Epic Cash

David Canellis

Coinbase stock is on a tear.&nbsp;



Its share price has nearly quadrupled this year, and funds revolving around one particular insider have played the market almost perfectly. Along the way, trusts and funds linked to Coinbase and Paradigm co-founder Fred Ehrsam have so far sold the top, bought the bottom and even taken profits.



Ehrsam initially <a href="https://www.sec.gov/Archives/edgar/data/1679788/000162828021003168/coinbaseglobalincs-1.htm">disclosed</a> ownership of 17.7 million shares leading up to Coinbase’s direct listing in April 2021, split across five entities.



Ehrsam, through a trust in his name, initially sold a little more than 1.4 million <a href="http://blockworks.co/tag/coinbase">Coinbase</a> shares in the months following the company’s direct listing.



The trust netted $472 million with those trades, averaged out to $328.86 per share. <a href="https://blockworks.co/price/coin">COIN</a> would go on to fall 90% from there, briefly sinking below $32 at the start of 2023.



Last week, the trust <a href="http://www.sec.gov/Archives/edgar/data/1679788/000120919123056654/xslF345X03/doc4.xml">sold</a> another 81,530 shares for $106.94 a pop, raking in $8.7 million. Forbes <a href="https://www.forbes.com/profile/fred-ehrsam/">puts</a> Ehrsam’s personal fortune at $1.8 billion.&nbsp;



Coinbase stock sits at about $128 today. What was an $8 billion crypto company in January is now worth more than $30 billion, trailing Spotify but slightly ahead of vaccine-maker Moderna.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/15924739/embed#?secret=U7c85I4sAz" data-secret="U7c85I4sAz" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Diamonds are buys, circles are sales</figcaption></figure>



Meanwhile, <a href="https://blockworks.co/tag/paradigm">Paradigm</a> has been buying (as has board member and <a href="https://blockworks.co/news/shopify-ceo-spends-3m-on-coinbase-stock-in-2-months">Shopify CEO Tobias Lutke</a>).



Paradigm One LP, of which 35-year-old <a href="https://blockworks.co/tag/fred-ehrsam">Ehrsam</a> was a managing partner until he <a href="https://www.bloomberg.com/news/articles/2023-10-24/paradigm-s-ehrsam-relinquishes-managing-partner-role-at-crypto-focused-vc-firm#xj4y7vzkg">stepped</a> back last month, scooped up more than 1.2 million Coinbase shares across trades made in May 2022 and May 2023.&nbsp;



That’s nearly the same amount of shares that Ehrsam’s trust sold following Coinbase’s direct listing. Paradigm One paid under $77 million for the haul, buying at $62.73 per share on average.&nbsp;



Those shares are currently worth almost $157 million, paper gains of more than 100%. The fund hasn’t yet sold any Coinbase stock, per OpenInsider which compiles US Securities and Exchange Commission filings.&nbsp;



<h2 class="wp-block-heading">Brian Armstrong has sold 2% of his Coinbase stake</h2>



It’s worth stressing that the buying and selling has been split between Paradigm One and Ehrsam’s trust — technically separate entities sold the top, bought the bottom and took profits.&nbsp;



(Most of Ehrsam’s transactions were in line with trading plans lodged with the SEC ahead of time.)



But overall per his disclosures, Ehrsam entities now own a little more than 17.4 million Coinbase shares — almost 99% of his share count before offloading nearly half-a-billion dollars in stock after Coinbase went public. And he has a cool $400 million to boot.



All this while his Coinbase co-founder Brian Armstrong has been <a href="https://blockworks.co/news/coinbase-ceo-stocks-stake">busy fulfilling his pledge</a> to sell 2% of his COIN stake to fund other ventures, including decentralized science startup ResearchHub — which helps <a href="https://blockworks.co/news/brian-armstrong-tokens-for-science">pay researchers in cryptocurrency to do science</a> — and life extension play NewLimit.



<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">I&#39;m passionate about accelerating science and tech to help solve some of the biggest challenges in the world. To further this, I&#39;m planning to sell about 2% of my Coinbase holdings over the next year to fund scientific research and companies like <a href="https://twitter.com/newlimit?ref_src=twsrc%5Etfw">@newlimit</a> + <a href="https://twitter.com/ResearchHub?ref_src=twsrc%5Etfw">@researchhub</a>&mdash; Brian Armstrong 🛡️ (@brian_armstrong) <a href="https://twitter.com/brian_armstrong/status/1581099147855155200?ref_src=twsrc%5Etfw">October 15, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



As of last week, <a href="https://blockworks.co/tag/brian-armstrong">Armstrong</a> has sold nearly 794,000 Coinbase shares since his initial tweet — more than 2% of his COIN stake disclosed to the <a href="https://blockworks.co/tag/sec">SEC</a> in 2021.&nbsp;



Armstrong pulled in $53.7 million with those trades, which averaged out to $67.58 per share. Had he sold the full batch today, Armstrong could’ve made as much as $101 million.



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Coinbase co-founder’s funds are really good at trading Coinbase stock

Ogle

As I was being escorted through the circuitous halls of Mar-a-Lago last weekend, I found myself questioning if I shouldn’t immediately turn around and leave. I had just arrived at the Trump NFT collection gala in West Palm Beach, Florida, with none other than Donald Trump himself in attendance.



It was both an honor and an embarrassment to be there, and I wasn’t sure how exactly I should react. Had my grandfather not been with me (I had brought him and a friend as my guests, both ardent Trump supporters), I probably would have left. But his excitement was palpable, so I continued the long walk to the final resting place of the evening, the famous gilded ballroom.



I’m no fan of Donald Trump. I’ve never loved his bombast, I disagreed with the majority of his decisions as US president, and, as a business owner, I don’t appreciate the ways he supposedly treats those he works with.&nbsp;



But despite these feelings, I spent almost $20,000 purchasing NFTs that directly supported him. It was a classic case of separating the art from the artist — only, in this situation, the “art” of the NFTs was less about aesthetic and more about opportunity to profit during a bear market.



I knew that if Donald Trump was involved in NFTs, they would probably be a great investment— as long as I timed things appropriately. In the long-run, his ventures don’t seem to do very well (Trump Steaks, Trump Shuttle and Trump University being notable failures). But, if one times the entry and exit well, his businesses in the past have done just fine.



I kept this in mind when purchasing the NFTs: Trump will probably pump the prices, so I will sell into the hype. Essentially, I’d use his marketing prowess to enrich myself. The art was unremarkable, the creator controversial, but the potential for profit was undeniable, so I made the decision to purchase.



It paid off.&nbsp;



Of the 200 NFTs I bought, I was able to recoup more than the costs by <a href="https://twitter.com/cryptogle/status/1604268466227273730">selling</a> just one rare NFT. Besides that, I won a round of four of golf at Mar-a-Lago, several copies of his new book and sold many of the NFTs to other collectors during the boom following the release.



But throughout it all, I couldn’t shake the moral quandary going through my head.&nbsp;



While I was happy with the ROI, participating in the project prompted me to deeply reflect on the ethical dimensions of such decisions. When my conservative-leaning family asked me “what was your best investment of the year?” during the holidays, I had to sheepishly admit it was an NFT collection released by a man I had spent years trying to convince them to reconsider their love for.



Even so, attending the gala wasn’t just about political alignment; it was more about familial bonds and an attempt to step out of my “elite bubble.” I justified going to the gala by the fact that my grandfather (who is a staunch Trump supporter) would be able to meet one of his idols. It transformed the event into a generational bridge where our political divides were less central than our familial love.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="2048" height="1542" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=1024&amp;h=1024" alt="" class="wp-image-74568" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=341 341w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=347 347w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=291 291w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/trumpnftgala.jpg?w=80 80w" sizes="(max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">Trump NFT gala dinner by Ogle</figcaption></figure>



Sitting down for dinner in the palatial ballroom, I found myself impressed by the refined elegance that surrounded me. They served a three-course meal and seemed to spare no expense. I could imagine the impact the ballroom itself would have made in distinguished meetings of years past. Witnessing the joy of my grandfather in this setting, and especially when he was able to speak with and shake Trump’s hand, completely justified the decision to come.



Read more from our opinion section: <a href="https://blockworks.co/news/crypto-subculture-x-reliance">If we want crypto to succeed, we’ve got to give X the boot</a>



While seeing President Trump speak in person didn&#8217;t sway my stance on his international politics, the crowd’s excitement at his words was enjoyable to experience. I didn’t agree with the guy, but being around excited and happy people is infectious. However, when I posted a picture from the gala to Twitter, the impact it had on my followers was immediate: They decreased in real-time.&nbsp;



Clearly, my presence at the gala was perceived as a deliberate political statement by some, and once again I felt uncomfortable being there.



But I believe that Trump’s involvement in NFTs is a net positive for the industry. It signifies at least a soft endorsement of the space (which we rarely receive from politicians) and serves as a potential catalyst for growth, introducing a previously untapped demographic to the realm of digital assets.&nbsp;



My grandfather&#8217;s newfound curiosity about cryptocurrency and NFTs during and after the gala is testament to this notion. His questions were continuous and his curiosity obvious — and it ended in him deciding it may be wise to invest some of his own money into the space when he’s able.



What started as a simple purchase of NFTs led me to deep assessments of investment ethics, family bonds and political neutrality. It required me to consider a fundamental question: Can one participate in opportunities that conflict with personal beliefs without losing one’s moral compass, or is the act of participation itself an endorsement of those beliefs?&nbsp;



I’m not sure that I have an answer for these questions yet, but I have to thank Donald Trump for indirectly causing me to confront these complexities head-on. The experience stands as a reminder that life&#8217;s most profound lessons can stem from the simplest of actions, often leading us down paths we never anticipated.



One thing I am sure of though: The Trump steak was the best I’ve ever had.



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


<div class="wp-block-post-author-biography">Ogle has been an active investor in cryptocurrencies since 2012. He stays busy building different products to benefit the space, including his upcoming networking marketplace Shibuya. He is also building a new blockchain called Glue which focuses on addressing security risks and lack of good user experience in the crypto space. In the meantime, he chases down cybersecurity criminals via his cybersecurity company, Ogle Security Group.</div>


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I attended Trump’s NFT gala. Here’s why it matters

Ben Strack

Crypto miner Hive Digital Technologies is repurposing a Sweden data center formerly used by the European Union as a prototype to test energy efficiency and sustainability.



The facility is set to house Hive’s ASIC servers to increase the company’s mining capacity by roughly 300 petahash, Hive Executive Chairman Frank Holmes told Blockworks.&nbsp;&nbsp;



It was previously constructed as part of EU Horizon 2020 — a research and innovation funding program that ran from 2014 to 2020 with a budget of roughly 80 billion euros ($88 billion). Horizon Europe has since <a href="https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-open-calls/horizon-europe_en">succeeded</a> that program.&nbsp;



The goal of what was known as the Boden Type Data Center was “to build the prototype of the most energy and cost-efficient data [center] in the world,” according to a project <a href="https://cordis.europa.eu/project/id/768875">brief</a>.



The prototype comprised a fresh air cooling system and evaporative cooler apparatus “using solely harmonic free renewable energy,” it adds.&nbsp;



Read more: <a href="https://blockworks.co/news/cambridge-bitcoin-electricity-consumption">Why did Cambridge revise its bitcoin electricity consumption index?</a>



Johanna Thörnblad, president of Hive’s Swedish operations, confirmed to Blockworks this former prototype facility is the data center Hive has purchased.&nbsp;



“This data center was initially built together with the Research Institute of Sweden to address the need for more energy efficient data centers,” she told Blockworks in an email. “It has since been expanded to include four additional buildings using low-carbon and locally sourced building materials.”&nbsp;



The site is near <a href="http://blockworks.co/tag/hive">Hive’s</a> existing Boden facility and no more than 500 meters from the city’s hydro plant, Thörnblad said. The data center runs on renewable hydro energy and relies on air and evaporative cooling technologies.



“Hive has always had a strong focus on sustainability and this data center fits very well into our strategy,” Thörnblad added.



HIVE acquired the property with a payment structure that includes up to $750,000 in cash and up to $1.5 million in common shares of the company. According to an <a href="https://hivedigitaltechnologies.com/news/hive-digital-expands-global-presence-with-the-acquisition-of-data-center-facility-located-in-sweden/">announcement</a> from the company, the common shares portion is to be paid in two installments, with the share price determined by specific conditions related to the TSX Venture Exchange&#8217;s closing prices.



Holmes noted the data center was most recently in private hands, declining to disclose the owner. The company, which was involved in high-performance computing, sought to sell ahead of the <a href="https://blockworks.co/tag/bitcoin-halving">bitcoin halving</a> slated for April — an event expected to put financial pressure on segment players.&nbsp;



Read more: <a href="https://blockworks.co/news/anniversary-of-2016-btc-halving">At anniversary of 2016 BTC halving, a look to the next one</a>



The purchase comes just months after the company formerly known as Hive Blockchain Technologies changed its name as it <a href="https://blockworks.co/news/hive-blockchain-ai-rebrand">shifted its focus to supporting the growth of artificial intelligence</a>.



Holmes said the Vancouver-based company looks to continue expanding in British Columbia, Manitoba, Ontario and Quebec. Competitors such as Marathon Digital have recently <a href="https://blockworks.co/news/marathon-mining-bitcoin-halving">shared plans to continue diversifying geographically</a>.&nbsp;



“Buying this facility right beside us is just another long-term vision of the great digital transformation that we’re putting long-term assets on our balance sheet,” Holmes said.



Updated Nov. 28, 2023 at 1:40 pm ET: Modified headline to emphasize Hive&#8217;s bitcoin mining functions.



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Bitcoin miner repurposes former sustainability-focused EU data center prototype

Jack Kubinec

Circle has moved its cross-chain transfer protocol (CCTP) to mainnet on Noble, allowing USDC to be natively minted within Cosmos’ inter-blockchain communication protocol (IBC).



By facilitating easier cross-chain transactions, Circle seeks to improve the utility of USDC, potentially helping to break a prolonged slump in its market capitalization.



Noble joins the likes of Arbitrum, Avalanche, Base, Ethereum and Optimism in allowing native USDC minting via the CCTP. The CCTP is on Solana’s <a href="https://developers.circle.com/stablecoins/docs/cctp-getting-started">testnet</a>.



<a href="https://blockworks.co/tag/circle">Circle’s</a> cross-chain protocol <a href="https://www.circle.com/en/cross-chain-transfer-protocol">lets</a> users create Noble USDC that can be moved to other Cosmos apps like Osmosis or dYdX. The total <a href="https://www.mintscan.io/noble/assets">supply</a> of Noble USDC is already above $20 million, according to MintScan.



The CCTP employs a burn-and-mint mechanism to facilitate the native creation of USDC across different blockchains. In this process, USDC is removed from circulation on the source chain (burned) and then recreated (minted) on the destination chain, based on a verification (attestation) by Circle’s system.



This approach, focusing on direct asset transfer, stands in contrast to token bridging, where assets are locked on one chain in exchange for equivalent wrapped tokens on another. The direct burn-and-mint method has seemingly gained preference over time, particularly in light of <a href="https://blockworks.co/news/rethinking-interoperability-after-string-of-crypto-hacks">multiple high-profile hacks</a> associated with token bridging.



If users want to remove USDC from <a href="https://blockworks.co/tag/cosmos">Cosmos</a> through Circle’s protocol, they must go through Noble. Circle <a href="https://www.circle.com/en/usdc-multichain/noble#:~:text=Noble%20is%20an%20appchain%20purpose,is%20simple%2C%20safe%20and%20seamless.">says</a> trying to move funds to a Circle account from any other app in the IBC “could result in a loss of funds.”



USDC’s market cap is mired in over a year of decline <a href="https://defillama.com/stablecoin/usd-coin">since</a> its $55 billion peak in mid-2022. USDC’s current market cap is $23.68 billion, according to DeFiLlama. Tether (<a href="https://blockworks.co/price/usdt">USDT</a>), the only stablecoin larger than USDC, has <a href="https://defillama.com/stablecoin/tether">grown</a> from $66 billion to $88 billion over the same time frame.&nbsp;



As a centralized company, Circle’s investment in a permissionless cross-chain protocol joins a broader trend of centralized crypto projects <a href="https://blockworks.co/news/cefi-making-defi-leap">bolstering their decentralized finance (DeFi) offerings</a>. 



According to a recent <a href="https://www.bloomberg.com/news/articles/2023-11-07/stablecoin-issuer-circle-internet-said-to-consider-2024-ipo">report</a> from Bloomberg, Circle is considering an initial public offering in early 2024.



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Circle moves native USDC offering to Cosmos mainnet

Casey Wagner

Cryptos and equities picked up steam Tuesday after an uneventful Monday, setting up traders for a positive end to a strong month.&nbsp;



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>) were in the green time of publication, both posting gains of around 1.3% and 0.9%, respectively. The S&amp;P 500 and Nasdaq Composite Indexes similarly clocked modest moves, with both up around 0.4%.&nbsp;



Bitcoin has gained close to 9% since the start of the month. The largest cryptocurrency <a href="https://blockworks.co/news/bitcoin-etf-grayscale-sec">rallied more than 5%</a> in the first ten days of November and has spent the past couple weeks jumping between $35,000 and $37,000. In 2022, amid the aftermath of FTX’s bankruptcy, bitcoin closed out November 16% lower.&nbsp;



Ether also saw its biggest moves early in the month, rallying close to 15% in the first nine days of November before paring gains to trade around 10% higher on the month as of Tuesday.&nbsp;



Better-than-expected inflation data pushed cryptos higher this month, analysts from Kaiko Research said. Last week’s news on <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">Binance’s historic $4.3 billion settlement</a> barely <a href="https://blockworks.co/news/binance-news-crypto-rally%5C">tipped the needle for cryptos</a>, in sharp contrast to what the FTX news from one year ago did to markets, analysts added.&nbsp;



“From an outsider’s perspective, the settlement proved grim, but within the industry, there was a sigh of relief knowing that Binance is still able to operate, albeit with increased restrictions and the dismissal of its CEO,” Kaiko researchers wrote in a Monday <a href="https://research.kaiko.com/insights/bitcoin-unbothered-by-binance-settlement">report</a>. “While the exchange reportedly saw outflows of over $1 billion, the immediate impact on volumes and liquidity was muted.”&nbsp;



Looking ahead, continued lower Treasury yields fuel traders’ risk-on attitudes, analysts say, but whether or not the trend is sustainable is up for discussion. Benchmark 10-year notes dropped to 4.35% Tuesday, down even further from Monday’s decline when they dipped from 4.47% to 4.39%. Still, a sustained reduction is unlikely, based on historical precedent, Nicolas Colas, co-founder of DataTrek Research said.&nbsp;



“Any substantial decline in nominal 10-year Treasury yields would have to come from lower real rates rather than reduced inflation expectations,” Colas said.&nbsp;



Since 2004, Colas said, only three conditions have led to real rates declining by 1% or more: recession, Federal Reserve bond buying, and the Fed changing its assessment of future interest rates.&nbsp;



“Since capital markets are not discounting a recession and the Fed is highly unlikely to change its current bond selling program, the only thing that will force real yields lower is a change in policymakers’ belief that ‘higher rates for longer’ is necessary to quell inflation,” Colas said.&nbsp; “As we get more data supporting the idea that inflation is continuing to decline, both bonds and stocks should rally further.”



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Traders ride risk-on sentiment to end November in the green

Macauley Peterson

Decentralization is a spectrum. After years of putting up with relatively centralized critical infrastructure in the node space, the industry is making progress towards achieving a more Web3-native vision.



Lava Network rolled out its Software Development Kit (SDK) Beta on Tuesday, turning the page to a new phase of its testnet. The project serves as a marketplace for high-performance, decentralized blockchain Remote Procedure Calls (RPC) and APIs.



RPC nodes are essential for users interacting with blockchains, but when offered by a few centralized companies, they present a single point of failure. They can also pose problems related to privacy, censorship and data accuracy.



Read more: <a href="https://blockworks.co/news/infura-decentralized-infrastructure-network">Consensys invites Big Tech to decentralized infrastructure network</a>



Unlike most testnets, Lava’s is already serving two hundred node providers, operating on their blockchain’s respective mainnets.



CEO Yair Cleper calls it “kind of Uber for nodes.”



So far, Lava has seen rapid organic growth of demand for the network to replace current public RPCs that are frequently run by ecosystems themselves.



“We call it an incentivized public RPC,” Cleper said, or IPRPC. “We are offering to our community — to our node runners — the option to join the IPRPC on its dedicated chain, and the ecosystem rewards them.”



The protocol, which is backed by leading crypto-native investors like Tribe Capital, Jump Capital, AlphaLab, Hashkey, and Alliance DAO, already supports 30 active <a href="https://allblocks.vercel.app/">chains</a>.



Lava Network itself is a modular layer built as a sovereign app-chain using the <a href="https://blockworks.co/tag/cosmos">Cosmos</a> SDK, and acts as a distribution channel for node providers. It automatically routes requests to the most optimal node available, according to quality of service score.



These scores, tallied by Lava based on latency, availability and “freshness” of the data, are what allows the network to feed reliable and fast data providers to developers and users. This is all done programmatically, based strictly on market forces rather than as a result of off-chain agreements.



The Lava chain tracks service scores and payouts distributed monthly, removing the need for locating nodes and contracting with them individually.



<h2 class="wp-block-heading">On a mission</h2>



Cleper and chief technology office Gil Binder both served in the Israeli army. Cleper is based in Tel Aviv, while Binder moved to New York about 5 years ago. The 2021 edition of the Solana Breakpoint conference was the pair’s first foray into crypto.



They observed shortcomings in infrastructure across the industry.



“There is a natural evolution in the way that the blockchain data is being consumed,” Cleper told Blockworks. “From the beginning — everyone running his own nodes — then going to the centralized provider; they really eliminate the barrier to consume, read, write data, but at the same time, introduce new problems.”



There have been efforts to decentralize the infrastructure stack, including <a href="https://blockworks.co/news/infura-decentralized-infrastructure-network">among the big centralized players</a>, but Lava’s approach to the problem is novel.



First, the Lava SDK is “a peer-to-peer communication protocol, straight from the browser,&nbsp;accessing only the top provider without any middle layer,” Cleper explained, sidestepping the drawbacks of the more centralized status quo.



Second, is a new blockchain primitive which Lava terms, “specs.”



<h2 class="wp-block-heading">Inspecting “specs”</h2>



The introduction of specs enables anyone to permissionlessly add support for new chains, APIs and data services to the network, significantly expanding Lava’s capabilities.



“Everyone can join lava, introduce their own specs and build it while supporting the new upcoming nascent chains,” Cleper said.



In a modular multichain world with potentially hundreds or thousands of app-chains and rollups, centralized node providers simply won’t be able to keep up, he said.



“And we thought, how do we harness the power of community to bring kind of an Amazon algorithm that automatically gives you the best provider constantly scoring the session, the service you give.”



The spec is analogous to categories of items in the Amazon store. Lava aggregates all providers adhering to a given spec, and its quality of service algorithm directly connects the user to the best available option.



To use another analogy, “a spec is like a menu at a restaurant,” Binder said. “It tells you what are the specifications, what data can you get, what&#8217;s the interface to getting the data.”



Node providers are like franchise owners of a restaurant chain with all the same dishes on the menu.



RPC nodes are only the first step, but Binder anticipates a flood of data APIs to use the network, providing structured, indexed data for all sorts of Web3 use cases. The team is in discussions with indexing providers such as <a href="https://subsquid.io/">Subsquid</a>.



Node providers, such as <a href="https://blockworks.co/tag/blockdaemon">Blockdaemon</a>, Chainstack and hundreds of others, get a pro-rated share of rewards based on quality of service. Lava facilitates reputation on-chain, based on verifiable data from the provider’s service.



“We use that reputation to increase how often a provider can get access to users,” Binder said. “It&#8217;s a market — for providers, for consumers, for champions — to bring in these opportunities and then have competition around quality, which results in better service in the end.”



It’s no longer necessary to make the case for decentralized infrastructure. “Everyone agrees with this message that decentralizing RPC, that&#8217;s the way to go, and now the question is executing the best platform that allows these providers to compete,” he said.



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Lava Network heats up the node landscape with market forces

Crypto infrastructure firm Fireblocks is the latest company aiming to ease institutional investors’ counterparty risk concerns following the collapse of centralized crypto giants like FTX.&nbsp;



Via a new product called Off Exchange, Fireblocks will let users lock funds in what it calls Collateral Vault Accounts (CVA), the company said Tuesday.&nbsp;



These accounts are on-chain multiparty computation (MPC) wallets that “programmatically lock and mirror assets” to the connected exchange, according to Stephen Richardson, Fireblocks’ managing director of financial markets.



Once traders transfer assets to a CVA, a credit is issued to the exchange. Crypto derivatives exchange Deribit is the first to integrate with the new offering.



Read more: <a href="https://blockworks.co/news/ftx-meltdown-timeline">FTX began to unravel one year ago today: A timeline</a>



&nbsp;The credit can then be used for spot, margin or derivatives trading activities, and settlement occurs in real-time and on-chain. Once the CVA is rebalanced, traders can withdraw their assets to another venue, counterparty or internal wallet.



“Because the MPC wallets are on-chain, exchanges have complete transparency to monitor and validate client collateral and enforce risk management without taking custody,” he told Blockworks. “This approach protects traders’ principals by enabling them to retain shared custody of their assets in a segregated MPC wallet, and mitigates risk of exposure of funds being commingled in a custodial account or misappropriated by an exchange.”



Some providers use custodial solutions that pool traders’ assets in a commingled account, Richardson noted. In those cases, he said, settlement occurs off-chain via a sub ledger, and exchanges are sometimes required to lock funds in a third-party cold storage solution.



Luuk Strijers, chief commercial officer of Deribit, said in a statement that <a href="https://blockworks.co/tag/fireblocks">Fireblocks’</a> approach is used “to reduce client capital deposited at exchanges while providing our business with greater liquidity and transparency.”&nbsp;&nbsp;



Fireblocks is not the only crypto player who has sought to mitigate counterparty risk after <a href="https://blockworks.co/tag/ftx">FTX</a> imploded last November. FTX founder Sam Bankman-Fried was <a href="https://blockworks.co/news/sam-bankman-fried-found-guilty">found guilty earlier this month</a> on charges including wire fraud, as well as conspiracy to commit fraud and conspiracy to commit money laundering.&nbsp;&nbsp;



More recently, the US Securities and Exchange Commission <a href="https://blockworks.co/news/kraken-commingle-customer-funds">alleged in a lawsuit that Kraken commingled customer crypto assets</a> with its own. The exchange said at the time: “We disagree with the SEC’s complaint against Kraken.”



Bitcoin asset management platform Onramp last month <a href="https://blockworks.co/news/bitgo-crypto-custody-investors">launched a multi-institution custody product</a> that divides key-holding responsibilities to three institutions. Two of the three keys are needed to move the funds at the direction of the end client.



Custodia Bank earlier this month <a href="https://blockworks.co/news/custodia-banking-bitcoin-custody">debuted a custody model</a> in which a customer delegates crypto storage to a custodian that stores the assets on-chain.



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Fireblocks debuts latest tool to combat crypto counterparty risk

Bessie Liu

Code, a Solana-based crypto wallet, has fully open-sourced its code.



This move will make Code one of the first Solana-based applications to completely open-source its application using the MIT License.



The MIT License enables users to copy software code and its associated files “as is,” meaning that anyone can now use, copy, modify and distribute Code’s software without limitation.&nbsp;



Tanner Philp, the chief operating officer of Code, told Blockworks in an interview that the MIT license is one of the most permissive licenses today.



“The Bitcoin code base is also an <a href="https://opensource.org/license/mit/">MIT license</a>, so adhering to Satoshi’s vision, it is the most permissive and open license, and that’s what we’re going with,” Philp said.



Philp notes that the team at Code subscribes heavily to Satoshi’s vision of creating a truly peer-to-peer electronic cash system, enabling anyone to validate and build upon the infrastructure itself.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/dydx-ethereum-open-source">DYdX steps closer to v4 by open-sourcing code</a>



Traditionally, many apps built on the Solana blockchain have been built privately, with very few projects choosing to open-source their software.&nbsp;



This is likely because the <a href="https://blockworks.co/tag/solana">Solana</a> blockchain attracts many developers who have built consumer products in Web2, Philp notes.&nbsp;



“A lot of these developers land in the Solana ecosystem because it’s the most performant chain and gives you the best opportunity to build slick consumer experiences, but from an engineering culture perspective, that means a lot of people are coming from <a href="https://blockworks.co/tag/web2">Web2</a>, where open source is not usually the norm,” he said.&nbsp;



Read more: <a href="https://blockworks.co/news/solana-gets-roasted">Solana ‘roast’ reveals painful truths</a>



Philp adds that this move to open-source Code is important for the Solana ecosystem as a whole, as it can allow the network to take on more of a leadership position. He also notes that open-sourcing software tools show conviction in the tooling that has been built.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="400" height="400" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg" alt="" class="wp-image-74528" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=400 400w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=80 80w" sizes="(max-width: 400px) 100vw, 400px" /><figcaption class="wp-element-caption">Code CEO Ted Livingston</figcaption></figure>



The Code team was founded by the team behind the Canadian messaging app, Kik. After struggling to find an appropriate business model to sustain its operations at Kik, the team launched its own cryptocurrency, Kin (<a href="https://blockworks.co/price/kin">KIN</a>).



On the Lightspeed podcast (<a href="https://open.spotify.com/episode/0DkQrKb9hYJYWTGAUasvXd">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/micropayments-are-cryptos-untapped-use-case-ted-livingston/id1697548240?i=1000636782136">Apple</a>/<a href="https://www.youtube.com/watch?v=aePdACgrhdQ&amp;ab_channel=Lightspeed">YouTube</a>), Code CEO Ted Livingston discusses Code’s announcement and crypto’s micropayments opportunity.



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG8207413857" width="100%"></iframe>







KIN was used to raise an initial coin offering (ICO) totaling $100 million for Kik, but after being <a href="https://www.sec.gov/news/press-release/2020-262">fined $5 million by the US Securities and Exchange Commission</a>, Kik — now under new ownership — is no longer associated with KIN.



Updated Nov. 28, 2023 at 10:40 am ET: Included photo of Code CEO Ted Livingston.



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Can ‘Code’ open up Solana’s closed culture?

The introduction of Ethereum Foundation’s <a href="https://blockworks.co/news/ethereum-erc4337-account-abstraction-smart-contract">ERC-4337 account abstraction standard</a> earlier this year drew much attention, but adoption and retention are off to a slow start.



Existing hardware wallets rely on a pair of keys. If those keys are compromised, so are tokens in the wallet. The ERC-4337 standard was instead intended as a new baseline for how users interact with crypto wallets services, including social recovery mechanisms and other multisig options.



The standard turns Ethereum accounts into “smart accounts,” which are much more flexible to suit the needs of wallet holders.



According to data on BundleBear:



<ul>
<li>Weekly retention for ERC-4337 smart wallets drops as low as 1% for accounts older than five weeks.</li>



<li>An average smart account only sends <a href="https://www.bundlebear.com/overview/all">five user operations</a>.&nbsp;</li>



<li>Revenue for transaction “<a href="https://www.erc4337.io/docs/bundlers/introduction">bundlers</a>” is also low, currently less than <a href="https://www.bundlebear.com/overview/all">$8,000</a> per week.</li>
</ul>



Read more: <a href="https://blockworks.co/news/what-are-smart-contract-wallets">What Are Smart Contract Wallets? A Beginner’s Guide</a>



At the time of writing, daily active users are at around 3%, <a href="https://dune.com/sixdegree/account-abstraction-overview">sixdegree</a> data shows. Most smart account users today are on the Polygon network, making up over <a href="https://dune.com/sixdegree/account-abstraction-overview">66%</a> of all smart account holders and almost all monthly new users by chain.



Despite the low adoption rates on Ethereum, industry participants remain optimistic about the future of smart accounts and have been actively working on proposals to spur usage.



John Rising, the co-founder of Stackup, an account abstraction infrastructure company, notes that many existing issues with ERC-4337 can be resolved with the first-ever Rollup Improvement Proposal, RIP-7560.



The existing ERC-4337 standard is considered a “<a href="https://www.stackup.sh/blog/four-shades-of-account-abstraction">semi-native+</a>” smart account, where a user does not need a private key because the trustless relay network is designed to forward transactions to the blockchain.



Rising believes that the goal is to move towards a “native” smart account, where accounts would be able to specify their own validation logic, completely removing the need for a private key — something that RIP-7560 hopes to do.&nbsp;



“ERC-4337 has always been intended as a stepping stone to native account abstraction. The account abstraction proposal, RIP-7560, is designed to be backwards compatible with ERC-4337,” Rising told Blockworks.



Further discussions around the proposal and its applicability must still be considered. Native account abstraction has drawn concerns over the complexity it adds, as it introduces consensus layer changes rather than just high-level infrastructure layer modifications.



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Ethereum ‘smart account’ adoption is low — the first rollup proposal wants to change that

One year out from the FTX implosion, traders have better choices for decentralized exchanges that remove or limit counterparty risk. But while DEXs with centralized-like user experience have begun to gain traction, they are still not as performant as their CEX competitors. And not everyone is keen on self-custody.



Cube.Exchange set out to split the difference. The platform offers spot trading of four crypto assets, differentiating itself with a user-centric approach to asset control. It takes the transparency of the blockchain, and pairs it with the convenience and performance of familiar centralized off-chain exchanges.



The exchange transitioned Tuesday from a private beta phase to a public beta. Its development was informed by the failings of centralized players, including the <a href="https://blockworks.co/tag/bankruptcy">bankruptcies</a> that wracked the industry in 2022.



Unlike conventional exchanges, Cube allows users to maintain ownership of their assets, using <a href="https://blockworks.co/news/mpc-wallets-security">MPC wallets</a>, with withdrawals and trades requiring explicit user authorization.



The team behind the exchange refers to it as a hybrid model, combining an off-chain matching engine for trading and on-chain settlement to layer-1 blockchains.



“On the custody and settlement side, we focused on using multiparty computation for custody of the assets and then focusing on directly connecting to each individual blockchains,” Bartosz Lipiński, CEO of Cube.Exchange told Blockworks.



&#8220;We wanted to find a middle ground where the exchange doesn&#8217;t own your assets — we never put them on our balance sheet as liabilities to our clients and classify them as our assets — because they are in the MPC wallet.&#8221;



When users deposit assets, such as bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>), the funds remain isolated and viewable at all times on a native Bitcoin block explorer. When they execute a trade, the transaction happens peer-to-peer. Cube batches trades and settles them periodically back to the Bitcoin network.



It&#8217;s like Cube acts as a centralized interoperability layer between chains, serving the same function as <a href="https://blockworks.co/tag/proof-of-reserves">proof-of-reserves</a>, but better, because the exchange never fully takes custody.



Read more: <a href="https://blockworks.co/podcast/bellcurve/5ca19e9a-880f-11ee-98c5-231590669273">Crosschain DEXs: The Next Frontier</a>



“Think of it as this like meta layer-2 that takes the state that happened on the exchange and settles MPC wallets to Bitcoin and Ethereum for example,” Lipinski said.



He emphasized the importance of separating asset custody from trading, citing it as a potential conflict of interest in the crypto asset trading space.



Lipinski sees a trend towards greater use of MPC solutions, citing Binance’s self-custody wallet, offerings from Coinbase and <a href="https://blockworks.co/news/fireblocks-crypto-counterparty-risk">Fireblocks</a> as examples.



The difference from, say, Fireblocks, is that Cube vertically integrates custody with the exchange and doesn’t charge clients for the MPC solution, making it suitable for retail users not just institutional players.



<h2 class="wp-block-heading">Solana in the mix</h2>



Curated Solana validators are the real-time record keepers of all trading, similar to how <a href="https://app.blockworksresearch.com/research/pyth-network-pull-not-push">Pyth’s oracle network</a> publishes price data. They also serve as “MPC guardians” to help users custody assets.



Cube itself does not hold a wallet key share, but facilitates vault recovery services for users who lose access to their own private key.



Lipinski became interested in the Solana ecosystem at an early stage, after leaving his job at Citadel, where he was head of equities application development.



“I got into it because of COVID,” he told Blockworks. “My wife told me to stop baking bread at home, so I started playing with Solana.”



Cube&#8217;s initial launch follows a $9 million fundraising round in October, and includes spot trading of native <a href="https://blockworks.co/price/btc">BTC</a>, <a href="https://blockworks.co/price/eth">ETH</a>, <a href="https://blockworks.co/price/sol">SOL</a> and <a href="https://blockworks.co/price/bonk">BONK</a> — a <a href="https://blockworks.co/news/dog-coins-dogecoin-floki-shiba-bonk">Solana meme coin</a> — each paired with <a href="https://blockworks.co/price/usdc">USDC</a>.



The exchange is actively applying for licenses around the world, but is already <a href="https://blockworks.co/tag/licensing">registered</a> as a virtual asset service provider (VASP) in Australia and Poland. The latter should provide EU-wide access to the exchange.



A public beta phase is expected to last around one to two months, Lipinski said.



“I want to build the best exchange out there, both from the market makers perspective and the user&#8217;s perspective,” he said.



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Cube.Exchange squares the circle of decentralization

Cosmos co-founder Jae Kwon has long felt that the protocol’s community is conspiring against him. Now, he may be leaving it for good.&nbsp;



After a proposal passed to crimp inflation on Cosmos’ ATOM token, Kwon announced AtomOne — a “minimal fork” of the Cosmos Hub application.&nbsp;



Kwon and his opponents fundamentally diverge on how much inflation is needed to keep the Cosmos blockchain secure.&nbsp;



Cosmos narrowly passed on Saturday Proposal <a href="https://www.mintscan.io/cosmos/proposals/848">848</a> pledging to set ATOM’s inflation rate at 10%, down from 14%. The proposal’s proponents <a href="https://x.com/EffortCapital/status/1724486648711237867?s=20">argue</a> that Cosmos is overpaying for security by raising inflation rates to incentivize staking.&nbsp;



Other <a href="https://blockworks.co/tag/layer-1">layer-1s</a> maintain high staking demand without inflation, which needlessly puts downward pressure on ATOM’s price, advocates say.&nbsp;



Read more: <a href="https://blockworks.co/news/cosmos-ethan-buchman-blockchain-convergence">Uniting the blockchain ecosystems: Q&amp;A with Cosmos founder Ethan Buchman</a>



<a href="https://blockworks.co/price/atom">ATOM</a>’s price is down 9% in the past 24 hours as Cosmos’ founder announced his breakaway token. It is unclear how exactly AtomOne tokens will be distributed, though the token’s <a href="https://github.com/atomone-hub/genesis">constitution</a> says Proposal 848 voters will receive fewer tokens, and the fork would still <a href="https://x.com/jaekwon/status/1728533010889449732?s=20">support</a> ATOM tokens.&nbsp;



Kwon <a href="https://x.com/jaekwon/status/1723464983370203572?s=20">voiced</a> opposition at the proposal’s outset and throughout the two week voting period. For some, the founder’s inability to sway the outcome is emblematic of Kwon’s <a href="https://x.com/sachayve/status/1728527986289172619?s=20">waning</a> influence in the Cosmos community.&nbsp;



Kwon co-founded <a href="https://blockworks.co/tag/cosmos">Cosmos</a> in 2014, but has <a href="https://x.com/jaekwon/status/1525154171216834560?s=20">accused</a> the community of conspiring against him multiple times in the years since.&nbsp;



AtomOne’s GitHub page shows Kwon began working on the document two weeks ago, around the time that voting started on Proposal 848.&nbsp;



At the center of Kwon’s critique is the argument that ATOM was never meant as <a href="https://x.com/jaekwon/status/1723816927230148912?s=20">money</a>, and viewing the staking token for its financial prospects risks <a href="https://x.com/jaekwon/status/1723464983370203572?s=20">compromising</a> the Cosmos Hub’s security.&nbsp;



“In the long run this is [a] game of survival, and survival comes from strict adherence to first principles (of security especially),” Kwon <a href="https://x.com/jaekwon/status/1729196890758304171?s=20">wrote</a> on X Monday.&nbsp;



Activist minority factions forking crypto projects have generally seen limited success — from bitcoin cash to more recent <a href="https://blockworks.co/news/nouns-dao-treasury-fork-governance">“rage quits” from the Nouns</a> and <a href="https://medium.com/floordao/floordao-floork-the-future-a220ae69bd9a">Floor</a> DAOs. In each case, some forkers profited, but the forkers were ultimately unable to recapture the social capital of their predecessors.



Updated Nov. 27, 2023 at 5:10 pm ET: Clarified that the forkers, rather than forked chains, were unable to recapture the social capital of their predecessors. 



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Cosmos co-founder splits ATOM after years of infighting

A federal judge wants Binance founder Changpeng Zhao to stay in the US as he awaits sentencing. At least for now.



Zhao and the exchange he founded pleaded guilty to violating US anti-money laundering laws last week.&nbsp;



The US Department of Justice <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">detailed $4.3 billion in fines and forfeitures</a> for Binance during a Nov. 21 press conference. Attorney General Merrick Garland alleged at the time that the company’s compliance team knew the exchange was used for money laundering and illicit financial activities.&nbsp;



Zhao was released on a $175 million bail bond and is slated to be sentenced in February. He is a citizen of the United Arab Emirates and Canada.



Magistrate Judge Brian Tsuchida proposed allowing Zhao to return to the UAE to be with his partner and three children prior to sentencing — finding he was at “no risk of flight,” according to a Nov. 23 court <a href="https://fingfx.thomsonreuters.com/gfx/legaldocs/dwpkawagrpm/11242023zhao_defense.pdf">filing</a>.



Read more: <a href="https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked">Here are the details of Binance and Changpeng Zhao’s plea deal</a>



But US District Judge Richard Jones put a pause on Zhao’s return to the UAE “until such time as this court resolves the government’s motion for review,&#8221; according to a Monday <a href="https://storage.courtlistener.com/recap/gov.uscourts.wawd.328570/gov.uscourts.wawd.328570.42.0.pdf">disclosure</a>. 



The <a href="https://blockworks.co/tag/binance">Binance</a> founder, as part of pleading guilty, agreed to step down from the company’s CEO post — <a href="https://blockworks.co/news/changpeng-zhao-announces-resignation-binance">naming Richard Teng as his successor</a>. Teng was Binance’s head of regional markets and previously spent time in regulatory roles at the Abu Dhabi Global Market and the Monetary Authority of Singapore.



Teng claimed in a blog <a href="https://www.binance.com/en/blog/from-our-ceo/my-first-blog-as-binances-ceo-2887294642016890803?ref=AZTKZ9XS&amp;utm_source=RichardTwitter&amp;utm_medium=GlobalSocial&amp;utm_campaign=GlobalSocial">post</a> Monday that Binance is “stronger today than we have ever been.” He doubled down on previous <a href="https://twitter.com/_RichardTeng/status/1727214060406808920?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1727214060406808920%7Ctwgr%5E50743ffb1242a01c516ed19cf0c8af6d809321d3%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fblockworks.co%2Fnews%2Fbinance-outflows-stabilize">comments</a> he made on X that the company maintains “robust revenues and profits” and that user assets are backed one-to-one.



“As an industry, we require more focus than ever on collaborating with policymakers,” Teng wrote. “Only then may we effectively contribute to the development of a globally harmonized regulatory framework that will foster innovation while providing critical consumer protections.”



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Binance’s Zhao ordered to stay in US for now

Google Cloud has joined EigenLayer’s “Operator Working Group” alongside more than 65 other operators and solo stakers, a representative for EigenLabs, the developer behind EigenLayer, told Blockworks.&nbsp;



Google Cloud Web3 now <a href="https://goerli.eigenlayer.xyz/operator/0x8a2e63fb50c6e4ac207d17712fc18c8813b1079d">appears</a> as a node operator on the Goerli testnet for EigenLayer — a restaking protocol that lets ether (<a href="https://blockworks.co/price/eth">ETH</a>) be staked on multiple platforms at once. Google Cloud confirmed the cloud computing service’s participation in EigenLayer’s testnet in an email to Blockworks.&nbsp;



Google Cloud declined to comment on whether it has plans to move to <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a>’s mainnet or if the protocol would be added to Google Cloud’s Blockchain Node Engine.



EigenLabs also couldn’t confirm whether <a href="https://blockworks.co/tag/google-cloud">Google Cloud</a> would remain as a node operator once node operation goes to mainnet. Representatives said they expect Google Cloud’s support to continue, since the goal of testnet is to prepare for mainnet.



<a href="https://blockworks.co/news/eigenlayer-deploys-on-ethereum-mainnet">EigenLayer went live for stakers</a>, who earn rewards by locking in their staked ether, in June. Operators, who enhance security and allow stakers to delegate assets, are still in testnet.&nbsp;



EigenLayer has <a href="https://www.blog.eigenlayer.xyz/launch-of-the-stage-2-testnet-eigenlayer-eigenda/">said</a> it expects mainnet deployment to happen in the first half of 2024.



Google Cloud, the cloud computing service offered by Google, has been on a steady march into Web3 since Bloomberg first <a href="https://www.bloomberg.com/news/articles/2022-01-19/google-forms-blockchain-group-under-newly-appointed-executive">reported</a> Google’s creation of a blockchain division in January 2022.



Later that year, <a href="https://blockworks.co/news/google-signals-major-crypto-push-with-ethereum-solana-support">Google Cloud released the Blockchain Node Engine</a>, a service meant to let developers run blockchain network nodes more easily. Google Cloud launched a web3 startup program in April 2023.



Google Cloud showed an interest in staking before the EigenLayer integration, <a href="https://blockworks.co/news/google-cloud-polygon-validator-proof-of-stake">becoming a Polygon validator</a> in September. The investment was minimal from the tech giant, though: Google Cloud has the second-smallest <a href="https://staking.polygon.technology/validators">stake</a> out of more than 100 validators.&nbsp;



The cross-chain protocol <a href="https://blockworks.co/news/layerzero-google-cloud-oracle-operator-messaging">LayerZero partnered with Google Cloud</a> in September 2023, with the company becoming LayerZero’s default oracle to verify transactions across blockchains.&nbsp;



Google Cloud’s move into Web3 has not been without controversy, with some seeing the behemoth cloud computing service’s presence as a <a href="https://blockworks.co/news/google-cloud-layerzero-0xresearch-oracle-provider">strike against decentralization</a>.



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Google Cloud confirms participation in EigenLayer testnet

Binance coin and XRP, two of the largest cryptocurrencies on the market, are diverging.



Only $2 billion separates BNB and XRP’s market caps — now $35.7 billion to $33.2 billion.&nbsp;



That puts XRP squarely in flipping distance: If BNB stays flat, XRP could firmly eclipse it with just an 8% price rally.



The two were way further apart at the start of the year. BNB’s market cap was more than double XRP’s back then — long before Changpeng Zhao’s <a href="https://blockworks.co/news/changpeng-zhao-announces-resignation-binance">forced resignation as CEO of Binance</a> last week.



In fact, XRP briefly flipped BNB in July when a US federal court ruled Ripple’s XRP <a href="https://blockworks.co/news/judge-rules-ripple-xrp-not-security">sales to retail weren’t securities</a>. The news ballooned its price by 75% and once again made XRP the fourth-biggest cryptocurrency on the market, behind bitcoin (<a href="https://blockworks.co/price/BTC">BTC</a>), ether (<a href="https://blockworks.co/price/ETH">ETH</a>) and tether (<a href="https://blockworks.co/price/usdt">USDT</a>).



XRP — one of the oldest cryptocurrencies, initially issued in 2012 — had handed fourth place back to BNB by the next month. The token is the native asset of the Ripple Ledger — now stylized as the “XRP Ledger” — pitched as a low-cost intermediary asset cross-border remittances.&nbsp;



<a href="https://blockworks.co/price/bnb">BNB</a>, on the other hand, is the native token for Binance Smart Chain, a network similar to <a href="https://blockworks.co/tag/tron">Tron</a>. The network supports its own bevy of tokens and applications, including typical cryptocurrencies, stablecoins, wrapped tokens, memecoins, decentralized exchanges and DeFi protocols. Traders can also use BNB to reduce trading fees on <a href="https://blockworks.co/tag/binance">Binance</a>.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
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</div><figcaption class="wp-element-caption">XRP flipping BNB would be a return to the old normal</figcaption></figure>



BNB first overtook <a href="https://blockworks.co/price/xrp">XRP</a> in February 2021, as the last bull market was picking up steam. Sans for a brief moment a few months later, BNB has been valued above XRP ever since.



All that could change for good if both cryptocurrencies keep their current trajectories. BNB has been retracing ever since its all-time high in November 2021 — now 67% below that point.



XRP meanwhile has been on the mend, now up by more than three quarters since it bottomed out in September. BNB is only up 6% across that time.



Granted, both cryptocurrencies face existential threats. While the US has dropped claims against Brad Garlinghouse and Chris Larsen, a <a href="https://blockworks.co/news/ripple-sec-jury-trial-spring">jury trial in spring next year</a> will decide whether Ripple’s XRP sales to hedge funds and other institutional investors violated securities law.&nbsp;



Ripple’s future will stay in the balance until that matter is settled.



Binance’s problems are more pressing: it must fork out $4 billion to US authorities, its founder Zhao has been forced to step down and prosecutors are pushing for 18 months in prison for Bank Secrecy Act violations.



In response, BNB has sunk more than 10% since Zhao’s <a href="https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked">guilty pleas were confirmed</a> last Tuesday. XRP is about even.



Granted, Binance is still the world’s largest crypto exchange by reported volume by far.&nbsp;



But between the lost billions and the three-year market surveillance program forced on the exchange, the case for Binance losing ground to other prominent global platforms seems a lot stronger.



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XRP threatens to flip Binance’s cryptocurrency once and for all

Last week, the discount at which Grayscale Bitcoin Trust shares trade compared to its net asset value closed at a level unseen since 2021.



But it is unlikely to get much lower than its current 8% discount, some segment observers say. Its shares trading at a premium are even less probable, they agree.



Eligible shares of GBTC are quoted on the OTC Markets Group. The value at which those are sold has fluctuated in the form of premiums and discounts to the value of bitcoin that it holds.&nbsp;



The shares haven’t traded at a premium since February 2021, according to <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav">YCharts.com</a>. And the discount was as steep as 46% in January, the data shows.&nbsp;&nbsp;



But the discount shrunk to roughly 8% on Friday, reflecting <a href="https://blockworks.co/news/21shares-bitcoin-etf-approval-incoming">increased investor confidence</a> in the potential approval of a bitcoin spot ETF. Following its <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf">court win against the US Securities and Exchange Commission</a>, Grayscale is <a href="https://blockworks.co/news/where-does-grayscale-gbtc-stand#">working on converting GBTC to an ETF</a> — a move the firm has said would essentially get rid of the current discount on its shares.



Read more: <a href="https://blockworks.co/news/grayscale-gbtc-ethe-discounts">Grayscale trust discounts keep shrinking — here’s why</a>



The discount has historically moved as bitcoin’s price has.&nbsp;



A dip in price to about $35,700 last week — as news unfolded about <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">the guilty pleas of Binance and its CEO</a> — was offset by clarity that such regulatory action against the exchange had been resolved, Fineqia International analyst Matteo Greco said in a Monday research note. This led to what he called “renewed stability in the market.”&nbsp;



Bitcoin’s (<a href="https://blockworks.co/price/btc">BTC</a>) price was at about $37,500 around 12:00 pm ET Monday — down 0.4% in the previous 24 hours.



“Any news related to settlements between law enforcement and digital asset service providers plays a vital role in bridging traditional finance and digital assets, increasing the likelihood of capital inflow from traditional finance investors,” Greco added in the note.



<h2 class="wp-block-heading">Will discount turn to premium?</h2>



Chase White, senior research and policy analyst Compass Point Research &amp; Trading, said uncertainty remains around when the <a href="https://blockworks.co/tag/sec">SEC</a> could allow GBTC to convert to an <a href="https://blockworks.co/tag/etf">ETF</a>. Barring any concrete news on that front, the discount is likely to stay at a high single digit to low double digit discount compared to its net asset value, he said.&nbsp;



“This is because there’s still a risk that the conversion is not approved,” he told Blockworks. “And if the discount gets too low [or] becomes a premium, traders playing for the narrowing of the discount will sell their positions — because the trade is over and they know a premium will be wiped away at conversion just like a discount would be.”



Fund group Ark Invest has recently sold shares of <a href="https://blockworks.co/tag/gbtc">GBTC</a> — most recently shedding 94,624 shares of the trust from its Ark Next Generation Internet ETF (ARKW) on Nov. 24.&nbsp;



Dave Nadig, a financial futurist at data firm VettaFi, said there is “no mechanical reason” for GBTC to trade at a premium.



“If anything I expect outflows as parity approaches, which, because of no redemption, means more discount,” Nadig said.



Likely the only way the GBTC discount completely disappears is if other fund issuers get regulatory approval to launch a spot bitcoin ETF, Greco said. The SEC is set to rule on such <a href="https://blockworks.co/news/sec-decision-date-bitcoin-etf">a proposal by Ark Invest and 21Shares by Jan. 10.</a>



“This way customers would know that with almost certainty the GBTC conversion will be approved shortly, and buying at a discount would basically mean a strong likelihood of buying BTC at a lower price compared to the market price,” Greco told Blockworks.&nbsp;



GBTC had previously traded at a premium when ways to get exposure to bitcoin were more limited, he added. Investors have found other proxies to do so in the past three years or so.



“In the off chance that it did trade at a premium, we think that would be short lived,” White said. “Traders would sell out of their positions.”



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Could GBTC’s shrinking discount turn to a premium?

Two recent catastrophic exploits of two DeFi protocols differed in many ways, yet shared one commonality — both were audited multiple times.



Raft Finance, a stablecoin provider inspired by Liquity but backed by staked ether, fell victim to an infinite mint bug two weeks ago. KyperSwap saw its liquidity pools drained on Nov. 23.



The Raft team’s post-mortem <a href="https://mirror.xyz/0xa486d3a7679D56D545dd5d357469Dd5ed4259340/_Nk6_1_VvInyC0pdvHiZuAXiqm6tYSsGYGHSfOhcO1I">analysis</a> of the incident pointed out that, “the exploited Raft smart contracts were <a href="https://docs.raft.fi/additional-information/security">audited</a> by Trail of Bits and Hats Finance. Unfortunately, the vulnerabilities that led to the incident were not detected in these audits.”



Kyber Network similarly flagged its platform’s audits from vaunted security experts, including 100proof, ChainSecurity and participants in an audit competition organized by Sherlock.



<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">7/ Security measures we’ve taken include internal smart contract checks, &amp; audits by 100proof (whitehacker), ChainSecurity, &amp; community developers via Sherlock’s audit competition. We encouraged further checks on the smart contracts through our Bug Bounty Program with Immunefi.&mdash; Kyber Network (@KyberNetwork) <a href="https://twitter.com/KyberNetwork/status/1728115872403976485?ref_src=twsrc%5Etfw">November 24, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Raft procured even more audits by Curious Apple and Aviggiano throughout 2023, indicating ongoing security evaluations and improvements​​ that have led onlookers to <a href="https://x.com/davgarai/status/1723351273817219445">question</a> the assumption that an audited protocol is necessarily safe.



Read more: <a href="https://blockworks.co/news/exploit-ether-defi-protocol">Raft Finance floats user bailout plan after odd exploit</a>



What’s needed is a “paradigm shift” in how blockchain projects tackle threats in the face of examples like these, says Halborn’s chief operating officer Dave Schwed, highlighting “sophisticated manipulation of smart contract functions.”



“It highlights the importance of projects taking a proactive and layered approach to security, beyond just relying on external audits,” Schwed told Blockworks.



Other smart contract specialists, including Yearn Finance security researcher Storming0x, concur. They <a href="https://x.com/storming0x/status/1724239791837917554">said</a> on X that it’s “a waste for a project to get an audit” absent attention to other best practices.



<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">IMO is a waste for a project to get an audit without good testing, coverage, fuzzing and at least 1 good peer review. Why? Because a good auditor will find most evident high issues at surface given the small amount time but not have time to go in depth. 7/ <a href="https://t.co/t64H0RVtC2">pic.twitter.com/t64H0RVtC2</a>&mdash; Storm Blessed 0x (@storming0x) <a href="https://twitter.com/storming0x/status/1724239791837917554?ref_src=twsrc%5Etfw">November 14, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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It is also difficult for ordinary users to tell whether an audit covers the final code in production.



<h2 class="wp-block-heading">The <s>Devil</s> vulnerability is in the details</h2>



Theoretically, a user could compare the audited code with the current published version, Schwed noted.



“Most audit reports show, or should show, a hash of the repo of the code that was audited,” he said. “There should be some automated mechanism to compare the code audited and the code in production enhancing transparency and trust.”



Michael Lewellen, head of solutions architecture at Open Zeppelin, noted that &#8220;change management&#8221; — ensuring the production version matches the audited one — was not an issue in Raft&#8217;s case. However, he does see a tendency for some development teams to ignore the advice of their auditors.



“Trail of Bits, despite missing the bug itself, did note in their report that the Raft codebase could have made improvements to their testing and verification,” Lewellen told Blockwoks.



“These recommendations should not be taken lightly by projects that might otherwise assume the audit report gives them the all-clear to launch without making improvements to other parts of their security stack,” he added.



<h2 class="wp-block-heading">Making users partly whole</h2>



After receiving feedback that it was unfair to exclude those who sold their R following the depeg event, Raft <a href="https://forum.raft.fi/t/raft-recovery-plan/237">retracted</a> its initial recovery plan.



A revised “recovery plan” was <a href="https://docs.raft.fi/additional-information/raft-recovery-plan-claim-your-dai">published</a> Friday, giving victims <a href="https://x.com/raft_fi/status/1728038665736290780?s=20">until</a> the end of March 2024, to recoup a portion of their losses.



“After substantial feedback from the Raft community, the Raft Recovery Plan has been finalized, resulting in a 42% recovery rate. This guide is for all the affected users who were included in the Raft Recovery Plan to claim their DAI,” the plan said.



For Kyber, <a href="https://blockworks.co/news/kyberswap-hacker-stole-48m">the scale of the loss was significantly greater</a> — some $48 million. The road to recovery is still unclear.



<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">9/ We are grateful for the overwhelming support from those who have offered assistance in aiding in the investigation. Our heartfelt appreciation goes out to our users &amp; partners who believe in our product &amp; mission. Updates will be provided as the situation unfolds.&mdash; Kyber Network (@KyberNetwork) <a href="https://twitter.com/KyberNetwork/status/1728115876749275229?ref_src=twsrc%5Etfw">November 24, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The KyberSwap exploit, noted for its <a href="https://twitter.com/KyberNetwork/status/1728115867580527071?s=20">unusual sophistication</a>, has left DeFi users wondering about the level of yield that could justify their risk-taking.



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