Cross

Byron Gilliam

This is a segment from The Breakdown newsletter. To read more editions, <a href="https://blockworks.co/brand/the-breakdown">subscribe</a>.



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“The continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.&#8221;&nbsp;



— Financial Report of the United States Government
</blockquote>



There once was a happy time when Fed chairs felt free to lecture politicians on their irresponsible spending habits.



In <a href="https://www.washingtonpost.com/archive/politics/1990/07/19/fed-would-lower-rates-if-congress-cuts-deficit/d1a24805-d603-436b-92c0-5779ffdc5c99/">1990</a>, for example, Alan Greenspan told Congress he would lower interest rates, but only if it cut the deficit.



In <a href="https://www.upi.com/Archives/1985/02/20/Volcker-says-Congress-must-cut-deficit/9515477723600/">1985</a>, Paul Volcker even specified a number, telling Congress that the Fed&#8217;s “stable” monetary policy was contingent on Congress cutting about $50 billion from the federal budget deficit.



(Oh, for the days when $50 billion of federal debt wasn’t just a rounding error.)



In both cases, the Fed chairs were not-so-subtly threatening Congress and the White House with recession: That’s a nice economy you&#8217;ve got there. Would be a shame if something happened to it.



Now, however, it’s the other way around, with President Trump lecturing the Fed on interest rates.



In just the last few weeks, the president has opined that the fed funds rate is “AT LEAST 3 points too high,” insisted there is “no inflation” and mocked the Fed Chair as Jerome “Too Late” Powell.



This, too, is a shakedown: That’s some nice central-bank independence you’ve got there…



President Trump lobbied for lower interest rates during his first term as well. Like nearly every modern US president, he wanted the Fed to stimulate the economy.



This time, however, it’s about much more than that: Trump wants the Fed to finance the deficit.



The Trump vs. Powell showdown is ostensibly about the current level of interest rates (which the FOMC left unchanged today, presumably to the president’s displeasure).



But what the president has been threatening is “fiscal dominance” — the state of affairs when monetary policy is subordinated to the needs of government spending.



“Our Rate should be three points lower than they are saving us $1 trillion a year (as a Country),” the president recently <a href="https://truthsocial.com/@realDonaldTrump/114902704048179740">wrote</a> on Truth Social (in his signature style of random capitalization).



With repeated such statements, Mr. Trump has made history by being the first US president to explicitly call for fiscal dominance.



But he’s far from the first to acknowledge the possibility.&nbsp;



When Volcker and Greenspan threatened Congress with rate hikes, it brought the usually hidden link between monetary and fiscal policy out into the open.&nbsp;



It worked for them: Both Fed chairs had some success in using the threat of recession to get Congress to address its deficit spending, which is a hopeful precedent.



But that tactic seems unlikely to work this time.



Chair Powell has often warned about the risks of growing deficits, and even explained that higher deficits could mean higher long-term interest rates.&nbsp;



But it’s hard to imagine him making an explicit threat in the way Volcker and Greenspan did — perhaps because he knows he’s bargaining from a much weaker position.



In the 1980s, the most-feared effect of higher interest rates was recession, which the Fed was willing to risk in order to get Congress to change its free-spending ways.&nbsp;



Back then, lawmakers faced a ballooning defense budget and a stagnant economy, both of which seemed manageable.&nbsp;



At just 35% of GDP, the national debt seemed manageable too.



Now, with federal debt at 120% of GDP, the US <a href="https://www.wsj.com/politics/policy/debt-has-always-been-the-ruinof-great-powers-is-the-u-s-next-02f16402">spends more on interest payments</a> than it does on defense:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXflkgNB1zlYtVD1qwbyfEhsXMynn4rcesXGWNtdFWBmiuFkjXtq077kd8t-pS_jjRqUSVVscyZT69E2YRXT5hiYlJtWWHkMGTHI9nrgi7UExqtw-mbAzffDpztweWIWx3hx6uVMvw?key=iWJ7_ctUrfu-bNc4jMJZgw" alt=""/></figure>



The fast-rising blue line above may now be the biggest budgetary problem.



This puts the Fed in a bind because raising interest rates to encourage fiscal sanity would only exacerbate the problem it wants lawmakers to address.



The Fed could risk it, of course.&nbsp;



But if rate hikes drive the deficit even higher, who blinks first: the Fed or the White House?



Before answering, consider that 73% of federal spending is now non-discretionary, vs. just 45% in the 1980s.



To believe the Fed can win a showdown over deficits is to believe Congress will make significant cuts to non-discretionary spending like Social Security and Medicare.



This seems, well, unbelievable.&nbsp;



Now, especially, with a president who appears wholly unperturbed by the country&#8217;s growing indebtedness.



This may come from his experience as an over-indebted real estate developer in the 1990s.



&#8220;I figured it was the bank&#8217;s problem, not mine,” Trump later <a href="https://www.amazon.com/Think-Big-Make-Happen-Business/dp/0061547840">wrote</a> of not being able to service his debts. “What the hell did I care? I actually told one bank, &#8216;I told you you shouldn&#8217;t have loaned me that money. I told you that goddamn deal was no good.'&#8221;



Now, as president, when Trump tells Powell that interest rates should be lower, what he’s really saying is that the national debt is the Fed’s problem, not his.



He’s not wrong.&nbsp;



“When interest payments on the debt rise and primary surpluses are politically off the table,” David Beckworth <a href="https://macroeconomicpolicynexus.substack.com/p/the-consolidated-government-budget">writes</a>, “something else has to give. That something is more debt, more money creation, or both.”



Yes, the Fed could run the Volcker/Greenspan playbook and threaten Congress with higher interest rates.



But Powell presumably knows that following through would only exacerbate a problem that might ultimately be the Fed’s to fix — and pull forward the time by which it’s forced to fix it.



“If debt levels are too high and growing,” Beckworth explains, “it becomes the Fed’s job to accommodate — by suppressing interest rates or monetizing debt.”&nbsp;



That, and not President Trump, he warns, is the real existential threat to the Fed: “When the central bank is forced to accommodate fiscal needs, it loses its economic independence.”&nbsp;



Beckworth remains hopeful that it might not come to that.&nbsp;



And maybe it won’t. We’ve just seen how unpopular inflation is, so maybe if we get another bout of it, voters will force lawmakers to address the deficit.



But he despairs that the focus on Trump’s demands for lower interest rates is a distraction: “What we are witnessing is less about Trump himself and more about the growing and unavoidable fiscal demands being placed on the Fed.”



President Trump is the first to start explicitly making those demands, presumably because he knows the US government’s current fiscal policy is unsustainable.&nbsp;



But everyone knows that, even the government itself.



The only question now is: Who’s going to deal with it?



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<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



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The Breakdown Newsletter

Fiscal dominance: Behind the Fed’s growing and unavoidable burden

Jeff Albus

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



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When building on Solana up until now, you&#8217;ve really only had two bad choices for storing and delivering your app&#8217;s data.



You could lean on Web2 giants like Cloudflare or AWS, which are fast and easy, but very much centralized and outside the crypto ethos. Or you could try to piece together more decentralized fixes using IPFS, Arweave, and other assorted gateways — bearing in mind that, while these latter methods do work, they require lots of duct-tape and set-top thwacking to dial in.



Decentralized CDN Pipe Network aims to change all that with Firestarter Storage, an infrastructure play designed to transform Pipe into a full-stack Cloudflare alternative for the Solana ecosystem.



Until now, Pipe has operated behind the scenes, powering Solana&#8217;s full <a href="https://blockworks.co/news/solana-proof-of-history">proof-of-history</a> archive and snapshots via its Firestarter infrastructure.



Now, with Firestarter Storage, Pipe graduates from decentralized transport to a full-stack cloud competitor, combining origin storage, CDN delivery and edge compute into a Cloudflare-class system — but decentralized from the ground up.



Developers can tap into the same backbone to serve anything from pay-as-you-scroll video to edge-optimized AI workloads.



&#8220;Storage from day one has been a critical element of Pipe Network&#8217;s service as a decentralized CDN running a global network of over 280,000 points-of-presence (PoP) node operators,&#8221; said David Rhodus, founder of Permissionless Labs.



&#8220;This would be impossible without origin support, which is already holding Solana&#8217;s full data set — 1 PB containing 350 million files — and cutting sync time by up to 30% through Solana Snapshots.&#8221;



Unlike legacy CDNs, Firestarter serves content directly from Pipe&#8217;s native storage layer, meaning it never leaves the Pipe Network.



Content lives entirely within the decentralized system, with pricing bundled at the protocol level — 1 $PIPE token per gigabyte for the base tier.&nbsp;



For developers, this manifests entirely new architecture capabilities: streaming micropayments per byte, geo-pinned smart contracts with hard data sovereignty guarantees, and pop-level compute for edge inference and ultra-low-latency gaming.



&#8220;Pipe&#8217;s unified fabric lets frontend code stream satoshi-sized, onchain payments per byte, so devs can launch pay-as-you-scroll video and per-query dataset APIs instead of pre-purchasing bandwidth buckets,&#8221; Rhodus told Lightspeed.



A critical differentiator is Pipe&#8217;s ability to meet jurisdictional and defense-grade requirements.



As Rhodus explained, &#8220;Firestarter nodes can be whitelisted to run only inside a customer&#8217;s jurisdiction, with remote-attested proofs that no replica ever leaves the boundary.&#8221;



With Firestarter now public, Pipe Network is positioning itself as a new foundation for real-time, decentralized content distribution, with sovereignty, speed and cost-efficiency converging at the protocol layer.



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
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Lightspeed Newsletter

Pipe Network debuts Firestarter Storage for Solana developers

Casey Wagner

The presentation portion of Roman Storm’s criminal trial came to a close Wednesday afternoon with the prosecution and defense each making their final pleas to the jury.&nbsp;



Both sides spent over 90 minutes on their closing arguments. The government opted to close with an additional 45-minute rebuttal. Attorneys on both sides focused on the same essential facts of the case, but urged the jury to come to different conclusions.&nbsp;



“This is a story about greed,” government attorney Benjamin Gianforti said at the beginning of his closing arguments. “It’s a story about helping criminals hide bags and bags of money.”&nbsp;



“Tornado Cash made dirty money clean money, and made it impossible to tell the difference,” he added.&nbsp;



The defense does not argue the truth of this second statement: they admit that criminals did use Tornado Cash for illicit activities, but this was never Storm’s intent in creating the software.&nbsp;



Storm created Tornado Cash to give users the ability to keep their financial transactions private, defense attorney David Patton told the jury.&nbsp;



“Did that also make it extremely useful to criminals? You bet it did,” Patton said.&nbsp;



The “privacy argument,” prosecutor Nathan Rehn said during the government’s rebuttal, is simply a “cover story.”&nbsp;



Storm not only knew criminals were using Tornado Cash to launder money, he supported them, Rehn argued.&nbsp;



The government presented messages to the jury in which Storm calls reports of hackers using Tornado Cash “advertising.” They also submitted photos of Storm and his co-developers wearing Tornado Cash T-shirts with images of a laundry machine.&nbsp;



These messages and photos are a mischaracterization, Patton later insisted. The shirts were a joke, and there are many communications that show Storm was not “celebrating hackers’ use of Tornado Cash.”&nbsp;



As for the prosecution’s claims that Storm “made millions” from Tornado Cash, the defense again maintained that this was a misleading portrayal of reality. The money Storm made came from selling the TORN token, which, Patton added, lost value when reports of criminals using Tornado Cash surfaced.&nbsp;



“They weren’t getting a cut” of money hackers laundered through Tornado Cash, nor did developers charge fees for using the software, Patton added.&nbsp;



After two weeks of witness testimony, jurors received charge instructions late Wednesday afternoon, the final step before the group heads to the deliberation room.



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Roman Storm

Tornado Cash trial is now in the jury’s hands

Ben Strack

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Despite Coinbase’s second quarter milestones, not all is rosy for the crypto exchange as it gets set to discuss its Q2 results tomorrow.



Coinbase’s stock price roughly doubled during the quarter — performance Oppenheimer analysts attributed to its S&amp;P 500 inclusion and progress around the GENIUS Act (progress that led to <a href="https://blockworks.co/news/trump-signs-genius-law">its ultimate passage</a> earlier this month).



COIN shares were trading around $382 on Wednesday at 1:30 p.m. ET — up 9% from a month ago.&nbsp;



And yet, in other ways, COIN’s setup ahead of the quarterly print is “unfavorable,” Oppenheimer’s Owen Lau and Guru Sidaarth wrote in a note. They estimate Coinbase’s Q2 trading volume to be ~$220 billion, marking a 44% decline <a href="https://blockworks.co/news/coinbase-outlooks-q1-results-deribit-analysts">from the prior quarter</a>.



Morningstar analyst Michael Miller noted that transaction volume will always be a key data point, given transactions account for Coinbase’s largest revenue stream.&nbsp;&nbsp;



Beyond that, though, Miller will be listening for commentary on pricing pressure (or lack thereof) as competitors like Robinhood ramp up their crypto offerings in a friendlier regulatory environment.&nbsp;



“I’ll also be looking for any data or commentary on the firm’s <a href="https://blockworks.co/analytics/base/base-overview/base-stablecoin-supply-and-transfer-volume">Base transaction volume</a> and revenue and how much USDC is on the firm’s platform and products,” Miller told me. “While Coinbase is still heavily exposed to cryptocurrency trading, USDC and Base have enjoyed a lot of momentum this year.”



Miller, in a Monday note, revealed he had increased his COIN “fair value estimate” from $170 to $205. A part of that was indeed due to USDC’s market cap eclipsing $60 billion and overall bullish sentiment after the stablecoin-focused GENIUS Act became law. If you forgot, Coinbase earns interest income on the USDC it holds on its platform.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcxoVOjxECsiraxBs-F32R7RMas5TsgXnD6OsYK_TVqFJZb0x4VXaZA72hqhn3zzG932EqmSISMNtPCLgQW3eGbWpqh73UmBVPDeYlCsYj54nKSu6NzV_wOgXDNuAwHLnlcnROB9A?key=wc4qbIEt1FJXnWzzwbFkzg" alt=""/><figcaption class="wp-element-caption">Source: rwa.xyz</figcaption></figure>



Despite Miller’s COIN upgrade, he still considers shares “significantly overvalued” as the market reacts to recent crypto price surges.&nbsp;



The Oppenheimer analysts see things a bit differently. They have a COIN price target (in the next 12-18 months) of $417.



Lau and Sidaarth note Coinbase’s US derivatives and International Exchange notional values were more resilient than spot trading volume — up 22% and 28%, respectively, quarter over quarter. That’s an area they’re more focused on after <a href="https://blockworks.co/news/coinbase-deribit-deal-focus-derivatives">Coinbase’s Deribit acquisition</a>.&nbsp;



Maybe Coinbase CEO Brian Armstrong will give us a sense of other <a href="https://blockworks.co/news/coinbase-circle-amazon-of-crypto">possible acquisition targets</a>. As far as link-ups go, Coinbase on Wednesday revealed a partnership with JPMorgan Chase that lets Chase customers link their bank accounts to Coinbase wallets.&nbsp;&nbsp;



Lau told me he’ll be seeking expense guidance from Coinbase executives tomorrow, as well as any update on July trading revenue.&nbsp;



Coinbase is pretty connected in DC, and could also offer thoughts around when they expect the CLARITY Act to become law. That bill, which would create a definition for “digital commodities,” got the <a href="https://blockworks.co/news/us-house-passes-clarity-act">House’s blessing</a> on July 17.“Passage of the CLARITY Act will support <a href="https://blockworks.co/news/crypto-treasury-companies-alt-season">Altcoin Summer</a>, following the Stablecoin Summer after the passage of the GENIUS Act,” Lau explained.



Add it to the list of things we’re monitoring. Never a dull moment.



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Coinbase

Coinbase outlooks are mixed ahead of Q2 earnings

Macauley Peterson

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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Ethereum’s first decade has taken it from a fringe experiment to the potential backbone of digital finance. In the roundup below, 10 builders, researchers, and market watchers explain what that journey has meant, and where the next 10 years may lead.



We open with Michael Egorov, founder of <a href="https://blockworks.co/tag/curve">Curve</a>, who reminds us of just how far things have come: “Ethereum is turning 10 years old: The time flies! Over that time, it has grown from an idea to the foundation of the new financial system.”



For Kirill Fedoseev of Blockscout, that foundation is now an ecosystem: “<a href="https://blockworks.co/tag/ethereum">Ethereum</a> turning 10 marks more than just the anniversary of a single chain. It’s a celebration of an open ecosystem that’s driving some of the most important infrastructure innovation in Web3.”



Anurag  Arjun, co‑founder of <a href="https://blockworks.co/tag/avail">Avail</a> and Polygon alumnus, quantifies the scale‑up: “The ecosystem growth is unprecedented: from 15 transactions per second to 24 million daily transactions across multiple layers, 127 million active wallets, $75 billion in DeFi protocols.” Those numbers, he argues, vindicate the modular, <a href="https://blockworks.co/tag/rollups">rollup‑centric</a> thesis.



Networking expert Muriel Médard of <a href="https://blockworks.co/news/optimum-ram-web3-protocol-memory-decentralized">Optimum</a> points to adaptability: “What attracted me most to Ethereum was seeing a decentralized network that could actually evolve and improve over time, and 10 years in, that adaptability has been validated repeatedly.” Her next priority is a faster networking layer to “strengthen how information flows between all stakeholders.”



Markets are noticing. Shawn Young of MEXC notes that “this is due to the shift in the institutional perception of Ethereum…spot Ether ETFs [have logged] 16 consecutive days of net inflows totaling over $5 billion.”



Yet usability still lags. Vikram Arun of Superform observes: “10 years in, Ethereum feels less like an experiment and more like critical infrastructure…The next 10 years will be defined by cohesion at the product layer: fintech‑like mobile apps with seamless UX.”



Rob Viglione of Horizen Labs underscores the slow grind behind that cohesion: “Over the past 10 years, Ethereum’s growth has often felt slower than we anticipated…but in reality, we’ve made meaningful progress in solving many of these issues.” He expects <a href="https://blockworks.co/tag/privacy">privacy</a> — via technologies such as <a href="https://blockworks.co/news/what-is-fully-homomorphic-encryption">fully homomorphic encryption</a> — to dominate the next cycle.



Steven Goldfeder, co‑founder of <a href="https://blockworks.co/tag/offchain-labs">Offchain Labs</a>, is motivated by the runway ahead: “What keeps me most excited…is its untapped potential paired with the community’s dedication to transparently and openly building a better system.”



Aryan Sheikhalian of CMT Digital sounds a cautionary note: “Even if ETH accrues value through <a href="https://blockworks.co/news/ethereum-blobs-balancing-act">blobspace</a>, Ethereum risks becoming the TCP/IP of crypto: essential, invisible, commoditized.” Remaining the cultural and economic center, he says, requires owning standards, liquidity and UX — not just settlement.



Finally, Hart Lambur of UMA and Across sketches the end‑state: “The real endgame is straightforward: a giant payments-and-exchange network that connects every blockchain.” Achieving that will hinge on seamless interoperability and the liquidity battles it will ignite.



From visionary beginnings to trillion‑dollar ambitions, these 10 voices agree on one thing: Ethereum’s first decade was merely the preface. Scaling trust, usability, privacy and culture for the world is an ongoing project.



What I return to as truly novel is Ethereum’s global scale and resilience. Spend a few minutes on the “<a href="https://www.youtube.com/live/igPIMF1p5Bo?si=mvTIndVlXDDT8HZS">10 Years of Ethereum Livestream</a>” and you find celebrations jumping from Toronto to Buenos Aires, Barcelona, Lagos and Mumbai. As a truly decentralized network, it has succeeded in maintaining <a href="https://dune.com/queries/3367820">virtually 100% uptime</a> across 10 years and 16 hard forks. That’s a level of resilience that no other network has been able to match.



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0xResearch Newsletter

10 reflections on Ethereum’s 10th anniversary

“Nothing further from the defense,” attorney Brian Klein told Judge Katherine Polk Failla yesterday afternoon at Manhattan’s Thurgood Marshall courthouse.



The team representing Tornado Cash co-founder Roman Storm had cycled through what remained of its witness list, and Storm chose not to take the stand.&nbsp;



A reminder that Storm is being charged with conspiracy to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money transmitting business.



His defense (and advocates of the privacy protocol) argue Storm isn’t criminally responsible for<a href="https://blockworks.co/news/treasurys-tornado-cash-sanctions-have-companies-stepping-back-from-users"> bad actors using</a> something he helped create.&nbsp;



Closing arguments were scheduled to begin at 9 a.m. “sharp” Wednesday — meaning in a matter of minutes (if you’re reading this when it publishes).&nbsp;



In the meantime, let’s go through Tuesday’s witnesses and some of the more memorable moments:



<h2 class="wp-block-heading">Guy Wuollet, partner at a16z crypto</h2>



Tuesday’s first witness, Wuollet had evaluated whether Andreessen Horowitz’s crypto/Web3 unit would invest in Tornado Cash in 2021.&nbsp;



In an email to Storm at the time, Wuollet wrote he was “impressed by the strength of the privacy” of Tornado Cash and “excited about the next iteration of the protocol.”



The reason a16z didn’t invest? Wuollet said the firm didn’t know if Tornado Cash would be profitable. “We will continue to be fans of Tornado Cash and to track its adoption onchain,” Wuollet added in the email.&nbsp;&nbsp;



When asked to acknowledge that crimes are committed on the blockchain, Wuollet paused before saying he thinks of it differently. “If someone robbed a store, I wouldn’t say the store was used in the crime.”



An attendee sitting to my left started laughing. The prosecution ended the cross-examination there.&nbsp;&nbsp;



<h2 class="wp-block-heading">Omid Malekan, Columbia Business School professor&nbsp;</h2>



Not on the stand long, Malekan said he used Tornado Cash in 2021 to purchase an Ethereum Name Service (ENS) name.&nbsp;



He used the protocol because he “didn’t want to put a bullseye on my back.”&nbsp;



The prosecution’s Ben Arad shouted out an objection. Failla asked Klein to control his witness.&nbsp;



<h2 class="wp-block-heading">Dr. Stephanie Hurder, founding economist of Prysm Group&nbsp;</h2>



We found out the defense has so far paid Hurder $120,000 for her time analyzing this case and being an expert witness. She reviewed Tornado Cash DAO proposals, TORN token price data, transactions on Etherscan, etc.&nbsp;



She countered several points previously brought up by the government about Tornado Cash’s supposed lack of decentralization. Hurder noted the protocol’s DAO was “well-designed and active” (55% of TORN tokens initially went to the DAO treasury) and that Tornado Cash founders did not have (or always use) their voting power on proposals.



She added that the founders did not have a direct hand in selecting entities on Tornado Cash’s relayer registry.



The government’s exchanges with Hurder were heated, with prosecutors getting her to acknowledge that bad actors have apparently used Tornado Cash to hide criminal proceeds. As we know, the case against Storm is more nuanced than that.&nbsp;



And in a reference to the vesting schedule for founders’ TORN tokens, a prosecutor asked: “Tornado Cash became less decentralized over time, right?”



Despite the government wanting only yes or no answers, Hurder got out: “The distribution of tokens became less decentralized. Yes.”



<h2 class="wp-block-heading">Dr. Matthew Green, computer science professor at Johns Hopkins University</h2>



Green, who helped create the <a href="https://www.researchgate.net/publication/286668243_Zerocash_Decentralized_Anonymous_Payments_from_Bitcoin">Zerocash</a> protocol, was brought in to emphasize the value of privacy.&nbsp;



Though he was intrigued with crypto and blockchain technology essentially from its outset, Green called the lack of privacy (i.e. public transactions) “a huge bug.”



He talked about the value of VPNs and credit-card tokenization in protecting individuals and institutions. At one point, I caught a juror dozing.



The Tornado Cash pools were immutable, Green confirmed — preventing hackers or founders from making changes there.&nbsp;&nbsp;



During the cross-examination, Arad asked Green whether the Tornado Cash website, user interface and relay registry could be changed. “Yes” to all three.



Also of note was Klein wanting Green to address the feasibility of a hypothetical user registry that one of the government’s witnesses, AnChain.AI’s Philip Werlau,<a href="https://blockworks.co/news/roman-storm-government-may-rest-case"> brought up last week</a>.&nbsp;



Green’s initial hesitation to respond and a subsequent sidebar with the judge meant that the question went unanswered.



But as this case winds down and the jury is charged, we’ll have other, more critical answers soon.&nbsp;



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Roman Storm trial: Witnesses play up Tornado Cash privacy, decentralization

This is a segment from The Breakdown newsletter. To read more editions, <a href="https://blockworks.co/brand/the-breakdown">subscribe</a>.



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“An economist says to a physicist: ‘Sure, this equation works in practice. But does it work in theory?’”



— Overheard in the faculty lounge
</blockquote>



For those fortunate enough never to have learned the mechanics of special purpose acquisition vehicles, here’s all you really need to know: If you don’t like the company a SPAC finds to buy, you can get your money back.&nbsp;



There are lots of important details, of course — PIPEs, warrants, fees, the price you paid — but the differentiating factor is the redemption mechanism.



SPACs raise capital by issuing shares at $10 and then looking for a company to buy.



If you like the one they find, you stay invested. If not, they’ll give you your $10 back.



In theory, this democratizes the IPO process.



As a retail investor, you won’t be getting into the next Goldman IPO at the offer price — banks reserve IPO allocations for their top institutional customers.



With SPACs, however, retail investors can typically buy in at or near the standard $10 offering price.



You won’t know what company the SPAC will become, which isn’t ideal, but when you do find out, you’ll have the option to redeem at $10.



In theory, that lets you participate in the IPO process at something close to the same terms of institutional investors.



In practice, however, it rarely works out.



Citing data from ListingTrack, the Financial Times <a href="https://www.ft.com/content/6da2f475-dd6a-4de4-abac-9e62f808bd41">reported</a> that “the median return from [SPACs] that have completed mergers with target companies is minus 83% since 2020.”



Minus 83%! Yikes.



In hindsight, though, it’s not hard to see why.



Here are some of the dubious businesses that were brought to the stock market in the last SPAC boom: electric-scooter sharing, hydroponic farms in Kentucky, cell towers in outer space, a music-streaming service with no paying users, an EV truck company that couldn’t make trucks, bitcoin ATMs, Playboy Inc. and BuzzFeed, to name just a few of the notorious ones.



(Partial disclosure: I may or may not have invested in the cell-towers-in-outer-space one.)&nbsp;&nbsp;&nbsp;



Even so, there was still a lot of money to be made — just not by retail.&nbsp;



One <a href="https://site.warrington.ufl.edu/ritter/files/SPACs.pdf">academic study</a> found that SPAC sponsors —&nbsp; the bankers who list the SPAC and go hunting for a deal — do extremely well: “The average annualized sponsor return, over approximately 2.5 years, was 113%.”



The institutions that invest in those SPACs via private funding rounds also did fine, earning an average one-year return of 9.3%.



But the public shareholders who invested in the exact same deals made an average loss of 19.8%.



And yet, SPACs have been wildly popular at times.



In 2021, a series of SPACs sponsored by Chamath Palihapitiya traded 50% to 80% above their $10 issue price before investors even knew what company they were investing in.



Most egregiously, a SPAC sponsored by star banker Michael Klein traded up 550% in anticipation of a merger with Lucid Motors (thought, at the time, to be the next Tesla).



It’s hard to overstate how irrational those prices were.



With his $10 SPAC trading at $65, the market was implying that Michael Klein could negotiate a deal that would instantly make a 6.5x return for his investors.



There are only two ways he could have made that happen: 1) by finding a company willing to sell itself for far less than its worth, or 2) finding a business that’s worth far more on the stock exchange than it is as a private company.



Either way, it turned out to be a poor assumption to make: Lucid Group now trades at $2.60.



That is an extreme example, but it illustrates the point that paying well above $10 for a SPAC doesn’t make much sense.



A skilled banker like Klein might buy a company for 10% or 20% below what it’s worth on the stock market, which would justify paying $11 or $12 for a SPAC, but not much more.&nbsp;



But what if the SPAC buys crypto?



As we’ve learned from MicroStrategy, the stock market routinely values crypto at double what it’s worth on a crypto exchange. Or more.



So it makes sense that a SPAC that uses $10 of investor money to buy $10 of crypto could be worth $20 or more.



In theory.



In practice, it’s not working.



SPACs that have recently announced deals to become digital asset treasury companies (let’s call them DAT SPACs) are mostly trading around $11 per share.



This seems pointless.



An $11 SPAC price implies that the new company will be valued at 1.1x NAV — and what’s the point of a digital asset company that trades at 1.1x NAV? The core value proposition of DATs is that they can grow their stack of crypto by selling shares above NAV: MicroStrategy, for example, has been growing its “bitcoin per share” by exchanging $10 of equity for $20 of crypto.



But exchanging $11 of equity for $10 of crypto? That hardly seems worth the trouble.



Weirdly, DATs that have gone public by merging with a shell company have been doing much better.



The shares of VAPE, SBET and TRON, for example, are all up 5-10x since announcing their conversion into digital asset companies (buying BNB, ETH and TRON, respectively).



Even the Litecoin one, MEIP, has doubled in price.



There’s no obvious reason why a digital asset company that started as a shell company should be any more valuable than one that started as a SPAC.



But most DAT SPACs — including high-profile ones like CEPO, led by Adam Back, and CCCM, led by Anthony Pompliano — are only up about 10%.&nbsp;



This doesn’t make much sense, in theory.



But it might make sense in practice: SPAC investors have learned that paying a big premium to NAV rarely works out.



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The practice and theory of DAT SPACs

Jack Kubinec

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



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Orca has released Wavebreak, a “human-first” Solana token launchpad.



The launchpad, which I <a href="https://x.com/whosknave/status/1945463174943138117">first</a> caught wind of earlier this month, integrates CAPTCHA with an onchain permission structure to keep bots and snipers from crowding out real humans, Orca CEO Nathan Davis told me. The move comes amid a raft of Solana DEXs releasing token launchpads — or vice versa — to compete in the memecoin-focused Solana DeFi market.



Outside of the onchain CAPTCHA, Wavebreak looks pretty similar to other launchpads on offer, with a few tweaks. One carrot Orca’s offering is daily rewards where users can earn rakebacks from a prize pool based on how much volume they trade.



Orca was launched on Solana by two Tokyo-based builders in 2021, according to the DEX’s docs. The DEX is also live on the SVM-based blockchain Eclipse.&nbsp;



During the doldrums of 2022 and 2023, <a href="https://app.blockworksresearch.com/flashnotes/orca-breaching-in-rough-seas">Orca was</a> Solana’s dominant DEX. Its market share would then come under siege by Raydium, which catapulted in usage in 2024 partly due <a href="https://blockworks.co/news/lightspeed-newsletter-raydium-volume-growth">to its popularity</a> among memecoin traders and partnership with Pump.fun.&nbsp;



Today, <a href="https://blockworks.co/analytics/solana/solana-dex-activity-2-0">Solana’s DEX sector</a> is more competitive than ever — and most of the top players, which include PumpSwap, Raydium, SolFi and Meteora, alongside Orca, have some connection to a memecoin launchpad, if they haven’t already developed one in-house.



The issue with existing memecoin launchpads, says Orca, is the proliferation of bots which buy up tokens as quickly as possible in hopes of selling at a profit. Earlier this year, one research outlet <a href="https://x.com/PineAnalytics/status/1914301091337953734">found</a> more than 50% of new Pump.fun tokens were being sniped, or purchased in the same block they were created. Such trades were profitable the vast majority of the time.



Whether this behavior is strictly bad is a matter of perspective (blockspace can be for bots, too), but it certainly does disadvantage human users.



“It&#8217;s not necessarily that other platforms themselves are intentionally malicious; many are also trying to combat this problem,” Davis explained.



There have been prior attempts to thwart snipers and bots from buying up memecoins, from anti-bot taxes to dutch auctions.&nbsp;



But Davis claims that “[o]ther implementations are exploitable by malicious users. We believe our implementation will be the first to mechanically prevent sniping, bundling, sandwiching and wash trading from being possible.”



Orca plans to host project fundraises on Wavebreak as well. DeFiTuna’s TUNA token will go live on the platform tomorrow, Davis said.



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DEXs

Orca releases Wavebreak launchpad for Solana tokens

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Crypto investment products have raked in record monthly flows in July, putting a spotlight on the institutional demand for ETH.&nbsp;



How much interest coins will see from investors further down the curve remains an open question.



The aforementioned flows record had extended to $11.2 billion by July 26, CoinShares data shows. That’s well above the prior monthly high of $7.6 billion seen in December 2024.&nbsp;&nbsp;



While bitcoin products have historically carried the crypto pack from a flows perspective, those have tallied only about half the segment’s flows this month.&nbsp;



ETH offerings attracted most of the rest:&nbsp;



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd70pfkURfWv2Fvew7xAmOeHOHbdU7XFlf2D8ooWe4XbEDNx_TiuNArr_26raBuN5DhW7BfBUvgGxaYN-Op7-LJBaK-lMjDd_wij8aKhrs22YcPq9wIz2cOQpJKgb_vzKaTMogd?key=peWoWZmYrygpJv74KCLAQA" alt="" style="width:645px;height:auto"/></figure>



Ether products clearly saw the most attention last week as money trickled out of bitcoin vehicles. US ETH ETFs brought in another $65 million on Monday.



It seems to be the <a href="https://blockworks.co/news/year-old-us-ether-etfs">institutional demand progression</a> we’ve heard about for years. BTC has the largest market cap. It gets the headlines. The narrative around BTC is a bit simpler and intuitive, attracting capital. It’s digital gold, yada yada.&nbsp;&nbsp;



But Ethereum has become hard to ignore, particularly after<a href="https://blockworks.co/news/trump-signs-genius-law"> </a>the <a href="https://blockworks.co/news/trump-signs-genius-law">GENIUS Act became law</a>.&nbsp;



Competition among institutions that now have a path to issue stablecoins (by registering with the OCC) is set to speed up adoption in the US, noted ZX Squared Capital co-founder CK Zheng. That will disrupt the existing payment infrastructure with faster and cheaper processes built on blockchain technology.&nbsp;



“Given most of the stablecoins are built on [Ethereum], the demand from the institutional investors for ETH will grow exponentially for the foreseeable future,” Zheng told me. “We expect ETH price to hit $10,000 during this bull market run.”



ETH was trading around $3,750 at 1 p.m. ET Tuesday — up 54% from a month ago.&nbsp;



Even with the narrative for ETH (as the platform for stablecoins) being stronger than ever, it remains “a catch-up trade.” For those keeping score at home, BTC has the edge over ETH on YTD returns, +26% to +12.5%.&nbsp;



As the chart further up shows, $860 million has flowed into solana and XRP products this month as well.&nbsp;



Whether or not we’re entering an “<a href="https://blockworks.co/news/crypto-treasury-companies-alt-season">altcoin season</a>” is a question with an “inconclusive” answer, according to CoinShares research head James Butterfill.



“These altcoin inflows may be driven less by broad-based enthusiasm and more by anticipation surrounding potential US ETF launches,” Butterfill<a href="https://blog.coinshares.com/volume-244-digital-asset-fund-flows-weekly-report-c9432f2cd3b1"> wrote</a>.



It’s worth noting too that, on the corporate crypto treasury strategy front, some are buying altcoins directly.&nbsp;



Mill City Ventures revealed a $450 million private placement on Monday to kick off efforts to make SUI — the native token of the layer-1 Sui blockchain — its primary treasury reserve asset.&nbsp;&nbsp;



London-based hedge fund Karatage Opportunities and Sui Foundation were the biggest investors. The company intends to use ~98% of the proceeds to buy SUI and ~2% to fund its short-term lending business.&nbsp;



Also on Monday, CEA Industries said it looks to build the world’s largest publicly listed BNB Chain treasury strategy. BNB’s market cap of ~$115 billion is the fifth-largest among cryptos.



The current lack of US ETFs holding altcoins boosts interest in these companies to access token exposure in a traditional brokerage account, said Grayscale research head Zach Pandl.&nbsp;&nbsp;



As <a href="https://blockworks.co/news/crypto-etf-launch-timelines-sec">more crypto ETPs</a> become available, he told me, demand for altcoin treasury companies may diminish. He expects those ETP launches later this year.&nbsp;



“Regardless of the product wrapper, institutional investors are likely to focus on the altcoins with sustainable revenue,” Pandl added. “In traditional finance, the ‘revenue meta’ never goes away.”



Zheng noted that it could take years before institutional investors get comfortable to take risks in this space — beyond BTC and ETH.&nbsp;&nbsp;



“It may require regulatory clarity around the entire crypto ecosystem as well as a clear narrative for a specific coin that has an eye-catching application with strong fundamentals,” he explained.&nbsp;



While we expect more clarity, the market will decide what applications catch their eye. As with most things, time will tell.



Updated 7/30/2025 at 3:15 p.m. ET to reflect US ETH inflows at $65 million.



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altcoins

Record crypto product inflows in July brings ETH demand into focus

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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It’s Fed Decision Day Eve, and while we’re all but certain interest rates will remain unchanged, tomorrow’s FOMC statement and Chair Powell’s press conference have potential to move markets.&nbsp;



Investors are hoping for a September rate cut, and right now, they’re decently confident that’s what we’ll get. Markers are currently pricing in a 62% chance of a 25bps cut in September, per <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">data</a> from CME Group.&nbsp;



What kind of language in tomorrow’s statement would assure markets that FOMC members are feeling dovish? For starters: any indication that <a href="https://blockworks.co/news/economic-strains-for-growth-outlook">tariff-related</a> <a href="https://blockworks.co/newsletter/daily/issue/post_d73eda3f-a46d-4b1e-84fc-d50b5685d944">inflationary fears</a> are easing.&nbsp;



We know uncertainty around trade relations has central bankers worried that there could be a relapse in inflation, and that has been a key reason why the Fed hasn’t cut rates so far this year. So if tomorrow’s statement notes that inflation is “easing,” that would be a positive sign for a September rate cut.&nbsp;



What else? Markets would like to see language suggesting that committee members are less concerned about economic uncertainty.&nbsp;



In June, <a href="https://blockworks.co/news/june-fomc-meeting-takeaways">the FOMC wrote</a> the following: “Uncertainty about the economic outlook has diminished but remains elevated.”&nbsp;



If tomorrow’s statement cuts those last three words, it would be a very dovish signal.&nbsp;



We know Powell is going to be asked about when the committee will cut rates, and we know he’s going to be evasive. But should he express confidence in the direction of inflation and the labor market, expect equities to rally. 



We’ll be watching tomorrow, and Forward Guidance podcast host Felix Jauvin will be breaking down the statement and Powell’s comments live. Be sure to <a href="https://x.com/ForwardGuidance">tune in on X</a> around 3:30 p.m. ET.



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Federal Reserve

What would a dovish Fed look like?

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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Linea, the layer-2 built by <a href="https://blockworks.co/tag/consensys">Consensys</a>, is making a play to become Ethereum’s most aligned rollup. In an updated roadmap announced Tuesday, the network committed to three headline features: native staking for bridged ETH, a protocol-level ETH burn equal to 20% of net fees, and an 85% token allocation to builders and users. Together, the features aim to make ETH on Linea not just more productive, but a scarcer asset.



If the idea of ETH yield as a layer-2 core feature sounds familiar, it’s because Linea is drawing clear lessons from Blast’s rise and fall. That network drew $2 billion in TVL by routing ETH into stETH and streaming yield back to depositors, only to see liquidity vanish after its June 2024 airdrop. Without any coherent follow-up to its initial marketing blast, Blast’s user base cratered — along with its narrative.



Linea, by contrast, looks to keep ETH native while promising fast withdrawals alongside ETH staking… eventually. While the July press release previews staking yield by October 2025, the canonical bridge’s yield feature was already discussed in a January roadmap post and flagged for rollout first on Status L2, not <a href="https://blockworks.co/news/linea-mainnet-ethereum">Linea Mainnet</a>.



While often referred to as a single network, Linea is also a modular rollup stack — much like the <a href="https://blockworks.co/tag/optimism">Optimism</a> OP Stack or <a href="https://blockworks.co/tag/polygon">Polygon</a>-developed <a href="https://blockworks.co/news/espresso-polygon-partnership-rollup-interoperability">AggLayer</a> CDK — that can be used to deploy independent <a href="https://blockworks.co/tag/zero-knowledge-rollup">zkEVM rollups</a>. Status L2 is one such chain: a separate layer-2 built on the Linea codebase, operated by the <a href="https://status.app/blog/linea-partnership-status-network">Status Network</a>, and focused on gasless transactions and native ETH yield. Though both chains share infrastructure and ETH-centric design goals, they operate independently, with distinct tokens, deployment schedules and governance structures.



Still, there is fresh clarity today: Linea head Declan Fox told us ETH deposited via the canonical bridge “will be staked natively through institutional-grade validators, with a noncustodial vault set-up,” with further technical details to come.



Linea also <a href="https://blockworks.co/news/polygon-katana-defi-focused-chain-agglayer">shares similar concepts with Katana</a>, the rollup incubated by Polygon Labs and GSR that launched last month. Both networks use ETH as their sole gas token and emphasize “productive capital,” but Katana routes fees to curated DeFi apps via VaultBridge. Linea goes further: Every transaction burns ETH on mainnet and LINEA on L2. That creates a visible value loop to <a href="https://blockworks.co/tag/ethereum">Ethereum</a> — at least in theory.



But theory runs into friction while the sequencer is still permissioned. According to the same January roadmap, Linea planned to move from Clique to QBFT consensus in Q2 and begin transitioning to a permissioned validator set in the second half of 2025. Full permissionless DPoS isn&#8217;t slated until “2027+.” Fox referred us to the roadmap timeline, which means all ETH burn mechanics still rely on operator goodwill for now.



Token utility remains another open thread. LINEA can now be used to pay gas, thanks to an ERC-20 payment feature that launched earlier this year, but it holds no formal governance power and no claim on revenue. Katana sidestepped that issue by stripping its token of any voting rights. Linea will eventually need to clarify whether burn and fee utility are enough to sustain long-term demand for its token.



Then there’s the regulatory question. A token that captures protocol fees and is permanently bought-and-burned resembles a corporate buyback loop — something US regulators have flagged in other contexts. Neither the roadmap nor the new announcement addressed the legal implications of the model.



For now, Linea has bought itself a strong narrative: a chain where ETH gets yield, ETH gets burned, and builders get the bulk of the token supply. If the staking bridge launches on time and the ecosystem fund is deployed with transparency, it could be a compelling alternative to L2s that extract more than they give back. But the hard parts — decentralization, custody design, token value — are still in the delivery phase.



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Linea previews ETH-first roadmap

Katherine Ross

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



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



Core VC’s David Roos is still pretty excited about all of the attention stablecoins are getting.&nbsp;



And he’s clearly not alone, based on Bitwise data. 



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Stablecoins are going parabolic. <a href="https://t.co/Fwj8b0Hhwg">pic.twitter.com/Fwj8b0Hhwg</a>&mdash; Bitwise (@BitwiseInvest) <a href="https://twitter.com/BitwiseInvest/status/1949871459570008553?ref_src=twsrc%5Etfw">July 28, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“You&#8217;re seeing that this is an innovation that really has legs,” Roos added. Conduit, a stablecoin infrastructure firm, is one of Core’s portfolio companies.&nbsp;



I asked him if he thought that everyone and their mother would launch stablecoins post-GENIUS, because we’ve already heard from a slew of interested firms, <a href="https://www.reuters.com/legal/government/interactive-brokers-considers-launching-new-stablecoin-customers-2025-07-28/">including Interactive Brokers</a>.



“It&#8217;s not going to be like thousands of stablecoins out there, but I do think there will be — call it a dozen — and it&#8217;ll be led by massive organizations that have the power to do so,” he said. Not every company has the brand power to launch its own stablecoin, he added.&nbsp;



He doesn’t think we’ll see something like Zelle but for stablecoins, “in terms of banks just kind of taking over the one use case.”



“I think we&#8217;ve seen, between Walmart and Amazon, you know, some Fortune 500’s that are looking at the ability to create this kind of closed-loop financial payment system in a way they weren&#8217;t able to do previously, and it gives them a lot of benefits to bypass the system and save a lot of dollars that they&#8217;re spending in interchange,” he continued.&nbsp;



This, Roos noted, makes a great case for digital wallets as well, which makes projects building wallets compelling.&nbsp;



“I think there still is a lack of consumer-friendly user interfaces in the crypto world…There is consumer education that&#8217;s typically needed in order to use digital wallets, and so I&#8217;m still in search of digital wallet unit interfaces that have usability and have friendly interfaces for the non-crypto-native users, because at the end of the day, the mass market will struggle to use what is currently the infrastructure that we built out today,” he said.&nbsp;



But he’s also interested in digital identity because, “as more and more companies [benefit from] your data, you want to be able to control what is in your wallet, and there needs to be more security around the identity of your wallet. And so I think there will be a platform that exists and a protocol that exists that creates this consumer-centric identity,” Roos added.&nbsp;



And there’s your food for thought today.



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Empire Newsletter

Not every firm has the brand power to launch a stablecoin: Core VC

This is a segment from The Breakdown newsletter. To read more editions, <a href="https://blockworks.co/brand/the-breakdown">subscribe</a>.



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“It&#8217;s like heroin: You do a little and you want a little bit more.”&nbsp;



— Jim Sinegal on the danger of raising prices
</blockquote>



The Monday after meeting Jim Sinegal for coffee in 2001, Jeff Bezos informed his top executives that, going forward, Amazon would model itself on the price-obsessed retailer that Sinegal had built: Costco.&nbsp;



Like Costco, Amazon had always promised low prices, but unlike Costco, it hadn&#8217;t always delivered. There were plenty of deals to be had at Amazon.com, but they weren’t always the best deals.



After meeting Sinegal, Bezos made it his mission to change that.&nbsp;



“There are two kinds of companies,” he told his executive team, “those that work to try to charge more and those that work to charge less. We will be the second.”



Bezos found Sinegal inspirational because keeping prices low at Costco had become, in Charlie Munger’s words, “almost a religious duty.”



“When other companies find ways to save money, they turn it into profit,” Munger explained. But when Costco finds ways to save money, they pass it on to customers.



Another prominent Costco investor, Nick Sleep, described this as “scale efficiencies shared.”&nbsp;



“Savings achieved through purchasing or scale are returned to the customer in the form of lower prices, which in turn encourages growth and extends scale advantages.”



Or, as Sam Walton put it, “keep costs low and pass the savings on to customers.”



It’s not charity, of course. “You can generate far more [profit] at a cheaper retail price than you would have by attempting to sell the item at a higher price,” Walton explained.



This philosophy of passing all savings on to customers is what turned Costco and Walmart into what Nick Sleep called “retail’s version of a perpetual motion machine.”



It takes a near obsession with low prices to become that.



Sinegal was so committed to keeping prices low that when a new CEO suggested raising the $1.50 price of Costco’s hot dog and soda combo (which was being sold at a loss), Sinegal shot back: “If you raise the effing hot dog, I will kill you. Figure it out.”



They did figure it out — by building a factory to make the hot dogs themselves.



As a result, the price of a hot dog and soda at Costco hasn’t changed since 1984.



Bezos was similarly obsessed with prices.



Soon after his meeting with Sinegal, Amazon began scraping competitors’ websites in search of any product offered anywhere for less than it was on Amazon.com.



When it found one, Amazon’s website automatically matched it.



If that meant selling something for less than it cost them to procure it, so be it.&nbsp;



Amazon not only passed efficiency gains and cost savings on to customers, it sold products at a loss to force itself to get more efficient and find more cost savings.



It’s not the only way to run a business, of course.



Luxury goods makers like <a href="https://www.google.com/search?client=safari&amp;sca_esv=97ba584d5f1b9119&amp;rls=en&amp;q=Herm%C3%A8s&amp;si=AMgyJEv4SzCgky5yjH-2ngoVwLJNIjQ20h2ebpIlCJ5wxSO-Qx_2EPeWqq0TYK-Xm1muFNvu1f6ywfB6ehtxTtb715Q2lvCODiVz61pzQ_Be_Axg4xTi0jMmUdQ38421Ng70QptUnA9x&amp;sa=X&amp;ved=2ahUKEwjW3MPlkeCOAxUzJNAFHUuoM_IQ_coHegQIGhAE&amp;ictx=0">Hermès</a> keep prices artificially high to create a sense of exclusivity, for example, and Nvidia prioritizes sky-high profit margins so it can plow the profits back into R&amp;D.



It isn’t always a good way to run a business, either.



Companies like WebVan and MoviePass prioritized low prices, but failed because they couldn&#8217;t find enough efficiencies or cost savings to make the prices sustainable.



(MoviePass is now trying again with higher prices.)



Even McDonald’s, famous for its meal deals, has <a href="https://www.wsj.com/business/mcdonalds-value-inflation-fast-food-38611481?gaa_at=eafs&amp;gaa_n=ASWzDAhGtk_GbUniCuqsA1L_pwpFtFDgIvJXEkpnWcail_XP0UJWFhGwCbzvIsPz_nY%3D&amp;gaa_ts=68877bd6&amp;gaa_sig=rwDgMCmFJp4Nz-Jy4IDBdvsR0XcyFhaAKPFSqwY2kcUVgGHWwI1RWQ74ebX3tJv1yFHgMyrj-VaPhcevl6bfcQ%3D%3D">recently struggled</a> to keep prices low enough to maintain its reputation for value.&nbsp;



One way to frame this dynamic is that some companies choose to have low margins (as part of a business strategy), while others are forced to have low margins (because they&#8217;re in a bad business).



As a rule of thumb, you want to invest in companies that have low margins by choice and not by necessity.



That might be a good way to think about layer-one blockchains, as well.



<h2 class="wp-block-heading">If you raise the effing MEV…</h2>



It’s not particularly expensive to create blockspace, so there’s no obvious reason why blockchains should have pricing power.



Kyle Samani, for example, <a href="https://youtu.be/qZq6bxfVQBE?si=ZcEuIjrVC-7JtUvC&amp;utm_source=mail.blockworks.com&amp;utm_medium=referral&amp;utm_campaign=crypto-s-enduring-mystery-why-l1-blockchains-have-value">thinks</a> blockchain fees will ultimately be close enough to zero that maximal extractable value (MEV) will become the sole reason layer-1 blockchain tokens have value.



MEV is the profit earned by validators who have the right to order the transactions in any given block, and on Solana, virtually all MEV is captured with software that’s created by Jito Labs.



Validators run Jito’s software to optimize MEV extraction and to share those profits with the SOL holders who’ve staked their tokens with them.



Now, however, a new Jito processing system — the Block Assembly Marketplace (or BAM) — will shift some MEV capture from the Solana blockchain to the applications running on top of it.



To me, this sounds a lot like Costco choosing to forgo profits in order to pass efficiency gains through to customers.



“BAM could lead to a reduction in topline revenue for the Jito DAO and SOL token holders,” <a href="https://x.com/0xcarlosg">Carlos Gonzalez Campo</a> wrote in a <a href="https://app.blockworksresearch.com/flashnotes/jito-bam-near-term-headwinds-for-sol-and-jto">recent report</a> for Blockworks Research.



Even in an asset class that doesn’t worry much about revenue, this should probably give token holders pause: “The shift to app-specific sequencing,” the report continues, “raises questions about the economics of the network.”



But Campo believes this is ultimately for the best: “By enabling apps to internalize transaction sequencing, Jito is acting as a good steward for the [Solana] network, despite forgoing meaningful incremental revenue in the short- to medium-term.”



He still expects Solana’s revenue to rise over the next year because “the increase in aggregate demand” should offset lower fees per transaction.



But this appears to be a defensive measure: “A significant motivator behind BAM is that Solana is losing the perps race to Hyperliquid.”



Sinegal might not be impressed. Adopting the Costco model would mean relentlessly pursuing efficiencies and then passing the savings through to customers as a matter of course, not just in response to a new competitive threat.



Sam Walton preached “everyday low prices,” regardless of what the competition was doing.



But if lowering fees at the expense of short-term profits becomes part of Solana’s culture, it could work out well for token holders. An investment portfolio of just Walmart, Costco and Amazon would have outperformed just about everything over the past 30 years or so.



Their “shared efficiencies” business model is not for everyone, however, because selling hot dog combos for $1.50 is a tough business.



And what’s made Costco great isn’t just that it’s managed it — it’s that it chose to.



If Solana is also a business, is it the kind that can choose to sacrifice profitability?&nbsp;



Or is it the kind that has to?



We might soon find out.



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What blockchain investors can learn from Costco

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



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For some time now, Solana&#8217;s pitch <a href="https://www.solanaroadmap.com">has hinged</a> on the levers of bandwidth and latency.



However, as we&#8217;ve seen from the limitations of high-frequency trading systems and the often uneven performance of existing onchain order books, high throughput and sub-second finality alone are likely insufficient to support the future of global markets.



While that may sound counterintuitive for a chain built on speed, it&#8217;s now emerging as the core thesis of a new, community-authored roadmap that lays out how Solana can become the backbone for internet capital markets.



Released last week, this <a href="https://www.anza.xyz/blog/the-internet-capital-markets-roadmap">new roadmap</a> was co-authored by Anatoly Yakovenko (Solana Labs), Max Resnick (Anza), Lucas Bruder (Jito Labs), Austin Federa (DoubleZero), Chris Heaney (Drift) and Kyle Samani (Multicoin Capital).



They argue that in addition to solving for bandwidth and latency, the network <a href="https://x.com/solana/status/1948432399333044621">must also account </a>for market microstructure.



Solana wants to be the best place to build — not just for liquidity and scale, but for custom markets themselves. To do that, it needs to let applications control the rules of their own transaction sequencing.



The roadmap <a href="https://x.com/anza_xyz/status/1948408290112889240">proposes</a> a shift toward application-controlled execution (ACE), a model that would give smart contracts granular control over how trades are ordered and settled.



ACE breaks with the single-leader norm in favor of programmable execution environments and multiple concurrent validators.



Combined with infrastructure upgrades like <a href="https://blockworks.co/news/jito-upgrade-block-assembly-marketplace">Jito&#8217;s Block Assembly Marketplace</a> (BAM), the <a href="https://blockworks.co/news/solana-exec-founds-internet-depin">DoubleZero</a> fiber network and the upcoming <a href="https://blockworks.co/news/solana-alpenglow-next-gen-consensus-layer-speed">Alpenglow consensus engine</a>, Solana apps will soon be able to define bespoke order-matching rules designed to rival Wall Street systems.



BAM, rolling out in late July, <a href="https://x.com/jito_sol/status/1947293546182025551">enables</a> apps to integrate custom sequencing logic — effectively delivering ACE today via a decentralized, TEE-powered network. It turns Solana blockspace into a programmable sandbox where developers can ship tailored order flow logic without forking clients or cutting BD deals with validators.



DoubleZero, currently <a href="https://x.com/doublezero/status/1947730722380227061">live on testnet</a> with over 100 validators and 3% of mainnet stake, reduces latency and jitter across the network by replacing the public internet with a multicast fiber backbone. It&#8217;s expected to go live on mainnet in mid-September.



Alpenglow, currently slated for late 2025 or early 2026, <a href="https://x.com/anza_xyz/status/1924491939040133515">finalizes</a> blocks in ~150ms and simplifies Solana&#8217;s consensus logic to support faster execution and future features, such as MCL and async program execution (APE).



By these <a href="https://www.youtube.com/watch?v=_F6YKiC1MI4">powers combined</a> — along with MCL, which introduces multiple simultaneous leaders — developers will be able to build high-performance markets without relying on good validator behavior or suffering from the single-leader bottleneck.



If successfully executed, the post’s authors believe that Solana apps will offer fairer, faster and more transparent trading, closer to a CEX experience but without compromising decentralization. Devs will unlock permissionless experimentation with tools like speed bumps, quote protection and order privacy. And for institutions, it will open the door to globally synchronized, composable liquidity onchain.



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blockchain

Solana roadmap targets market microstructure with ACE

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Friday’s the deadline for most countries to negotiate new trade agreements with the US.



President Trump on Sunday reached a deal with the European Union that would establish a 15% levy on imports to the US. It’s less than the original rate proposed on Liberation Day (20%) and half of what Trump threatened the EU with earlier this month (30%).&nbsp;



The rate is higher than the 10% baseline most imports to the US have had since the spring, when the White House first said it would delay higher rates.&nbsp;



Additionally, the EU will purchase $750 billion in US energy and invest $600 billion in the US by 2028, the White House added in a Monday statement. The feasibility of the investment, however, is being <a href="https://www.politico.eu/article/eus-600bn-us-investment-will-come-exclusively-from-private-sector/">questioned</a>.&nbsp;



Investor reaction to the deal was subdued, but still positive. Futures moved higher on Sunday night, and the S&amp;P 500 and Nasdaq Composite indexes were trading in the green for the first half of Monday’s session. Both had dipped lower by 2 p.m. ET.&nbsp;



Economists largely agree that the deal is a good thing — or, at the very least, it’s better than nothing. An all-out trade war between the US and EU would have been a true worst-case scenario, so the agreement brings a sense of relief to both sides. That said, the details are not exactly being universally celebrated. Plus, the details are still a bit murky.



Some “strategic products” are exempt from the 15% tax (i.e. aircrafts, select chemicals and agricultural products and other raw materials). What’s currently not exempt? Luxury goods. LVMH shares were trading 2% lower at the time of writing.



European Commission President Ursula von der Leyen said Monday that more items could be added to the exemption list should negotiations continue.&nbsp;



The White House called the agreement a &#8220;colossal deal” that helps “liberate America from unfair trade practices.” Other countries involved are less enthused. Just ask French Prime Minister François Bayrou.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcKLFLoA8yv-8XGjgSoKk4KI-4dOASWvmut2o963PN2ctez3hU0hI0u3_6h0Nr-V6KfrzBPJ7bIAab44r-FSJjHB-qTT_ZiIyq91u3rfAM-vxJHVHlnFVfiR9w-zdp_UfngCI1f?key=ht3xDkP_szEI-Tjka4S--w" alt=""/></figure>



It’s a busy day for the president, and not just because of tariffs. He’s currently in Scotland meeting with British Prime Minister Keir Starmer.&nbsp;



The two are discussing trade and the humanitarian crisis in Gaza, per the White House. Trump told reporters Monday morning that the US will offer aid to Gaza, saying there is “real starvation” in the region.&nbsp;



And let’s not forget about China. Officials have a little longer to ink a deal, but not much. Higher tariffs on both Chinese and American goods will go into effect on Aug. 12.&nbsp;



Chinese and American officials are meeting in Sweden today to discuss how to proceed. More on that (and future trade developments) later this week.&nbsp;



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Donald Trump

US inks trade deal with EU days before deadline

Donovan Choy

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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The last time Zora was in the <a href="https://blockworks-research.beehiiv.com/p/vitalik-s-new-l1-scaling-plan-456481d76685267c">limelight</a>, the protocol was seeing an all time-high of 20-25k tokens created daily.



That was in April, just before the ZORA token-generation event — launching a “<a href="https://support.zora.co/en/articles/4796161">for fun only</a>” token that was universally panned by the Crypto Twitter commentariat.



The ZORA token dumped immediately on launch, daily tokens created cratered to less than 5k, and price had largely stagnated until last week.&nbsp;



Now it’s back. ZORA is today trading 227% up on the week, and its mobile app is <a href="https://x.com/js_horne/status/1949570371285315677">climbing</a> ranks on the iOS App Store.



Nearly 40k tokens were created yesterday, the highest in the protocol’s history. About 15-50% of the tokens (denoted in blue below) are coming from Base App, Coinbase’s newly rebranded wallet app.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdzj-ZxXpfV5FyQ_euqvhAKuja2UcuaC9xRLXZGhz2b9PsOcJ7VBWCgzqqdjLzY-EkERBH8czbrS0S0JDuBL1UmgzBJyk2Lz3B2_X8SVuNwLaAqPNXoLqhHUZmzFo69ie6DoV2GjA?key=MktSgORwkkHHEzwd57U5Fw" alt=""/></figure>



<h2 class="wp-block-heading">The economics of Zora</h2>



Zora is not a difficult product to understand.



It’s pump.fun with a social network. Or think Instagram, but tokenized into oblivion.



Here’s roughly how it works:



You are a social media influencer, and you post cool stuff on Zora. Each of your posts are tokenized as an ERC-20 token with a 1 billion supply. You receive 1% (10 million).



People think your post will go viral, so they buy it (via Uniswap under the hood), and you earn a 1% cut of the trading fee paid in ZORA. That’s the first revenue stream for creators.



These trades are paired against your “<a href="https://support.zora.co/en/articles/6338497">Creator Coin</a>,” which is basically your profile tokenized when you sign up on Zora. Your username is the ticker.



Every Creator Coin has a 1 billion supply, 50% of which is immediately tradable.&nbsp;



The other half vests linearly to you over five years. But here’s the catch: It only pays out to you when someone really likes you and trades your Creator Coin. That’s the second revenue stream for creators.



You quickly see how the incentives line up.&nbsp;



Make cool content, people buy your tokenized posts, you earn 1% trading fees. Become super popular, people speculate on your Creator Coin, your market cap grows, you get paid out more.



Most Zora trading volume is coming from Creator Coins — about $33 million yesterday.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc_ctetBNrrIMrPlYZXRjDABvK3h7Sa0XJ6MRsdzblT-qxzWF2SNmQ0TGStzh-ocAXRZFGhVG4m-2wWbYzet2MUk7pYRWyw5xr8F6jlB_AblHSoTUo2CBlS9Jtwje7flN3Au8NNdA?key=MktSgORwkkHHEzwd57U5Fw" alt=""/></figure>



I imagine that is quite lucrative for content creators.



Consider <a href="https://dexscreener.com/base/0x80a46421e3edbd8a25d623859ea875c344ca4427eb87605eae626bcf8a03a413">JACOB</a>, the Creator Coin of Zora co-founder Jacob Horne. It’s the second-largest Creator Coin, with a $6.2 million market cap today.



At a linear vesting rate of 500 million tokens over five years, that’s 273,973 tokens vested a day. Or about $3,397 in daily value at a $6.2 million market cap.



Contrast that with a typical Instagram creator who takes years to build a 50k following, and gets paid something like $100-$500 for a sponsored post, based on <a href="https://www.shopify.com/sg/blog/influencer-pricing#">Shopify’s</a> estimates.



Zora draws a lot of <a href="https://x.com/aeyakovenko/status/1949535075118494008">comparisons</a> to Pump for the way that it both attracts speculators to trade on low-cap tokens.



The key distinction is that Zora is attempting to anchor this activity to a native social network, betting that a durable network effect will sustain engagement.&nbsp;



(Pump appears to be moving in a similar direction with Twitch‑style livestreaming.)



That may explain Zora’s decision to deploy on Base, despite having already developed its own OP-stack L2 chain in 2023.



Zora’s revenue-sharing tokenomics is undoubtedly superior to traditional social networks. But without a genuinely organic social graph — and that is the most daunting task of them all — it’s hard to see Zora maintaining its momentum.



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<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

CrossCROSS

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