Bessie Liu

Shared sequencer solution Espresso will partner with Ethereum layer-2 scaling solution Polygon Labs to develop AggLayer (aggregation layer) in order to solve rollup interoperability.



AggLayer was first introduced in January. It is designed to solve the fragmented liquidity problem in the blockchain space by centering scaling UX on one single, unified aggregation layer. AggLayer is similar to Risc Zero’s <a href="https://blockworks.co/news/risc-zero-zkevm">“Type 0” zkEVM, Zeth</a>, a general-purpose programming language that can be EVM equivalent.



Both solutions are designed to enable transaction verification across multiple chains. In the case of AggLayer, the protocol uses a process called “proof aggregation” to ensure that transactions across its ecosystems are valid.&nbsp;



Read more: <a href="https://blockworks.co/news/polygon-zkevm-type-1-prover">Polygon zkEVM prover reaches Type 1 status</a>



According to Polygon Labs documents, all transactions will be <a href="https://polygon.technology/blog/aggregated-blockchains-a-new-thesis">guaranteed</a> on AggLayer without having to depend on a third-party bridging solution.&nbsp;



In the long term, <a href="https://blockworks.co/tag/polygon">Polygon</a> hopes that when a rollup creates a message for a destination chain, it will also create a validity proof that verifies its accuracy instantaneously.



That’s one problem that Anurag Arjun, the founder of Avail, and his team are hoping to resolve.&nbsp;



Arjun notes that although cross-chain communication is great for users who belong to the same ecosystem, once they leave the ecosystem, they are likely to receive a “subpar experience.”&nbsp;



Read more: <a href="https://blockworks.co/news/avail-fundraise-addressing-interoperability">Avail raises $27M, readies entrance into modular narrative</a>



“If you want to really bring these <a href="https://blockworks.co/tag/rollups">rollups</a> together, you need two things primarily,” Arjun told Blockworks. “You need a proof of ordering — the transaction data ordering — in the sense that if a rollup has committed to a certain order of the transactions, you need some guarantees for that. That is what Avail validity proof [data availability sampling] provides. And then you need the execution proofs, which are provided by the rollup themselves.”



The distinction that needs to be made is that proof aggregation itself is not enough, and transaction ordering of these rollups is equally important, Arjun said.&nbsp;



“So when you combine ordering guarantees with the actual execution proof, then that is why we are able to do this orchestration — connecting these rollups,” he explained.



However, the state of proving at this point in time is not yet at the speed of real-time verification, and all interdependent rollups must be created, aggregated and verified jointly before they are settled on <a href="https://blockworks.co/tag/ethereum">Ethereum</a>.



This is where Espresso comes in. Espresso will be the coordinator that unifies the interdependent rollups before they are settled onto Ethereum.&nbsp;



Ben Fisch, the CEO of Espresso Labs described the collaboration efforts between <a href="https://blockworks.co/tag/espresso-systems">Espresso</a> and Polygon as pivotal for both ecosystems.



“Our respective teams have been thinking deeply about layer-2 interoperability over the last year — it’s amazing to see our solutions converge in such a synergistic way. Polygon’s AggLayer and Espresso’s coordination layer are perfect complements,” Fisch told Blockworks.



Marc Boiron, CEO of Polygon Labs, shares this sentiment. He told Blockworks he believes this new partnership will synergistically elevate interoperability within Ethereum&#8217;s layer-2 environment.



&#8220;While the AggLayer guarantees the integrity of data exchange among Ethereum <a href="https://blockworks.co/tag/layer-2-2">layer-2s</a>, Espresso&#8217;s sequencing marketplace optimizes this process by enabling efficient coordination and fast transaction finalization across multiple Ethereum layer-2s,” Boiron said. “This integrated approach markedly enhances the fluidity and user experience of transactions within Ethereum&#8217;s layer-2 network.”



Espresso&#8217;s latest partnership with Polygon on AggLayer shows the progress of the modular approach to scaling Ethereum, one that stands in contrast to what, for instance, the Nil Foundation is working to achieve with sharded layer-2s.



Misha Komarov, the founder of Nil Foundation, previously told Blockworks that it aims to take a protocol-level approach to interoperability by embedding the sequencer into the protocol to make it capable of sending transactions between different shards.&nbsp;



Read more: <a href="https://blockworks.co/news/ethereum-rollup-zksharding-nil-mainnet">New Ethereum rollup takes a zero-knowledge approach to sharding</a>



“So basically, that means it keeps them all composable, it keeps them all together, it keeps the liquidity unified. It&#8217;s like no separation, no Balkanization of ETH is happening, in fact,” Komarov said.



In simpler terms, the two approaches can be viewed as vertical versus horizontal scaling, though they combined features of both to varying degrees.



“ZkSync and Polygon pursue vertical scaling — layer-2s and layer-3s — [while] on our side, we pursue horizontal scaling,” he said. “We kind of say, okay, modularity can be done in a better way. It might be not even the modularity anymore.”



Whichever approach ultimately prevails, there is a widespread recognition that the fragmentation of UX and liquidity that currently prevails across many Ethereum scaling efforts is an impediment to adoption.



“This whole industry is a competition of ideas,” Komarov adds. “A competition of who gets the better idea and the first one who gets there — the implementation of it — captures the market.”



Macauley Peterson contributed reporting.



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Espresso partners with Polygon Labs to solve rollup interoperability 

Sean (Xiang) Ren

Many Americans got their first glimpse behind the machine learning curtain when details of Amazon’s “Just Walk Out” technology <a href="https://www.businessinsider.com/amazons-just-walk-out-actually-1-000-people-in-india-2024-4">went public</a>. Instead of pure technology tallying up customers’ purchases and charging them when they left the store, the sales were manually checked by about 1,000 real people working in India.



But these workers were the human-half of what most AI really is — a collaboration between reinforcement learning and human intelligence.&nbsp;



The human element tends to be ignored in discussions of AI safety, which is a little disturbing given how much of an impact AI will likely have on our job markets and ultimately our individual lives. This is where decentralization, the inherent trustlessness and security of blockchain technology can play a major role.



The Center for Safe AI <a href="https://www.safe.ai/ai-risk">identifies</a> four broad categories of AI risk. As a start, there’s malicious use, in which users might “intentionally harness powerful AIs to cause widespread harm” by engineering “new pandemics or [using them] for propaganda, censorship and surveillance, or [releasing AIs] to autonomously pursue harmful goals.”&nbsp;



A more subtle concern is the risk of an AI race, where corporations or nation states compete to quickly build more powerful systems and take unacceptable risks in the process. Unchecked cyberwarfare is a potential outcome, another is allowing systems to evolve on their own, potentially slipping out of human control; or a more prosaic, but no less disruptive outcome, could be mass unemployment from unchecked competition.&nbsp;



Organizational risks with AI are similar to any other industry. AI could cause serious industrial accidents, or powerful programs could be stolen or copied by malicious actors. Finally, there’s the risk that the AIs themselves could go rogue, “optimizing flawed objectives, drifting from their original goals, becoming power-seeking, resisting shutdown or engaging in deception.”&nbsp;



Regulation and good governance can contain many of these risks. Malicious use is addressed by restricting queries and access to various features, and the court system could be used to hold developers accountable. Risks of rogue AI or and organizational issues can be mitigated by common sense and fostering a safety-conscious approach to using AI.&nbsp;



But these approaches don’t address some of the second-order effects of AI. Namely, centralization and the perverse incentives remaining from legacy Web2 companies. For too long, we’ve traded our private information for access to tools. You can opt out, but it’s a pain for most users.



AI is no different than any other algorithm, in that what you get out of it is the direct result of what you put in — and there are already massive amounts of resources devoted to cleaning up and preparing data to be used for AI. A good example is OpenAI’s ChatGPT, which is trained on hundreds of billions of lines of text taken from books, blogs and communities like Reddit and Wikipedia, but also relies on people and smaller, more customized databases to fine-tune the output. 



Read more from our opinion section: <a href="https://blockworks.co/news/blockchain-ai-misleading-narrative">What can blockchain do for AI? Not what you’ve heard.</a>



This brings up a number of issues. Mark Cuban has recently pointed out that AI will eventually need to be trained on data that companies and individuals might not want to share, in order to become more commercially useful beyond coding and copywriting. And, as more jobs are impacted by AI — particularly as AI agents make custom AI applications accessible — the labor market as we know it could eventually implode.&nbsp;



Creating a blockchain layer in a decentralized AI network could mitigate these problems.&nbsp;



We can build AI that can track the provenance of data, maintain privacy and allow individuals and enterprises to charge for access to their specialized data if we use decentralized identities, validation staking, consensus and roll-up technologies like optimistic and zero-knowledge proofs. This could shift the balance away from large, opaque, centralized institutions and provide individuals and enterprises with an entirely new economic system.



On the technological front, you need a way to confirm the integrity of data, the ownership of data and its legitimacy (model auditing).&nbsp;



Then, you would need a method of provenance, (to borrow a phrase from the art world), which means being able to see any piece of data’s audit trail in order to properly compensate whoever’s data is being used.



Privacy is also important — a user must be able to secure their data on their own electronics and be able to control access to their data, including being able to revoke that access. Doing so involves cryptography and a security protection certification system.



This is an advancement from the existing system, where valuable information is merely collected and sold to centralized AI companies. Instead, it enables broad participation in AI development.&nbsp;



Individuals can engage in various roles, such as creating AI agents, supplying specialized data or offering intermediary services like data labeling. Others might contribute by managing infrastructure, operating nodes or providing validation services. This inclusive approach allows for a more diversified and collaborative AI ecosystem.



We could create a system that benefits everyone in the system, from the digital clerics a continent away to the shoppers whose cart contents provide them raw data to developers behind the scenes. Crypto can provide a safer, fairer, more human-centric collaboration between AI and the rest of us.



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


<div class="wp-block-post-author-biography">Sean is the CEO and co-founder of Sahara, a platform building blockchain-powered infrastructure that is trustless, permissionless, and privacy-preserving to enable the development of customized autonomous AI tools by individuals and businesses. Additionally, Sean is an Associate Professor in Computer Science and the Andrew and Erna Viterbi Early Career Chair at the University of Southern California, where he is the Principal Investigator (PI) of the Intelligence and Knowledge Discovery (INK) Research Lab. At Allen Institute for AI, Sean contributes to machine common sense research. Prior, Sean was a data science advisor at Snapchat. He completed his PhD work in computer science at University of Illinois Urbana-Champaign and was a postdoctoral researcher at Stanford University Department of Computer Science. Sean has received several awards recognizing his research and innovation in the AI space including Samsung AI Researcher of the Year, MIT TR Innovators Under 35, Forbes Asia 30 Under 3, and more. </div>


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AI has a monopoly on power and privacy. Blockchain fixes this.

Michael McSweeney

Katherine Ross

<h2 class="wp-block-heading">Crypto gets political</h2>



In a new interview, Gary Gensler made no bones about his special focus on the crypto space, bristling at what he decried as excessive questions about his plans.&nbsp;



Those comments, as expected, drew widespread criticism across the crypto space. But there was also some dissent from inside the proverbial building, in the form of SEC Commissioner Mark Uyeda.



According to Fox Business’ Eleanor Terrett, Uyeda took issue with Gensler’s tack when it comes to crypto regulation.



“While the easiest regulatory response to crypto and digital asset innovation is to use bad actors as an excuse to ‘shut it all down,’ regulators should be creating a pathway to compliance for legitimate efforts,” Uyeda told Terrett. “The SEC has yet to develop that pathway.”



Sound familiar? Uyeda has been a consistent voice of dissent on what we might call the Gensler approach.&nbsp;



Uyeda was a <a href="https://blockworks.co/news/commissioner-etf-statements-signals-contention">supporter of spot bitcoin ETFs</a>. He <a href="https://blockworks.co/news/sec-commissioners-disagree-with-coinbase-decision">objected to the SEC’s denial</a> of Coinbase’s request for rulemaking. He, alongside fellow Commissioner Hester Peirce in these instances, <a href="https://blockworks.co/news/sec-nfts-dissenting-hester-peirce">questioned the SEC’s approach</a> to NFTs and called on the agency to answer questions of jurisdiction when it comes to tokenized digital art.&nbsp;



This is all to say that there appears to be a deep split within the SEC leadership. What’s more, it’s a split that comes as the agency wages legal war —&nbsp;or prepares to potentially do so —&nbsp;with some of the biggest names in the industry: Coinbase, Binance, Uniswap, Consensys and Kraken.



<a href="https://blockworks.co/tag/gary-gensler">Gensler</a>’s strategy has taken on more <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">explicitly political dimensions</a> in recent days — during a critical election season, no less.&nbsp;



The expression of dissent over Gensler’s crypto strategy reached the floor of Congress last night with the passage of a <a href="https://www.congress.gov/bill/118th-congress/house-joint-resolution/109/cosponsors">resolution</a> that objects to SEC’s controversial crypto accounting guidance.&nbsp;



That joint resolution was the <a href="https://blockworks.co/news/house-hearing-democrats-republicans-clash">subject</a> of a contentious House hearing one day earlier, as Blockworks’ Casey Wagner previously reported. The measure faces an uncertain future in the Senate and, more critically, President Joe Biden has promised to veto it should it reach his desk.



At least as far as Crypto Twitter is to be believed, opposition to the SEC —&nbsp;as well as Democrats like Sen. Elizabeth Warren, D-Mass., and Biden himself —&nbsp;has fueled support for former US president Donald Trump, who is seeking a second term this fall. The thinking seems to be that a Trump win means Gensler’s ejection from office and perhaps the ascent of more industry-friendly leadership.



Trump, for example, won <a href="https://twitter.com/CoinDesk/status/1786083216270516253">an X poll</a> hosted by CoinDesk that drew about 8,800 participants last week.



Trump <a href="https://twitter.com/twobitidiot/status/1788389754502856707">appeared</a> to throw his support behind crypto —&nbsp;or the American crypto industry, at least —&nbsp;during an event for holders of one of his NFT collections last night. Trump also touted his <a href="https://blockworks.co/news/cash-grab-trump-nfts-political-cultism">branded NFT products</a> and said “I don’t like that investment” when asked about a Joe Biden-themed memecoin.



How serious Trump actually is — given that his business and political careers were defined by a propensity for telling people exactly what they want to hear —&nbsp;remains to be seen, as does the question of how crypto might factor into his <a href="https://time.com/6972021/donald-trump-2024-election-interview/">second-term plans</a>.&nbsp;



— Michael McSweeney



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



<ul>
<li>BODEN is up 14%, according to <a href="https://www.coingecko.com/en/coins/jeo-boden">CoinGecko</a>, after former president Donald Trump was asked about it last night.</li>



<li>Meanwhile, the Doland Tremp memecoin is up 119% in the past 24 hours, per <a href="https://www.coingecko.com/en/coins/doland-tremp">CoinGecko</a>.</li>



<li>Bitcoin ETFs mostly reported flat flows on Wednesday (with the exception of Bitwise’s BITB, which brought in $11.5 million of inflows), per <a href="https://twitter.com/FarsideUK/status/1788414492029657595">Farside</a> data.&nbsp;</li>



<li>Bitcoin’s down to $61,000, though it bounced back after hitting $60,000 early Thursday morning.</li>



<li>Robinhood’s up 5% to nearly $19 a share in pre-market trading.</li>
</ul>



<h2 class="wp-block-heading">To the moon</h2>



I’m bringing Robinhood up again. But don’t worry, it’s not about the Wells notice this time.&nbsp;



An earnings report naturally sets the tone for the follow-up analyst call, which tends to occur a bit after the report itself is released.&nbsp;



When it’s a good report, the call’s tone tends to be more positive —&nbsp;that much was evident with <a href="https://blockworks.co/tag/robinhood">Robinhood</a> yesterday.&nbsp;



But Robinhood’s leaders struck a pretty bullish tone on the crypto side of the business, all things considered.&nbsp;



They definitely had a right to that bullishness, <a href="https://blockworks.co/news/robinhood-trading-volume-february">based on the numbers</a>.&nbsp;



Robinhood’s crypto business helped to drive the company’s massive earnings beat that left Wall Street impressed. Crypto transactions made up $126 million in revenue last quarter, an increase of over 230%. Transaction-based revenue itself weighed in at $329 million.&nbsp;



Net revenues jumped to $618 million. To put the number in perspective, analysts expected $549 million.&nbsp;



Finally, the company reported that it held custody of $26 billion in customer crypto at the end of March —&nbsp;a 78% increase from the end of 2023.&nbsp;



Pretty impressive numbers, right?



Keep in mind that these figures were recorded after a massive bull run in the first quarter. We’re set to get April data from Robinhood next week, which’ll provide a better picture on how the current market is reflected in the business side of things.&nbsp;



Based on CFO Jason Warnick’s comments, I wouldn’t be surprised if the strength continued last month with maybe a slight dip.&nbsp;



One analyst asked if Robinhood would reconsider the coins it offers <a href="https://blockworks.co/news/robinhood-wells-notice-sec">because of the Wells notice </a>—&nbsp;yes, I know, we have to talk about it for a moment —&nbsp;due to Robinhood’s previous attempts to avoid the SEC’s ire.&nbsp;



The executives unsurprisingly didn’t address that directly, though Warnick reiterated that the company is “confident” it listed coins that met its standards.&nbsp;



CEO Vlad Tenev, in response to a question about volumes in March, noted: “But if our market share is growing throughout all conditions, then over the long run, we’ll do very, very well on that side of the business.”



Sounds pretty bullish to me.&nbsp;



— Katherine Ross



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



<ul>
<li>Binance, in late 2023, fired an investigator who uncovered a client manipulating markets, the Wall Street Journal <a href="https://www.wsj.com/finance/currencies/binance-investigation-suspicious-trading-dwf-5f481f9d">reports</a>.</li>



<li>VanEck <a href="https://www.marketvector.com/indexes/digital-assets/marketvector-meme-coin">launched</a> its memecoin index on MarketVector, which tracks the top six memecoins.</li>



<li>JPMorgan analysts believe the SEC could establish a “middle category” for ETH, declaring that it’s neither a security or commodity, The Block <a href="https://www.theblock.co/post/293417/jpmorgan-sec-wells-notice-robinhood-crypto-spot-ethereum-etf-approval">reports</a>.</li>



<li>The US House of Representatives <a href="https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=409250">voted</a> to overturn the SEC’s Staff Accounting Bulletin 121.&nbsp;</li>



<li>Speaking of SAB 121, President Biden <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">said</a> he’ll veto the joint resolution if it hits his desk.</li>
</ul>



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



The back-and-forth between <a href="https://blockworks.co/tag/binance">Binance</a> and Nigeria took another turn this week after Binance CEO Richard Teng penned a blog post essentially accusing Nigeria of bribery.



Teng also called the country out for setting a “dangerous new precedent” by detaining an executive who visited the country with the intention of discussing the relationship between Binance and Nigeria (both the executive, Tigran Gambaryan, and Binance face tax evasion and money laundering charges now).&nbsp;



Yesterday, <a href="https://blockworks.co/tag/nigeria">Nigeria</a> denied the bribery allegation and called it an “act of blackmail” by Binance.&nbsp;



Meanwhile, Gambaryan <a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">sits in the Kuje correctional facility</a>.&nbsp;



Binance has been notably quiet when asked by yours truly about updates to the Nigeria situation. But the blog post sheds some light on the lead-up to the executive detentions.&nbsp;



It’s undoubtedly a <a href="https://blockworks.co/news/binance-comments-on-exec-nigeria-detention">concerning situation</a>. While the court proceedings appear to be moving along on paper, there’ve been so many changes at this point that it’s hard to keep the trials and hearings straight.&nbsp;



<a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">Keep an eye on May 17</a>, at least until the next postponement is announced — currently, there are two trials and a hearing set to take place on the same day.



— Katherine Ross



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Empire Newsletter: The SEC’s internal rift

Macauley Peterson

Ethereum co-founder Vitalik Buterin published a new Ethereum Improvement Proposal (EIP) on Tuesday that aims to reconcile core developers’ disparate approaches to account abstraction in upcoming hard forks.



The proposal, EIP-7702, is a <a href="https://github.com/ethereum/EIPs/blob/9e04cf1094eae64172ce04e0a04ec40f1edbdc5d/EIPS/eip-7702.md">successor</a> to EIP-3074 which was considered a Candidate For Inclusion (CFI) in Ethereum’s next upgrade known as Prague-Electra — or “Pectra.”



But 3074’s road to CFI status was bumpy, with substantial time spent debating the EIP across multiple All-Core Dev calls since January.



Read more: <a href="https://blockworks.co/news/gnosis-chain-ethereum-dencun-hard-fork">Gnosis Chain premieres Ethereum’s Dencun hard fork</a>



Developers have sought to provide tangible improvements to end users in the next hard fork, while keeping open various paths towards the “endgame” of account abstraction.



When looking at what could conceivably be moved into production first, 3074 was judged as most realistic.



But it wasn’t without its critics. For instance, Ansgar Dietrichs at the Ethereum Foundation called it “relatively heavy-handed” on the Jan. 18 ACD call, and more recently <a href="https://x.com/adietrichs/status/1778442942115377277">expressed</a> reservations as well.



<a href="https://blockworks.co/tag/vitalik-buterin">Buterin</a> wrote the new proposal in 22 minutes, <a href="https://twitter.com/decentrek/status/1788188707595403554">according to</a> ZeroDev wallet CEO Derek Chiang, although the published proposal also credits Dietrichs alongside Sam Wilson and Matt Garnett.



A new transaction type allows EOAs to operate as smart contract wallets temporarily. At the end of a transaction, they revert to a normal account.



This approach promises to simplify the developers’ tasks by allowing the use of existing contract code and interaction patterns.



<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">Very much in favor of EIP 7702, it is SO good. It makes transactions composable (bundles!), addresses 3074 concerns nicely, isolates user-ops as top-level EVM calls, yet also supports side-effects of the bundle without hitting state/disk permanently.&mdash; proto.eth (@protolambda) <a href="https://twitter.com/protolambda/status/1787891701920542932?ref_src=twsrc%5Etfw">May 7, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“This EIP is designed to be very forward-compatible with endgame account abstraction, without over-enshrining any fine-grained details of ERC-4337 or RIP-7560,” the authors <a href="https://github.com/ethereum/EIPs/blob/9e04cf1094eae64172ce04e0a04ec40f1edbdc5d/EIPS/eip-7702.md">wrote</a>.



Read more: <a href="https://blockworks.co/news/ethereum-devs-debate-account-abstraction">Ethereum devs debate future of account abstraction</a>



Unlike 3074, the new proposal aims to replicate its functionalities without adding new opcodes. By assuming a smart contract&#8217;s code temporarily, EOA can perform complex operations like batch transactions, making use of transaction sponsorship, and constrained sub-key operations — a security feature employing secondary keys (sub-keys) that have limited or specific permissions — within a single transaction.



Further down the <a href="https://notes.ethereum.org/@yoav/AA-roadmap-May-2024">roadmap</a>, a wallet-centric approach to account abstraction is expected to become the norm. The new EIP is designed to be quite compatible with EIP-4337, rolled out in March 2023, making use of existing wallet code and transaction frameworks to minimize disruption and duplication of effort.



Read more: <a href="https://blockworks.co/news/ethereum-improvement-proposals-2024">Ethereum Improvement Proposals to watch in 2024</a>



7702 has rallied support from 3074 proponents like core developers Garnett and Andrew Ashkhmin, as well as important dapp developers <a href="https://twitter.com/haydenzadams/status/1787881356631871631">including</a> Uniswap’s Hayden Adams.



Opposition to the previously included improvement had grown in recent months, as more developers became aware it was on a path to become part of the next <a href="https://blockworks.co/tag/ethereum">Ethereum</a> upgrade.



Ethereum’s governance operates on principles of consensus-building, where points of contention are meticulously debated in public, both on group calls and online forums, until a clear course of action emerges.



Independent development teams then agree on shared specifications, which are coded into new versions of their respective Ethereum <a href="https://app.blockworksresearch.com/glossary#C">clients</a>.



Ultimately, operators of thousands of <a href="https://app.blockworksresearch.com/glossary#V">validators</a> must concur to install the new software versions at sufficient scale to successfully initiate a <a href="https://blockworks.co/tag/hard-fork">hard fork</a> at an agreed upon date.



The next such upgrade, Pectra, is tentatively scheduled for Q4 2024.



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Vitalik rallies support for temporary smart wallets on Ethereum

Ben Strack

Activity on the Bitcoin network has evolved over the span of a billion transactions, with the latest usage starting to resemble that of Ethereum in 2020.



Bitcoin transaction number 1,000,000,000 occurred at the start of the week, giving an excuse to take a closer look at how a network once used mostly for payments is starting to sport broader utility.



The Runes protocol is a recent driver of Bitcoin blockchain activity, satisfying “a surge of interest in the purchase of memecoins and NFTs,” according to Bitget research analyst Ryan Lee.



Read more: <a href="https://blockworks.co/news/runes-bitcoin-token-standard-ordinals">A look into Runes, a new Bitcoin token standard for issuing fungible tokens</a>



The protocol is a fungible token standard designed by Ordinals creator Casey Rodarmor. It was <a href="https://blockworks.co/news/bitcoin-ordinals-brc-20-standard">created as an alternative to BRC-20</a>.&nbsp;



<a href="https://blockworks.co/tag/ordinals">Ordinals</a>, which debuted in January 2023, is a protocol used to inscribe individual units of BTC with unique data to create digital collectibles.



Unlike BRC-20, Runes do not depend on the Ordinals mechanism of inscription, Rodarmor <a href="https://x.com/rodarmor/status/1774613900119699701">said</a> on X.



Runes has accounted for between 10% and 70% of daily Bitcoin transactions in recent weeks, according to Dune Analytics <a href="https://dune.com/cryptokoryo/runes">data</a> — reaching as high as 81.3% on April 23.



The majority of activity on the <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> blockchain has historically been payment transactions — a fact that is poised to change as more gets built on top of it.



“Current activity on the Bitcoin network is very similar to the state of the Ethereum blockchain during the boom of dapp projects,” Lee said. “I think it will continue to varying degrees as the number of new projects and add-ons based on Bitcoin grows.”



Bitcoin’s total value locked (<a href="https://blockworks.co/tag/tvl">TVL</a>) stands at roughly $1.2 billion, according to DeFiLlama <a href="https://defillama.com/chains">data</a> — about what Ethereum’s TVL was four years ago, Lee noted.&nbsp;



That was a time that preceded a “DeFi boom” that spurred a rise in yield farming, algorithmic stablecoins and new liquidity models, Lee said. Ethereum’s TVL is $53 billion today, making up nearly 60% of the TVL across all blockchains.&nbsp;



“As DeFi increasingly adopts BRC-20 tokens, which have a potential to displace competitors, Bitcoin may react to these shifts positively due to increased demand,” Lee added.



Compass Point Research &amp; Trading analyst Joe Flynn said in an April 30 note that, unlike prior bitcoin cycles, the addition of protocols built on top of the layer-1 are indeed set to up demand for blockspace. This could lead to periods of congestion “that users will pay up for to be included in the next block,” he added.



Read more: <a href="https://blockworks.co/news/ordinals-impact-on-bitcoin-network">Ordinals are driving up Bitcoin fees — but that may be good for the network</a>



The Bitcoin network’s advanced functionality — like the innovation in standards like BRC-20 — are converging with broader factors set to drive BTC adoption, according to Neo founder Da Hongfei.



One of the most influential was the launch of <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">US spot bitcoin ETFs in January</a>, he noted. Such funds have given retail and institutional investors alike exposure to the crypto asset via a familiar investment vehicle.



The 11-fund category has tallied net inflows of nearly $11.8 billion during the four months they have traded, Farside Investors <a href="https://farside.co.uk/?p=997'">data</a> shows. “The impact of such an initiative will continue to encourage heightened trading activity, as these new financial instruments become embedded in the traditional financial infrastructure,” Hongfei said.



Not to mention the recent Bitcoin halving — reducing per-block mining rewards from 6.25 BTC to 3.125 BTC — <a href="https://blockworks.co/news/bitcoin-halving-2024-occurs">occurred on April 19</a>.&nbsp;



Bitcoin&#8217;s “immutable monetary policy” and a receptive macro backdrop could spark the crypto market&#8217;s “most violent supply squeeze yet,” Hongfei explained — pushing BTC price up.&nbsp;



That said, industry watchers have argued the current environment could hold back BTC in the coming months before the expected post-<a href="https://blockworks.co/tag/bitcoin-halving">halving</a> rally plays out.&nbsp;



Read more: <a href="https://blockworks.co/news/macro-headwinds-bitcoin-summer">Macro headwinds could spur a ‘boring’ bitcoin summer — or something worse</a>



Either way, Bitcoin’s DeFi and Web3 capabilities appear poised to help it challenge smart contract networks.



“We anticipate critical mass adoption of Web3 settlement on Bitcoin&#8217;s ecosystem within this decade,” Hongfei told Blockworks. “As Bitcoin&#8217;s utility and reliability become apparent for global trade and contracts, network effects and technical advantages could propel a mass migration from 2028 to 2030.”



Ethereum is likely to remain a place to test gadgets and “tinkering without jeopardizing critical applications,” the Neo founder added.&nbsp;&nbsp;



“Both networks would then assume complementary roles,” Hongfei said. “Bitcoin as the supreme base settlement layer and Ethereum pioneering less mission-critical use cases as a secondary chain.”



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After billionth Bitcoin transaction, a look at the network’s evolution

One of the final battles between the Securities and Exchange Commission and Ripple continues.&nbsp;



The case, initially launched in 2020, still faces a final judgment. The SEC is seeking nearly $2 billion in a final judgment. A sum, Ripple argued, that is too high. The firm asked the court to lower the penalty to “no more than $10 million” in a filing late last month.&nbsp;



The SEC, in its newest filing, disagrees with Ripple unsurprisingly.&nbsp;



Ripple, the regulator said, failed to argue how “that negligible ‘low’ penalty would meaningfully punish its violations or deter it or others from future large-scale capital raises without required registration.”



The regulator is arguing that the <a href="https://blockworks.co/news/sec-wants-multi-billion-sum-from-ripple">$1.9 billion it’s seeking</a> pales in comparison to the $1 billion that <a href="https://blockworks.co/tag/ripple">Ripple</a> made in violating Section 5 of the Securities Act and “the multi-billion-dollar business it built selling XRP.”



Read more: <a href="https://blockworks.co/news/ripple-counters-sec-penalties">Ripple proposes ‘no more than $10M’ in penalties after SEC seeks $1.9B</a>



Ripple, on the other hand, argues that the multi-million sum is fair when looking at other crypto cases like BlockFi, Genesis Global and Block.one. The <a href="https://blockworks.co/tag/sec">SEC</a> disagreed with the argument, saying the listed cases were just settlements.&nbsp;



“Ripple has failed to meet its burden of showing that the SEC’s calculation is not a reasonable approximation of Ripple’s ill-gotten gains,” the SEC wrote.&nbsp;



On X, Ripple’s Chief Legal Officer Stuart Alderoty <a href="https://twitter.com/s_alderoty/status/1787985041043386531">said</a> that the filing was “more of the same from the SEC.”



“The good news is that we are closer than ever to putting this lawsuit behind us, though unfortunately, <a href="https://blockworks.co/news/empire-newsletter-sec-issues-robinhood-wells-notice">many are just starting the journey</a>. We trust the Court will approach the remedies phase fairly,” he continued.



The filings suggest that the final judgment is looming, though it’s unclear what the court will decide with two radically different proposals.



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Ripple and the SEC’s legal fight continues ahead of final judgment

Mike Mallazzo

In the craziest highs of ZIRP mania, there was a popular internet adage that Coinbase and DraftKings were the same product, but just didn’t know it. Well, it sure as hell seems like they know it now. Crypto is currently tumbling off its high water mark precisely as sports betting seems to have reached its fathomable peak. With the number of gambling platforms ads and live in-game betting lines, watching an NBA playoff game in 2024 is essentially staring at a roulette wheel with a sideshow of world-class athleticism. The best player in baseball is <a href="https://sports.yahoo.com/new-details-emerge-in-alleged-gambling-ring-behind-shohei-ohtani-ippei-mizuhara-scandal-004930035.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAAJu6pYq4wJZqcOrD0lxMqWBpSu7WCZeUR_0yjilgc2LKzrswA9P0NzrK2RygQ9cb6Q9RJDfUyA-chLgCAgadUMbKNnIJmrU-gaLJTwLhdGp13L4sIFO2sHNIFYwRuMLVZyPbNLrsJzxG198C3oE4RMt92TyMYyDcucqjpuzwDqL">embroiled</a> in a <a href="https://sports.yahoo.com/new-details-emerge-in-alleged-gambling-ring-behind-shohei-ohtani-ippei-mizuhara-scandal-004930035.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAAJu6pYq4wJZqcOrD0lxMqWBpSu7WCZeUR_0yjilgc2LKzrswA9P0NzrK2RygQ9cb6Q9RJDfUyA-chLgCAgadUMbKNnIJmrU-gaLJTwLhdGp13L4sIFO2sHNIFYwRuMLVZyPbNLrsJzxG198C3oE4RMt92TyMYyDcucqjpuzwDqL">gambling scandal</a> that defies any semblance of reason and reminds us all that the richest among us have no idea how much money is in their checking account.  Zooming out, we’re currently experiencing the ultra financialization of every aspect of American society. You can now ruin lifelong friendships<a href="https://www.nytimes.com/2024/05/02/business/dave-busters-arcade-betting.html"> betting on Hungry Hungry Hippos at Dave and Busters</a>. One of the largest private equity firms is making futures bets on life insurance policies. Brown computer science students are making more than the median American salary <a href="https://www.businessinsider.com/brown-sophomore-sold-105000-dollars-in-restaurant-reservations-2024-4">reselling</a> Carbone reservations on the secondary market. As the always eloquent Neeraj Agrawal at Coin Center <a href="https://twitter.com/NeerajKA/status/1783142965956825133">said</a> on Twitter, “let’s tokenize that shit.” 



More than ever before, crypto is unabashedly embracing its most reductionist and obvious purpose — turning everything into a game where you can seamlessly buy low and sell high.&nbsp;



<h2 class="wp-block-heading">What came before</h2>



In previous crypto boom cycles, there was a subtle pretense that utilitarian, normie use cases beyond vibes-based speculation were a prerequisite for any crypto technology to hold true value.&nbsp;



In the ICO era, every coin was trying to convince buyers that there were super legit, world-changing companies behind the tokens.&nbsp;



NFTs had an even wilder grifter-industrial complex, trying to shill themselves as the future of personal identity. Or art? Or was it entertainment?&nbsp;



Mercifully, tokens like Jeo Boden have no such delusions of grandeur. The memecoin is — quite literally — just the President’s name spelled differently. With sincere apologies to Marshall McLuhan, it appears that the memecoin is now the message.&nbsp;&nbsp;



When the powers that be pivot and start talking about world-changing use cases again, know that they need exit liquidity. When the grand utopian promises of reimagining the concept of currency rear their heads again, the fat cats are looking for a new generation of retail suckers to offload their bag on. In related news, Stripe just <a href="https://decrypt.co/228152/stripe-stablecoin-payments-usdc-ethereum-solana">announced they are re-entering crypto after a six-year hiatus.</a> To the lifeboats, lads!&nbsp;



There’s a certain midwit approach to crypto that suggests that anything less than the full reform of the global financial system is an unworthy and cynical goal. At its best, crypto is a fun way to make money and vibe with good people.&nbsp;



The real egalitarian appeal to crypto is not that it will democratize payments — but that a wintergreen ZYN-fueled degenerate in his mom’s basement can outperform an MIT trained quant who spent a decade at Goldman. If even a single hedge fund trader quits over the shame of being shown up by a degen to pursue a career in theoretical mathematics or civic analytics, we should give Satoshi the Presidential Medal of Freedom.&nbsp;



The counterpoint to this logic, of course, is that sophisticated institutional investors often prey on the naivete of everyday retail traders. In a sense, the powers that be amplify the stories of the underdogs who beat the system so that others are naive enough to buy at the top.&nbsp;



But here too, the macro brand of crypto is evolving in a positive direction. One of the sneaky benefits of this current crypto run being less ideologically driven is that retail investors are simply more willing to take profits. When crypto is less identity politics and more a means to an end of securing a bag, people will take the money and run. This is a good thing.&nbsp; None of this is to say that the initial promise of a peer-to-peer electronic cash system or a next generation smart contract is unworthy. But bifurcating the grand ideological notion of permissionless currency from the broad appeal of “number go higher” will be good for both causes.&nbsp;



To date, crypto has been two different value propositions with two different customer profiles bundled under one abstract idea.&nbsp;



There are still plenty of zealots who care a lot about a 1/4 inch drill. But the hundreds of millions of regular people still to be onboarded into Web3 just want a 1/4 inch hole. And that hole is basically a fairer playing field for speculating on how to make money.&nbsp;



Depending on where you sit ideologically, this is either the perfect embodiment of late capitalism or the wheels of an unfettered free market dripping in grease and pumping out incremental equity value.&nbsp;



But one thing is for damn sure — everything is a market that can be tokenized.&nbsp;



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


<div class="wp-block-post-author-biography"> Mike Mallazzo is a revenue leader, writer and red sauce aficionado. By night, he drinks Dorothy Parker gin and writes United States of Amazon, a newsletter covering the nexus of commerce, technology and democracy. His words have appeared in Bloomberg, Adweek, The Drum, AdExchanger, QZ, The Next Web, Entrepreneur, Chicago Tribune and many more. He lives in Brooklyn with his wife, daughter and English bulldog and was once mistaken for Justin Bieber in a South Africa&#8217;s largest karaoke bar.</div>


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Everything in crypto is becoming a game — and that’s good

Michael Ippolito

Jason Yanowitz

I am excited to announce that Blockworks has acquired The Breakdown, a podcast and newsletter network founded by Nathaniel Whittemore (NLW).



The Breakdown’s offerings, including its influential The Breakdown podcast, YouTube channel, dedicated newsletter, and the Bitcoin Builders podcast, are now integral parts of the Blockworks family.&nbsp;



Mike and I first met Nathaniel in 2018. We had just launched Blockworks, and he had just launched one of the early crypto newsletters. In 2020, when we decided to start building our editorial division, Nathaniel became a pivotal advisor, helping us shape our vision for a crypto-native media brand.



Over the years, we&#8217;ve seen Nathaniel elevate The Breakdown into the most trusted daily podcast in the industry. What sets The Breakdown apart is not just its frequency — published six times a week — but its depth. It delves into macroeconomics, geopolitics, and major power shifts, always framing these discussions within their implications for the crypto world.



This acquisition marks a significant expansion of our podcast network, enhances our advertising capabilities, and broadens our distribution channels. It also strengthens our ability to cross-promote our events and research, furthering our commitment to delivering top-tier information to crypto professionals and investors.



Looking ahead, our plan is to establish The Breakdown as the flagship daily podcast of Blockworks. We are also thrilled to share that NLW will continue to lead The Breakdown podcast as its host.&nbsp;



The Bitcoin Builders podcast will become our flagship Bitcoin podcast – more on that soon.&nbsp;



This is a momentous step for Blockworks, and we are excited about the opportunities this collaboration unlocks for our community.



 — Jason and Mike



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Blockworks expands ‘House of Brands’ model with acquisition of The Breakdown

<h2 class="wp-block-heading">End in sight</h2>



There’s some good news for creditors in the joint reorganization plan filed late Tuesday by FTX’s bankruptcy overseers.



FTX says it has collected between $14.5 billion and $16.3 billion in cash, and it’s ready to distribute those funds to creditors. It owes customers and other creditors around $11 billion. FTX says that 98% of its non-government creditors will receive “at least” 118% of claims in cash within two months of the plan being approved.&nbsp;



Some, including crypto loan creditors, could see up to 142% of their claims paid back, according to a court filing.&nbsp;



Others can expect to be paid in full and receive interest on their claims.&nbsp;



But don’t get too excited just yet. The plan still needs to be approved by the bankruptcy court. While it seems to check all of the boxes on paper, one should expect this process to take a while to play out.&nbsp;



Further, creditors shouldn’t expect to see their claims benefit from the recent crypto boom. Instead, the claims will be <a href="https://blockworks.co/news/ftx-former-customers-oppose-bankruptcy-plan">paid out according to November 2022 prices</a>. Bitcoin hovered around $20,000 back then —&nbsp; a far cry from its current level of $62,000.&nbsp;



But that shouldn’t be a surprise after the judge <a href="https://blockworks.co/news/ftx-bankruptcy-victim-compensation">said</a> earlier this year that the bankruptcy code is “very clear” and that FTX doesn’t meet the criteria for an exception.



A press release about the new plan explained that debtors reached a series of settlements, including the IRS claims, an agreement with the CFTC, and a separate agreement with the DOJ.



The hope, according to the estate, is to resolve disputes “without costly and protracted litigation.” That’s something, I think, everyone can agree on.&nbsp;



Much of the funds came from the sales of Alameda and FTX Ventures investments, including the firm’s stake in Anthropic, which was <a href="https://blockworks.co/news/ftx-to-sell-anthropic-shares">approved for sale</a> earlier this year. The estate also sold out of its position in Grayscale’s bitcoin ETF.&nbsp;



CEO John J. Ray, who took over from the now incarcerated Sam Bankman-Fried, expressed his <a href="https://blockworks.co/news/new-ftx-ceo-on-government-claims">optimism about the proposed plan</a>, saying that the firm was “pleased” to be able to pay back creditors.&nbsp;



While there’s no denying that this plan is good news for creditors, the debtors previously teased that they had enough to pay people back. FTX lawyer Andrew Dietderich said in January that it expected to repay creditors in full “eventually.”



According to the bankruptcy docket, the court scheduled two hearings for later this summer.&nbsp;



Approval of the plan could represent one of the final steps in the closure of the FTX saga since Bankman-Fried was sentenced earlier this year after being found guilty of fraud.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/sbf-blew-it-final-defense-trial">Given one more chance to defend himself, SBF blew it&nbsp;</a>



It’s been a long journey since Ray took over nearly two years ago and said the bankruptcy represented an “unprecedented” mess. (That, coming from the guy who took over Enron’s bankruptcy, says a lot.)&nbsp;



Soon we can officially put <a href="https://blockworks.co/tag/ftx">FTX</a> in the rearview mirror.



— Katherine Ross



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



<ul>
<li>Grayscale’s bitcoin ETF once again saw outflows Tuesday, with $28 million departing the fund.</li>



<li>ARK <a href="https://ark-funds.com/?utm_campaign=idt_fund_homepage&amp;utm_medium=email&amp;_hsenc=p2ANqtz-9W1OZVa2mBS-SXb2AZPyM8TOcqFU9mQSVW2LCamh3qiakQEbgXlV3O74tvKuIK_iQnr-Wh234rIInQgydD7ZPJW1EMFA&amp;_hsmi=306060191&amp;utm_content=idt_0572024&amp;utm_source=IDT">offloaded</a> $15 million worth of Coinbase shares from three funds.</li>



<li>Over the past 24 hours, $27 million of shorts have been liquidated, per CoinGlass <a href="https://www.coinglass.com/LiquidationData">data</a>.</li>



<li>Bitcoin continues to slip from its local Monday highs, <a href="https://www.tradingview.com/chart/?symbol=COINBASE%3ABTCUSD">trading</a> around $62,250 as of press time.</li>



<li>Ether, too, is showcasing some near-term weakness as well, <a href="https://www.tradingview.com/chart/?symbol=COINBASE%3AETHUSD">trading</a> just below $3,000 this morning, or about 2.4% off in the past day.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">Where in the world is Binance?</h2>



<a href="https://blockworks.co/tag/binance">Binance</a> has a checkered past when it comes to getting along with countries and regulators.&nbsp;



The exchange still struggles with this today, as countries like Nigeria and the Philippines either move to <a href="https://www.sec.gov.ph/pr-2024/sec-proceeds-with-blocking-of-binance/#gsc.tab=0">block</a> the exchange from operating or — <a href="https://blockworks.co/news/nigerian-government-binance-fine">in Nigeria’s case</a> — detain executives and charge them with the same crimes as their employer.&nbsp;



Speaking of Nigeria, Binance stopped support for the naira as it continues to <a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">fight for the country to release</a> Tigran Gambaryan, one of <a href="https://blockworks.co/news/binance-executive-escapes-nigerian-custody">the aforementioned detained</a> executives.



Binance’s own website claims that it’s available in over 100 countries. However, it only lists 44 countries. Binance didn’t return my multiple requests for comment on the discrepancy.&nbsp;



Here’s a fun little note: Binance’s site says it supports 19 European countries but lists Europe as one of those countries, alongside others like the Czech Republic and France.&nbsp;



Despite the <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">multibillion-dollar settlement</a> Binance agreed to pay the US government last year, operations in the US remain a sticky situation. Investors in the States — well, really, just certain states — can use the platform. Unfortunately, if you’re based in a handful of states, including my home state of Texas, you’re unable to use the US platform.&nbsp;



The exchange exited the Canadian market last year, citing regulatory concerns. Those worries didn’t seem to faze Coinbase, though, which received registration as a restricted dealer last month.



Binance is also <a href="https://www.reuters.com/technology/binance-did-monthly-transactions-worth-90-bln-banned-china-market-wsj-2023-08-02/">blocked</a> in China after the country took action against crypto a few years back. It ceased operations in South Korea back in 2020, citing low usage and volume.&nbsp;



Over in Europe, Binance left the Netherlands last year and withdrew its application for a crypto license in Germany. But the firm still operates in France and is available in other European countries including Spain.&nbsp;



The exchange did admit that French authorities made an on-site visit in June of last year, <a href="https://blockworks.co/news/binance-france-on-site-visit">claiming</a> that it was “fully collaborative” with said authorities.



According to a February report from Bloomberg, Binance is still trying to re-enter the UK market, but the company continues to face regulatory hurdles.



Oh, and did I mention that the company still doesn’t have a headquarters? Though new CEO Richard Teng did <a href="https://www.theblock.co/post/287168/binance-ceo-says-exchange-is-weighing-up-a-few-jurisdictions-for-selecting-its-headquarters">say</a> — at Paris Blockchain Week — that the company was mulling a “few jurisdictions.”



Stay tuned.&nbsp;



— Katherine Ross



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



<ul>
<li>The US filed <a href="https://www.justice.gov/opa/pr/us-charges-russian-national-developing-and-operating-lockbit-ransomware">charges</a> against the creator of the ransomware program LockBit, offering a $10 million reward for information that would lead to their arrest.&nbsp;&nbsp;</li>



<li>Mastercard and a group of banks including Citi and JPMorgan <a href="https://www.bloomberg.com/news/articles/2024-05-08/mastercard-citi-jpmorgan-test-ledger-for-settling-bank-money?embedded-checkout=true">tested</a> new blockchain-based tools for in-bank settlement, Bloomberg reports.&nbsp;&nbsp;</li>



<li>Tom Brady’s troubled history in the crypto space <a href="https://www.tiktok.com/@netflix/video/7365942757124361515">came up</a> during a new Netflix-hosted roast.&nbsp;</li>



<li>Consensus continues its tradition of hosting US presidential hopefuls with an <a href="https://www.coindesk.com/policy/2024/05/07/robert-f-kennedy-jr-a-pro-crypto-presidential-candidiate-to-appear-at-consensus-2024/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">appearance</a> by independent candidate Robert F. Kennedy.&nbsp;</li>



<li>Microsoft built an “air gapped” artificial intelligence tool for <a href="https://qz.com/microsoft-offline-ai-service-chatgpt-gpt4-us-spies-1851462266">US spy agencies</a>, according to Quartz.</li>
</ul>



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



Turns out Gary Gensler’s not the biggest fan of crypto journalism.



The SEC Chair <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">grew a bit frustrated</a> yesterday during an interview with CNBC’s Andrew Ross Sorkin over the latter’s questioning on crypto.&nbsp;



Crypto, Gensler stressed, is “a small piece of our overall markets” but “an outsized piece of the scams and frauds and problems in our markets.” As a result, “you end up with, like, an outsized ratio of journalist questions and crypto journalists to market cap.”



Gensler basically accused Sorkin (and other journalists, I guess?) of focusing too much on crypto.&nbsp;



Okay, fair point, I suppose. But perhaps it’s equally fair to say that the SEC is <a href="https://www.coindesk.com/policy/2024/03/22/us-sec-asking-for-more-millions-dozens-of-lawyers-to-beef-up-crypto-oversight/#:~:text=The%20Treasury%20Department's%202025%20budget,and%20around%20%242.5%20billion%20for">seeking</a> a budgetary bump thanks to its strong focus on crypto. And Gensler has made it pretty clear that he thinks the SEC ought to have <a href="https://www.wsj.com/articles/secs-gensler-supports-commodities-regulator-having-bitcoin-oversight-11662641115">a bigger</a>, not smaller, role in overseeing an industry that has attracted billions of dollars of capital over a relatively short period.&nbsp;



There ought to be an equal trade off. Want more power? Prepare to answer more questions. Seems pretty fair to me.&nbsp;



— Michael McSweeney



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Empire Newsletter: FTX bankruptcy almost across the finish line

Jack Kubinec

Solana’s validators are a bit like baristas flipping around an iPad — they’re nicer to you when you include a tip. And as traders keep cramming into Solana’s metaphorical coffee shop, the validator tip jar looks increasingly stuffed with money.&nbsp;



Validators are a group of 1,728 computers that run software to produce blocks on the Solana blockchain. Coinbase Cloud <a href="https://www.jito.network/stakenet/">is</a> a prominent Solana validator, as is Google Cloud. One revenue stream that validators earn is called maximal extractible value (MEV), which refers partly to tips paid by searchers to be included in Solana blocks.&nbsp;



This MEV revenue has been growing quickly since mid-March. Notably, Solana validators are earning more from MEV overall than Ethereum validators, <a href="https://app.blockworksresearch.com/analytics/l1?interval=daily&amp;dashboard=l1-sector-comparison-financial">according</a> to Blockworks Research. Just a few months ago, Solana’s MEV revenue was a rounding error compared to Ethereum’s.



Read more: <a href="https://blockworks.co/news/draft-mev-dydx-chorus-one">MEV doesn’t have to be a zero-sum game, research suggests</a>



Broadly defined, <a href="https://blockworks.co/tag/mev">MEV</a> refers to the largest amount of value that validators can create by packing transactions into blockchain blocks. Blockworks Research’s dashboard suggests Solana validators raked in a hair under $7 million from MEV last week.



At the moment, <a href="https://blockworks.co/tag/solana">Solana</a> MEV is almost entirely the product of a protocol named Jito. Jito offers a fork of the Solana validator called Jito-Solana, and 78% of Solana’s validators use this client, according to Jito’s website. The client lets searchers, or traders, arrange transactions in bundles. Searchers can include a tip to try getting validators to send their particular bundle to the blockchain.



Whether all this is good for Solana is something of a matter of perspective. Some forms of MEV can be predatory. Jito recently suspended its mempool, a kind of waiting area for transactions, due to “sandwich attacks” that let opportunists create MEV by trading right before and after a transaction to manipulate the price and take profit from the trader.&nbsp;



Read more: <a href="https://blockworks.co/news/jito-labs-suspends-mempool-functionality">Jito Labs ends mempool functionality citing impact on Solana users</a>



In Jito’s <a href="https://jito-labs.gitbook.io/mev">telling</a>, the protocol is making Solana more efficient while also minimizing negative forms of MEV like sandwich attacking. If it can pull that off, Solana could see a lot of benefit.&nbsp;



Continued long-term growth in Solana’s MEV would likely imply that less spam is being included in blocks, and Solana would have more available blockspace, Blockworks Research analyst Hayden Tsutsui said. In a best case scenario, more blockspace could free up room for more on-chain activity, which could also bring along more liquidity, Tsutsui said.



But it bears mentioning that as things currently stand, Solana is still staggering under a mountain of spam. More than 60% of non-vote transactions fail on Solana, according to Blockworks Research, largely due to bots <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">taking advantage of Solana’s cheap fees</a> by inundating the network in hopes of getting transactions to land.&nbsp;



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MEV collected by validators is now higher on Solana than on Ethereum

Bitcoin is no longer merely that taboo thing your techie uncle awkwardly brings up at family gatherings.



Well, maybe the asset is only that for you —&nbsp;but if so, you’re in the minority at this point.&nbsp;



Whether you believe in bitcoin or not, it has increasingly perforated traditional finance in recent years and months. Institutions can gain exposure to crypto through a regulated liquid derivatives market, and more recently via bitcoin ETFs.



While some traditional finance bigwigs still criticize the asset (at least publicly), large financial companies are waking up to the potential of BTC, as well as <a href="https://blockworks.co/news/blackrock-tokenization-investment">blockchain tech more broadly</a>.



“Before, people had to buy coins,” said Lucas Kiely, chief investment officer at Yield App. “Now they can trade on [traditional finance] markets which means big market players can get involved.”



The increased market participation around bitcoin is one reason the asset has become more correlated to global markets — a fact that could spur investor concern in an environment like this one.&nbsp;



That’s because a range of macro factors are set to continue tussling with post-halving bitcoin price rally expectations in the coming months, industry watchers say.



Bitcoin halvings — when per-block rewards for mining bitcoin are reduced every four or so years — have historically helped catalyze crypto bull markets.&nbsp;



Read more: <a href="https://blockworks.co/news/post-bitcoin-halving-price-predictions">With halving just hours away, bitcoin price predictions proliferate</a>&nbsp;



Such events prior to the latest one last month have propelled BTC to new highs between 12 months and 18 months after the halving.



Before then, the macro environment this time around may push BTC downward.



<h2 class="wp-block-heading">Macro headwinds lingering</h2>



Though bitcoin has rebounded from its recent stint below $57,000, “investors should be wary of being lulled into a false sense of security,” Kiely noted.



The asset’s price hovered around $63,000 at 4 pm ET Tuesday — down 9% from a month ago, but up nearly 7% in the last five days.&nbsp;&nbsp;



“The macro headwinds that pushed BTC south have not eased,” he said in an email. “If anything, global political uncertainty is only more pronounced, while inflation in the US is still not under control.”



K33 research analysts Anders Helseth and Vetle Lunde said in a Tuesday note that global macro conditions have “re-emerged to become a relevant market mover.” Bitcoin’s 30-day correlation to the S&amp;P 500 has reached a seven-month high, they added. “BTC first followed the market down on increased interest rate expectations on Wednesday, before following the markets up on decreased interest rate expectations on Friday.



The analysts are referring to the “higher for longer” posture from the Federal Reserve last Wednesday, which held interest rates at their current level.&nbsp;



Fed Chair Jerome Powell called the path forward “uncertain,” noting that central bankers will need to see more evidence that inflation is easing before cutting rates.



Two days later, bitcoin’s price rose on news that the economy added 175,000 positions in April — a number closer to the pre-pandemic monthly average of 183,000 job gains.



Read more: <a href="https://blockworks.co/news/bitcoin-back-above-60k">Bitcoin is back above $60K, stocks rally on cooler jobs data</a>



The crypto market has been “consumed” in recent months by the first US spot bitcoin ETF launches and the Bitcoin halving, according to LMAX Group market strategist Joel Kruger.&nbsp;&nbsp;&nbsp;



“As these risks have played out and the market has settled down, attention is shifting to the other side of the equation where there has been more pressing volatility risk around the state of the US dollar, yield differentials and the outlook for fiat monetary policy,” Kruger told Blockworks.&nbsp;



Market participants previously expected the Fed to cut rates by 0.75% or 1% in 2024, Finequia International research analyst Matteo Greco said in a research note.&nbsp;



After Powell’s comments last week, many now anticipate lower cuts amounting to 0.25% or 0.50% — and only if inflation doesn’t worsen.



<h2 class="wp-block-heading">How far down before a possible rally?</h2>



Outside of monetary policy, the war in the Middle East rages on, and the US domestic situation is “increasingly volatile” ahead of the November presidential election, Kiely said.



Oh yeah, and the Securities and Exchange Commission appears to be continuing its regulation-by-enforcement approach, with <a href="https://blockworks.co/news/robinhood-wells-notice-sec">Robinhood most recently receiving a Wells notice</a>.&nbsp;



In other words, tailwinds for bitcoin are few and far between right now, Kiely added.



“Best case scenario, we will see a very boring summer,” he explained. “Worst case scenario, bitcoin will lose some key support and take a long journey back down to recent lows.”



Such a retreat could mean BTC sinking to between $50,000 and $55,000, Kiely predicts.



Aside from central bank policy developments, bitcoin investors should monitor the pace of traditional finance adoption of bitcoin ETFs, Kruger noted. Some institutions and corporations are also considering adding bitcoin to their balance sheet.&nbsp;



“We believe any setbacks should be exceptionally well supported into the $50,000 area, with any dips below to be short-lived,” he said. “As far as the topside goes, we wouldn’t at all be surprised to see bitcoin making fresh record highs towards and through the next major barrier at $100,000.”



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Macro headwinds could spur a ‘boring’ bitcoin summer — or something worse

Casey Wagner

Democrats and Republicans clashed over how the Securities and Exchange Commission is handling crypto enforcement actions during a House Financial Services subcommittee hearing Tuesday.&nbsp;



Capital Markets Subcommittee Chair Ann Wagner, R-Mo., kicked off the hearing titled “SEC enforcement: balancing deterrence with due process,” with a jab at the securities regulator, mentioning the recent sanctions the SEC received in its case against Debt Box.&nbsp;



“Public trust in the SEC will only decline when its employees are sanctioned and forced to resign for their quote gross abuse of power, as they were in the recent case against the crypto platform known as Debt Box,” Wagner said.&nbsp;



Read more: <a href="https://blockworks.co/news/secs-gensler-crypto-disclosures-for-investors">SEC’s Gensler calls for more crypto disclosures for investors</a>



Rep. Brad Sherman, D-Cali., was quick to counter Wagner’s point, arguing that the agency <a href="https://blockworks.co/news/sec-overreach-failure-debt-box">handled the misconduct appropriately</a>.&nbsp;



“There were two SEC lawyers who acted wrongfully in the Debt Box case,” Sherman said. “They&#8217;ve been fired, and I think that sets an example that will assure that other <a href="https://blockworks.co/tag/sec">SEC</a> lawyers do not act similarly.”&nbsp;



Rep. Maxine Waters, D-Cali., a typical vocal opponent of the crypto industry alongside Sherman, took a partisan stance, asserting that her side of the aisle is the only one looking out for constituents.&nbsp;



“My message to the crypto industry and everyone else: Democrats will always press for compliance, investor protection and market integrity,” Waters said.&nbsp;



The hearing comes a day after the House Committee on Rules moved to advance a joint <a href="https://www.congress.gov/bill/118th-congress/house-joint-resolution/109/all-actions">resolution</a> that would overturn the SEC’s Staff Accounting Bill (SAB) 121, a controversial advisory that states <a href="https://blockworks.co/news/house-committee-resolution-against-sab121">digital asset custodians should report a liability</a> and “corresponding assets” on their balance sheets for all cryptocurrencies under custody.



Committee members Mike Flood, R-Neb., and Wiley Nickel, D-N.C., introduced the resolution earlier this month alongside a similar measure in the Senate spearheaded by Cynthia Lummis, R-Wyom. The legislators cited a report from the Government Accountability Office, which stated in an October 2023 <a href="https://www.gao.gov/products/b-334540?utm_medium=social&amp;utm_source=twitter&amp;utm_campaign=usgao">report</a> that SAB 121 should have been issued as a rule under the official process.&nbsp;



“It is unfortunate that the SEC would attempt to circumvent the rulemaking process while falsely claiming that SAB 121 is simply non-binding staff-level guidance,” Flood said Monday during testimony before the Rules Committee.&nbsp;



The resolution heads to the House floor Wednesday for debate. Waters argued Tuesday that this “attempt to kill SAB 121” is unnecessary and prevents the SEC from carrying out its rightful duties.



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Democrats, Republicans clash over SEC role in House hearing 

Ryan Whitehead

Forget the halving. Don’t mention ETFs. What then is arguably the most important narrative in crypto?



Memecoins.



Yes, that often-cringeworthy menagerie of anime, animalia and animations collectively are the primary on-ramp into crypto for new users. People are always asking, “Where are the next billion users going to come from?”&nbsp;



The answer is pretty clear — the only remaining question is whether the dog will be wearing a hat or not.



Before fans of self-custody, real-world assets and DeFi (and I’m certainly among them) turn up their noses in disdain, let’s consider some of the very valid reasons for the persistent popularity of memecoins and their kissing cousin, airdrops.



First up is entertainment. People love to be entertained, and they don’t mind spending money on it. The global entertainment and media market is valued at well over $2 trillion, according to <a href="https://www.pwc.com/gx/en/industries/tmt/media/outlook/insights-and-perspectives.html">analysts from PwC</a>, on par with the overall market cap for all cryptocurrencies. What’s the utility of $DOGE, $PEPE or $BONK, compared to governance tokens or stablecoins? Entertainment in itself is a utility.



People are also attracted to risk. The global casino industry alone is worth <a href="https://www.businesswire.com/news/home/20230927456720/en/Global-Casinos-Strategic-Business-Report-2023-Market-to-Reach-224.1-Billion-by-2030-from-157.5-Billion-in-2022---Machines-Segment-to-Account-for-Almost-Half-the-Market-Value---ResearchAndMarkets.com#:~:text=The%20global%20casinos%20market%2C%20valued,period%20from%202022%20to%202030.">more than $150 billion</a> and is growing, according to a ResearchAndMarkets.com report. That doesn’t include sports betting, lotteries or all the other ways that people put down relatively small amounts of money in hopes of winning relatively large amounts of money. (In investment lingo, “asymmetric opportunities.”) Obviously, buying a memecoin carries a lot of this type of risk, but putting in time, resources and energy into a potential airdrop event — where the amount and timing of the reward is uncertain — is an experience undeniably tinged with the thrill of the gamble as well.



Read more from our opinion section: <a href="https://blockworks.co/news/memecoin-mania-learn-risk-management">Memecoin mania can teach us something</a>



Organizations and builders support memecoins and airdrops because they can bring liquidity to an ecosystem. They also help capture slices of the exceedingly precious &#8220;attention economy,&#8221; whose value economists <a href="https://deliverypdf.ssrn.com/delivery.php?ID=732088024087092092125077080120102089026050064018017000018003123126008094069005107120099022017062023057007117019122019087082089051090012016041006112073127119112008068012087073015082122027123083074026007001029122022001026119004091004109068071072100031&amp;EXT=pdf&amp;INDEX=TRUE">estimate</a> to be in the “trillions of dollars.” It can be argued that the $BONK airdrop and community campaign were the lighter and lighter fluid that reignited the Solana ecosystem. Or just look at how <a href="https://blockworks.co/news/bitcoin-halving-runes-launch">Ordinals and now Runes</a> have turned Bitcoin into a blistering hot network, as opposed to a passive digital-gold-like store of value.



In my position as head of marketing for Moonbeam (which integrates the Ethereum and Polkadot ecosystems), I’ve had a front-row seat for the recent launch of a memecoin on our network and the concomitant entertainment, risk and attention.



Based on my experience, I can attest that admittedly silly memecoins can have seriously positive effects on a network level. New users are attracted by the entertainment value and potential for airdrops. Cross-chain synergies are fostered with other ecosystems where the memecoin has also been launched. And networks that are able to secure a supply of the memecoin can direct those resources to targeted growth areas in strategic areas, in our case, DeFi, gaming, real-world assets, DePIN, AI and more.



But while memecoins are sweet and all, here&#8217;s the bitter pill: Besides memecoins, we in crypto have largely created a very bad, very difficult system from a user experience perspective.



Gambling and lotteries comprise the dark side of the traditional financial system, but at least it’s an easy way of participating in the financial system. Memecoins play a similar role in crypto and DeFi — they’re the best on-ramp we’ve got.&nbsp;



If buying $DOGE or the latest Solana microcap leads someone to exploring the broader crypto ecosystem, then it’s a win for everyone who believes in the democratizing potential of blockchain technology and governance.



But if the rest of the crypto ecosystem provides such a poor user experience — or is not perceived as useful by the new memecoin holders — then this year’s nascent bull run will turn out to be another playing-card structure, doomed again to collapse when the bubble pops or macroeconomic conditions next convulse.



Memecoins are hot again — for the moment. It’s now time for &#8220;serious&#8221; builders to demonstrate real value for new users and capitalize on the attention that dog coins have fetched, because there’s no guarantee they’ll last through the next cycle.



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


<div class="wp-block-post-author-biography">Ryan Whitehead is the Moonbeam Foundation’s Global Head of Marketing, where he owns branding, messaging and outreach. Moonbeam is a major EVM-compatible parachain integrating Polkadot with the Ethereum ecosystem. Prior to Moonbeam, Ryan was Director of Product Marketing &#8211; Ecosystems at Coinbase. He’s also held senior positions at Facebook and Microsoft. He’s a graduate of Stanford University.
</div>


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The most important trend in crypto? It’s always been memecoins

Securities and Exchange Commission Chairman Gary Gensler says that the agency is just a “cop on the beat” when it comes to policing the crypto industry.&nbsp;



Gensler spoke to CNBC a day after Robinhood <a href="https://blockworks.co/news/robinhood-wells-notice-sec">disclosed</a> that it received a Wells notice from the US securities regulator.&nbsp;



“We have a really important responsibility as being a cop on the beat and ensuring that people that are asking you to put your money into buy or sell securities are following the law so you get disclosures, that you get certain protections,” Gensler <a href="https://www.cnbc.com/2024/05/07/cnbc-exclusive-cnbc-transcript-sec-chair-gary-gensler-speaks-with-cnbcs-andrew-ross-sorkin-on-squawk-box-today.html">said</a> when asked about the notice.&nbsp;



The crypto industry, Gensler argued, comprises an array of digital assets that constitute securities “under the law of the land, as interpreted” by the Supreme Court. He also said that he doesn’t believe that investors are receiving all of the “information” in crypto.&nbsp;



Read more: <a href="https://blockworks.co/news/consensys-sec-lawsuit-debate">Is the SEC weighing a lawsuit against Consensys?</a>



“Everybody’s asking about what’s the earnings release and how many companies are beating earnings or falling behind and so forth. Where’s the disclosures from these crypto tokens similar to these season earnings releases?” Gensler asked, comparing tokens to publicly traded stocks.



Gensler added that he “genuinely think[s] they’re not getting that in crypto. And if they are a crypto security, it’s required and needed.”



He didn’t directly address the allegations that Consensys made against the <a href="https://blockworks.co/tag/sec">SEC</a> in a lawsuit filed last month, and also avoided addressing the alleged investigation around ether, Ethereum’s native token. 



Read more: <a href="https://blockworks.co/news/empire-newsletter-sec-issues-robinhood-wells-notice">Empire Newsletter: A busy crypto lawsuit season looms</a>



When asked Tuesday, <a href="https://blockworks.co/tag/gary-gensler">Gensler</a> just said that the “intermediaries in the center of this rather centralized market generally are conflicted and doing things we would never allow the New York Stock Exchange to do. The New York Stock Exchange is not allowed to trade against the investors.”



In its lawsuit, <a href="https://blockworks.co/news/consensys-files-lawsuit-against-sec">Consensys claimed that the SEC served</a> the company with subpoenas regarding ETH. The lawsuit confirmed <a href="https://fortune.com/crypto/2024/03/20/sec-gary-gensler-ethereum-security-commodity-crypto-foundation/">reports</a> that the SEC was looking into the status of ETH.



Former employees of the <a href="https://blockworks.co/news/sec-hinman-eth-not-security">SEC had previously agreed</a> that ETH wasn’t a security. The <a href="https://blockworks.co/news/cftc-chair-says-ether-is-a-commodity-hints-that-sec-disagrees">Commodities and Futures Trading Commission has labeled ETH</a> a commodity.&nbsp;



Gensler also added that the ether ETFs are sitting “in front” of the five-member commission now.&nbsp;



The Commission will take up the filings “at the appropriate time,” he said.



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SEC’s Gensler calls for more crypto disclosures for investors

The advent of bitcoin ETFs came only after a legal victory over the Securities and Exchange Commission.



A similar action could be what it takes to get US spot ether ETFs over the finish line, law professionals told Blockworks.



And let’s not forget Consensys’ lawsuit against the US securities regulator, which they added could play a role in helping sort out the ether ETF question.



<h2 class="wp-block-heading">Bitcoin ETFs born from a legal victory</h2>



In a world where the SEC and crypto companies constantly appear to be at odds, the courts have been able to offer some clarity.&nbsp;



<a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf">Judges in the DC Circuit Court of Appeals ruled</a> last August that the SEC’s decision to deny the conversion of the Grayscale Bitcoin Trust (GBTC) to an ETF, but allow bitcoin futures ETFs, was “arbitrary and capricious.”



SEC Chairman Gary Gensler said in a January <a href="https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023">statement</a> that approving bitcoin ETFs was “the most sustainable path forward” given that court decision. He added that the regulator “acts within the law and how the courts interpret the law.”



Enter: proposed funds that would directly hold ETH — the second-biggest crypto asset by market capitalization.&nbsp;



Investment firm VanEck first filed for a spot ether product in 2021. The company, <a href="https://blockworks.co/news/21shares-ark-filing-for-spot-ether-etf">along with Ark Invest and 21Shares</a>, renewed the efforts last September. BlackRock and Grayscale were among those to follow suit.&nbsp;&nbsp;



The SEC, as expected, <a href="https://www.sec.gov/files/rules/sro/cboebzx/2024/34-100065.pdf">delayed</a> its decision on Monday for a spot ether fund filed by Invesco and Galaxy Digital. A ruling on other similar planned offerings by Ark Invest, VanEck, Grayscale, BlackRock and others is expected by the end of the month. Various segment observers have said they don’t expect the US regulator to approve them. This is due to concerns over the liquidity of ETH&#8217;s spot and futures markets and the question of its status as a security or commodity.



Read more: <a href="https://blockworks.co/news/ether-etf-approval-unlikely-soon">Ether ETFs coming in May? Here’s why many are bearish</a>



The “cleanest path” for the SEC to deny the spot ether ETFs would be solely based on the correlation between the ETH futures and spot markets, Van Buren Capital general partner Scott Johnsson said in an April 25 X <a href="https://twitter.com/SGJohnsson/status/1783487721933070754">post</a>.



Bitwise, a fund group with its own ether ETF filing, submitted a data <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2024/SR-NYSEArca-2024-31.pdf">analysis</a> showing what it <a href="https://twitter.com/BitwiseInvest/status/1773427635919458551">called</a> a correlation between the ETH futures and spot markets that are “substantially similar” to that of bitcoin.&nbsp;



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1450" height="1392" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=1024&amp;h=1024" alt="" class="wp-image-85468" style="width:768px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=1450 1450w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=268 268w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=272 272w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=228 228w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Bitwise-Correlation-data.png?w=80 80w" sizes="(max-width: 1450px) 100vw, 1450px" /></figure>



“They probably overextend, and push for more reasons, because correlation concerns will only result in a temporary delay (and they know this),” Johnsson added at the time.



<h2 class="wp-block-heading">Suing again could be the best route</h2>



Court intervention is of course not needed for the SEC to greenlight spot ether funds, noted Liz Boison, a partner at law firm Hogan Lovells.&nbsp;



But it appears it could come to that.



“We should expect that one of the applicants will sue the SEC if the SEC either unreasonably extends the deadline or disapproves the application,” Boison told Blockworks. “Just as the Grayscale suit succeeded in giving the SEC a court-ordered deadline, the ether spot funds will want the same.”



A Grayscale spokesperson did not immediately return a request for comment.&nbsp;



Hailey Lennon, a corporate partner in Brown Rudnick’s digital commerce unit, said she too thinks issuers will consider fighting a potential ether ETF application denial in court.&nbsp;



“The SEC has typically regulated the cryptocurrency industry through enforcement action and has not provided regulatory clarity until it’s pressured to do so by the courts,” Lennon said. “I do think a decision by the court may be the only way we see the spot <a href="https://blockworks.co/tag/ether-etfs">ether ETFs</a> approved.”



Many of the same arguments can be made for a spot ether ETF, she contended. After all, the SEC approved ether futures-based ETFs in October, and companies may argue — like in the Grayscale lawsuit — that those approvals set a precedent for spot ether products.&nbsp;



Muddying the water is additional complexities around the SEC possibly looking to treat ETH as a security, whereas the regulator had clearly labeled bitcoin a commodity.



Not all agree that issuers suing the SEC — should the regulator deny the ether funds — is a foregone conclusion.



Bloomberg Intelligence analyst Eric Balchunas questioned that assumption in an April 10 X <a href="https://twitter.com/EricBalchunas/status/1778186317165437292">post</a>, noting the disparity between the assets in ether futures ETFs compared to bitcoin futures ETFs.



The largest bitcoin futures ETF — the ProShares Bitcoin Strategy ETF (BITO) — has grown to nearly $1.9 billion in assets. ProShares’ ETH futures fund, also the largest in that category, has $70 million.



“That&#8217;s a lot of time and money for something that may only get a fraction of the [assets under management],” he added.



Read more: <a href="https://blockworks.co/news/hong-kong-crypto-etfs-usa-eth">What Hong Kong crypto ETFs may tell us about US ETH fund appetite</a>



Whether prospective ether ETF issuers choose to sue the SEC or not, another court case could help efforts to launch such products.



<h2 class="wp-block-heading">Consensys legal action could offer answers&nbsp;&nbsp;&nbsp;</h2>



MetaMask developer <a href="https://blockworks.co/news/consensys-files-lawsuit-against-sec">ConsenSys sued the SEC last month</a> in a case alleging regulatory overreach. The suit is expected to put pressure on the SEC to defend any position it might have that ETH is a security.



“The SEC has been notoriously tight-lipped about their classification of ETH,” Lennon said. “The SEC is likely trying to retain their stance that Ethereum and bitcoin are not the same, especially after the Ethereum Merge in September 2022 when Ethereum moved from proof of work to proof of stake.”



Read more: <a href="https://blockworks.co/news/sec-investigation-of-eth-as-security">SEC has been investigating ETH for over a year, new court filing shows</a>&nbsp;



The portion of the suit requesting a declaratory judgment that ETH is not a security likely will require the SEC to shed light on its stance, Boison explained.



Approval of spot ether ETFs could take place before briefing in the Consensys case is complete, she noted.



Boison added: “The SEC can theoretically approve spot ether ETFs, file charges regarding staked ether and still have a court declare that ETH, itself, is not a security.”



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Court decision could be only way US spot ether ETFs see light of day

Polygon, an Ethereum layer-2 scaling solution, has recently launched its Miden Alpha Testnet,&nbsp; a zero-knowledge rollup solution designed for private, high-throughput applications.



Miden enables its users to generate proofs for their own state transitions without revealing the state to the wider network. The network will only track commitments, meaning users can transact privately.



Some features that will be unlocked with Miden include the ability to create private accounts and private notes, though it will still be possible to create public accounts and public notes. Additionally, the Miden client will enable parallel transaction <a href="https://0xpolygonmiden.github.io/miden-base/introduction.html#:~:text=Polygon%20Miden%20is%20a%20modular,execution%20and%20client%2Dside%20proving.">execution</a> and client-side proving.&nbsp;



“For builders, that means designing self-sovereign and high-throughput applications. With Miden’s zk-powered rollup, you can build what’s currently not feasible on EVM-chains,” <a href="https://blockworks.co/tag/polygon">Polygon</a> <a href="https://twitter.com/0xpolygon/status/1787533326091235785?s=46&amp;t=ar91EF_W_z2BKrQdY-hJLQ">wrote </a>in a post on X.&nbsp;



Read more: <a href="https://blockworks.co/news/ey-uses-polygon-proof-of-stake-for-business">‘Big Four’ accounting firm EY to use Polygon PoS for business contracts</a>



According to Polygon Miden <a href="https://docs.polygon.technology/miden/miden-client/">documents</a>, there are currently three different types of smart contracts available on Miden. These include a basic wallet contract for sending and receiving tokens and assets and fungible and non-fungible faucet smart contracts, which are used to mint and burn different assets.



Polygon Miden is not the only rollup solution that is hoping to innovate in the <a href="https://blockworks.co/tag/zero-knowledge-rollup">zk rollup</a> space. <a href="https://blockworks.co/news/starkware-starknet-zero-knowledge-prover">Competitors include StarkWare</a> and Matter Labs, the team behind zkSync, who are similarly hoping to bring new possibilities to blockchain scaling.



There has been little price action following the announcement of Miden. The price of Polygon’s native token (<a href="https://blockworks.co/price/matic">MATIC</a>) is <a href="https://www.coingecko.com/en/coins/polygon">trading</a> at $0.7153, <a href="https://www.coingecko.com/en/coins/polygon">down</a> by 0.9% over the past 24 hours, according to CoinGecko.



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