CoW Protocol

Byron Gilliam

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Money has been reduced to a simulacrum of its former self, a mere obligation by a counterparty to perform bookkeeping functions.” — Stefano Gogioso, A Quantum Moneyfesto
</blockquote>



In Star Trek, it took only seconds to travel from the Starship Enterprise down to a nearby planet.



Crewmembers only had to step into the Transporter, which dematerialized them into a pattern of energy (accurate to the quantum level) and beamed them to a target location where the energy would be converted back into matter so the person could be reassembled.



But is the person who beams back up the same that beamed down?



The official, in-universe answer is that they’re one and the same. The consciousness of transported crewmembers remains continuous, they say, thanks to the perfection of the Transporter’s quantum-level scan and reconstruction.&nbsp;



As proof, they cite crewmembers claiming a memory of being in transit.



But we’ve since learned how quantum-level transportation works, and that’s not it.



In quantum teleportation, first <a href="https://journals.aps.org/prl/abstract/10.1103/PhysRevLett.70.1895">discovered in 1993</a>, the only thing being teleported is information.



Teleporting, say, a qubit, requires that the original quantum state of that qubit be destroyed: By the laws of physics, collecting precise information on a quantum state collapses its superposition, thereby destroying it.&nbsp;



But the collected information can then be sent as classical data (ones and zeros) over a satellite or fiber optic cable and then, thanks to the physics-magic of entanglement, reassembled (from other particles) at its destination.



So the unsettling truth is that the Transporter on the Starship Enterprise can only have worked by killing its passengers — the crewmember who beamed down is not the one who beamed back up.



This has some sci-fi implications for the future of money.



In banking, the way money is &#8220;sent&#8221; from Bank A to Bank B is that Bank A subtracts a number in its spreadsheet and sends a message to Bank B instructing it to add the same number to theirs.



Only the message is sent, not the money — which is why we need banks: to send each other messages about our money.



With quantum money, however, the money sends its own messages.



Quantum money is the idea that value could be represented by the quantum state of a particle and exchanged via quantum teleportation.



“The most important thing to understand here is that quantum [money] behaves like a resource, not like data,” <a href="https://x.com/fabgenovese?s=20">Fabrizio Genovese</a> explained in an email.&nbsp;&nbsp;



Where a bank deposit is information about money and Bitcoin is a consensus record representing money, quantum money would be the money itself — an uncopyable atom, photon, or molecule that is money.



Not data about money but the physical resource of money.



This has utility because it would allow money to be secured and transported according to the unbreakable laws of superposition, entanglement and the no-cloning theorem.&nbsp;



In other words, physics might someday do what databases and distributed ledgers do now, but without the database or distributed ledger.



Quantum money would therefore have the self-custodial properties of physical cash: You could keep qubits of money in a hardware device the same way you keep cash in your pocket.



That would make exchanging money perfectly permissionless (no intermediary required) and perfectly private (there’s no ledger of transactions).



But quantum money would also have the transportable properties of digital money: Destroying the money on your device creates the sendable information required to recreate it on another device, however far away.



(There is a moment when the quantum state, in transit as classical data, does not exist — which proves that the Star Trek Transporter really is a suicide machine.)



Sending quantum money will be like sending physical cash in the mail. But better, because it arrives instantly.



Sending money over great distances created the need for banks, but solving that problem introduced the intermediaries that now control nearly all of our money.



Bitcoin, of course, is a way of making peer-to-peer transactions possible over great distances.&nbsp;



But quantum money would be the unstoppable way to do it.



“Blockchain transactions are not quite peer-to-peer,” Stefano Gogioso <a href="https://www.youtube.com/live/_ZoKdulXcVk?si=deNi9vnwICRAulOa">says</a>, “because there’s always going to be part of the mechanism that can stop your transaction from going through. For economical, political, or technological reasons.”



Nothing will stop a quantum transaction, for any reason.



There is one limitation, however: Unlike Star Trek, where Captain Kirk could beam down to a newly discovered planet, quantum money can only be transported to a hardware device prepared to receive it.



That device does not yet exist, so quantum money is not yet feasible — we’re three or four years away from the earliest iteration, Gogioso estimates.&nbsp;



When it arrives, though, it will be the safest conceivable way to send money.



Getting security from quantum states, Genovese says, is like getting energy from the Sun: “It’s what the universe gave us.”



As such, he expects all cybersecurity will eventually be done through quantum states — including money.



We&#8217;ll still have to give that money value, however, which might prove to be the hardest trick.&nbsp;



Building a transporter to teleport qubits is one thing; getting others to accept them as payment is another.



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Cybersecurity

Beam-me-up money

Carlos

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Over the past several days, the exchange between Kamino and Jupiter has escalated from healthy competition to a clear public dispute. The events started on Nov. 27, when Jup Lend introduced a <a href="https://support.jup.ag/hc/en-us/articles/23407960232092-All-about-Refinance">refinancing tool</a> on its frontend to migrate looping positions from Kamino Multiply directly into Jup Lend with a single click. The refinance operation initiated an atomic transaction involving four steps:



<ol class="wp-block-list">
<li>Repay outstanding debt on Kamino.</li>



<li>Withdraw the associated collateral.</li>



<li>Transfer these assets to Jupiter Lend.</li>



<li>Recreate the position inside Jupiter Lend, maintaining the same loan amount and collateral ratio.</li>
</ol>



On Dec. 2, Kamino <a href="https://x.com/prady_v/status/1995756192988323845?s=20">updated</a> its smart contracts to block Jupiter’s program, preventing one-click refinancing. Both the Jupiter and Fluid teams (Jup Lend uses Fluid in the backend) framed the move as anti-competitive and against “open-finance principles.”



On Dec. 6, Kamino’s co-founder publicly <a href="https://x.com/y2kappa/status/1997333295474802777?s=20">explained</a> the rationale for blocking Jup Lend’s migration tool, noting that Jupiter had repeatedly suggested that borrowers’ collateral is isolated, implying it is neither rehypothecated nor exposed to cross-contamination risk. However, this claim was not true, with even Fluid’s co-founder <a href="https://x.com/smykjain/status/1997075350799736981?s=20">acknowledging</a> rehypothecation within Jup Lend.



​Notably, Kamino never prevented users from repaying their loans manually and withdrawing their capital to Jup Lend. Whether against open-finance principles or not, the move to block the refinancing program was fundamentally a business decision, much like Jup Lend’s decision not to open-source its code (though it has plans to do so). In this regard, it’s interesting to analyze the competitive dynamics between both money markets over the past few months.



Since its launch in late August, Jup Lend has grown to $1.6 billion in deposits and $610 million in borrows. The chart below shows that Kamino’s deposits and borrows have decreased by $1.3 billion (-28%) and $460 million (-26%), respectively, during the same period.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=1024&amp;h=1024" alt="" class="wp-image-110353" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-74.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



The top five assets by deposit growth since Jup Lend’s launch are USDC ($485 million), JLP ($225 million), SOL ($206 million), syrupUSDC ($174 million), and jupSOL ($85 million). During the same period, Kamino has seen sizable outflows for all of these assets, except syrupUSDC. However, even for syrupUSDC, Jup Lend still attracted roughly 3x more inflows.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=1024&amp;h=1024" alt="" class="wp-image-110352" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-73.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Kamino’s growth over the past few months has come from assets not yet supported by Jup Lend. In particular, stablecoin inflows in Q4 have been driven by PYUSD ($42 million) and Phantom’s CASH ($125 million). Kamino has also been proactive in onboarding DATCO LSTs; most notably dfdvSOL and more recently fwdSOL.



Kamino’s PRIME integration stands out as a catalyst that can bring net new inflows into the money market. PRIME gives users exposure to a regulated credit pool backed by US real estate loans originated and serviced through Figure. This integration effectively gives access to a source of yield uncorrelated from crypto markets that may attract more institutional borrowers.



Wrapping up, Kamino and Jup Lend are obviously competitors, and competition is healthy as it drives innovation and ultimately benefits users. That said, as Solana Foundation’s Lily Liu<a href="https://x.com/calilyliu/status/1997563223193849952?s=20"> noted</a>, instead of fighting with each other, Kamino and Jupiter should focus on growing the pie and capturing market share from other chains and TradFi thereafter. Combined, both money markets still account for less than 10% of Aave’s deposits, and without initiatives like the PRIME integration, it will be impossible to close this gap.



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0xResearch Newsletter

Analyzing Jup Lend vs. Kamino

Luke Leasure

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While crypto prices have shown a modest recovery in the short term, negative breadth and relative underperformance to TradFi benchmarks on the monthly suggests a prevailing bearish environment. 



Zooming out, we look at the secular growth trends within stablecoins and lending as durable sectors for multi-year growth.



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



Crypto markets remain rangebound after November’s harsh selloff. The past week has shown a modest recovery, with BTC at $90,400 now being 12% off of its recent correction low of $80,700. Over the trailing 24 hours, the AI and Modular sectors were the top winners, with TAO (+6.4%)  and TIA (+6.2%) as notable contributors to this short-term strength. The Perp Index was the top loser, with DYDX (-3.1%) and HYPE (-0.6%) accounting for the sector’s weakness. 



<img loading="lazy" decoding="async" width="720" height="405" src="blob:https://cms.blockworks.co/b89f7e71-0662-4e87-a1ab-377c7de8b679">



Zooming out to the monthly, the picture remains unfavorable. TradFi benchmarks like Gold, Nasdaq and the S&amp;P 500 are all green over the past month, while every crypto index we track is measuring negative returns.



Breadth is decisively negative on the monthly for all crypto indices, with no safe haven provided. Notably, the Protocol Revenue index is the top performing among crypto sectors, suggesting relative strength in protocols with strong fundamental positioning.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1488" height="837" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=1024&amp;h=1024" alt="" class="wp-image-110344" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=1488 1488w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-70.png?w=80 80w" sizes="auto, (max-width: 1488px) 100vw, 1488px" /></figure>



Despite recent strength, it remains to be determined whether this rally is countertrend to a prolonged downtrend, or if the low is in for the rest of 2025.



<h2 class="wp-block-heading">Market Update</h2>



Amid the downtrend, don’t lose sight of the bigger picture, and take a moment to appreciate just how far we’ve come. At the bear market low, lending applications within DeFi accounted for just $5 billion in deposits, a rounding error within the larger financial system. In the years since, this figure has grown to $71 billion in deposits, having just previously tagged near $100 billion.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="900" height="500" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-69.png" alt="" class="wp-image-110342" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-69.png?w=900 900w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-69.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-69.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-69.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-69.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-69.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-69.png?w=80 80w" sizes="auto, (max-width: 900px) 100vw, 900px" /></figure>



Similarly, loans outstanding on these applications amounted to $1.6 billion at the bear-market low. Since, active loans have risen to over $27 billion now, and recently passed $38 billion. These figures have grown to a scale worth paying attention to, not just for the crypto native. Variance can cut both ways, to the upside and to the downside, for both key metrics and spot prices. But 20x growth in topline metrics in just a few years suggests this sector is a long way off from its terminal growth rate.&nbsp;



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="900" height="500" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-68.png" alt="" class="wp-image-110343" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-68.png?w=900 900w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-68.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-68.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-68.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-68.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-68.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-68.png?w=80 80w" sizes="auto, (max-width: 900px) 100vw, 900px" /></figure>



Amid the drawdown in crypto prices, the aggregate stablecoin supply has retraced back up to its all-time high of $310 billion, after a brief period of -$10 billion in outflows.&nbsp;



The growth in stablecoins is a trend that I would not bet against. Onchain money markets stand as primary beneficiaries of the growing stablecoin supply, purporting to be the primary applications for utilization. Stablecoin lenders seek yield, while borrowers look for leverage. While spot assets will remain volatile, this secular trend should remain a persistent and durable tailwind for DeFi applications.&nbsp;&nbsp;&nbsp;&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=1024&amp;h=1024" alt="" class="wp-image-110346" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-72.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Notably, continued growth in the stablecoin supply comes amid very modest onchain yields. Benchmark supply rates on lending applications are reading 3.6%, a discount to SOFR at 3.9%. Growing depth in onchain stablecoin liquidity may continue to dampen the upside in supply rates, and absent a material risk premium to legacy rates, growth in stablecoin utilization on money markets may falter.&nbsp;



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="900" height="500" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-71.png" alt="" class="wp-image-110345" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-71.png?w=900 900w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-71.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-71.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-71.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-71.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-71.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-71.png?w=80 80w" sizes="auto, (max-width: 900px) 100vw, 900px" /></figure>



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Rangebound markets, resilient onchain lending

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&nbsp;“Productivity isn’t everything, but in the long run it is almost everything.”



— Paul Krugman
</blockquote>



“Total factor productivity” (TFP) is how economists measure the contribution of technological innovation to economic growth — the sustained ability of an economy to produce more output with the same amount of inputs.



As such, it’s arguably economists’ most important measurement, because the continual process of producing more with less is how life gets better.



“A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker,” Paul Krugman explains.&nbsp;



Technology is what makes that happen and TFP is how it’s measured.



To get a more tangible sense of how important technology-generated productivity is, consider this: A <a href="https://www.nber.org/system/files/chapters/c15154/c15154.pdf">recent paper</a> from the National Bureau of Economic Research (NBER) estimates that an additional 0.5% of annual TFP growth would stabilize the US government&#8217;s finances at today’s level of debt-to-GDP.



0.5%! It doesn’t sound like a lot, but if sustained over the next 10 years, NBER estimates that would reduce the baseline forecast for US government debt by $2 trillion.



Over 30 years, a sustained 0.5% boost to TFP would make the US government’s debt-to-GDP ratio 42 percentage points lower than NBER’s baseline forecast (and 80 percentage points lower than its pessimistic one).



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="835" height="465" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png" alt="" class="wp-image-110337" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=835 835w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=80 80w" sizes="auto, (max-width: 835px) 100vw, 835px" /></figure>



Given the seemingly hopeless state of government finances, maintaining today’s level of indebtedness is a dream scenario that seems too good to be true.



But researchers at Anthropic think we can do even better.



Anthropic conducted a study of 100,000 Claude.ai conversations to “estimate how long the tasks in these conversations would take with and without AI assistance, and study the productivity implications across the broader economy.”&nbsp;



Its conclusion? LLMs could raise total factor productivity by 1.1 percentage points.



1.1%!



If 0.5% would stabilize the US government’s finances for decades, what would 1.1% do? It would probably fix almost everything.&nbsp;



There are reasons to be skeptical of this optimistic forecast, of course.&nbsp;



The study finds, for example, that Claude saves teachers four hours of labor by creating curricula in just 11 minutes. But estimating how such time-savings might lead to higher economic output requires the kind of economic modelling that’s full of best-guess assumptions and false precision.



So, even if Anthropic is right about the time savings, it might be wrong about productivity: It might be that we use all the time AI saves us to do something economically unproductive, like watch more TikTok videos or read more newsletters.



In that case, AI would raise our welfare (more free time) but not our wealth (more economic output) — still great news for people, but no help to governments hoping for a silver bullet solution to their debt problem.



Conversely, there are reasons to think Anthropic’s model is being too pessimistic: “We don’t take into account the rate of adoption” it explains, “or the larger productivity effects that would come from much more capable AI systems.”



In other words, its study assumes we continue to use AI only as we do now and that we’re still using today’s language models, unimproved, for another 10 years.



Language models get noticeably better every few months and we’ve only just started learning how to use them — so Anthropic is right to say its estimate might represent an “approximate lower bound on the productivity effects of AI.”



If so — if 1.1% is the lower bound for AI-induced productivity — we might pay down government debt and have much more time for TikTok.



And that’s only taking into consideration AI’s impact on non-physical work — just wait until we get robots!&nbsp;



To dismiss such optimism entirely is to think the trillions of dollars that corporations are planning to spend on AI capex and R&amp;D will all be wasted.



Which it might be — technology revolutions don’t always arrive on schedule.



But the biggest reason for optimism is that Anthropic’s 1.1% estimate is based solely on AI “making existing tasks faster to complete” — &nbsp;its model does not account for AI’s potential to completely change the way we complete those tasks.



“Historically,” Anthropic notes, “transformative productivity improvements — from electrification, computing, or the internet — came not from speeding up old tasks, but from fundamentally reorganizing production.”



There’s no way to model these new ways of doing things, but it seems likely its impact will be bigger than the one Anthropic has tried to measure.



Anthropic’s researchers are careful to caveat their hopeful findings by enumerating the limitations of their methodology and documenting the many assumptions they’re making.&nbsp;



And even if all those assumptions work out and AI productivity solves the US government’s debt problem, lawmakers will probably spend their way right back into it.



But given the 100% probability everyone seems to put on looming fiscal disaster, even a small chance Anthropic’s estimates prove correct is a reason to update our priors: The US government’s finances are not as intractable as we think, and the US dollar is not as doomed as we think.



In the long run, productivity is almost everything — and AI might be on the verge of making us a lot more productive.



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The productivity bull case for almost everything

Boccaccio

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Today, we break down the BTC move over the past week, how ETFs have seen net inflows for the first time in nearly four weeks, and application and chain revenue. We also look into who President Trump&#8217;s next Federal Reserve Chair nominee might be.



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



BTC bounced off $85,000 lows, and is back up to $92,000. Over the past three weeks, BTC has increased 5%, with significant volatility throughout. In particular, BTC has been underperforming through the EU session, while outperforming in the US and APAC sessions.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1600" height="838" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=1024&amp;h=1024" alt="" class="wp-image-110314" style="width:648px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-58.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Over the past week, oracles, lending and Ethereum ecosystem tokens performed well, with each up just over 4%. Crypto equities performed the best, up 6.7%, primarily due to outperformance by HOOD.&nbsp;&nbsp;



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=1024&amp;h=1024" alt="" class="wp-image-110319" style="width:686px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-62.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



The Nasdaq 100 (+1.70%) and S&amp;P 500 (+0.78%) continue to grind up, while Gold underperforms slightly (-0.85%).



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="895" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=1024&amp;h=1024" alt="" class="wp-image-110324" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=467 467w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-65.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=1024&amp;h=1024" alt="" class="wp-image-110325" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-66.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



In terms of worst-performing, gaming has outperformed significantly toward the downside, with -23% returns over the past week. LGCT was the worst performer, and declined in price by -75% over the past week.&nbsp;



<h2 class="wp-block-heading">Charts for The Week</h2>



Odds have surged (up to 78% on Kalshi) that Kevin Hassett will be President Trump&#8217;s next Federal Reserve chair nominee, an announcement Trump recently confirmed is imminent. Hassett, a close White House ally, is favored because he aligns with the president&#8217;s demand for much lower interest rates to provide cheaper consumer loans and mortgages.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1600" height="825" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=1024&amp;h=1024" alt="" class="wp-image-110315" style="width:619px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-59.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Bitcoin ETF flows reversed sharply in November, posting significant net outflows after a steady run of inflows from May through October. The month saw roughly $3.46 billion in redemptions, completely erasing the $3.42 billion in new inflows seen last month and the worst outflows since February 2025 ($3.56 billion). The reversal highlights how quickly sentiment deteriorated despite months of strong accumulation. The alignment between ETF flows and price action remained intact, with November’s outflows closely mirroring BTC’s double-digit monthly decline.



The first week of December has been the first positive net inflow week for BTC ETFs since the last week of October, with $70.2 million in net BTC ETF inflows. Ethereum and Solana ETFS have both seen higher net inflows this past week, at $312 million and $108 million, respectively.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1600" height="889" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=1024&amp;h=1024" alt="" class="wp-image-110321" style="width:682px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-64.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



In terms of network revenue, we’re seeing similar figures to what we saw the week prior, with Hyperliquid leading the charge with 35% of all network revenues, followed by Tron (20%) and Solana (15%). Noticeably, BNB revenue is still at lows following the highs it put in October, and the majority of that has been captured by Hyperliquid and Solana.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1600" height="889" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=1024&amp;h=1024" alt="" class="wp-image-110317" style="width:715px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-60.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Application revenue has stopped declining (now at $38 million, 10% higher than last week), following four weeks of net decline across all tracked applications. Hyperliquid continues to lead the way (35%), followed by pump.fun (25%) and Axiom (8%).



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1600" height="889" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=1024&amp;h=1024" alt="" class="wp-image-110318" style="width:740px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-61.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Helius’ Lostin and Ichigo proposed SIMD411, which aims to accelerate Solana’s emission schedule by doubling the disinflation rate from -15% to -30%, keeping the 1.5% terminal inflation unchanged. This simple, predictable parameter change would bring inflation from ~4.14% today to 1.5% in ~3.1 years (early 2029), rather than ~6.2 years (early 2032). If implemented, SIMD411 would cut 22.3 million SOL ($2.9 billion) in emissions after six years vs. the current inflation path, reducing the “leaky bucket” sell pressure.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=1024&amp;h=1024" alt="" class="wp-image-110320" style="width:753px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-63.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



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Risk back on the table as crypto ETFs bounce back

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Conventional measures of economic growth omit some of the largest gains in living standards and therefore underestimate economic progress.”



— William Nordhaus
</blockquote>



In 1906, Upton Sinclair went undercover in Chicago&#8217;s meatpacking plants to expose the brutal realities of poverty that he depicted in The Jungle: families living in overcrowded squalor, children working in hazardous, dehumanizing factories, workers maimed and discarded by industrial capitalism with no safety net whatsoever.



In 2025, we have a new kind of data-driven muckraker: Michael W. Green, an asset manager, whose brave discovery that American families making less than $140,000 are living in poverty has gone viral.&nbsp;



One can only marvel at how these families survive on such meager six-digit incomes! By Green’s logic, two-thirds of Americans should be eligible for food stamps.



Unlike Sinclair, however, Green doesn&#8217;t appear to have spent any time with the families he&#8217;s championing. If he had, he might have sensed that his spreadsheet was leading him astray.



Economists who are more adept at interpreting data are seemingly unanimous in their assessment of Green’s <a href="https://www.yesigiveafig.com/p/part-1-my-life-is-a-lie">viral thesis</a>.



Scott Winship <a href="https://scottwinship.substack.com/p/how-not-to-redefine-poverty">calls</a> it “the worst poverty analysis I have ever seen.”&nbsp;



Tyler Cowen <a href="https://www.thefp.com/p/the-myth-of-the-140000-poverty-line">finds</a> that Green’s study is “all wrong. The underlying concepts are wrong, the details are wrong, and the use of evidence is misguided.”



Jeremy Horpedahl <a href="https://economistwritingeveryday.com/2025/11/26/the-poverty-line-is-not-140000/">says</a> “it’s ridiculous to use $140,000 as a poverty measure.”&nbsp;



Noah Smith <a href="https://www.noahpinion.blog/p/the-140000-poverty-line-is-very-silly">says</a> Green “gets his own numbers completely wrong” and that his conclusions are “very silly.”



Green responds to some of these critiques <a href="https://substack.com/home/post/p-179828750">here</a>, but you probably don’t need to be a credentialed economist to sense the critics are right — because surely no one making $139,000 a year is going hungry?



Green’s argumentation is admittedly more nuanced than that.



He cites, for example, MIT’s “cost of thriving” index which estimates that it took 30 weeks of the median male’s earnings to live a good life in 1985 vs. 63 weeks now.&nbsp;



I’m not an economist, and I would not have even made the waitlist at MIT. But, having been alive in 1985, I can authoritatively say that things are now both easier and better than they were back then — economically, at least.



(Television shows, movies, music, fashion and celebrities were all far better in the 1980s, of course. Not to mention the blissful lack of both cellphones and adult supervision.)



But cars, appliances, power tools, video games, beer? Virtually anything you can buy to make your life better is better today than it was then.&nbsp;



In nearly all cases it’s cheaper too, when adjusted for quality.



Even housing.



“Green notes that housing costs have risen,” Cowen writes, “but Americans today have more living space on average than ever before, and live alongside fewer people.”



And healthcare!&nbsp;



Cowen explains that “the overall trend in healthcare has been deflationary, rather than inflationary — or, in economics speak, that the cost of buying an extra expected year of life has been going down rather than up.”



More intuitively, Cowen says simply, “I would rather have current healthcare at current prices than 1972 healthcare at 1972 prices.”&nbsp;



Me, too: I’d rather have current anything at current prices than 1985 anything at 1985 prices.



This intuition — that the statistics Green is looking at miss massive improvements in what our dollars actually buy us — is more than just anti-nostalgia, if that’s a word. (Presentism? Currentism?)&nbsp;



William Nordhaus famously demonstrated this systematically by measuring the cost of lighting in lumens. By tracking lumen-hour costs across technologies like candles, kerosene and electric bulbs, Nordhaus showed how ignoring quality change (more light per unit input, in the case of lighting) massively underestimates historical assessments of economic growth.



The cost of lighting a room for three hours — which took about three hours of work to afford in 1800 — requires just a fraction of a second of labor now: a roughly 43,000-fold improvement that official statistics missed almost entirely.



With this, Nordhaus demonstrated the larger point that because technological change is not fully reflected in GDP statistics, we tend to underappreciate how much our standard of living has improved.



The flip side is that failing to account for these changes can lead to some absurd conclusions about the cost of living, as expressed in this classic <a href="https://x.com/dril/status/384408932061417472?s=20">tweet</a>:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="816" height="297" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png" alt="" class="wp-image-110300" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=816 816w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=80 80w" sizes="auto, (max-width: 816px) 100vw, 816px" /></figure>



The joke is that someone stuck buying 1800s lighting technology at 1800s costs would indeed be impoverished because they wouldn’t have anything left over to spend on modern healthcare, housing or smartphones.



Green seems to make the same statistical mistake: He looks at modern families spending on vastly superior goods and services without accounting for the vastly superior value they’re getting.



“There is a major conceptual error in Green’s focus on high prices,” Cowen concludes. “Prices are high in large part because demand is high, which can only happen because so many more Americans can afford to buy things.”



$140,000 a year buys a lot of things.&nbsp;



Let’s check the charts.&nbsp;



Moving on up:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="842" height="574" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png" alt="" class="wp-image-110308" style="width:660px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=842 842w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=377 377w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=383 383w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=321 321w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=80 80w" sizes="auto, (max-width: 842px) 100vw, 842px" /></figure>



The US middle class has been shrinking, but only because the upper class has been expanding. In 1967, 5.2% of US families earned over $150,000 (inflation adjusted) vs. nearly 34% now.



People have been moving up into the middle class, too:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="802" height="570" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png" alt="" class="wp-image-110304" style="width:644px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=802 802w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=362 362w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=367 367w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=308 308w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=80 80w" sizes="auto, (max-width: 802px) 100vw, 802px" /></figure>



The percentage of Americans with income more than 200% of the federal poverty line (c. $60,000 for a family of four) has risen by 8.5 percentage points since 1975.&nbsp;&nbsp;



Poverty, however measured, is trending down:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="965" height="439" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png" alt="" class="wp-image-110309" style="width:706px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=965 965w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=80 80w" sizes="auto, (max-width: 965px) 100vw, 965px" /></figure>



This chart from the <a href="https://www.economicstrategygroup.org/publication/kearney-sullivan-poverty/">Economic Strategy Group</a> shows that poverty has fallen by roughly half according to income-based measures and by more than 80% using consumption-based measures — in both cases, more than government statistics indicate.



Consumption is up:



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1203" height="737" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=1024&amp;h=1024" alt="" class="wp-image-110307" style="width:688px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=1203 1203w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=419 419w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=426 426w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=357 357w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=80 80w" sizes="auto, (max-width: 1203px) 100vw, 1203px" /></figure>



An <a href="https://sites.nd.edu/james-sullivan/files/2023/10/2022-Consumption-Poverty-Report_10_20_2023.pdf">academic study</a> of &#8220;consumption poverty&#8221; (in green) and &#8220;after-tax poverty&#8221; (in red) shows that the official, CPI-based measure of poverty fails to capture decades of improvement.



More food:



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1254" height="743" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=1024&amp;h=1024" alt="" class="wp-image-110302" style="width:746px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=1254 1254w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=441 441w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=370 370w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=80 80w" sizes="auto, (max-width: 1254px) 100vw, 1254px" /></figure>



Americans consume about 3,800 calories a day — 15% more than we did in 1985 and roughly 50% more than we’re supposed to.



More healthcare:



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1033" height="619" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=1024&amp;h=1024" alt="" class="wp-image-110303" style="width:701px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=1033 1033w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=436 436w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=365 365w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=80 80w" sizes="auto, (max-width: 1033px) 100vw, 1033px" /></figure>



8.2% of Americans were uninsured in 2024, down from 16% in 2010.



Candles were once a luxury good:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="789" height="752" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png" alt="" class="wp-image-110306" style="width:618px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=789 789w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=270 270w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=274 274w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=230 230w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=80 80w" sizes="auto, (max-width: 789px) 100vw, 789px" /></figure>



This is a reminder that as recently as 1800, candles were so expensive that it was economic for people to venture out into the oceans and risk their lives hunting whales.&nbsp;



Illuminating:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="1001" height="609" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png" alt="" class="wp-image-110301" style="width:729px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=1001 1001w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=422 422w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=429 429w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=80 80w" sizes="auto, (max-width: 1001px) 100vw, 1001px" /></figure>



A million lumen-hours is roughly the amount of light you’d get from an ordinary household light bulb running continuously for about two months. In the year 1300, that would have cost the equivalent of $52,000. Yikes.



In Nordhaus terms:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="960" height="592" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png" alt="" class="wp-image-110305" style="width:664px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=960 960w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=417 417w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=423 423w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=355 355w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=80 80w" sizes="auto, (max-width: 960px) 100vw, 960px" /></figure>



William Nordhaus made economic progress more tangible by calculating the “time-price” of light. In 1830, you had to work three hours to afford a single hour of candlelight. Today, you earn that same hour of light in one-thirteenth of a second.



Have a great weekend, upper-class readers.



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Economy

Illuminating progress: Is a $140K income ‘poor’?

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Crypto markets are ending the week on a muted note, with BTC giving back part of its rebound and equities largely flat ahead of next week’s FOMC meeting. Against this backdrop, Solana ecosystem tokens showed remarkable relative strength.



BTC retraced part of its recent rebound on Thursday, closing down -1.38%, though it remains up nearly 10% from Monday’s $84,000 intraday low. As seen below, the S&amp;P 500 and gold were flat on the day, while the Nasdaq slipped -0.14%.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="898" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=1024&amp;h=1024" alt="" class="wp-image-110282" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=465 465w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-45.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



On the macro front, Kevin Hassett now appears to be the frontrunner for Fed Chair, with Polymarket pricing his nomination at roughly 75%. Currently the Director of the National Economic Council and a close Trump ally, Hassett’s appointment would mark a clear shift toward tighter alignment between Fed policy and the administration’s economic agenda. As for the current Fed, a December rate cut is almost certain just five days ahead of the final FOMC meeting of the year, with the CME FedWatch tool assigning an 87% probability to a 25 bps cut.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=1024&amp;h=1024" alt="" class="wp-image-110284" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-47.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Regarding cross-sector performance, the only three crypto-related indices that were positive on the day were Miners (+6.1%), Solana Eco (+1.8%), and Crypto Equities (+0.9%). Even with Thursday’s bounce, the Miners index is still down 28% over the past 30 days, making it the worst-performing index after Memecoins (-33%).&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="902" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=1024&amp;h=1024" alt="" class="wp-image-110281" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=463 463w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-44.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Looking at Solana ecosystem tokens, amongst the top 10 components on our index, CLOUD (Sanctum) was the best-performer yesterday (+13%). The move comes after Forward Industries launched its own LST (fwdSOL) powered by Sanctum earlier this week. Back in May, DeFi Dev Corp. launched dfdvSOL, also using Sanctum’s infrastructure.



Instead of natively staking SOL and losing liquidity, an LST enables Solana DATCOs to earn staking yield while distributing their liquidity into other DeFi applications to expand yield earnings. Working with Sanctum, DATCOs can easily design and deploy their own LSTs to fulfill their mandate of increasing SOL per share. The Forward Industries team has bootstrapped fwdSOL with ~25% of their SOL holdings (represented by over 1.7 million fwdSOL), leading to an all-time high of 13.1 million SOL locked in Sanctum LSTs. 



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="889" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=1024&amp;h=1024" alt="" class="wp-image-110283" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-46.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



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Solana tokens see gains amidst weeklong crypto slump

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Even when I was little, I was big.”



— William Perry
</blockquote>



<a href="https://pca.st/episode/421fde7c-e03b-452e-b0dc-e12b35d63e4f?t=1087">The first prop bet</a>



Michael Lewis dates the beginning of betting on everything to 1985 when Caesars Palace offered 20-1 odds on William “Refrigerator” Perry scoring a touchdown in the Super Bowl.



He did — a one-yard rumble into the end zone — and Caesars lost at least $250,000 on the bet (a substantial sum in an era when bettors had to call Las Vegas by phone to place wagers).



That was the first known &#8220;proposition” bet — a bet on anything other than the score or result of a game, and as such, the primordial ancestor to today’s prediction markets that offer odds on seemingly everything.



Despite the loss it took, the president of Caesars called it the best bet they’d ever taken: “We’ve had so much publicity on the bet, whatever we’ve lost was worth it.”



“The next day, just about every book in town, your phone started to light up from every big city in the country,” the bookmaker Jimmy Vaccaro told Lewis. “They heard about Perry scoring a touchdown.”



Now, bookmakers “write” more business on the props — will the coin toss be heads or tails? what will the first commercial be for? will there be a wardrobe malfunction? — than they do on the games.



Before The Fridge, there were only about three bets to make on the Super Bowl: the winner, the total points, the halftime score.



Now, there are hundreds.



As it turned out, that was the last of The Fridge’s three career touchdowns despite his 10 additional years in the league (playing on defense).



But those three short rumbles set us on the path to today’s world of betting on virtually anything with prediction markets.&nbsp;



(Although we still mostly want to <a href="https://x.com/AlexKolicich/status/1995936524492476798?s=20">bet on sports</a>.)



<a href="https://open.substack.com/pub/freesystems/p/inside-the-markets-aggregating-political?utm_source=share&amp;utm_medium=android&amp;r=3qcul">A look inside political markets</a>



Here’s a measure of how sophisticated prediction markets have gotten: When Andy Hall watches sports, he’s now gotten in the habit of checking prediction markets right before a big play “because the markets move several seconds before my TV feed does.”



Hall teaches political science at Stanford, so he’s more interested in how prediction markets are “changing how we monitor and understand politics.”



Hall seems cautiously optimistic that booming prediction markets will prove to be a public good because they should offer “a clearer shared picture of a highly complex political environment.”



But he’s also concerned about the “strange feedback loops” they create.



As an example, he cites a Virginia Attorney General race where unverified claims about exit polls circulating on social media moved prediction markets, which caused social media to post the “BREAKING NEWS” of the move in prediction markets, which, in turn, caused the prediction markets to move even further.&nbsp;



That probably did not do the public any good.&nbsp;



Hall notes that prediction markets are also raising questions about what it means to “win” an election.



“In a world where prediction markets are increasingly seen as sources of truth — many people pointed to when Kalshi ‘called’ the mayoral election in New York City as the proof that Mamdani had won — determining these edge cases will be exceedingly fraught.”



So what does it mean if Kalshi calls a close presidential election in 2028?



I’m not sure I want to find out.



(For another foreboding example of prediction markets affecting reality, see this <a href="https://archive.is/IS2cx">story</a> about bettors changing maps of the frontline in Ukraine.)



<a href="https://red.anthropic.com/2025/smart-contracts/">AI agents are very good at hacking smart-contracts</a>



Researchers at Anthropic report that their AI agents successfully exploited 56% of smart contracts known to have vulnerabilities.&nbsp;



More impressively (or worryingly), when tested on 2,849 smart contracts with no known vulnerabilities, the agents also discovered two novel “zero-day” exploits — a demonstration that agents can find new vulnerabilities autonomously.



Perhaps most worryingly, the agents are getting better at an astonishing rate: “Over the last year, frontier models&#8217; exploit revenue…doubled roughly every 1.3 months,” the researchers report.



(They want you to know that no blockchains were harmed in this experiment — they tested on “blockchain simulators.”)



To put that in perspective, Moore&#8217;s Law describes the performance of semiconductors doubling every two years.



These AI agents are doubling their capacity to exploit smart contracts every six weeks.



Amazing. And terrifying.&nbsp;



Anthropic does not have a particular interest in crypto. Instead, it has run this experiment to measure how adept agents will be at hacking code of any sort: “The same capabilities that make agents effective at exploiting smart contracts — such as long-horizon reasoning, boundary analysis, and iterative tool use — extend to all kinds of software.”



Here’s another amazing thing it’s found: “It costs just $1.22 on average for an agent to exhaustively scan a contract for vulnerability.”



“As costs continue to fall,” it concludes, “attackers will deploy more AI agents to probe any code that is along the path to valuable assets, no matter how obscure.”



Consider investing in a lockbox to hold all the physical cash and gold coins we’ll soon be back to using.&nbsp;



<a href="https://epicenter.tv/episode/627-what-will-quantum-computing-change">Quantum computers are coming for crypto first</a>



The risk that quantum computers pose to crypto is often dismissed with a hand-wavy assertion that once the computers get that good, everything will be at risk, so we’ll have bigger things to worry about.&nbsp;



But the latest episode of Epicenter explains why crypto is uniquely vulnerable.



“Most of the classical cryptography community…has been working on this for years,” Stefano Gogioso explains. “They already have protocols they could use if quantum were to happen tomorrow.”



In Web2, “you have centralized authorities,” he adds. If worse comes to worst, “you have banks that would refuse to transact for a day or two.”



In crypto, however, there are two problems: 1) blockchains use “new applications of cryptography” that have gotten little attention from researchers studying quantum resistance and 2) even if we had solutions, there are so many different voices, opinions and vested interests in decentralized crypto, “it would be challenging to change the infrastructure.”



Even more fundamentally, Gogioso notes, “we built an entire ecosystem for the very purpose of making [our data] available to everybody at all times” — which means that once quantum computers are available, they’ll be able to decrypt the entire transaction history of every blockchain.&nbsp;



So, if you’ve been using a privacy chain like Monero to make illicit transactions, you might want to relocate to a non-extradition country sometime soon.&nbsp;



“Monero is already broken,” Gogioso says.&nbsp;



Gogioso also expects governments to use quantum computers to identify who hasn’t been paying capital gains taxes on their crypto winnings: “They’re certainly going to send them a bill for the money they haven’t been paid yet.”



(Personally, I look forward to the refund I&#8217;ll get on all the crypto losses I&#8217;ve been too lazy to report.)



Other fun scenarios include someone moving one of Satoshi&#8217;s coins — how will we know if that’s Satoshi himself or just a guy with a quantum computer?



Or consider a US rival like China targeting Bitcoin — not to make money, but to destabilize a system that&#8217;s become ingrained in US finance.



But the biggest threat of all might be Gogioso’s final prediction: that quantum technology could create a form of permissionless, digital money that solves the double-spend problem without resorting to crypto’s exploit-prone model of distributed consensus.&nbsp;



Whatever the risks, the response has been woefully inadequate.&nbsp;



John Lilic notes that because crypto has a $3 trillion market capitalization, if there’s even a 1% chance of total loss, &#8220;we should be spending $30 billion” on making crypto quantum resistant.



His assessment of the current investment? “We’re not spending anything.”



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Thursday links: Prediction markets, agent hackers, quantum risks

Shaunda Devens

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One of Hyperliquid’s core innovations is builder codes. These codes function as a protocol-level parameter in transaction payloads, allowing interfaces to append a builder address for automated, onchain fee capture. Builders can attach a surcharge of up to 100 basis points (1%) on spot and 10 basis points (0.1%) on perps.



This decoupling of execution from settlement enables frontends to monetize proprietary flow without the technical complexities of maintaining an orderbook or the capital inefficiency of bootstrapping liquidity. As shown below, third-party frontends integrate Hyperliquid perps and add their own variable fee tiers on top, effectively creating a differentiated pricing landscape for the same underlying execution.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=1024&amp;h=1024" alt="" class="wp-image-110261" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-38.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



As such, builder codes have unlocked a powerful distribution flywheel. Nearly 40% of daily active users now trade through third-party frontends rather than the native UI, a share that briefly crossed 50% in late October. The top three builders alone, Based, Phantom, and pvp.trade, have collectively captured more than $31 million in fees.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=1024&amp;h=1024" alt="" class="wp-image-110262" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-39.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



From a market structure perspective, this pushes Hyperliquid away from the fully-integrated crypto exchange model and closer to the layered intermediation of traditional equities. In a centralized exchange like Binance, one entity controls the full stack across onboarding, routing, matching and custody.



Hyperliquid’s design mimics the US equity market, where retail brokers (Robinhood, Schwab) own the client relationship and monetize distribution, while routing orders to wholesalers (Citadel Securities, Virtu) that handle execution and settlement. In effect, the stack becomes two-tiered:



<ul class="wp-block-list">
<li>A broker-like distribution layer, where builders compete for order flow and differentiate on product and fee pass-through.</li>



<li>A central execution venue, where Hyperliquid concentrates liquidity and handles matching and margining.</li>
</ul>



While new to crypto perps, this decoupling mechanism has already played out on Solana. Trading terminals like Photon and Axiom controlled the user flow by focusing on the consumer layer. Photon grew first by being the fastest Solana memecoin sniper, while Axiom eventually challenged it with a broader product suite and more aggressive points and rebate designs. These terminals effectively functioned as builders: They sat on top of DEXs, bolted on their own fee markups, and maintained accounting manually. Hyperliquid’s builder codes essentially turn that pattern into a native protocol primitive.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=1024&amp;h=1024" alt="" class="wp-image-110265" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-42.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



However, the Solana example also highlights the risk. Trading terminals captured 77% of Solana&#8217;s DEX revenue over the past year, $633 million vs. $188 million for DEXs, a 3.4x multiple that highlights that owning the frontend is often more valuable than owning the backend. Specifically, is the frontend too valuable for Hyperliquid to give away?



The relationship between frontends and backends is rarely purely symbiotic. Frontends like Jupiter aggregate various backends (Meteora, Raydium, Orca) and return the best route given size, fees and slippage constraints. 



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1072" height="494" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=1024&amp;h=1024" alt="" class="wp-image-110266" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=1072 1072w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-43.png?w=80 80w" sizes="auto, (max-width: 1072px) 100vw, 1072px" /><figcaption class="wp-element-caption"><a href="https://jup.ag/">Source: Jupiter Frontend Aggregation Example</a></figcaption></figure>







This forces DEX backends into severe margin compression. With zero moat, they must be the cheapest route to win flow. Since they don&#8217;t own the user, backends are also at risk of replacement. We see this when pump.fun replaced Raydium as its liquidity backend with its own in-house AMM, significantly impacting Raydium&#8217;s volume share.&nbsp;



Right now, Hyperliquid does not face this problem. By pioneering builder codes on perps, it is effectively a singular-builder code environment. However, if builders evolve from a UI on top of HL into true routers that can send flow to competing backends, they start to resemble a smart-order router in traditional finance. In this scenario, builders can:



<ul class="wp-block-list">
<li>Optimize all-in cost: Calculate spread/slippage + taker/maker fees + builder surcharge − rebates + expected funding.</li>



<li>Bargain with venues: Demand higher builder shares or rebates with the threat of routing flow elsewhere.</li>



<li>Capture the user relationship: While venues are forced to compete purely to be the cheapest, best-execution wholesale liquidity provider.</li>
</ul>



Similarly, in traditional finance, wholesalers compete with broker-dealers for volume. Robinhood routes to Citadel Securities, Virtu, and Jane Street based on which provides the best execution and payment for order flow.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1318" height="748" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=1024&amp;h=1024" alt="" class="wp-image-110263" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=1318 1318w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=460 460w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-40.png?w=80 80w" sizes="auto, (max-width: 1318px) 100vw, 1318px" /><figcaption class="wp-element-caption"><a href="https://www.federalreserve.gov/econres/feds/files/2024080pap.pdf">Source</a></figcaption></figure>







While rival DEXs like Drift and Ostium have integrated builder codes, none have emerged as genuine competitors to date. However, a significant structural risk remains: If a venue like Lighter were to pair builder rebates with its zero-fee model, it could theoretically allow wallets like Phantom and Rabby to bypass Hyperliquid’s 4.5 bps fee. This would enable frontends to capture the entire fee stack, effectively doubling their revenue per trade compared to the current Hyperliquid model.&nbsp;



<a href="https://docs.tryliquid.xyz/trading/trading">LiquidTrading</a> serves as a leading indicator of this future. The Paradigm-backed terminal, which raised $7.6 million in its seed round, has facilitated $5.6 billion in volume on Hyperliquid. But crucially, it also allows users to trade on Ostium and Lighter via the same interface. If larger builders follow this path and begin actively routing flow based on venue rebates rather than loyalty, Hyperliquid builder frontends could evolve into a commoditized perp aggregator, directly threatening the protocol&#8217;s ability to capture value.



Still, there is a fundamental difference. Spot is easy to aggregate because each swap is atomic and the asset is fungible across venues. One transaction equals one fill, and a router can seamlessly split a trade across multiple pools. However, with perps, positions are persistent and venue-specific. A BTC-PERP position on Venue A is not fungible with a BTC-PERP position on Venue B due to differences in index composition, funding rates, liquidation engines and risk limits.



To route perps across venues meaningfully, the market needs one of two difficult solutions:



<ul class="wp-block-list">
<li>User fragmentation: Users must keep collateral on multiple venues, which is capital inefficient and results in poor UX.</li>



<li>Prime brokerage layers: The router must act like a clearing layer, solving the hard problems of credit extension, cross-margining and liquidation coordination.</li>
</ul>



While non-fungibility offers a short-term defense, the harsh reality is that frontends are rational economic actors; they will migrate if a competitor offers superior margins. Yet, the data suggests this threat is currently contained. Despite the high user counts on third-party interfaces, the vast majority of volume, over 90%, still originates from Hyperliquid’s native frontend.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=1024&amp;h=1024" alt="" class="wp-image-110264" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-41.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Furthermore, the HYPE token adds a retention layer. Builders can hold HYPE to access fee discounts, allowing them to stack revenue streams: referrals, builder fees, and volume-based discounts. With this, the cost of switching for incrementally better fees may not be worth it for existing frontends. Finally, the flow coming from builders appears to be additive rather than cannibalistic. These are new users entering the ecosystem via wallets and terminals, not users switching interfaces.&nbsp;



Therefore, while builder codes offer an effective expansion vector, expecting Hyperliquid to maintain total dominance over its distribution layer is unrealistic. As the sector matures, Hyperliquid will face a tougher grind to defend its lead against aggregators and low fee competitors. However, building a performant onchain orderbook remains an immense technical moat, and with frontend margins remaining healthy, the incentives for builders to switch are low. Still, in a rapidly expanding market, this is not a battle to retain volume, but rather a more competitive race for growth where Hyperliquid remains the heavyweight to beat.



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Hyperliquid: The frontend wars

Kunal Doshi

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/0xresearch" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Markets continued to claw back losses from Monday’s selloff, with BTC, the S&amp;P 500, and the Nasdaq up 2.52%, 0.22%, and 0.05%, respectively, yesterday. Even safe haven gold has given back some gains and is down -0.12% on the day as risk appetite improves.



The uptick came after a surprise <a href="https://tradingeconomics.com/united-states/adp-employment-change">decline</a> in private sector employment. Private employers shed 32,000 jobs in November, compared with expectations for job growth. This pushed the <a href="https://www.investing.com/central-banks/fed-rate-monitor">odds</a> of a rate cut next week to 85%, up from 80% a week ago. Microsoft dragged on the Nasdaq, falling more than -2% after reports that the company has <a href="https://www.tradingview.com/news/gurufocus:6c14c4ac7094b:0-microsoft-stock-falls-amid-slow-corporate-adoption-of-ai-solutions/">lowered</a> AI software sales quotas due to softer than expected demand.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1174" height="628" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=1024&amp;h=1024" alt="" class="wp-image-110254" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=1174 1174w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-34.png?w=80 80w" sizes="auto, (max-width: 1174px) 100vw, 1174px" /></figure>



Across crypto sectors, most indices finished in the green except Gaming, which fell -1.65%. Gaming has been one of the weakest performers this year and is down -77% year to date. Memes, typically the most reflexive sector during market rebounds, also lagged with a modest 1.24% gain. The index was weighed down by PUMP and PENGU, which fell -2.54% and -1.80%, respectively, on the day.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1169" height="625" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=1024&amp;h=1024" alt="" class="wp-image-110255" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=1169 1169w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-35.png?w=80 80w" sizes="auto, (max-width: 1169px) 100vw, 1169px" /></figure>



On the upside, the AI sector led the market with a 7.46% gain. TAO continues to drive the index higher and climbed 7.6% ahead of its halving next week. L1s followed with a 6.45% move, powered by ETH and BNB, which make up 63% of the index and were up 6.6% and 5.2%, respectively.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="950" height="365" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-31.png" alt="" class="wp-image-110251" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-31.png?w=950 950w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-31.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-31.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-31.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-31.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-31.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-31.png?w=80 80w" sizes="auto, (max-width: 950px) 100vw, 950px" /></figure>



Flows tell a more cautious story. After five days of inflows, BTC ETF flows turned negative again with a modest -$14.9 million in outflows. ETH ETFs, however, saw a strong rebound with $140.2 million of inflows after two days of declines earlier in the week. Even so, flows have yet to show real conviction when set against the -$4.4 billion in net outflows seen across November.



<h2 class="wp-block-heading">Market Update: Monad</h2>



Now that we are about one and a half weeks past the Monad TGE, it is a good moment to step back and assess how the chain is actually performing post launch. After a strong initial rally, MON has cooled off and is down -28% on the week, leaving it up a modest 16% from its ICO price. On the ecosystem side, DeFi TVL continues to climb and now sits at <a href="https://defillama.com/chain/monad">$277.5 million</a>.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=1024&amp;h=1024" alt="" class="wp-image-110257" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-37.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



A large portion of that TVL is concentrated in AUSD. Around <a href="https://defillama.com/stablecoin/agora-dollar">$144 million</a> of the $277.5 million sits inside Agora’s stablecoin, which is being farmed across various protocols to earn ecosystem incentives. Upshift holds $73 million and is deploying AUSD across DeFi protocols such as Morpho, Uniswap and Euler. Morpho currently offers 4.5% APY on AUSD and 5.98% on USDC, with most of the yield coming from <a href="https://app.morpho.org/monad/earn">MON incentives</a> rather than organic borrow demand. Incentives are an acceptable way to jump start early liquidity, but the real test will be whether Monad can attract DeFi applications that generate sustainable, organic yield once the incentive fire hose tapers off.



Looking at native apps, Nad.fun has been the breakout leader in both accounts and transactions since day one. It is Monad’s native memecoin launchpad, but its staying power is not guaranteed. Only <a href="https://nad.fun/">two tokens</a> launched there have crossed the $1 million market cap mark. Even Chog, the chain’s first community token, is <a href="https://nad.fun/tokens/0x350035555E10d9AfAF1566AaebfCeD5BA6C27777">down</a> more than 65% from its highs and sits at $4.5 million today. Not exactly the early momentum you would want for a vibrant meme ecosystem.



Other homegrown projects are <a href="https://monadvision.com/ecosystem?day=1D">gaining</a> traction. FastLane has become the primary LST on Monad. Pinot Finance is emerging as an alternative DEX to Uniswap. Lumiterra, an MMORPG, has quietly put up strong usage numbers and <a href="https://monadvision.com/ecosystem?day=1D">ranked</a> third by accounts and second by transactions yesterday.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1332" height="602" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=1024&amp;h=1024" alt="" class="wp-image-110253" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=1332 1332w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-33.png?w=80 80w" sizes="auto, (max-width: 1332px) 100vw, 1332px" /></figure>



On the chain level, activity looks promising for a network this early. Monad generated $100,000 in fees over the last seven days, placing it ahead of chains like Avalanche and Ton. <a href="https://monad.socialscan.io/charts/tx">Daily transactions</a> and <a href="https://monad.socialscan.io/charts/active-address">active addresses</a> have been hovering around 2.2 million and 117,000, respectively. These are respectable metrics for a chain that just came out of the gate.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1599" height="432" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=1024&amp;h=1024" alt="" class="wp-image-110252" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=1599 1599w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-32.png?w=80 80w" sizes="auto, (max-width: 1599px) 100vw, 1599px" /></figure>



But one data point stands out. WormholeScan shows that 75% of the assets bridged into Monad have already flowed back out to other chains. That is an early sign that users may be farming and rotating rather than sticking around.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="728" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=1024&amp;h=1024" alt="" class="wp-image-110256" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-36.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



For Monad, the next phase is all about conversion. Can the chain turn early speculative inflows into sticky liquidity and real economic activity? The charts above are the ones I’ll be watching closely to see whether this ecosystem can turn early hype into lasting traction.



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After Monad’s TGE, can the chain turn hype into long-term conversion?

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Growth in revenues cannot exceed growth in people who can execute and sustain that growth.”



— Packard’s Law
</blockquote>



Arboreal ecosystems operate on a brutal but necessary paradox: For a forest to grow, it occasionally needs to burn.



Without these seemingly-apocalyptic conflagrations, the forest floor becomes choked with underbrush, preventing the new growth needed for regeneration and long-term viability.



Dion Lim <a href="https://ceodinner.substack.com/p/the-ai-wildfire-is-coming-its-going?utm_source=share&amp;utm_medium=android&amp;r=3qcul&amp;triedRedirect=true">says</a> this is how technology cycles work, too.



“The first web cycle,” he explains, “burned through dot-com exuberance and left behind Google, Amazon, eBay, and PayPal: the hardy survivors of Web 1.0. The next cycle, driven by social and mobile, burned again in 2008-2009, clearing the underbrush for Facebook, Airbnb, Uber, and the offspring of Y Combinator.”



The speculative frenzy of investment bubbles burns off non-productive capital much like a wildfire consumes dense fuel — and the inevitable crash clears the way for the market’s resources to be reallocated.



Without these seemingly apocalyptic market conflagrations, a permanent underbrush of failed startups would drain the technology sector of the resources it needs to grow.



This might be why crypto feels so left behind this year: A tangled undergrowth of big projects that never seem to die has been hoarding the resources the ecosystem needs to evolve.&nbsp;



In the real economy, labor is constantly being reallocated from failed companies to successful or promising ones: “Many of Google’s best early employees,” Lim notes, “were founders or early employees of failed Web 1.0 startups.”



This seems to happen less in crypto.



To cite just one example, the Polkadot blockchain — which collected <a href="https://tokenterminal.com/explorer/projects/polkadot/metrics/fees?granularity=day&amp;interval=7d">$72 of fees</a> yesterday — is <a href="https://www.developerreport.com/">supported</a> by 482 full-time developers and 1,404 contributors.



If a project like that — in its sixth year of operations — was funded by stock and not tokens, I’m guessing those resources would have been released back into the ecosystem by now.



This is a problem because <a href="https://www.jimcollins.com/article_topics/articles/the-timeless-physics.html">Packard’s Law</a> suggests that if the scarce resource of crypto developers is not being redistributed to successful projects, crypto will struggle to grow.



Unproductive crypto projects hoard investment resources, too.&nbsp;



Crypto founders are notorious for <a href="https://x.com/hasufl/status/1995417501321040346?s=20">over-raising from investors</a> and living off the proceeds, with no market-imposed urgency to find product market-fit.



For example: One of the original crypto projects, Golem, stockpiled 820,000 ETH in its 2016 ICO, and still held <a href="https://x.com/WuBlockchain/status/1810148153087173023?s=20">231,400</a> of it as recently as last year.



Traditional startup investors expect their capital to be deployed far more quickly than that.&nbsp;



In other cases, projects with inexplicably large market valuations fund themselves seemingly forever by selling their native token out of treasury. Cardano, for example, <a href="https://messari.io/report/state-of-cardano-q3-2025">holds</a> roughly $700 million of its ADA token in treasury, which should keep the project funded approximately forever.



Collectively, crypto protocols are sitting on billions in capital and have little or no incentive to deploy it efficiently — no activist shareholders to placate, corporate raiders to fear or quarterly earnings estimates to meet.



In short, crypto may be too funded to fail.



Ben Thompson has recently articulated a similar fear about traditional tech, worrying that giants like TSMC, Nvidia and Alphabet have become so dominant that the entire ecosystem risks stagnation.



He therefore welcomes the bubble: “What is invigorating or why we should embrace the mania, embrace the bubble, is [that] ‘too-big-to-fail’ was starting to afflict tech as well.”



Thompson notes that the benefit of private enterprise is that &#8220;stupid stuff&#8221; eventually goes out of business. But when companies become entrenched monopolies (or government-backed entities), the stupid stuff doesn’t die. It just becomes over-engineered and inefficient.



He argues we need investment bubbles precisely because they bring risk back into the equation: “You don’t get upside risk without downside risk.”



This might explain why crypto has felt so stagnant this cycle. We have the &#8220;stupid stuff&#8221; — protocols with few users and minimal revenue — but lack the mechanism to make them go out of business.



“Growth becomes difficult when everyone’s roots are tangled,” Lim warns.



Until a forest fire is allowed to burn through the tangled roots of over-funded zombie protocols, the nutrients — capital and developers — will remain trapped, and the next era of growth will remain out of reach.



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amazon

Too funded to fail: Crypto needs a forest fire

Marc Arjoon

Sam Schubert

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Today markets leaned decisively risk-on, with crypto leading the move while traditional assets stayed muted. Ethereum’s Fusaka upgrade arrived with PeerDAS, BPO hard forks, and the under-discussed EIP-7918, which together may finally restore deflationary pressure on ETH. On the thematic front, Sui is making an aggressive full-stack push into robotics, positioning onchain coordination, settlement and telemetry as critical primitives for a coming wave of real-world machines.



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



Markets leaned firmly risk-on, with crypto broadly outperforming traditional assets. BTC (+5.8%) sat mid-pack, while equities were muted. The S&amp;P 500 (+0.3%) and Nasdaq 100 (+0.9%) barely budged. Gold (-0.3%) slipped, and crypto miners were the clear outlier to the downside (-8.7%), suggesting profit-taking and sensitivity to BTC’s consolidation.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=1024&amp;h=1024" alt="" class="wp-image-110222" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-29.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



The crypto sector breadth was exceptionally strong. Oracles, lending and the broader Ethereum ecosystem led the board, signaling a clear rotation back into core infrastructure and high-utilization protocols. DeFi, Modular, the Solana ecosystem, and perps followed close behind with similarly solid showings, pointing to broad appetite for beta across liquid alt sectors. Lower down the stack, L2s, AI plays, launchpads and gaming tokens all moved higher, while more speculative areas like memes lagged. The only clear pockets of weakness were crypto equities and miners especially, which saw meaningful pullbacks.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=1024&amp;h=1024" alt="" class="wp-image-110218" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-27.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



The move fits with improving sentiment as macro headwinds ease. Yields stabilized, liquidity indicators firmed, and positioning metrics suggest investors are adding risk after a muted stretch. Strong rebounds in infra sectors imply expectations for higher onchain activity and potential catalysts from upcoming protocol upgrades. Looking ahead, attention turns to macro prints later this week, which could test the durability of this risk-on tone. Volatility remains compressed, but with crypto sector dispersion widening, traders should expect sharper rotations as narratives evolve.



<h2 class="wp-block-heading">Market update&nbsp;</h2>



Today is Fusaka day in Ethereum land, the second upgrade this year (the <a href="https://blockworks.co/news/ethereum-pectra-fork-live">Pectra hard fork</a> was in May). It’s not often that Ethereum has two upgrades in one year, and that’s because Fusaka is more of a half-upgrade. Over a dozen EIPs were removed after <a href="https://blockworks.co/news/ethereum-consensus-evm-upgrade-fusaka-devs">EOF was mothballed</a> in April.



Of the 12 EIPs remaining, PeerDAS, is the most significant, according to Gabriel Trintinalia, protocol engineer at Consensys.



&#8220;During the initial development of the Fusaka upgrade, any feature that carried a risk of delaying the fork, such as those requiring more research or having high complexity, was deprioritized and removed from the scope,&#8221; Trintinalia told Blockworks.



PeerDAS introduces <a href="https://ethereum.org/developers/docs/data-availability/">data availability sampling</a>, which allows validators to share the load of blobs, effectively allowing for an increase in blobs per block. There is one upgrade being overlooked, but first, some background:&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=1024&amp;h=1024" alt="" class="wp-image-110219" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-28.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



Blobs have failed to hit their target of six per block, and just when it looked like they were about to, Ethereum is looking to raise the target again. Technically, Fusaka will not be raising the blob target, but is instead introducing <a href="https://blockworks.co/news/ethereum-fusaka-dec3-launch">Blob Parameter Only</a> (BPO) hard forks. This creates a separate and easier process to adjust blob storage parameters. So instead of waiting for a major upgrade, Ethereum can make smaller, more frequent adjustments to blob capacity.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1124" height="624" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=1024&amp;h=1024" alt="" class="wp-image-110216" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=1124 1124w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-25.png?w=80 80w" sizes="auto, (max-width: 1124px) 100vw, 1124px" /></figure>



The larger point still stands: With supply exceeding demand, the blob gas price has been largely immaterial (apart from a few blips here and there when the blob price reached a measly 1 gwei).&nbsp; 



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1124" height="624" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=1024&amp;h=1024" alt="" class="wp-image-110224" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=1124 1124w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-30.png?w=80 80w" sizes="auto, (max-width: 1124px) 100vw, 1124px" /></figure>



Post-Pectra, between June and October, Ethereum generated around $900 in blob fees. The brief spike in November brought this to ~$23,000. Still not material, but it highlighted the order-of-magnitude difference when blobs actually have a market.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1124" height="624" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=1024&amp;h=1024" alt="" class="wp-image-110215" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=1124 1124w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-24.png?w=80 80w" sizes="auto, (max-width: 1124px) 100vw, 1124px" /></figure>



This is why <a href="https://eips.ethereum.org/EIPS/eip-7918">EIP-7918</a> needs more attention. It addresses the blob fee market problem by introducing a reserve price tied to execution costs (a floor price of sorts). When L2 execution costs dominate blob costs, this prevents the blob fee market from becoming ineffective at 1 wei. For example, as shown below, if EIP-7918 was introduced on June 1, 2025, burnt blob fees would have been nearly 8x more. The upgrade isn’t only a reserve pricing model, it also presents more price stability and predictability, avoiding dramatic fee spikes when the blob market becomes inelastic.&nbsp;



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="917" height="445" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-26.png" alt="" class="wp-image-110217" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-26.png?w=917 917w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-26.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-26.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-26.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-26.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-26.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-26.png?w=80 80w" sizes="auto, (max-width: 917px) 100vw, 917px" /></figure>



Together with PeerDAS and BPO, this suggests that as Ethereum scales L2 capacity, blob fees should go up as well (historically, this relationship has been strictly inverse). For ETH holders, this, combined with L1 scaling, can hopefully return the ETH supply to a deflationary phase.



Updated Dec. 4, 2025 at 2:12 am ET: Clarified comment



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Ethereum’s Fusaka upgrade lands today

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”



― Rudiger Dornbusch
</blockquote>



The opening scene of Philip K. Dick’s 1969 sci-fi classic <a href="https://www.amazon.com/Ubik-Philip-K-Dick-ebook/dp/B005LVR6ZA/ref=tmm_kin_swatch_0?_encoding=UTF8&amp;dib_tag=se&amp;dib=eyJ2IjoiMSJ9.JF_a_3YBqUArh4K_Z-iE6I6X9p5rZmjuOVdoQJ2WB_pOXJYsddjBJD-C4GbxF5PWnydxdgUc4oqmKMArafhTlD7WDLvesTxtppG3tuVe4le3qpVkyrP5ILCHmxpK4PwQzG84S5zO1_X4hBi3WbFsSCuYetIwZlBHM-aeR3h0knDZvx-eCVN1xWYCwvl9yP_BRaaMJLQFiMfUchLg7OnMpClGXXjn1Q_bDHY_GK-k04o.yw3FYUPmpQ7IHVLHZEGZAiB6TQljO59oXPF-sq8ttjI&amp;qid=1764648536&amp;sr=8-1">Ubik</a> features an apartment door demanding payment from its owner.&nbsp;



When Joe Chip, behind on his rent, attempts to open the door for a guest, it replies, “Five cents, please.” Short of change, he offers to pay tomorrow, but his credit score is shot so the door ignores him.&nbsp;



He tries to reason with it:&nbsp; “What I pay you,” he informed it, “is in the nature of a gratuity; I don’t have to pay you.”&nbsp;



“I think otherwise,” the door responds, before instructing Chip to check his contract.



“You discover I’m right,” the door says. It sounds smug.



When Chip starts to unscrew the bolt mechanism with a knife, the door threatens legal action, but Chip is undeterred — “I’ve never been sued by a door. But I guess I can live through it.”



Before any damage is done, Chip’s guest pays from the other side and the door finally opens.&nbsp;



Later, the refrigerator, coffee maker and shower all demand payment before rendering their services — and the guest has to pay the door again to leave.



Such was Philip Dick’s dystopian vision of the future: Apartments turned into pay-as-you-go vending machines.



But this might also be the u-topian future of decentralized finance.&nbsp;



The dream of decentralized finance is to transform every asset into a programmable financial instrument that automatically enforces the terms of its own contract.



The problem with decentralized finance is that it’s limited to crypto assets, because a smart contract can’t reach into the physical world to repossess a car or evict a tenant.



But what if a smart contract could lock the door to your house, car or refrigerator? In that world, a lender could accept those kinds of real-world assets — anything that can be locked — as collateral against onchain loans.&nbsp;



It’s not a new idea.



Way back in 1997, Nick Szabo <a href="https://nakamotoinstitute.org/library/the-idea-of-smart-contracts/">described</a> the utility of turning smart contracts into smart locks: “Many kinds of contractual clauses (such as collateral, bonding, delineation of property rights, etc.) can be embedded in the hardware and software we deal with, in such a way as to make breach of contract expensive (if desired, sometimes prohibitively so) for the breacher.”



“These protocols would give control of the cryptographic keys for operating the property to the person who rightfully owns that property,” he added, “based on the terms of the contract.”&nbsp;



So far, that property has only been tokens, because that’s the only property whose ownership can be embedded in smart contracts.



But smart locks, controlled by smart contracts with verifiable, immutable rules, could turn the whole world into a vending machine.&nbsp;



Szabo called vending machines the &#8220;primitive ancestor of smart contracts”: a mechanical contract that holds an asset (a can of soda, say) and releases it to anyone who satisfies the conditions of that contract (inserting a coin). No human or corporate shopkeeper needed.



The rules-based machine becomes the shopkeeper — much like Joe Chip’s door becomes his landlord.



Szabo thought something like the latter was where we were headed: “Smart contracts go beyond the vending machine in proposing to embed contracts in all sorts of property that is valuable and controlled by digital means.”&nbsp;



Sixteen years before the advent of Ethereum, Szabo envisioned smart locks granting digital control of real-world property, citing cars as the “most straightforward” use of smart locks.&nbsp;



“We can create a smart lien protocol: If the owner fails to make payments, the smart contract invokes the lien protocol, which returns control of the car keys to the bank.”



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="839" height="314" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png" alt="" class="wp-image-110212" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=839 839w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=80 80w" sizes="auto, (max-width: 839px) 100vw, 839px" /></figure>



Nothing exactly like that has happened as of yet, but Szabo was at least directionally correct — on two counts: Smart contracts exist, on Ethereum and elsewhere, and auto-loan lenders are securing their collateral with remote locks.



Starter interrupt devices (SIDs) that allow lenders to remotely disable a car when a borrower has fallen behind on their payments have become popular with sub-prime auto lenders in recent decades.



This raises some obvious questions: What if you need the car to get to work to make money to catch up on your loan? What if you’re doing 80 on the freeway when your lender decides to disable your auto? 



Unlike Joe Chip’s door, you can’t drop coins into the dashboard of a SID-disabled car to unlock it. And good luck getting someone on the phone at the lender to plead your case or even make a payment.



You could, however, quickly top up your payment via smart contract, on a smart phone with a digital wallet.



This is not a new idea, either.



In 2015, Slock.it promised exactly the kind of digital locks (Slocks) that Joe Chip negotiated with: “With Slock, the person who rents your house pays directly to the lock itself. The lock enters into a smart contract with the renter.”



For reasons that remain unclear, Slocks didn’t catch on — or get into production, even.



(The Slock.it team may have taken their eyes off the ball when their side project, The DAO, nearly sank Ethereum.)



But it might also be that they were just early.



If so, now may finally be the time for blockchain-based smart locks.



The infrastructure is built: Chains are fast, transactions are cheap, frontends are user-friendly.



TradFi wants to tokenize everything: Crypto assets have flopped this year, but the enthusiasm for bringing real-world assets onchain has only grown.&nbsp;



Investors want alternative assets: The demand for productive yield outside the shrinking universe of public equities is seemingly insatiable.



Smart contract smart locks might be the way to provide it.



Consider Turkey, for example, where borrowers pay 5% per month on their <a href="https://www.fibabanka.com.tr/en/product-and-service-fees/personal-interest-rates/auto-loans">auto loans</a>, which works out to over 100% per year — 70 percentage points above inflation.



If those loans were tokenized and governed by a smart contract that automatically disables a car when a borrower defaults, wouldn’t that attract investors from everywhere?



BlackRock’s Larry Fink <a href="https://www.economist.com/by-invitation/2025/12/01/larry-fink-and-rob-goldstein-on-how-tokenisation-could-transform-finance">said</a> this week that “tokenization can greatly expand the world of investable assets beyond the listed stocks and bonds that dominate markets today.”



Philip K. Dick predicted the technology. Nick Szabo wrote the manual.&nbsp;



Now, finance just needs to build the door to this investors’ utopia.



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smart contracts

The sci-fi future of onchain assets and smart locks

Strategy stress, liquidity strain

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“It is essential for human flourishing that we conduct substantial parts of our lives unobserved.”



— Tiffany Jenkins
</blockquote>



Hallways were the first privacy tech.



In 1716, the Duchess of Marlborough questioned the architect designing Blenheim Palace because of all the long, narrow rooms he had planned. The architect had to explain that these were “no more than a passage” between rooms.



Another contemporary builder articulated the purpose of this revolutionary new design:&nbsp; “All the Rooms in this House are private; that is, there is a Way into each of them without passing through any other Room.”



In other words, hallways created privacy.&nbsp;



“It took a century for this architectural feature to become commonplace,” Tiffany Jenkins writes in <a href="https://www.amazon.com/Strangers-Intimates-Rise-Fall-Private/dp/1529034167">Strangers and Intimates; the Rise and Fall of Private Life</a>. “But once it did, the Victorians embraced it wholeheartedly.”



Before the time of hallways, “there was no strictly separate private sphere, no aspect of life where others could not legitimately intrude,” she explains. “The outside world could pry into anyone’s business and was expected to do so. Curiosity and nosiness were mandated.”



Counterintuitively, that began to change with the Puritans, whose insistence that matters of religion and conscience were private freedoms established the first barrier the state could not cross.



Once established, this zone of non-interference expanded into a Victorian definition of privacy that protected bedrooms, communications and commerce.&nbsp;



In 1844, the privacy zone was tested when the British government was caught opening the letters of the political exile Giuseppe Mazzini to snoop on his correspondence with Italian revolutionaries.&nbsp;



Mazzini proved the surveillance by having friends mail him grains of sand and poppy seeds. When the letters arrived otherwise empty — the grains having fallen out during the government’s clumsy inspection — the breach of privacy sparked national outrage.



Thomas Carlyle called opening a man’s letters a “scoundrelism” equivalent to picking his pocket.



Radical MP Thomas Duncombe said the practice was “subversive of the public confidence essential to a commercial country.”



Most tellingly, the plots of two Charles Dickens novels — Bleak House and Little Dorrit — revolved around stolen letters that threatened to expose family connections and economic dealings.



All of which confirmed, as Tiffany Jenkins says, that “a revolution in the value and esteem of privacy had taken place.”



But while Victorians were the first to embrace this cultural ideal, the United States was the first to write it into law — sort of.



In 1890, Samuel Warren and Louis Brandeis published <a href="https://www.brandeis.edu/library/archives/exhibits/ldb-100/career/privacy.shtml">The Right to Privacy</a> — a foundational article arguing for a fundamental &#8220;right to be let alone&#8221; that was written in response to the privacy intrusions of newspapers and early photography.



This was a &#8220;seminal moment&#8221; in the history of privacy, Jenkins writes. But, in researching their article, the two lawyers observed a surprising gap: There is no mention of privacy in the Constitution — not even in the Amendments.



Despite the influence of the article, the constitutional silence on privacy persisted for decades.



In 1928, the Supreme Court upheld the government’s use of warrantless wiretaps in Olmstead v the United States, which ruled that wiretapping did not violate the Fourth Amendment (because there was no physical trespass onto the defendant&#8217;s property).&nbsp;



Writing on behalf of the four dissenting justices, Justice Brandeis warned that “the progress of science in furnishing the Government with means of espionage is not likely to stop with wiretapping. Ways may someday be developed by which the Government, without removing papers from secret drawers, can reproduce them in court, and by which it will be enabled to expose to a jury the most intimate occurrences of the home.”



Exactly that has happened, of course.&nbsp;



(Less prophetically, Brandeis also warned that “advances in the psychic and related sciences may bring means of exploring unexpressed beliefs, thoughts and emotions.”)



It was not until Griswold v Connecticut in 1965 that the Supreme Court asserted a constitutional right to privacy. And even then it took some creative logic.&nbsp;



“To rule that privacy is a constitutional right,” Jenkins writes, “Justice Douglas argued that the Bill of Rights’ specific guarantees have ‘penumbras’ which, when drawn together, add up to a de facto right to privacy.” Penumbras — a concept that sounds more astronomical than legal — seems like a precarious legal foundation for privacy.



In 1967, the right to privacy got a little more concrete when the Supreme Court ruled in Katz v the United States that the Fourth Amendment protected not just places, but people, too.



This was celebrated by privacy advocates because it decoupled privacy rights from property rights, ensuring that the Fourth Amendment applied in places like the telephone booth where Charles Katz was illegally betting on college basketball.



In hindsight, though, the celebrations look misplaced because the court simply required that the government get a warrant for its eavesdropping.&nbsp;



“The ruling actually normalized wiretapping surveillance as a tool of law and order,” Jenkins writes.



For privacy advocates, things have only gone downhill from there.



“Through a series of rulings,” Jenkins writes, “the Supreme Court narrowed the definition of prohibited searches while broadening the scope of permissible searches and warrants. As a result, constitutional protections for privacy were progressively undermined.”



To illustrate just how undermined, Jenkins cites the case of Monica Lewinsky, who was forced to surrender her private correspondence, gifts, and clothing simply because her infamous correspondent was accused of a crime (and not even a big one).



With the government granting itself that kind of subpoena power, privacy is no longer a locked door at the end of a hallway — instead, it’s just a paperwork requirement.



Jenkins laments this.



“It’s essential to have a private space shielded from corporate, state and public scrutiny,” she concludes; “a place where we can be alone.”



But her history of privacy demonstrates that, contrary to popular belief, “it’s neither ‘natural’ nor universal to have a private life.”



So if we want one, we’ll have to build it.



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Privacy is not a ‘natural’ right — it’s an invention

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Today, we break down the BTC move during Asia hours and the renewed pressure from Japan’s carry unwind. We then look at China’s latest crypto FUD and track the continued USDe deleveraging cycle ahead of Pendle expiries, mapping what needs to shift for Ethena yields to recover.



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



BTC dropped about 5% in early Asia hours, trading near $86K. The move hit thin late-weekend liquidity and flushed several hundred million of long leverage.



On the rates side, Japan is again reactivating the yen-carry unwind. Two-year Japanese Government Bonds (JGBs) trade near 1%, 10-year yields are around 1.9%, both the highest since 2008. Overnight Interest Swaps now price about 80% odds of a December hike from the BOJ.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="920" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=1024&amp;h=1024" alt="" class="wp-image-110158" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=454 454w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-1.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



The last surprise move in mid-2024, when the BOJ lifted rates to 0.25%, drove a sharp USD-JPY reversal and contributed to a near 30% BTC drawdown to roughly 49K as macro books de-grossed risk. A similar pattern appeared today, with BTC tracking the Nikkei lower during Asia hours.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="920" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=1024&amp;h=1024" alt="" class="wp-image-110159" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=454 454w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=381 381w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-2.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



The underlying mechanism is unchanged. Global macro funds and institutions borrow yen or short JGBs to fund higher-yielding USD and EUR assets. As JGB yields rise, the yen funding leg becomes more volatile and more expensive. Investors reduce carry books and cut the highest beta exposures first, so BTC sits at the front of the liquidation stack.



The September 2024 BIS Quarterly Review quantified the size and opacity of this ecosystem:



<ul class="wp-block-list">
<li>Notional FX swaps and forwards with JPY on one side reached $14.2 trillion dollars (about 1,994 trillion yen). These positions sit off-balance-sheet and do not appear in conventional debt metrics.</li>



<li>Visible on-balance-sheet yen loans to foreign non-banks totaled only $271 billion dollars, confirming that most yen borrowing happens through derivatives rather than loans.</li>



<li>About $1.7 trillion dollars of yen liquidity is provided by non-bank financial institutions like trustee accounts. These allocators are volatility-sensitive and are prone to withdraw liquidity quickly under stress.</li>
</ul>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="965" height="703" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-4.png" alt="" class="wp-image-110161" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-4.png?w=965 965w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-4.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-4.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-4.png?w=353 353w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-4.png?w=358 358w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-4.png?w=301 301w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-4.png?w=80 80w" sizes="auto, (max-width: 965px) 100vw, 965px" /><figcaption class="wp-element-caption"><a href="https://www.bis.org/publ/qtrpdf/r_qt2409y.htm">Source: Sizing up carry trades in BIS statistics</a> </figcaption></figure>







As yen becomes more expensive, positions need to be unwound. This forces both de-risking in high beta assets and mechanical JPY buying, which can feed a reinforcing loop as yen strengthens.



Adding fuel to the fire, China contributed another catalyst. The PBoC reiterated that all virtual-currency trading remains illegal and explicitly categorized stablecoins under AML and capital flight restrictions. Hong Kong crypto-linked equities reacted immediately: Yunfeng Financial fell more than 10%, Bright Smart dropped about 7%, and OSL Group declined over 5%.



The substance of the policy is not new, and it seems this is the hundredth time China is banning crypto. However, the price reaction is significant, and shows we are still in a highly skittish regime.



<h2 class="wp-block-heading">Charts for The Week</h2>



This year’s Oct. 11 liquidation episode was the largest in crypto’s history. A Trump tariff tweet sent BTC from about $120K to roughly $102K and wiped out about $19 billion dollars of open positions in 24 hours. USDe traded as low as $0.65 on Binance and about $0.92 on Bybit. Despite this, Ethena processed $1.9 billion of redemptions, maintained full backing and contained systemic contagion. Combined with Bybit’s February $1.5 billion exploit, this was a second major stress event that USDe passed with flying colors. However, despite that resilience, USDe supply has fallen almost 50% from the $14 billion dollar peak to about $7 billion.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1350" height="712" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=1024&amp;h=1024" alt="" class="wp-image-110163" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=1350 1350w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-6.png?w=80 80w" sizes="auto, (max-width: 1350px) 100vw, 1350px" /><figcaption class="wp-element-caption"><a href="https://app.ethena.fi/dashboards/transparency">Source: Ethenas Dashboard</a></figcaption></figure>







The driver behind this is unattractive carry. Following October&#8217;s OI wipeout, funding rates for BTC and ETH are muted to negative, with Ethena’s dashboard showing negative funding across majors. Since November, the sUSDe spread has been below three-month Treasury yields.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1354" height="718" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=1024&amp;h=1024" alt="" class="wp-image-110162" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=1354 1354w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-5.png?w=80 80w" sizes="auto, (max-width: 1354px) 100vw, 1354px" /></figure>



With core delta-neutral strategy being unprofitable or returning low yields, 63.3% of the system is now held in liquid stables rather than deployed in delta neutral carry.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1342" height="672" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=1024&amp;h=1024" alt="" class="wp-image-110160" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=1342 1342w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-3.png?w=80 80w" sizes="auto, (max-width: 1342px) 100vw, 1342px" /></figure>



The unwind also shows up in Aave and Pendle TVL.



<ul class="wp-block-list">
<li>sUSDe looping became unattractive as sUSDe yields fell below USDC borrow rates (4.87% USDC borrow vs 4.77% sUSDe APY).</li>



<li>The November Pendle sUSDe PT expiry removed most of the size from Aave, and exposure fell from more than $5.4 billion to about $340 million.</li>
</ul>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1184" height="864" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image.png?w=1024&amp;h=1024" alt="" class="wp-image-110157" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image.png?w=1184 1184w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image.png?w=352 352w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image.png?w=358 358w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image.png?w=80 80w" sizes="auto, (max-width: 1184px) 100vw, 1184px" /><figcaption class="wp-element-caption"><a href="https://dune.com/sealaunch/ethena-on-aave">Source: SeaLaunch Dunes</a></figcaption></figure>







Going forward, the market needs to assess whether new expiries will attract significant utilization. The February 2026 PT implies a yield of only 5.8%, the lowest of any previous expiry, and at current levels, looping against Aave borrow rates is not profitable, so Aave PT utilization should remain low. Secondly, sUSDe rates must climb back above USDC borrow rates to continue to see demand on Aave.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1426" height="822" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=1024&amp;h=1024" alt="" class="wp-image-110166" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=1426 1426w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=453 453w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=380 380w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-9.png?w=80 80w" sizes="auto, (max-width: 1426px) 100vw, 1426px" /></figure>



Therefore, until funding turns frothy, Ethena’s core engine remains impaired. And as crypto becomes more institutionalized, with larger market makers and deeper derivatives liquidity, our base case is that funding rates trend structurally lower. For yields to recover, directional appetite must return so perp basis widens, and ETH vol needs to rise so positive funding can re-establish itself.



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