a 3.2% increase in GDP for the third quarter. </li>



<li>We’re on the ground in Salt Lake City at Permissionless! If you’re here, be sure to say hi to Ben, Casey and Felix.</li>
</ul>



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From crypto ETFs to VC: VanEck unveils $30M fund

Jason Yanowitz

Since launching Blockworks Research two years ago, we’ve become the leading provider of crypto intelligence, research, and data. As this happened, we learned valuable lessons about what it takes to build and scale a crypto company and protocol.



Protocols asked us to share these lessons with them. Since then, we’ve been lucky enough to work with some of the best teams in the industry designing incentives, scaling governance, improving their analytics, giving guidance on treasury management, and more.&nbsp;



Today, we’re thrilled to formalize these services with the launch of Blockworks Advisory – a comprehensive suite of services designed to hypercharge growth for crypto projects from inception to maturity.



One of our core beliefs at Blockworks is that every year, more and more value will move onchain. As this happens protocols will become the new institutions. They’ll be bigger than any software business. They’ll be bigger than any bank.



Blockworks Advisory is here to support these protocols as they scale from their infancy to an entire ecosystem with diverse stakeholders.



<h2 class="wp-block-heading">Built Different: The Blockworks Approach</h2>



Blockworks Advisory stands apart with its depth-focused, authentic, and transparent approach. Our core offering includes:



<ul class="wp-block-list">
<li>Foundation Launch Partner: Creating a comprehensive solution to coordinate project Foundation launches through personalized service</li>



<li>Go-to-Market Strategy: Leveraging Blockworks&#8217; extensive network to drive brand awareness and identify optimal distribution channels</li>



<li>Economic Design: Applying quantitative techniques to forge sustainable growth paths, from incentive design to risk parameter definition.</li>



<li>DAO Operations: Advising on structure, co-authoring proposals, and administering grant programs to allow projects to focus on product development.</li>
</ul>



<h2 class="wp-block-heading">Charting the Future of Crypto Projects</h2>



Blockworks Advisory doesn&#8217;t just study trends — it defines them:



<ul class="wp-block-list">
<li>Protocol Dashboards: Building custom data dashboards to showcase in-depth adoption metrics on dedicated landing pages</li>



<li>DAO Research Partner: Providing objective, data-driven analysis for informed community decision-making</li>



<li>Finance &amp; Treasury Management: Outsourcing Foundation or DAO finance functions and offering treasury management guidance</li>



<li>Community Engagement: Hosting community calls and driving active discussions among key stakeholders</li>
</ul>



<h2 class="wp-block-heading">What Drives Blockworks Advisory</h2>



Our beliefs are as profound as the minds that champion them:



<ol class="wp-block-list">
<li>Depth over breadth: We deliver deep insights</li>



<li>Authenticity rules: Our genuine understanding of crypto&#8217;s nuanced ecosystem sets us apart</li>



<li>Transparency builds trust: We earn trust through clear, conflict-free analysis and data</li>



<li>Experience is everything: Our user-centric approach ensures seamless interaction with complex data</li>
</ol>



Blockworks Advisory aims to redefine how crypto projects launch, grow, and thrive. By focusing on Foundations and communities, we enable projects to concentrate on core product development.



As David Rodriguez, our Head of Advisory says: “At Blockworks Advisory, we believe that every project deserves a tailored approach to navigate the complexities of the crypto landscape. Our mission is to empower teams with the insights and support they need to not just launch, but thrive in this dynamic environment. We’re here to ensure that your vision becomes a reality, enabling you to focus on innovation while we handle the intricacies of launching a decentralized protocol.&#8221;



For more information, visit blockworksresearch.com/advisory or email us at advisory@blockworks.co



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Blockworks launches protocol advisory services

Jack Kubinec

Solana’s march into mobile continued yesterday when the popular DeFi platform Jupiter released its mobile app.&nbsp;



Jupiter’s pseudonymous founder meow said on X that the team built and dropped many features while developing the app, but the final version sticks pretty closely to Jupiter’s hit feature, which is swaps. Interestingly, Jupiter doesn’t appear to be making money from fees on the app, so the initiative is purely a play at growing Jupiter’s distribution for now.&nbsp;



The app has just two tabs, one for making swaps and one for viewing your wallet balance. Jupiter partnered with MoonPay to offer fiat onramps, and I was able to fund a wallet with SOL via Apple Pay in under ten minutes. The process wasn’t completely seamless — I could only pay with my debit card rather than with a credit card, which I only learned by trial and error — but it felt smooth overall.&nbsp;



Once Moonpay is set up and you have a wallet connected, it takes four taps to buy more SOL, which is a pretty frictionless experience akin to something like Robinhood.&nbsp;



Candidly, it’s not the best-designed crypto app I’ve used. Even in the memecoin world, Moonshot has a sleeker UX with features like live price charts which Jupiter lacks.&nbsp;



“[C]urrent onboarding for the app is still 2/10 &#8211; we are no where near ready for mainstream adoption,” meow told me in a text.



But it seems like for now, Jupiter may be betting that users want the best prices above all else — and taking aim at Phantom in the process. Jupiter is a swap aggregator that algorithmically routes trades across multiple decentralized exchanges to achieve the best possible price for users. It also doesn’t charge fees on swaps, making the prices even better. As I’ve written before, even as Jupiter releases other popular DeFi features like perpetual swaps and a token launchpad, <a href="https://blockworks.co/news/lightspeed-newsletter-solana-top-swap-venue">swaps remain the moat</a> that make Jupiter a force in Solana DeFi.



Phantom — which has a lot of distribution by dint of being arguably the most popular Solana wallet — also offers swaps through a mobile wallet, but its swap prices are consistently worse than Jupiter’s. Jupiter’s fee-generating products aren’t currently live on the mobile app, meaning this is currently a pure play for distribution — and Phantom is the most likely target for disruption.



As the Solana Seeker <a href="https://blockworks.co/news/lightspeed-newsletter-solana-second-phone">gears up for release</a>, it’s becoming clearer that the Solana world thinks the crypto market of the future will be won and lost on mobile devices. With Jupiter’s launch, a pretty venerable competitor just entered that arena.



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Solana’s top swap venue Jupiter just released a mobile app

Donovan Choy

Today, enjoy the 0xResearch newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/research">Subscribe to the 0xResearch newsletter</a>. 



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



<h2 class="wp-block-heading">Babylon sees $1.4 billion in deposits</h2>



Babylon is a restaking protocol on the CometBFT consensus that saw a mainnet launch in August.&nbsp;



As of today, the Babylon chain has racked up an impressive 23,000 bitcoin ($1.4 billion) staked from 25.3k stakers. That puts it in the TVL ballpark of major restaking protocols like Symbiotic ($1.5 billion) and EigenLayer ($10.7 billion).



<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">🎉 Cap-2 Completed! 🎉 Today, Babylon reached an incredible milestone—almost 23,000 bitcoins staked in Cap-2! A big thank you to all of our stakers for being part of this journey&mdash; Babylon (@babylonlabs_io) <a href="https://twitter.com/babylonlabs_io/status/1843795314282770869?ref_src=twsrc%5Etfw">October 8, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Unlike previous sidechain attempts at bridging bitcoin to smart contract chains, Babylon offers a trustless coordination layer to do so <a href="https://docs.babylonchain.io/docs/faq/overview">without technically</a> bridging bitcoin.



This is achieved through the use of Cosmos’s Inter-Blockchain Communication (IBC) protocol to communicate messages between networks, and a mix of cryptography methods like “covenants” to lock bitcoin in a time-locked self-custodial vault until conditions are fulfilled. Additionally, <a href="https://docs.babylonchain.io/docs/introduction/btc-timestamping">timestamping</a> is used to synchronize a record of transactions on PoS chains.



To get around the lack of smart contract compatibility on the Bitcoin chain, Babylon’s design requires stakers to use their private keys to lock and unlock their stake, which is then delegated to a trusted validator for a fee.



In the event of malicious behavior, the validator’s private key is revealed and slashed with extractable one-time signatures (EOTS) — a concept that builds on Bitcoin’s Schnorr signatures algorithm.



This architecture allows bitcoin stakers to “bridge” their bitcoin into a PoS chain, and receive a yield that is paid out in the destination PoS chain’s tokens, a future feature to be implemented.



Presently, the two <a href="https://btcstaking.babylonlabs.io/">largest stakers</a> are liquid restaking protocols Lombard, and Solv Protocol, which have a total delegated 7166 and 6009 bitcoin, respectively.



Solv Protocol also <a href="https://x.com/SolvProtocol/status/1843607388181672008">announced</a> yesterday the Staking Abstraction Layer (SAL), a framework to standardize token standards across the growing number of bitcoin derivative tokens.



Due to its lack of smart contract capabilities, Bitcoin DeFi must go cross-chain. This in turn creates a need for such common standard frameworks.&nbsp;



Various cross-chain <a href="https://li.fi/knowledge-hub/comparing-token-frameworks/">token standards</a> have been used in Ethereum DeFi to create standardization, such as LayerZero’s OFT (Omnichain Fungible Token) and Axelar’s ITS (Interchain Token Service) standard.



<h2 class="wp-block-heading">Chart of the Day</h2>



Most Polymarket users lose money:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc0FRZL63MUzQ5-bUaZ-hXPMXC29YE-AEY0cSJdYidgo_l5TUuQSaRhNP_jXlzE_xauj8ZLbFm4tlPS-GcJyQs7e8XL6snro_nAu1lr9fCDdSFgR9DxR9hNW_-HcjaMsbzt2pizvd5OQlwG-2VvN7xQxaXi?key=W4Q8IbtOgbPiDJVVY9bCnQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://layerhub.xyz/protocols/polymarket">Layerhub</a></figcaption></figure>



As with most casino-based businesses, most Polymarket users are unsurprisingly in the red. Based on Layerhub’s data, 86.7% of users have made losing bets on the prediction market. Only about 2,148 (1.2%) of Polymarket users have made profits of upwards of $1k.



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Bitcoin-staking protocol Babylon attracts $1.4B in deposits

Macauley Peterson

Delta, a new layer-1 platform challenging the status quo for building high-throughput decentralized applications, has raised $11 million in funding.&nbsp;



The platform positions itself as a &#8220;network of networks&#8221; that seeks to break the traditional trade-off between blockchain sovereignty and interoperability, a nagging problem that many developers face today.



Delta’s pre-seed funding round was led by Figment Capital and Maven 11, with Variant and DBA leading the seed. (Blockworks co-founder Michael Ippolito is also an angel investor.)



The functional goals of Delta’s architecture are similar to those of the major rollup “clusters” — OP Superchain, the AggLayer or ZKsync Elastic Chain frameworks — all of which face interoperability challenges born from Ethereum’s rollup-centric roadmap.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-rollups-closer-than-expected">Bitcoin rollups may be closer than we think</a>



Dapp developers often have to choose between two approaches: building within the confines of a single framework or creating an independent appchain that must retrofit interoperability solutions.



The new approach aims to combine the best of both worlds by offering developers local control over their environment while still maintaining global connectivity through the base layer, according to Ole Spjeldnaes, CEO of Repyh Labs, which is building Delta.



“Originally we thought that this is what Ethereum was going to be like — you wouldn&#8217;t need to have these local clusters,” Spjeldnaes told Blockworks.



Delta&#8217;s architecture separates execution and transaction ordering from data availability and settlement, offering theoretical advantages over both appchains and <a href="https://blockworks.co/tag/rollups">rollups</a>, which typically require complex bridging solutions. In Delta, execution occurs within individual &#8220;domains,&#8221; which are akin to app-specific rollups or execution shards.



The key difference from, say, a <a href="https://blockworks.co/news/zk-sync-elastic-chain-rebrand-seeks-to-carve-out-scaling-niche">ZKsync Elastic Chain</a>, is that these domains retain complete power over their blockspace and can use any existing virtual machine or develop custom programs. However, Delta eschews Ethereum, and all its domains settle on a new decentralized base layer, which ensures shared global state and interoperability.



Read more: <a href="https://blockworks.co/news/funding-zero-knowledge-in-spotlight">Funding Wrap: Zero-knowledge is back in the spotlight</a>



“Delta is a more bottoms up approach to achieving, first of all, stronger properties than what something like the ZK Elastic Chain can provide because it&#8217;s a single state machine,” Spjeldnaes said. “If Ethereum did not have to think about being backwards compatible and had had the foresight, this might have been what it would have ultimately looked like.”



Unlike Ethereum rollups, all assets within Delta’s network stay on the base layer, notes Myles O’Neil, Repyh’s chief product officer.



“There&#8217;s no real equivalent for this in rollup terminology,” O’Neil told Blockworks.



That has consequences for asset issuance and liquidity — for instance, a stablecoin gets issued once on the base layer and is automatically available for use in all domains.



Another standout feature of Delta is its use of zero-knowledge proof-based settlement integrated directly into the base layer, allowing domains to interoperate without any external coordination or intermediary bridges.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf79gO1U8CAmrX9e6V40fCA8UYxTjbEavfzo6IYkjwjZjtVlZGYjxpYRokSix1HjbpniDJ45uA3JUOmepVy2ySks0b5F3N4DycQ44zABLvmsSLg_16TW1WK0gUflW89-xDeneAxAthpqo32OPJVmD1BOp7Q?key=mk3rPL2w0isHLHhpmNvX0w" alt=""/><figcaption class="wp-element-caption">Source: Repyh Labs</figcaption></figure>



“There are a minimal number of things that need to be proven by all domains,” Spjeldnaes explained, but so long as they are following this set of what are called Delta’s “global laws,” they retain the flexibility to use whatever execution, sequencing or permissions model they want.



Domains generate a State Diff List (SDL), a compressed standardized format for state changes based on their own transaction ordering, and submit it to the base layer, along with proofs that the SDL doesn’t violate any global laws (or the domains own “local laws”). The state model prevents conflicts between each domain&#8217;s subset of state.



“We let the domains be opinionated about how much else they want to prove,” O’Neil said. “So if they want to be completely trustless, just like a zk rollup, they can choose to prove their entire execution path.”



All domains will need to use a shared prover, which should be “the most efficient one for all” Spjeldnaes said. “The goal is really to maximize strong interop without infringing on the sovereignty of each domain,” he added.



Delta’s proof-of-stake validator set uses a leaderless and orderless consensus mechanism, known as Byzantine Reliable Broadcast (BRB), which Spjeldnaes compares to Sui’s <a href="https://blog.sui.io/mysticeti-consensus-reduce-latency/">Narwhal-Bullshark</a> consensus algorithm.



“I think Sui is very elegant,” Spjeldnaes said. “They are able to just do ordering for those transactions that need ordering [but] that adds a ton of overhead — which you can tell by their benchmarks — you have Narwhal and then you have to add consensus on top of Narwhal, and that is really the bottleneck.”



BRB avoids this overhead, and Spjeldnaes noted the computation requirements for validators will be very low, because their main task is verifying proofs. By foregoing the need for global transaction ordering, the network scales linearly as more machines are added, Spjeldnaes said.



“We see this as being also a protocol which would scale quite well in terms of the number of validators, but we haven&#8217;t tested this yet, so we cannot really make a strong claim about it.”



Delta’s biggest problem will be how to bootstrap usage and bring in assets to yet another new layer-1 network. With the mainnet launch still over a year away, O’Neil said they’ll be going after both crypto natives and non-crypto developers from the fintech and Web2 world.&nbsp;



By taking on the shortcomings of current leading ecosystems like Ethereum and Solana, the team hopes to demonstrate the merits of a new paradigm.&nbsp;



“What a system would look like if you were to rebuild things from scratch,” O’Neil said.



Updated to clarify which firms led the pre-seed and seed rounds.



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Starting from scratch: A new architecture looks to challenge incumbents

Today, enjoy the Empire newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox.&nbsp;<a href="https://blockworks.co/newsletter/empire" target="_blank" rel="noreferrer noopener">Subscribe to the Empire newsletter</a>.



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<a href="https://blockworks.co/event/permissionless-iii">Permissionless III</a> kicks off in Salt Lake City today!&nbsp;



Whether you’re on or off the ground, follow <a href="https://x.com/Permissionless">@Permissionless</a> for all the latest updates. And be sure to check the <a href="https://x.com/search?q=%23permissionless&amp;src=typed_query">hashtag</a> for more cool stuff.



<h2 class="wp-block-heading">Grasping at straws</h2>



Despite slick marketing leading up to the release of HBO documentary Money Electric, we’re no closer to finding out the identity of Satoshi Nakamoto.



What filmmaker Cullen Hoback, whose most recent work chronicled QAnon and 8chan with Q: Into The Storm, has given us is more of a creative retelling of Bitcoin lore.&nbsp;



The early efforts of the Cypherpunks, the formation of Blockstream and its victory in the Blocksize War, into the corporatization/industrialization of bitcoin mining and El Salvador adopting it as legal tender.



All that’s squeezed into 90 minutes, including cutaways to incessant negging from Nouriel Roubini and the mainstream media — solid comedic relief.



That side of the film makes for a great primer on the discourse. It even features a decent, albeit small, roster of legitimate insiders, including, among others: Blockstream co-founder Adam Back, veteran hacktivist Amir Taaki, a prominent early Bitcoiner now working on anonymous protocol DarkFi, as well as cryptography consultant and former Bitcoin core dev Peter Todd. 



Hoback later suggests Todd could be Nakamoto, hiding in plain sight all these years.



The bulk of Electric Money’s baseline reality, however, is woven with clips of Hoback following Back around the streets of Malta, to see if he’s Satoshi.&nbsp;



If Back was the progenitor, then the surrealness of Bitcoin Miami and nation state adoption were expressions of his genealogy.&nbsp;



It would also technically make Back a trillionaire, if bitcoin were to hit $1 million per coin, a factoid the film repeats over and over. That’s based on prior analysis that found Nakamoto had mined over 1 million BTC, although there is some <a href="https://blog.bitmex.com/satoshis-1-million-bitcoin/">dispute</a> about the real number.



Other scenes shadow former Blockstream marketing chief Samson Mow — who advised El Salvador president Nayib Bukele on his bitcoin adoption plan — on a world trip as a self-styled Bitcoin ambassador. The film also tags along with Todd on urban exploration trips in Latvia, before he’s presented as a real candidate.



Back, who has repeatedly denied that he created Bitcoin, is the only person cited by name in the body of the white paper for his work on Hashcash. It was an early proof-of-work system built in 1997 for curbing denial of service attacks and email, which Nakamoto tweaked for bitcoin mining.



Hoback looked for holes in Back’s story, the biggest of which was a letdown: Back was actually interested in bitcoin years earlier than he previously claimed, and he’d even edited a Wikipedia entry to include potential identities for Nakamoto that weren’t him, including Nick Szabo, Wei Dei and Hal Finney. Not exactly proof.



It’s only at the 80th minute that Hoback lays his cards on the table: a bluff based on a loose interpretation of BitcoinTalk forum posts.



Todd was supposedly Nakamoto at the age of 15 because he’d:



<ul class="wp-block-list">
<li>Spoken online about building a digital currency based on Hashcash before 2009.</li>



<li>Never officially held a position at Blockstream despite working closely on Bitcoin Core, for decentralization purposes.</li>



<li>Minorly corrected Nakamoto about how a fee market would work in a BitcoinTalk thread, by “finishing his sentence” with a followup post over an hour later.</li>



<li>Perhaps created a sockpuppet, roleplaying as a US intelligence agent who would later publicly assign Todd the task of coding that fee market.</li>



<li>Stopped posting on BitcoinTalk around the same time as Nakamoto.</li>



<li>Cryptically once suggested in an IRC channel that he had physically destroyed the keys to his bitcoin.</li>
</ul>



<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">“The level of reaching here rivals QAnon stuff (which is pretty ironic if you know what Cullen&#39;s previous documentary was about)” Exactly. The truth is pretty simple: there&#39;s hundreds, even thousands of people who could have created Bitcoin. We&#39;re not going to find Satoshi. <a href="https://t.co/TZMtqJhxgU">https://t.co/TZMtqJhxgU</a>&mdash; Peter Todd (@peterktodd) <a href="https://twitter.com/peterktodd/status/1843957196830441766?ref_src=twsrc%5Etfw">October 9, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It makes for a fun theory, and for a final showdown, Hoback presents it to Todd and Back in an abandoned railway, a have-fun-staying-poor man’s Point Break. They both — rightfully — laugh it off, which has continued on X following the film’s release.



Whether we should or shouldn’t know who Nakamoto is or was is a tired conversation at this point.&nbsp;



Still, it’s obvious that for many normal folk, the question indeed presents a Rubicon that they can’t cross. That itself would hinder adoption, I guess, but as far as shedding light on the way through that mess goes, Money Electric ain’t it.



— David Canellis



<h2 class="wp-block-heading">The Works</h2>



<ul class="wp-block-list">
<li>Canary Capital is joining the <a href="https://www.theblock.co/post/320158/canary-capital-files-for-a-spot-xrp-exchange-traded-fund-with-the-sec?utm_source=rss&amp;utm_medium=rss">race</a> for an XRP ETF, filing its registration statement with the SEC on Tuesday.</li>



<li>BTC and ETH are where they were yesterday: bouncing off $62,000 and $2,400 apiece.</li>



<li>Solana is “richly valued” against the rest of the market, Standard Chartered <a href="https://www.coindesk.com/markets/2024/10/08/solana-is-richly-valued-versus-ether-but-could-still-outperform-if-trump-gets-elected-standard-chartered/?_gl=1*qyu0a7*_up*MQ..*_ga*MTE2NzM2OTIwMC4xNzI4NDQ5MjM2*_ga_VM3STRYVN8*MTcyODQ0OTIzNi4xLjAuMTcyODQ0OTIzNi4wLjAuMTE5NzAxNDY2NQ..">said</a>.</li>



<li>Ex-Alameda Research CEO Caroline Ellison <a href="https://www.theblock.co/post/320198/former-alameda-ceo-caroline-ellison-agrees-to-hand-over-bulk-of-her-assets-to-settle-ftx-lawsuit?utm_source=rss&amp;utm_medium=rss">agreed</a> to turn over assets to FTX debtors to settle a lawsuit, per The Block.&nbsp;</li>



<li>$168.4 million has flowed into Ethereum mainnet bridges in the past <a href="https://defillama.com/bridges/chains">week</a>, while $215.8 million has flowed out of Arbitrum’s.</li>
</ul>



<h2 class="wp-block-heading">The Riff</h2>



Q: What are Crypto.com’s chances against the SEC?



To put it simply: Crypto.com faces an uphill battle.&nbsp;



The firm filed a lawsuit against the Securities and Exchange Commission after it received a Wells notice from the agency.



The case, in some ways, mirrors what we saw from Consensys earlier this year. The firm receives the notice from the SEC — which threatens, but doesn’t promise legal action on the SEC’s behalf — and then responds by filing a lawsuit.&nbsp;



Earlier this year, Consensys filed suit against the SEC — also disclosing a Wells notice — as the firm took the fight to the regulator. The two cases are clearly a bit different despite some similarities, such as the fact that they both were filed in Texas courts.&nbsp;



While Consensys was really focused on ETH, the SEC seems to be taking a different approach with Crypto.com.



“The SEC has refused to provide Crypto.com a complete list of network tokens sold on the platform that it plans to allege are crypto asset securities. Instead, it has referred Crypto.com to other enforcement actions in which the SEC has asserted claims based on secondary-market sales of various network tokens, including the Targeted Network Tokens,” the complaint said.



Those targeted network tokens include BNB, SOL, ADA, FIL, ATOM and ALGO.&nbsp;



A Texas court recently dismissed the claims from Consensys. Now we’ll just have to see how Crypto.com fares.&nbsp;



— Katherine Ross



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We’re no closer to finding Satoshi Nakamoto

Despite slick marketing leading up to the release of HBO documentary Money Electric, we’re no closer to finding out the identity of Satoshi Nakamoto.



What filmmaker Cullen Hoback, whose most recent work chronicled QAnon and 8chan with “Q: Into The Storm,” has given us is more of a creative retelling of Bitcoin lore.&nbsp;



The early efforts of the Cypherpunks, the formation of Blockstream and its victory in the <a href="https://blog.bitmex.com/the-blocksize-war-chapter-1-first-strike/">Blocksize War</a>, into the corporatization/industrialization of bitcoin mining and El Salvador adopting it as legal tender.



All that’s squeezed into 90 minutes, including cutaways to incessant negging from <a href="https://blockworks.co/news/nouriel-roubini-crypto-bitcoin-atlast">Nouriel Roubini</a> and the mainstream media — solid comedic relief.



That side of the film makes for a great primer on the discourse. It even features a decent, albeit small, roster of legitimate insiders, including (among others): Adam Back, co-founder of Blockstream, veteran hacktivist Amir Taaki, a prominent early Bitcoiner now working on anonymous protocol DarkFi, as well as cryptography consultant and former Bitcoin core dev Peter Todd. 



Hoback later suggests Todd could be Nakamoto, hiding in plain sight all these years.



Read more: <a href="https://blockworks.co/news/craig-wright-is-not-satoshi-nakamoto">Craig Wright is not Bitcoin creator Satoshi Nakamoto, UK judge says</a>



The bulk of Electric Money’s baseline reality, however, is woven with clips of Hoback following Back around the streets of Malta, to see if he’s Satoshi.&nbsp;



If Back was the progenitor, then the surrealness of <a href="https://www.coindesk.com/markets/2017/04/18/miami-2014-the-last-days-of-bitcoins-wild-west/">Bitcoin Miami</a> and nation state adoption were expressions of his genealogy.&nbsp;



It would also technically make Back a trillionaire, if bitcoin were to hit $1 million per coin, a factoid the film repeats over and over. That’s based on prior analysis that found Nakamoto had mined over 1 million BTC, although there is some <a href="https://blog.bitmex.com/satoshis-1-million-bitcoin/">dispute</a> about the real number.



Other scenes shadow former Blockstream marketing chief Samson Mow — who advised El Salvador president Nayib Bukele on his <a href="https://blockworks.co/news/el-salvador-timed-bitcoin-bottom-empire-newsletter">bitcoin adoption plan</a> — on a world trip as a self-styled Bitcoin ambassador. The film also tags along with Todd on urban exploration trips in Latvia, before he’s presented as a real candidate.



Read more from our opinion section: <a href="https://blockworks.co/news/philosophers-bitcoin-resistance-money">Why we need philosophers to explain bitcoin: A review of ‘Resistance Money’</a>



Back, who has repeatedly denied that he created <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a>, is the only person cited by name in the body of the white paper for his work on Hashcash. It was an early proof-of-work system built in 1997 for curbing denial-of-service attacks and email, which <a href="https://blockworks.co/tag/satoshi-nakamoto">Nakamoto</a> tweaked for bitcoin mining.



Hoback looked for holes in Back’s story, the biggest of which was a letdown: Back was actually interested in Bitcoin years earlier than he previously claimed, and he’d even edited a Wikipedia entry to include potential identities for Nakamoto that weren’t him, including Nick Szabo, Wei Dei and the late Hal Finney. Not exactly proof.



Read more: <a href="https://blockworks.co/news/hal-finney-bitcoin-satoshi-nakamoto-zk-proofs">25-year old video shows Bitcoin pioneer Hal Finney talking zero-knowledge proofs</a>



It’s only at the 80th minute that Hoback lays his cards on the table: a bluff based on a loose interpretation of BitcoinTalk forum posts.



Todd was supposedly Nakamoto at the age of 15 because he’d:



<ul class="wp-block-list">
<li>Spoken online about building a digital currency based on Hashcash before 2009.</li>



<li>Never officially held a position at Blockstream despite working closely on Bitcoin Core, for decentralization purposes.</li>



<li>Minorly corrected Nakamoto about how a fee market would work in a BitcoinTalk thread, by “finishing his sentence” with a followup post over an hour later.</li>



<li>Perhaps created a sockpuppet, roleplaying as a US intelligence agent who would later publicly assign Todd the task of coding that fee market.</li>



<li>Stopped posting on BitcoinTalk around the same time as Nakamoto.</li>



<li>Cryptically once suggested in an IRC channel that he had physically destroyed the keys to his bitcoin.</li>
</ul>



<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">“The level of reaching here rivals QAnon stuff (which is pretty ironic if you know what Cullen&#39;s previous documentary was about)” Exactly. The truth is pretty simple: there&#39;s hundreds, even thousands of people who could have created Bitcoin. We&#39;re not going to find Satoshi. <a href="https://t.co/TZMtqJhxgU">https://t.co/TZMtqJhxgU</a>&mdash; Peter Todd (@peterktodd) <a href="https://twitter.com/peterktodd/status/1843957196830441766?ref_src=twsrc%5Etfw">October 9, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It makes for a fun theory. For a final showdown, Hoback presents it to Todd and Back in an abandoned railway, a have-fun-staying-poor man’s Point Break. They both — rightfully — laugh it off, which has continued on X following the film’s release.



Whether we should or shouldn’t know who Nakamoto is or was is a tired conversation at this point.&nbsp;



Still, it’s obvious that for many normal folk, the question indeed presents a Rubicon that they can’t cross. That itself would hinder adoption, I guess, but as far as shedding light on the way through that mess goes, Money Electric ain’t it.



A version of this article first appeared in the daily Empire newsletter. Subscribe <a href="https://blockworks.co/newsletter/empire">here</a> so you don’t miss tomorrow’s edition.



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We are all Satoshi Nakamoto — except Peter Todd

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<h2 class="wp-block-heading">SEC strikes again</h2>



In an exciting start to the SEC’s 2024-2025 fiscal year, Singapore-based Crypto.com has been served a <a href="https://blockworks.co/news/crypto-dot-com-sec-wells">Wells notice</a>, and, in response, filed a suit against the securities regulator.&nbsp;



In its complaint, the exchange says the SEC is “unlawfully expanding its jurisdiction to cover secondary-market sales” of certain cryptocurrencies. These certain tokens are, according to Crypto.com: SOL, ADA, BNB, FIL, FLOW, ICP, ATOM, ALGO, NEAR and DASH.&nbsp;



There are some familiar names here. In its lawsuit <a href="https://blockworks.co/news/coinbase-sec-rulemaking-appeals-court">against Coinbase</a>, the SEC also named SOL, ADA, FLOW, NEAR, DASH and ICP as securities. When the agency sued Binance, SOL, ADA, FIL, ATOM and ALGO made the SEC’s list. So there’s clearly a trend.&nbsp;



Wells notices, which precede formal enforcement actions, have been a dime a dozen lately. <a href="https://blockworks.co/news/consensys-files-lawsuit-against-sec">Consensys</a> sued the agency in June after receiving a Wells. <a href="https://blockworks.co/news/uniswap-responds-to-sec-wells-notice">Uniswap</a> got its notice in May. <a href="https://blockworks.co/news/sec-issues-wells-notice-opensea-nfts">OpenSea</a> was served in August. You get the picture.&nbsp;



These “counter-suits,” if you will — when a company preemptively takes a legal action before the SEC does the same — don’t tend to go very well for the filer. Consensys’s suit against the SEC was <a href="https://blockworks.co/news/consensys-lawsuit-against-sec-dismissed">dismissed</a> last month, although the ruling was fairly procedural (the SEC <a href="https://blockworks.co/news/sec-drops-ethereum-consensys-investigation">stopped</a> its investigation into Ethereum, so the court said Consensys’s complaint was now moot).&nbsp;



We’ll be watching how the Crypto.com suit plays out. The SEC has declined to comment, on both this matter and the Wells notice, but we will be keeping an eye out for an enforcement action as well.&nbsp;



— Casey Wagner



<h3 class="wp-block-heading">+52%&nbsp;</h3>



This is the 10-year average for bitcoin’s fourth quarter returns, as noted by Galaxy Research in a new report. Bitcoin gained 3% in the third quarter of this year after losing almost 13% during the second quarter.&nbsp; If history repeats itself, these final months of the year could be lucrative. But as always, this is not investment advice.



<h2 class="wp-block-heading">An FTX reminder before the election&nbsp;&nbsp;</h2>



Those infamous three letters have hit the news cycle again, and the timing could prove impactful. Then again, maybe not.&nbsp;



You know the FTX story by now. Its founder is <a href="https://blockworks.co/news/sam-bankman-fried-sentenced">in jail</a> because of it. But there was a bit of closure yesterday when a bankruptcy judge <a href="https://blockworks.co/news/ftx-bankruptcy-plan-approved">greenlit a plan</a> to pay back investors.&nbsp;



The plan, as laid out in previous filings, called for 98% of non-government creditors to <a href="https://blockworks.co/news/empire-newsletter-ftx-bankruptcy-finish-line">get “at least”</a> 118% of the value in their accounts (at the time of the exchange&#8217;s <a href="https://blockworks.co/news/ftx-meltdown-timeline">implosion</a> in November 2022) within two months of the plan’s approval.



It will be paid in cash, meaning investors are <a href="https://blockworks.co/news/ftx-former-customers-oppose-bankruptcy-plan">not getting back</a> any tokens they held on FTX. That isn’t exactly ideal for them, given most assets have <a href="https://blockworks.co/news/sam-bankman-fried-crypto-portfolio">increased substantially</a>. Bitcoin’s price back then was about one-quarter of what it is today.&nbsp;&nbsp;



Still, a portion of this story is being put to rest. Where are we still needing closure? Crypto regulation in the US (and other jurisdictions).



And oh, by the way, the US presidential election is 28 days away.&nbsp;



Mark Cuban, who has thrown vocal support behind VP Kamala Harris, recently reiterated what plenty have said over the last two years: The FTX pain could have been avoided. And <a href="https://decrypt.co/284737/mark-cuban-harris-ftx-sec-gary-gensler">he apparently told</a> one of Harris’s advisors as much over lunch.&nbsp;



The billionaire <a href="https://www.youtube.com/watch?v=tMvufQQbGJo">criticized</a> the SEC’s regulation-by-litigation approach and lack of clear guidelines (instead lauding efforts by Japan, for example). He put at least some of the blame on SEC Chair Gary Gensler — a man that Donald Trump in July said he would <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">fire</a>, if elected.



An SEC spokesperson did not immediately return a request for comment.&nbsp;



While Trump has been <a href="https://blockworks.co/news/on-the-margin-newsletter-trump-crypto-promises">vocal</a> about being a pro-crypto president, Harris now too has made it known she wants to <a href="https://blockworks.co/news/on-the-margin-newsletter-china-stimulus-stagnation">support</a> the industry. Specifics have been elusive.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



We know politicians read the news, and maybe some even scroll through Crypto Twitter (or X, whatever). The FTX repayment plan making headlines again so close to Nov. 5 might help highlight the need for comprehensive regulation strides.&nbsp;&nbsp;



Alex Saleh, head of partnerships at Coincover, said in a Tuesday email that more jurisdictions need to begin “moving the dial” on regulatory frameworks.&nbsp;&nbsp;



“It’s clear that regulation will play a central role in preventing future crises like FTX,” Saleh added. “The EU’s MiCA legislation, for example, introduces specific rules around fraud protection and capital reserve requirements which will help foster a safer and more secure ecosystem.”&nbsp;



— Ben Strack



<h2 class="wp-block-heading">Bulletin Board</h2>



<ul class="wp-block-list">
<li>Economists are now <a href="https://www.reuters.com/sustainability/sustainable-finance-reporting/ecb-cut-rates-by-25bps-both-oct-dec-euro-zone-economy-wobbles-2024-10-08/?utm_source=Sailthru&amp;utm_medium=Newsletter&amp;utm_campaign=Reuters-Business&amp;utm_term=100824&amp;user_email=fa79e40e809c025fd4827946d76a7c6be663b35e69ebda4628a3ff9f08f02c28&amp;lctg=6217b5e4e61dc90bfd6de99d">calling</a> for two 25 basis point interest rate cuts from the European Central Bank in October and December. The updated forecasts come after September data showed that eurozone inflation is now below 2%.</li>



<li>Officials from China’s National Development and Reform Commission on Tuesday failed to promise more robust stimulus plans, disappointing investors. The CSI 300 index — a cap-weighted index tracking the top 300 stocks on the Shanghai Stock Exchange and the Shenzhen Stock Exchange — closed 5.9% higher after initially surging 11%.</li>



<li>Tomorrow is the day! <a href="https://blockworks.co/event/permissionless-iii">Permissionless III</a> kicks off in Salt Lake City. Casey, Ben and Felix will all be taking the stage to talk about the biggest trends in macro and crypto. You don’t want to miss it.</li>
</ul>



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SOL, ADA listed in Crypto.com Wells notice

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Trendy new apps don’t tend to last long in crypto — except, apparently, for pump.fun.



After a tame September, memecoins have returned to prominence in recent days, with the Solana-based launchpad seemingly leading the way.



The app, which seemed past its heyday just weeks ago, has recorded 12 straight days of at least $900,000 in revenue, according to a Dune <a href="https://dune.com/adam_tehc/pumpfun">dashboard</a>. The last time it pulled that off was *checks notes* never. MOODENG, a pump.fun token based on a viral baby hippo from a zoo in Thailand, seemingly kicked off the recent memecoin rally, in which traders seem to be skipping out on traditional memes to trade pump.fun coins.



Kaito AI, which uses AI to analyze online sentiment, <a href="https://x.com/_kaitoai/status/1843195759434531250">said</a> Monday that memecoin mindshare is now at a yearly high. 



A majority of the 10 largest memecoins are down on the week, according to CoinGecko, while pump.fun had its most consistent week and a half of revenue yet — indicating that traders are passing up the likes of dogecoin and pepe in favor of pump.fun’s cute animal pictures du jour.



Crypto’s online hype machine has already kicked in. Murad Mahmudov, a longtime crypto public figure who’s shifted from bitcoin maximalism to memecoins, went <a href="https://x.com/MustStopMurad/status/1843014105273389405">viral</a> for a podcast segment explaining why memecoins will “Outperform Everything” in 2025. Su Zhu, most famously the co-founder of collapsed crypto hedge fund Three Arrows Capital, <a href="https://x.com/zhusu/status/1842551529997504665">weighed</a> in that “[i]nstitutional allocation to memecoins is likely to be the story of q4 2024.” Ethereum co-founder Vitalik Buterin <a href="https://x.com/VitalikButerin/status/1843260976206082216">said</a> he sold his MOODENG allocation and donated the proceeds to support anti-airborne disease technology.



And — stop me if you’ve heard this before — a rapper who’s a few years past her last top hit released a pump.fun memecoin.&nbsp;



Not everyone was feeling quite so upbeat.&nbsp;



“If you are finally joining the influencers that missed out and are just now joining memes in Q4, congrats, you are exit liquidity for everyone who was early,” wrote based16z, a popular crypto poster.



For anyone who’s been following over the past six months, it feels like crypto is stuck in something of a pump.fun Groundhog Day. The meme market pumps, similar players play similar roles in the online drama, and some industry watchers — myself being one of them — fall into believing that the pump.fun top is finally in.



But enough time has passed for crypto to wise up. Bet against pump.fun, which has already booked over $120 million in revenue roughly 10 months after launching, at your own peril.



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Pump.fun tops $900K revenue for 12 straight days

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Memecoins are entering a so-called “supercycle phase” — a fitting choice of words when you need to scream into the ears of unsuspecting investors that something of epic proportions is coming.



That’s the thesis of a somewhat viral <a href="https://youtu.be/6nqzwdGxTGc">Token2049</a> talk by Murad Mahmudov titled “The Memecoin Supercycle,” to which a growing contingent of Crypto Twitter seems to be subscribing.



Embrace memecoins, argues Mahmudov, because memecoins give you hope, fun, identity, a sense of belonging, emotional connection, a way to reduce loneliness and a way to engage in collective artistic expression and an imagined reality.



Let’s back up for a second here.



Based on <a href="https://www.coingecko.com/en/categories/meme-token">CoinGecko</a>, the entire memecoin market is $53 billion, about 2.3% of the entire $2.3 trillion crypto market cap. <a href="https://blockworks.co/news/lightspeed-newsletter-pump-dot-fun-memecoin">Pump.fun launched</a> in January 2024, and about <a href="https://dune.com/hashed_official/pumpdotfun">2.3</a> million memecoins have been created since then.



How many of these memecoins have been “successful” for investors?



Not many, is the answer. Based on August data by <a href="https://x.com/Adam_Tehc/status/1824994679265349802">@Adam_Tehc</a>, 64.7% of pump.fun traders on Solana lose money or breakeven at best. Only 3% make more than a thousand dollar profit, and a rare few of 0.0028% wallets are hitting the $1 million moonshot on memecoins.



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcQsSuXzpMETIbsynFe0NTEsuMEbiGiZdkCfchgztgK8rJM-Jtj_oNpqJMPhdGLVSuN0hfBuI553uhmlmV0ri6xMSmisy4EiBbwqztU1rn-bgNXqUyvO8LTke-stE1KC3w5yJbgB1-lQTe2ux8SdYv5NK_d?key=mfn73cL5xdusnrfBtAxlGg" alt="" style="width:551px;height:auto"/><figcaption class="wp-element-caption">Source: <a href="https://x.com/crypto__kermit/status/1825109763966787894/photo/1">@crypto__kermit via Twitter</a></figcaption></figure>



Part of the argument for “why memecoins” is because the VC-backed altcoin alternatives are terrible.&nbsp;



There’s admittedly a grain of truth there. Most VC-backed tokens have seen a down-only chart from their CEX listings, they’re rid with <a href="https://blockworks.co/news/0xresearch-newsletter-eigen-tokens-transparency">fishy insider investor tokenomics</a> and many of their products haven’t panned out (about 18% of crypto companies that <a href="https://blockworks.co/news/lightspeed-newsletter-solana-venture-capital">raised in 2022</a> have shut down, according to <a href="https://x.com/reganbozman/status/1841218868787978255">Lattice Fund</a>).



But the solution, I think, is to get these things right rather than dive headfirst into memecoins and throw the baby out with the bath water.



Recall that the history of the internet for instance, is littered with dead companies that collectively raised billions of dollars. In her <a href="https://www.amazon.sg/Bull-History-Boom-Bust-1982-2004/dp/0060564148">recollection</a> of the dot-com bubble, journalist Maggie Mahar estimated that by February 2002 — two years after the peak of the bubble — about 100 million investors lost ~$5 trillion in the stock market.&nbsp;



Today, the internet is indispensable. Suffice to say, we did not arrive there by doubling down on speculative use cases.



Memecoins do not pretend to try to create a socially innovative product, and that has been wrapped up in a marketing spin to be portrayed as a kind of investor advantage.



But failed crypto projects at the very least net socially important lessons and knowledge that is being taken and applied forward in the industry.&nbsp;



We know that algorithmic stablecoins are probably not a good idea, given the <a href="https://blockworks.co/news/one-year-since-terra">spectacular collapse of Terra</a>.



We know from the meager improvements in costs from decentralized storage solutions like Filecoin (relative to centralized competitors like AWS) that data is not likely to be the breakout use case for DePIN.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf5c3ldVjEXVZsXdevlFQ7S2h2m-XsBHthqJYVBqfYz9-bl5RwlD1FCdyoX0ltr_i6sB8LfkygdG4CoLjO9MinHk3IhHhjPhUWcXhWuYbix8xUPHv0Wn50g8gRWKh_x1homGvC9Tl5q31nj_yHE0xce_EfQ?key=mfn73cL5xdusnrfBtAxlGg" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://x.com/dunleavy89/status/1833167137633866157">MV Global</a></figcaption></figure>



We know that from the downfall of Axie Infinity, the next wave of blockchain-based games are not likely to be based on play-to-earn mechanics.



The point here, really, is that we don’t know the exact recipes for what will and won’t work until entrepreneurs (and, unfortunately, many hoaxsters along the way) give it a go. That is — after all — the whole point of a permissionless market: to allow an archipelago of experiments to flourish simultaneously.



If memecoins do indeed see a “supercycle,” it does beg the giant question of: So what? What has the blockchain industry proved to themselves, as well as outsiders and regulators, aside from the perennial need that people gamble?



Crypto wasn’t designed to make you rich. If that happens along the way, congratulations! But crypto was here to set you free.



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Who cares about a memecoin supercycle?

Here’s my confession: I was a decentralization maxi for the first half-decade of my time in crypto.&nbsp;



The market has however shifted to a slightly different bent, taking me along with it. Permissionless maximalism is now the prevailing alignment.&nbsp;



Decentralization does tend to feed into permissionless-ness. The latter implies there is no central authority granting or denying permission to join the network — thereby making it decentralized — but permissionless systems can be centralized in nature.&nbsp;



Image boards like 4chan, for instance, don’t ask users to create accounts to post or view content. Setting aside the extensive moderation, there’s effectively no initial permission beyond accepting basic terms and conditions. The underlying site still runs on Cloudflare and could technically be seized at any moment.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/decentralization-for-data-security">Without decentralization, our data will never be safe</a>



Within the blockchain context, think of smaller protocols that allow anyone to validate transactions, but due to a lack of interest, the team itself ends up running almost all of the full nodes. Permissionless, but centralized.



I identified with the hardline Bitcoiner. The tangibility of metal machines running proof-of-work is what uniquely ties blockchains to the North Star of censorship-resistance.&nbsp;



As long as mining rigs hum along in a data center in some remote corner of the world, the blockchain is alive, resistant to police raids, war and other types of physical interference.



Monero was okay, too. At least it was mineable. Same with Ethereum — until it <a href="https://blockworks.co/news/staking-eth-no-security">switched to proof-of-stake</a>.&nbsp;



If the seizure of bitcoin mining farms was a concern, then the potential for one machine to act as thousands — or even tens of thousands — of validators at the same time must centralize that risk.



Throughput, by that logic, is secondary. Yes, Bitcoin and Ethereum can only handle single-to-low-double-digit transactions per second. Too slow for mass appeal that comes with use cases broader than sending BTC or USDT back and forth, like <a href="https://consensys.io/blog/the-inside-story-of-the-cryptokitties-congestion-crisis">breeding</a> digital cats.



That’s just the cost of <a href="https://blockworks.co/tag/decentralization">decentralization</a>, I would say.



Besides, it’s not clear whether NFTs and memecoins really need to be onchain and forever cryptographically-verified at the expense of people managing the servers.&nbsp;



We could simply inspire all that less-important compute to move to more centralized networks. (And therein lies Vitalik’s <a href="https://x.com/VitalikButerin/status/1435413681588736007">pitch</a> for Ethereum’s scaling roadmap.)



Doing so would free up the actual censorship-resistant blockspace for folks with unquestionable claims to it — those living under authoritarian regimes and hyperinflationary economies.



Read more: <a href="https://blockworks.co/news/stablecoin-empire-emerging-economies-user-interface">Stablecoins are ‘a better product’ than local currencies in emerging economies, Carrica says</a>



As Frictionless co-founder Logan Jastremski alluded to on the latest <a href="https://blockworks.co/podcast/empire">Empire</a> episode, goals like these are noble. The world wide web has such immense societal impact only because it is open source, permissionless and decentralized.&nbsp;



More censored internets in places like mainland China and North Korea are, by contrast, methods of control — not tools for freedom.



Bitcoin currently makes up more than 58% of the crypto market, up from 41% at the start of last year, its highest level in over three years. Although, it’s obvious that the blockchain space has moved on from decentralization maximalism.



For most of the world, there is one internet. In crypto, we now have dozens (or even hundreds) of tech companies and startups building competing “finternets” — all with varying degrees of decentralization, speed and security.&nbsp;



Read more: <a href="https://blockworks.co/news/lightspeed-newsletter-solana-finternet">Indian tech magnate teases Solana-built ‘finternet’ for an economy onchain</a>



Practically none of them are even close to their final form.&nbsp;



The trillion-dollar question is then: Does all that make Web3 a winner-take-all situation, with the blockchain that finally cracks the perfect balance of the <a href="https://vitalik.eth.limo/general/2021/05/23/scaling.html">scalability trilemma</a> taking the lion’s share?



It could be that we end up with two major blockchains: one “money” blockchain and one “general purpose,” with a smattering of boutique networks in their orbit, some of which could be more decentralized and censorship-resistant. They would cater to the hobbyists and those that desperately require those properties.



And, behind the scenes, the continued development of the finternet might look more like the Web2 app layer. Like how Meta runs the backbone for WhatsApp, Facebook and Instagram, and whichever outfit that wins the Web3 race maintains the tech stack for all the killer crypto apps.&nbsp;



Perhaps a chain with far fewer than 100 full nodes, so that it’s fast enough to support whatever mainstream app will bring the next wave of non-native users onchain. For scale, Solana, Ethereum and Bitcoin each have thousands.



Read more: <a href="https://blockworks.co/news/ton-outage-permanent-uptime-web3">The Offline Network: Maybe permanent uptime isn’t a Web3 thing after all</a>



In that scenario, decentralization is not the be-all-and-end-all. It’s instead replaced by strict adherence to permissionlessness: becoming an active participant in the network, say by running a high-performance full node in a server farm somewhere, may be prohibitively expensive for most, but it’s still technically possible for anyone.&nbsp;



In the spirit of pragmatism over dogmatism — and until Moore’s law unlocks more possibilities for blockchain builders — maybe that’s enough.



A version of this article first appeared in the daily Empire newsletter. Subscribe <a href="https://blockworks.co/newsletter/empire">here</a> so you don’t miss tomorrow’s edition.



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Decentralization maximalism is dead. Long live permissionless maxis.

Crypto.com said it filed a suit against the Securities and Exchange Commission after it received a Wells notice earlier this year.&nbsp;



The crypto firm <a href="https://crypto.com/company-news/complaint">said</a> it’s trying to “protect the future of the crypto industry in the US, joining a series of our peers who are actively defending themselves and taking action against a misguided federal agency acting beyond its authorization under the law.”



A slew of other crypto firms have also received similar notices, including Uniswap, Consensys and Robinhood.&nbsp;



Read more: <a href="https://blockworks.co/news/robinhood-wells-notice-sec">Robinhood discloses Wells notice over its crypto business</a>



“Our lawsuit contends that the SEC has unilaterally expanded its jurisdiction beyond statutory limits and separately that the <a href="https://blockworks.co/tag/sec">SEC</a> has established an unlawful rule that trades in nearly all crypto assets are securities transactions no matter how they are sold, whereas identical transactions in bitcoin (BTC) and ether (ETH) are somehow not,” a press release announcing the suit said.



The suit — similar to the one Consensys <a href="https://blockworks.co/news/sec-lawsuit-against-consensys-securities">filed earlier this year</a> — was <a href="https://blockworks.co/news/consensys-files-lawsuit-against-sec">filed in a Texas court</a>. It names SEC Chair Gary Gensler and Commissioners Caroline Crenshaw, Jamie Lizarraga, Hester Peirce and Mark Uyeda, as well as the agency itself.&nbsp;



Per the <a href="https://crypto.com/document/complaint.pdf">suit</a>, the SEC’s Wells notice is focused on <a href="https://blockworks.co/tag/cryptocom">Crypto.com</a> allegedly acting as an “unregistered broker-dealer and securities clearing agency under the federal securities laws.”



A Wells notice warns firms of potential enforcement actions, though it doesn’t always mean that the SEC will file its own suit against the firm. Crypto.com said it received the notice on Aug. 22.&nbsp;



“The SEC has refused to provide Crypto.com a complete list of network tokens sold on the platform that it plans to allege are crypto asset securities. Instead, it has referred Crypto.com to other enforcement actions in which the SEC has asserted claims based on secondary-market sales of various network tokens, including the Targeted Network Tokens,” the suit claims.



“The SEC does not comment on the existence or nonexistence of a possible investigation,” a spokesperson told Blockworks.



Updated October 8, 2024 at 1:24 pm ET: Added statement from the SEC. Updated October 8, 2024 at 10:11 am ET: Modified language for clarity.



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Crypto.com files suit against SEC, discloses Wells notice

Today, enjoy the Empire newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/empire" target="_blank" rel="noreferrer noopener">Subscribe to the Empire newsletter</a>.



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This week, Blockworks is taking over Salt Lake City with Permissionless III — a three-day conference specially for users, founders, investors, devs and policymakers.



Our editorial team will be there in force, which means we’re scaling back the Empire newsletter format during the event.&nbsp;



Enjoy the slightly abbreviated read, and if you haven’t secured your tickets yet, <a href="https://blockworks.co/event/permissionless-iii">grab them here</a>.



— David Canellis



<h2 class="wp-block-heading">RIP FTX</h2>



We’re one step closer to wrapping up the <a href="https://blockworks.co/news/ftx-meltdown-timeline">FTX saga</a> for good. Really.



The bankruptcy of the FTX estate — which was once one of the biggest crypto exchanges in the world — will now proceed to its final stages, after Judge John Dorsey approved the estate’s repayment plan yesterday.



Not to mention, three of the five executives charged in the downfall of FTX have been sentenced (Sam Bankman-Fried is <a href="https://blockworks.co/news/sam-bankman-fried-sentenced">serving 25 years</a>, Caroline Ellison <a href="https://blockworks.co/news/caroline-ellison-sentenced-to-24-months">will serve two</a> and <a href="https://blockworks.co/news/former-ftx-exec-ryan-salame-sentenced">Ryan Salame is facing 7.5</a>). The last two, Nishad Singh and Gary Wang, are set to be sentenced next month.&nbsp;



With its two-year anniversary quickly approaching, putting to bed one of crypto’s darkest moments might even come in time for the next bull run.&nbsp;



But who knows.&nbsp;



The repayment confirmation hearing, which started early Monday morning, lasted almost the entire day as the bankruptcy court heard objections and cross-examined witnesses.&nbsp;



Alvarez &amp; Marsal’s Steven Coverick took the stand and faced a cross-examination that touched on a, well, understandably touchy subject for a lot of FTX creditors: the matter of in-kind versus cash distributions.&nbsp;



Here’s the deal. A lot of creditors pushed the debtor&#8217;s estate to return their crypto as it was when FTX went bust. However, the plan that was approved yesterday returns the amount of crypto that was in wallets of former customers in cash — not their original tokens.



The caveat that lawyers representing the estate had pushed is that creditors are getting interest on top of that sum, which supposedly makes them more than whole — if we’re basing this all on November 2022 prices, which had been severely deflated by the ordeal.&nbsp;



Bitcoin, for instance, currently changes hands for nearly four times what it was as FTX suspended withdrawals.



Coverick helped to shed some light on why the estate didn’t budge on its plans to distribute cash. FTX, he said, “never had the crypto.”&nbsp;



The entire issue came down to the way that the estate had to scrape together the funds. “The debtors simply don’t have the crypto to make in-kind distributions” so they would then have to purchase the crypto to make in-kind distributions. It would be expensive, lower the amount returned to customers,” he explained in court to attorney David Adler, who was representing a set of objectors.



This revelation isn’t a huge surprise. We’ve known for a while that user funds were misappropriated. The FTX estate under John J. Ray managed however to find between $14.5 billion and $16.3 billion. It needed $11 billion to fully pay back customers.&nbsp;



Now you might be wondering — especially if you were in Adler’s shoes — perhaps the estate could buy the crypto it owes customers to execute full and fair in-kind distributions. According to both FTX’s lawyers and Coverick, that could have ramifications for the broader market.&nbsp;



Judge Dorsey agreed with them, overruling Adler, when he greenlit the plan. Adler tried to push for a <a href="https://blockworks.co/news/blockfi-ftx-bankruptcy-comparison">distribution plan similar to BlockFi’s</a>, but Coverick said that FTX was a “very different” case. Again, the judge seemed to agree with that reading.&nbsp;



There’s “nothing in the code to require in-kind versus cash distributions and so far I’ve only heard that the suggestions for in kind could do more harm than good,” Dorsey told the court.&nbsp;



What does this mean for creditors? Per the May court filing, 98% of non-government creditors will <a href="https://blockworks.co/news/empire-newsletter-ftx-bankruptcy-finish-line">receive “at least” 118% of claims</a> in cash within two months of the plan’s approval.&nbsp;



If everything goes to plan, we could officially put FTX to rest in early 2025.&nbsp;



— Katherine Ross



<h2 class="wp-block-heading">Data Center</h2>



<ul class="wp-block-list">
<li>BTC and ETH are mostly flat, with the former bouncing above $62,200 multiple times this morning and the latter at $2,400.</li>



<li>Solana memecoin POPCAT has retraced 12% from its $1.47 all-time high set on Sunday evening. Its market cap is currently $1.2 billion, slightly <a href="https://www.coingecko.com/en/categories/meme-token">trailing</a> FLOKI.</li>



<li>Ether spent most of the past day <a href="https://ultrasound.money/">deflationary</a> amid a jump in native DEX <a href="https://defillama.com/dexs/chains">volumes</a>: 23% week-on-week.</li>



<li>Global NFT sales <a href="https://www.cryptoslam.io/nftglobal?headerPeriod=7d">volumes</a> are also up 21% in the past week to $91.3 million, per CryptoSlam.</li>



<li>Donald Trump has taken the lead on <a href="https://polymarket.com/event/presidential-election-winner-2024/will-donald-trump-win-the-2024-us-presidential-election">Polymarket</a>: 52.8% to Kamala Harris’ 46.6%.</li>
</ul>



<h2 class="wp-block-heading">The Riff</h2>



Q: The topic of the Ethereum camp’s dogmatic approach to retaining solo stakers came up on <a href="https://blockworks.co/podcast/empire/e81d92fc-84f4-11ef-aa3b-37f12def5ce8">today’s Empire podcast</a>. So, is it worth sacrificing decentralization and ideology for more throughput?



Here’s my confession: I was a decentralization maxi for the first half-decade of my time in crypto.&nbsp;



I identified with the hardline Bitcoiner. The tangibility of actual machines running proof-of-work is what uniquely ties blockchains to the North Star of censorship-resistance.&nbsp;



As long as mining rigs hum along in a data center in some remote corner of the world, the blockchain is alive, resistant to police raids, war and other types of physical interference.



Monero was okay, too. At least it was mineable. Same with Ethereum — until it switched to proof-of-stake.&nbsp;



If the seizure of bitcoin mining farms was a concern, then the potential for one machine to act as thousands, or even tens of thousands, of validators at the same time must centralize that risk.



Throughput, by that logic, is secondary. Yes, Bitcoin and Ethereum can only handle single-to-low-double-digit transactions per second. That’s just the cost of decentralization, I would say.



Besides, it’s not clear whether NFTs and memecoins really need to be onchain, forever cryptographically verified at the expense of the people managing the servers.&nbsp;



We could simply inspire all that less-important compute to move to more centralized networks. (And therein lies Vitalik’s <a href="https://x.com/VitalikButerin/status/1435413681588736007">pitch</a> for Ethereum’s scaling roadmap.)



Doing so would free up the actually censorship-resistant blockspace for folks who need it — those living under authoritarian regimes and hyperinflationary economies.



As Frictionless co-founder Logan Jastremski alluded to on <a href="https://blockworks.co/podcast/empire">Empire</a>, goals like these are noble. The World Wide Web has such immense societal impact only because it is open source, permissionless and decentralized.&nbsp;



More censored internets in places like mainnland China and North Korea are, by contrast, methods of control — not tools for freedom.



Bitcoin currently makes up over 58% of the crypto market, up from 41% at the start of last year, its highest level in over three years. But it’s obvious that the blockchain space has moved on from decentralization maximalism.



For most of the world, there is one internet. In crypto, we now have dozens (or even hundreds) of tech companies and startups building competing “finternets” — all with varying degrees of decentralization, speed and security.&nbsp;



Practically none of them are even close to their final form.&nbsp;



The trillion-dollar question is then: Does all that make Web3 a winner-take-all situation, with the blockchain that finally cracks the perfect balance taking the lion’s share?



It could be that we end up with two major blockchains: one “money” blockchain and one “general purpose,” with a smattering of boutique networks in their orbit, some of which could be more decentralized and censorship-resistant. They would cater to the hobbyists and those that desperately require those properties.



And, behind the scenes, the continued development of the finternet might look more like the Web2 app layer. Like how Meta runs the backbone for WhatsApp, Facebook and Instagram, and whichever outfit that wins the Web3 race maintains the tech stack for all the killer crypto apps.



In that scenario, decentralization is not the be-all-and-end-all. It’s instead replaced by strict adherence to permissionlessness: becoming an active participant in the network, say by running a high-performance full node in a server farm somewhere — may be prohibitively expensive for most, but it’s still technically possible for anyone.&nbsp;



In the spirit of pragmatism over dogmatism — and until Moore’s law unlocks more possibilities for blockchain builders — maybe that’s enough.



— David Canellis



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



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>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

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