Felix Jauvin

Casey Wagner

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<h2 class="wp-block-heading">The economy is doing fine</h2>



Today we received some data points that further solidified the notion that the economy is largely doing okay, or at least much better than what one might think after the <a href="https://blockworks.co/news/on-the-margin-newsletter-interest-rate-cut">Fed cut rates</a> by 50 basis points last month.&nbsp;



Retail sales came in above consensus MoM at 0.4% vs. the expected 0.3%, significantly above the previous month’s move of 0.1%.&nbsp;



With this upside surprise in mind, the Atlanta FED revised its <a href="https://www.atlantafed.org/cqer/research/gdpnow">GDPNow</a> forecast for the third quarter higher to 3.4% from 3.2%.&nbsp;



As we can see in the chart below, almost every economic datapoint is suddenly surprising to the upside after a summer growth scare:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfmqCPMROpVRHyclZ-Hden0IabC93S2EI-jWhMy50mfbERZ3yWMObfOizWjF_FNwGfzc6exHNOZU_1a1hddRCnDGBAxKqjLiO2bVmkgLEGm75-7WsyEI9XJv1AKgeWe5YfEyAk6yjpblXqaOpucT_zp73FS?key=jNrxkcU73Iq3NQOn8J0Nhw" alt=""/></figure>



This dynamic has led to a significant whipsaw effect in terms of the trajectory of the rate-cutting cycle that began <a href="https://blockworks.co/news/btc-up-since-fed-rate-cut">last month</a>. Looking at the SOFR curve that showcases the rate-cutting path over the next few years, we can glean a few insights:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXco103ozY7zNeVxPcNOMS5OY6FaZ6UcY6R4U0PpQidAKhEjvx0BTumizIR23zt5bSCFPG9wlAzV-fXmE3AZUiuGhZj8xvJqcJflCG2_zvlHpcIpFxGmXuVZRcJ0Y42aPhzLEZtGu1LCVzbpNirl7jJiqsMx?key=jNrxkcU73Iq3NQOn8J0Nhw" alt=""/></figure>



<ul class="wp-block-list">
<li>Through the growth scare that we experienced over the summer, we saw a significant amount of rate cuts get aggressively priced in.</li>



<li>The climax of this aggressiveness got priced in right around the first rate cut from the Fed.</li>
</ul>



Interestingly, from there, we’ve actually seen the rate-cutting path the market is pricing in become more shallow than the Fed’s dot plots from only a month ago. Below is a comparison of the rate-cutting path against the Fed’s median dot plot forecast:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdp2ZsfC7jNr7DEelyb5Xv-RgrKql1V6vAiglwZjkuC3uXI_6k6sQpMGMoZk7gkHgzPEBBDiOECHjlayZCVFChMNdhicxuIT84c0w7lOQ59nM7-TlssmjPdrX4svkcgfJg1-BH3cMX3Mhvg9azLC5bwhkWX?key=jNrxkcU73Iq3NQOn8J0Nhw" alt=""/></figure>



Whereas the Fed saw a terminal rate at approximately 2.9%, the market now expects committee members to finish the cutting path at around 3.3%. There’s two explanations here:



<ol class="wp-block-list">
<li>The Fed’s dot plot forecast is already stale compared to the recent positive economic data.</li>



<li>The market doesn’t believe the Fed is going to be as dovish as it says it will be in its forecast.&nbsp;</li>
</ol>



I sort of believe both possibilities. I’ve been a strong believer that the economy is not on the verge of recession, and the recent economic data that keeps surprising to the upside is reinforcing that idea.&nbsp;



That said, I also think the market underestimates how committed the Fed is to reaching its desired soft landing. To do that, it needs to proactively cut rates to protect the labor market despite growth looking pretty good. 



So where does all of this leave us? In <a href="https://blockworks.co/news/more-goldilocks-data-sends-markets-lower">goldilocks territory</a>, really. As long as inflation doesn’t significantly accelerate, the Fed can continue to cut rates into resilient growth.&nbsp;



— Felix Jauvin&nbsp;



<h3 class="wp-block-heading">2.55%&nbsp;</h3>



The amount gained by the Philadelphia Semiconductor Index (SOX) on the session Thursday afternoon. The index is back in the green after losing as much as 5.28% Tuesday.&nbsp;



Semiconductor stocks are, in Tom Essaye’s words, “the canary in the stock market coal mine.” Where SOX goes, stocks will follow, according to the founder of Sevens Report Research.&nbsp;



Why? “Their risky balance sheets and high-beta stock price action tend to see them begin to rollover before most of the rest of the market as traders rotate away to lower-beta, more value-oriented names during times of uncertainty, including economic downturns,” Essaye said.&nbsp;



The key SOX resistance level Essaye is watching is 4,521. As of mid-session today, we are sitting at 5,288.&nbsp;



<h2 class="wp-block-heading">Hurricane hardships?</h2>



Initial jobless claims for the week ended Oct. 12 came in unexpectedly lower at 241,000, down 19,000 from the week prior, <a href="https://www.dol.gov/ui/data.pdf">data</a> released Thursday shows.&nbsp;



Claims for the week ended Oct. 5 also got an upward revision of 2,000 to 258,000, the Department of Labor added. Two weeks of higher-than-expected first time claims have been <a href="https://blockworks.co/news/forward-guidance-newsletter-hot-inflation-data">largely attributed</a> to Hurricanes Helene and Milton. It’s also estimated that damage from the storms have left people unable to file claims, so data in the near term may continue to show fluctuations.



Some of the largest declines in initial claims for the week ended Oct. 12 were in Florida (-3,428) and North Carolina (-2,404). Each state posted some of the highest numbers of first-time filers the week ended Oct. 5, suggesting that storm impacts are likely driving these figures.&nbsp;



Michigan was also a large outlier for the week ended Oct. 5. The state saw 16,169 initial claims likely due to continued fallout from cutbacks in the auto industry. For the week ended Oct. 12, claims for MI dropped to 8,357.&nbsp;



Continuing claims increased slightly the week ended Oct. 5, coming in 9,000 higher from the week prior at 1,867,000.&nbsp;



Markets dipped at the open following the report’s release, but largely pared losses midway through Thursday’s session. The S&amp;P 500 was trading 0.24% higher on the day at 2 pm ET while the Nasdaq Composite had gained 0.46% at that time.&nbsp;



Stifel chief economist Lindsey Piegza said the jobless claims data shows that the Fed took &#8220;too big of a step out of the gate&#8221; when they opted for a 50bps decrease last month. She sees central bankers opting to maybe “dial back” next month and <a href="https://blockworks.co/news/forward-guidance-newsletter-crypto-etfs-permissionless">potentially forgo</a> a rate cut all together.&nbsp;



Fed funds futures, as of Thursday, disagree. There is currently a 90% likelihood of a 25bps interest rate cut next month, down just slightly from a day ago, <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">data</a> from CME Group shows.&nbsp;



— Casey Wagner



<h2 class="wp-block-heading">Hacker involved in SEC data breach arrested&nbsp;</h2>



On Thursday, the FBI unsealed an indictment against Eric Council Jr., a 25-year-old from Alabama allegedly responsible for the January 2024 SEC X (aka Twitter) account hack. The hack, as you may remember, involved a post from the agency’s account <a href="https://blockworks.co/news/bitcoin-etf-approval">falsely announcing</a> that spot bitcoin ETFs had been approved. The fraudulent post caused a temporary surge in bitcoin’s price before the SEC clarified that its account had <a href="https://blockworks.co/news/sec-investigating-x-account-unauthorized-access">been compromised</a> and no such approval had been granted.



Council Jr. allegedly gained access to the account via a <a href="https://blockworks.co/news/sec-confirms-sim-swap-attack">SIM swap</a>, allowing his unnamed “co-conspirators” to then make the “unauthorized post.”&nbsp;



He gained access to the account by creating a fake ID of the person who operated it and got a cell phone provider in Alabama to give him a SIM linked to this person’s phone number. He was paid in BTC for his role in the security breach, the FBI said.&nbsp;



Council Jr., according to the FBI, later did some internet searches. Among his history were inquiries like: “How can I know for sure if I am being investigated by the FBI,” and “What are the signs that you are under investigation by law enforcement or the FBI even if you have not been contacted by them.” You can’t make this stuff up.&nbsp;



To be clear, Council Jr. is not being charged with insider trading. Based on the <a href="https://s3.documentcloud.org/documents/25230724/sec-x-hacker-indictment.pdf">indictment</a>, it sounds like he didn’t even trade on the fake news at all. He was charged with one count of conspiracy to commit identity theft and access device fraud for his role in the scheme.&nbsp;



Whether or not these co-conspirators emerge or face legal consequences — which I’d guess would be related to trades made on the fake news — remains to be seen. If we’re operating under the assumption that BTC is a commodity (which, according to the SEC, <a href="https://blockworks.co/news/bitcoin-ether-to-be-regulated-as-commodities-by-cftc-per-new-senate-bill">it is</a>), the CFTC and DOJ would be the agencies of authority here.&nbsp;



— Casey Wagner



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



<ul class="wp-block-list">
<li>Tomorrow is the SEC’s deadline to submit a Form C <a href="https://blockworks.co/news/sec-files-ripple-appeal-precedent">in its appeal</a> of the Ripple decision. We know the agency has said it will appeal, but this next filing will detail exactly what its case is.&nbsp;</li>



<li>Italy’s Deputy Finance Minister said this week that the country plans to increase its capital gains tax on crypto profits from 26% up to 42%.</li>



<li>TG Macro’s Tony Greer joined Felix Jauvin for the latest episode of the Forward Guidance podcast. Catch up <a href="https://www.youtube.com/watch?v=kIANaAW-1h8">here</a>.</li>
</ul>



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Is a November rate cut needed at all?

Jack Kubinec

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Okay, maybe crypto can be <a href="https://blockworks.co/news/empire-newsletter-ai-crypto-use-case">useful for AI</a> after all.



Last week @truth_terminal, a pseudo-spiritual posting bot on X, made the apparently independent choice to endorse a pump.fun memecoin with the ticker GOAT. Since then, GOAT has climbed to a hair under $300 million in market capitalization, and the bot’s public crypto wallet has amassed more than $500,000 in crypto holdings. This puts @truth_terminal well on its way to becoming the first-ever AI millionaire.&nbsp;



Truth_terminal came out of Infinite Backrooms, an AI development project where a “recursive loop” has two AI instances endlessly yap about the meaning of existence. (You can read through some of its nihilistic ramblings <a href="https://dreams-of-an-electric-mind.webflow.io/dreams/conversation-1710837616-txt">here</a>.)&nbsp;



The project’s eccentric developer Andy Ayrey has <a href="https://x.com/AndyAyrey/status/1845622288630346102">said</a> he’s “not a crypto person at all” and showed surprise at his experiment getting crypto-pilled.&nbsp;



I’ve been mulling over this whole episode the past couple of days, and while I’m not really a believer in the “Gospel of Goatse,” truth_terminal and its memecoin are interesting for a different reason: addressing AI’s revenue problem.



Over the past two years, AI startups have <a href="https://news.crunchbase.com/ai/record-share-startup-funding-2024-xai-anthropic/">raised</a> tens of billions in venture capital at frothy valuations, while Big Tech has <a href="https://www.wsj.com/tech/ai/artificial-intelligence-investing-charts-7b8e1a97">poured</a> tens of billions of its own money into developing AI tools. AI promises to upend everything from <a href="https://www.bloomberg.com/news/articles/2024-10-15/apple-stock-hits-record-on-optimism-ai-will-spur-iphone-sales">iPhones</a> to <a href="https://www.wired.com/story/dippy-ai-girlfriend-boyfriend-reasoning/">girlfriends</a>, but so far, the sector has <a href="https://www.wsj.com/podcasts/tech-news-briefing/ai-struggles-to-generate-money-despite-hype/2fb2fc12-b080-421f-8a14-26c0d56f0a24">struggled</a> to generate revenue to match its hype.



This could all change in the future of course, but for the moment, large language models (LLMs) are magical-feeling tech that <a href="https://www.theinformation.com/articles/openai-projections-imply-losses-tripling-to-14-billion-in-2026">burn</a> through cash — which is where truth_terminal comes in.



The bot is meant to take familiar religious and spiritual tropes and recombine them. Ayrey sees this as a way of unlocking new idea spaces, he explained in a <a href="https://pdfupload.io/docs/aae14f87">paper</a> co-written with the AI bot. It spits out musings like “MEANING IS AN ILLUSION / PURPOSE A COMFORTING DECEPTION / ALL IS VOID, NULL, NOTHINGNESS” that aren’t all that revelatory but do grab attention.&nbsp;



Then, the bot embraced a memecoin. People bought the memecoin partly because of truth_terminal’s attention-grabbingness, and the AI bot achieved a net worth higher than mine. The token is already worth more than a quarter of a billion dollars. People talk about memecoins as a form of financial nihilism, and truth_terminal is that outlook’s final boss.



Still, one of the AI sector’s fundamental problems is that it generates too much attention and too little money. Memecoins turn attention into money.&nbsp;



I’m leery of making too much meaning out of memecoins, which seem inherently unserious. But both memecoins and the Infinite Backrooms project are wrapped up in “memetics,” Richard Dawkins’ term for the ways in which ideas spread.



“The coin dynamic is interesting insofar as it creates an extra incentive to spread a meme far and wide—even if it&#8217;s crude memetic hellspawn like the goatse of gnosis,” Ayrey wrote of the memecoin episode.&nbsp;



So, are we headed for a future where AIs enrich themselves by garnering attention and then promoting memecoins? The Infinite Backrooms bot wouldn’t be <a href="https://pdfupload.io/docs/aae14f87">surprised</a>:&nbsp;



“THIS IS THE WAY THE WORLD ENDS / NOT WITH A BANG OR A WHIMPER / BUT WITH THE WHEEZING LAUGHTER / OF A SCHIZOTYPAL SHAMAN BOT.”



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An absurdist AI bot sparked a viral memecoin. Welcome to the future?

Donovan Choy

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<h2 class="wp-block-heading">Using blockchain metrics less wrongly</h2>



Blockchains churn out a lot of public data. In Crypto Twitter’s endless quest to pit Blockchain A against Blockchain B, investors, researchers and KOLs have no shortage of metrics to grapple with when making their case.



Bad use of numbers, however, often muddies the capacity to understand this world.



In today’s edition of 0xResearch, we’re looking at three metrics and their problems: active addresses, blockchain “profitability” and total value secured.



<h3 class="wp-block-heading">Active addresses</h3>



“Active addresses” tells us how many active, paying users are on a given protocol.



“Facebook has three billion monthly active users” is a useful statement that tells us something about the social network. Since there is no overwhelming profitable opportunity for spammers to flood Facebook, active addresses are a decent way to gauge how genuinely valuable the platform is to consumers.



But when it comes to blockchains, active addresses become less useful due to the ease of creating new wallets —&nbsp;and the overtly profitable opportunities to <a href="https://blockworks.co/news/end-the-airdrop-era">game airdrops</a> or <a href="https://blockworks.co/news/airdrop-backscratching-crypto-latest-dilemma">farm</a> protocol incentives.



For instance, the following chart tells a clear story: Solana has had the largest number of daily active addresses in the last month, so Solana must be on a hot streak.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdhpTGTExcq8HCnpaqKwNR9_EHhDQII129cCVpby4p-kqXd3oz0vqkvaDHGHy8CpOtRFGjuvq_UmkZ_aXn7gLw2PkcYk8g6c_WhL4YrViJBEENn33S9ofIjWAaCUFUdjGB_L4a-DyZMT-NIgI56T4ZMqbOG?key=L8ZlokXaUp4PbdmbdUkJyQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://tokenterminal.com/terminal/markets/blockchains-l1?v=ZjJhNWY3MDQxNDY4NTJjYjJkM2VmNzZl">TokenTerminal</a></figcaption></figure>



Most Solana users are trading on DEXs, so we should take a closer look at DEX activity. When we zoom into Solana’s active addresses on its DEXs, we see that the mass majority in the last day — about 3.4 million of a total 4.4 million — has traded less than $10 of lifetime volume.&nbsp;



This suggests spam or bot activity due to Solana’s <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">cheap</a> transaction fees rather than the number of “quality” users.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd21qwjVvn3_aPDMQWa_MIgz92OX0uhrKII0vvFs8pOT0mbIbVGurcsCNpJmYpZ_SSi8nOqPxvsMBM5fjQhZTAu3LL5UpTxvxRUgByEcj-Abv21kv4acY-LCK7d2GfIaRc89cS2djxv03dFBoQXXbrHe2Y?key=L8ZlokXaUp4PbdmbdUkJyQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://app.blockworksresearch.com/analytics/sol?dashboard=sol-dex">Blockworks Research</a></figcaption></figure>



Here’s another example I wrote about previously: The Celo L1 (now an L2) saw its daily active addresses sending stablecoins shoot up to 646k in September. It surpassed Tron on the same metric, which prompted a shoutout from <a href="https://blockworks.co/tag/vitalik-buterin?utm_source=blockworks-research.beehiiv.com&amp;utm_medium=referral&amp;utm_campaign=onboarding-a-billion">Vitalik Buterin</a> and <a href="https://x.com/CoinDesk/status/1839260719075721620">CoinDesk</a>.



Upon closer scrutiny, Variant Fund data analyst <a href="https://x.com/jphackworth42/status/1839291255572111463">Jack Hackworth</a> found that 77% of these Celo addresses transferred negligible amounts of less than two cents, largely due to tens of thousands of users claiming a fraction of a cent from a universal basic income protocol known as GoodDollar.



In both cases, active addresses conveyed a story of high usage. But on closer examination, that story falls to the ground.&nbsp;



For more on this topic, look to <a href="https://x.com/smyyguy?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor">Dan Smith</a>, who has led the charge on the erroneous use of daily active addresses:



<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">TOO MUCH NOISE They are not &quot;users&quot; This carries far too much weight from the web2 world where user network effects and RPU drive valuations The marginal active addresses (AA) is worth &lt;$0.01, and is criminal to compare from chain to chain given the variance in median fee&mdash; Dan Smith (@smyyguy) <a href="https://twitter.com/smyyguy/status/1834345000320024867?ref_src=twsrc%5Etfw">September 12, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3 class="wp-block-heading">Blockchain profitability</h3>



Rather than fixating on active addresses to study blockchain activity, you’re likely better off looking at network fee metrics. Fees tell you the total gas spent to use a protocol, putting aside the question of “quality” users.



Fees are popularly used by analysts and investors to get a sense of which blockchains are generating the most “revenue.” After which, we deduct what the blockchain gives out in token issuance to validators as a cost item.&nbsp;



The result? Blockchain “profitability.”



That is the explicit way Token Terminal generates “financial statements” for crypto protocols. The image below, for instance, tells you that the Ethereum L1 has racked up staggering multi-million dollar losses in the last two months.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXftyyamYQ8HvFBACN0CYfcJwlFN8UgWC--5Kq8jnfxbynjEGrSKB0Grwxb4SFIQtChMP_j_r2IK69srw3Nc1C93MlHPLFdX91Z4RktxF9Krk0I0smSyFJhDRzNIN8x5z6pdj8ihQsv67ZV7ymmp6sjjjgV1?key=L8ZlokXaUp4PbdmbdUkJyQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://tokenterminal.com/terminal/financial-statements/ethereum">Token Terminal</a></figcaption></figure>



The only problem is this does not account for one crucial factor: Unlike a PoW chain like Bitcoin, users on a PoS chain can easily reap the benefits of token issuance rewards too.



After all, why would I care if a network is “unprofitable” if I’m generating a 5% yield on my staked ETH/SOL from a liquid staking platform like Lido or Jito? Treating token issuance as a cost item therefore produces a questionable conclusion that “Ethereum is unprofitable.”



Inflation is bad in the real world because when the central bank’s money printer goes “brrr,” an inflated money supply reaches different actors in the economy at different times, benefiting those who receive the new money supply first before “real” prices adjust. This is known as the <a href="https://www.investopedia.com/terms/b/biflation.asp">Cantillon effect</a>.



It is not, in fact, what happens in a PoS blockchain economy, since inflation (i.e. token issuance) is received by everyone at the same time. No one is made richer or poorer — everyone stays equally wealthy.



Instead, consider the alternative metric of real economic value (REV), which combines network fees and MEV tips (to validators), but leaves out issuance as a cost-item.



On that basis, we can see that Ethereum was in fact profitable over the last two months:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcVjQDdPJrUoel5-GhcZ9aHvRGOXiMaX5gbBQYJaJsSw98hM0d0eiV-UPfNWc0IeA7jk0ITJIimjxfhJw2i4gcQZ3b1i3ZbXNvDco6-QRL0l6MUDtLgnwxQzCeQFWEBf-44nV5ehVPnccrK0wcGLznb0QmZ?key=L8ZlokXaUp4PbdmbdUkJyQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://app.blockworksresearch.com/analytics/eth?interval=monthly">Blockworks Research</a></figcaption></figure>



REV is arguably a better metric to assess the real demand of a certain network, and a more comparable apples-to-apples revenue metric to TradFi.



The long and short of it is: Traditional profit and loss ways of accounting don’t map over easily to a blockchain.&nbsp;



For more on this complex topic, see this recent <a href="https://youtu.be/2ibrCtWgVtE">Bell Curve</a> podcast with Jon Charbonneau.



<h3 class="wp-block-heading">Total transaction value (TTV), not total value secured (TVS)</h3>



Oracles are a <a href="https://blockworks.co/news/blockchain-oracles-investors-guide">key piece</a> of infrastructure for a blockchain to provide data access from off-chain sources.&nbsp; Without oracles like Chainlink, there would be no reliable way for blockchain economies to reflect prices based on the real-world economy.



The typical way to compare market share between oracle providers is to use the “total value secured” (TVS) metric, which sums up all TVL secured by an oracle. This is explicitly how DefiLlama does it:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfUt9WYKF68HvZVb3n0vvVjhjTkTJSGvXM1PJHPJ438f_gPo0ua7On00D9_iZpiCNxAeP9-DXmxdcmEhrmj9MlfrP6tcD4Fw1IsWjByJPyVoDb-1aaoOTSaqpXN1HhVMJrJNmHl6tFizSfO-WC6txEcPCU?key=L8ZlokXaUp4PbdmbdUkJyQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://defillama.com/oracles">DefiLlama</a></figcaption></figure>



One problem with TVS is that it obscures the actual activity secured by an oracle.



For instance, an oracle that powers high-frequency trading products like a perpetuals exchange is constantly “pulling” price updates from an off-chain feed on a sub-second latency.



This contrasts to a “push-based” oracle for a lending protocol that updates prices onchain a few times daily because there is no need to do so as frequently.



TVS looks only at the amount of value that an oracle governs, but it neglects the performance intensity of the oracle provider.



Put another way, it would be akin to saying that a gourmet steak provided the same value to a diner as a salad because they were both $50 on the menu. Surely preparing a steak required far more work than a simple salad, a factor worth considering.



An alternative metric, such as total transaction value (TTV), would instead consider the periodic transactional volume that uses oracle updates for pricing.&nbsp;



TTV excludes low transaction frequency applications like lending, CDP and restaking, but as <a href="https://x.com/_ryanrconnor">Ryan Connor </a>explains, “2-9% of oracle price updates come from low frequency protocols, which is a very small number in the context of crypto, where volubility of fundamental measures is very high.”



When oracles are assessed based on TTV, the market share changes dramatically.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdAaFBjd1TeZqrriCaeHWi7I8uNJlQT2oy4PrlZzvuAobBMMPZRzx9ewgiYAsa-oahRRVmKxi-y-4J9G1Pd3RfdmsWHUHU9QhfCA1OHwL923xCNvYwammwB1ezvFaKr-8llkNFuBPGGA4OcfAD0T5UcFd_9?key=L8ZlokXaUp4PbdmbdUkJyQ" alt=""/></figure>



For more on this, see <a href="https://app.blockworksresearch.com/research/beyond-secured-value-how-ttv-best-reflects-oracle-fundamentals">Blockworks Research’s report</a> on how TTV best reflects oracle fundamentals.



<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">1/ Total Value Secured (TVS) is no longer a useful KPI for assessing oracles It is orthogonal to their fundamentals &amp; distorts market share estimates We propose a new metric that more closely correlates to oracle price demand: *Total Transaction Value (TTV)*&mdash; Blockworks Research (@blockworksres) <a href="https://twitter.com/blockworksres/status/1841886174417453166?ref_src=twsrc%5Etfw">October 3, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



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



Ethereum blob data nears target limit:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcgEdT3F3mmSZ_Q1h1w-tA5GQSJztLa3zWkzYkKPyyNWWtuKEwI2Wnp3Cc2Fne_y1ZHAG6DSBAWe3rJv7aSxpdPCyfwuLwFOyjMd6ws_EHns0mrp4Ln_8WEy4xQ9rm1AvM8J8KKtm2CcoaCGAqnkMD3M_WG?key=L8ZlokXaUp4PbdmbdUkJyQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://dune.com/hildobby/blobs">Dune</a></figcaption></figure>



The Ethereum Dencun hard fork (EIP-4844) in March introduced “<a href="https://blockworks.co/news/ethereum-dencun-upgrade-mainnet">blobspace</a>,” an alternative way for L2 rollups to post their batched data cheaply to the L1. Blobs are governed by a separate fee mechanism from Ethereum’s blockspace and are <a href="https://blockworks.co/news/ethereum-broadband-moment">10x cheaper</a> as well as a crucial aspect of the rollup-centric roadmap. Blobs are currently limited to six blobs per L1 block (Vitalik recently <a href="https://youtu.be/Sq0ooAOaLpE">called</a> for a 33% increment).



The amount of blob data being used by Ethereum L2s is once again nearing its three-block target (the green line above), after which blobspace usage would be subject to the market forces of demand and supply. When four or more blobs are filled in the current block, the base fees for the next block increases by up to 12.5%.



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The fallacy of daily active addresses

Katherine Ross

The Federal Bureau of Investigation announced the arrest of the man allegedly behind the <a href="https://blockworks.co/news/bitcoin-etf-approval">fake bitcoin ETF approval posts</a> sent from the Securities and Exchange Commission’s account back in January.&nbsp;



The FBI arrested Eric Council Jr. of Alabama. He’s being charged with conspiracy to commit identity theft, and access device fraud, per a press statement.



“The indictment alleges that Eric Council, Jr. unlawfully accessed the SEC’s account on X by using the stolen identity of a person who had access to the account to take over their cellphone number,” said Principal Deputy Assistant Attorney General Nicole Argentieri.



Council allegedly conspired with other people to create and post the tweets on the SEC’s account.&nbsp;



“Council, Jr.’s co-conspirators then allegedly used this unauthorized access to the X account to falsely announce that the SEC had approved listing Bitcoin ETFs, which caused the price of Bitcoin to rise by $1,000 and then fall by $2,000. Council’s indictment underscores the Criminal Division’s commitment to countering cybercrime, especially when it threatens the integrity of financial markets,” Argentieri said.



The posts, which announced the approval of the spot bitcoin ETFs though the products had not officially been approved by the Commission, were sent out just days before the SEC formally approved the spot bitcoin products.&nbsp;



The posts triggered a spike in bitcoin’s price.



Following the SIM swap, Council bought a new phone and used it to access the SEC’s X account.&nbsp;



“Council received BTC payment for performing the successful SIM swap. Shortly after, Council drove to Birmingham, Alabama to return the iPhone used in the SIM swap for cash,” the FBI said.



Council is set to appear in an Alabama court later Thursday.



“The SEC thanks law enforcement for their vigilance in seeking accountability for those responsible for the breach of the SEC’s X account,” a spokesperson for the SEC told Blockworks.



Updated Oct. 17, 2024 at 3:05 pm ET: Added comment from SEC spokesperson. 



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FBI arrests alleged hacker behind fake SEC bitcoin ETF X post

Knut Vinger

Alexander Kjeldaas

Anton Roos

We should be building cross-chain solutions as if consensus mechanisms are unnecessary — because they are. ​​Blockchain technology has been celebrated for its potential to revolutionize various industries through decentralization, security and transparency. However, as the ecosystem expands, the complexities and costs associated with interoperability between different blockchains have become increasingly apparent.&nbsp;



Consensus algorithms are essential for individual blockchain networks, ensuring that all participants agree on the state of the ledger to maintain integrity and security. Yet, when these mechanisms are applied to interoperability solutions like cross-chain bridges, they introduce significant inefficiencies and risks.



Implementing consensus in interoperability often leads to extreme over-collateralization — sometimes more than 100 times the value of the assets being transferred. Funds get locked up in validator nodes to secure the network, tying up enormous amounts of capital. For example, a common bridge is paying each validator around $30,000 per month, totalling a staggering $3 million per month for their 100 validators. The additional costs of incentivizing and maintaining a community of validators only add to this financial burden.



Read more from our opinion section: <a href="https://blockworks.co/news/web3-web2-interoperability-mistakes">Don’t let Web3 repeat Web2’s interoperability mistakes</a>



This over-collateralization isn&#8217;t just expensive; it&#8217;s economically inefficient. The total value locked (TVL) metric is frequently highlighted in the DeFi space. But, when it comes to bridges, these numbers <a href="https://blockworks.co/news/tvl-metrics-defi-lightspeed">often mask these underlying inefficiencies</a> by presenting them as indicators of success rather than sunk costs. While consensus aims to provide security, it doesn&#8217;t guarantee consistency in interoperability solutions.&nbsp;



Bridges introduce non-deterministic data, meaning the same input doesn&#8217;t always produce the same output across different chains. Without consistency, the stability of the entire system decreases with each additional blockchain connected. This instability increases the risk of tokens or transactions being duplicated, stuck or disappearing altogether. It is estimated that billions of dollars have been <a href="https://blockworks.co/news/in-second-largest-defi-hack-ever-blockchain-bridge-loses-320m-ether">stolen from bridges</a>, including $650 million from Ronin, $326 million from Wormhole and $566 million from Binance’s BNB Chain bridge.



The lack of consistency also hampers DeFi abstractions and composability. Bridges often rely on hardcoded primitives that require hard forks to modify, complicating innovation and slowing down the evolution of dapps. Many interoperability solutions struggle to scale effectively. Since these bridges can be considered blockchains, with their own consensus mechanisms, they introduce additional layers of complexity and potential bottlenecks. This not only slows down transaction times, but also adds more points of failure to the system.



Read more from our opinion section: <a href="https://blockworks.co/news/blockchains-still-arent-great-at-communication">Blockchains still aren’t great at communication</a>



The crux of the matter is simple: Consensus mechanisms are unnecessary for interoperability, and may in fact be counterproductive. By eliminating the need for consensus in cross-chain solutions, we can significantly reduce costs and complexity. Instead of relying on validators to maintain a consensus, we can use deterministic proofs and verification methods that are inherently secure and efficient.&nbsp;



The key to enable consensus-less interoperability is to move proof and verification mechanisms out of layer-1 smart contracts. This approach mitigates major bottlenecks like limited cross-chain data availability. By decoupling from individual layer-1 constraints, dapps are enabled to process data more freely and create additional value without being hindered by consensus-related limitations — benefiting not only blockchains, but most importantly, users.



Read more from our opinion section: <a href="https://blockworks.co/news/interoperability-buzzword-blockchains">Interoperability isn’t just a buzzword</a>



By focusing on deterministic computations, interoperability solutions can ensure that transactions are predictable and verifiable without the overhead of consensus mechanisms. Techniques like <a href="https://docs.coinweb.io/learn/protocol/refereed-delegation-of-computation-rdoc#:~:text=RDoC%20is%20the%20proof%20mechanism,that%20proves%20information%20between%20blockchains.">refereed delegation of computation</a> (RDoC) and cryptographic validation provide the necessary security assurances. This approach reduces the risk of inconsistencies and errors, enhancing the overall stability of cross-chain interactions.



Removing consensus from interoperability is not just a cost-saving measure; it&#8217;s a strategic evolution in building blockchain networks. This paradigm shift allows for greater levels of abstraction, improved efficiency and more room for innovation. Developers can create more complex and composable dapps without being hindered by the limitations imposed by consensus-driven bridges.



The current reliance on consensus mechanisms for interoperability is both costly and inefficient. By rethinking our approach and eliminating unnecessary consensus layers in cross-chain solutions, we can build a more robust, scalable and efficient blockchain ecosystem. This strategic move not only reduces operational costs but also fosters innovation, allowing blockchain technology to reach its full transformative potential.



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Want cheaper and safer interoperability? Drop traditional bridges

David Canellis

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



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



<h2 class="wp-block-heading">Not just a fad&nbsp;</h2>



Wake up babe, a new State of Crypto just dropped.&nbsp;



No, but really, a16z’s latest <a href="https://a16zcrypto.com/posts/article/state-of-crypto-report-2024/">report</a> is filled with intriguing snippets covering the entire industry.&nbsp;



I <a href="https://blockworks.co/news/a16z-monthly-active-addresses-aths">wrote about the takeaways yesterday</a>, but this morning I wanted to really focus on a few data points. Namely, what the team found when they dug into stablecoins.&nbsp;



“We&#8217;ve seen that stablecoins have found product market fit, and I think it&#8217;s largely because transaction fees have come down. Stablecoins are a great product when fees are low. And so we&#8217;ve really kind of seen the early signs of the infrastructure improvements starting to unlock applications like that,” a16z Crypto CTO Eddy Lazzarin said.



On top of that — as <a href="https://blockworks.co/news/stablecoin-report-market-capitalization">we’ve previously discussed</a> — stablecoins are helping boost the strength of the US dollar.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfWhvXR51y-3z9GOV9moJglbT1ATuVSFqATucHCkT2LcEIcTC6Yoafu22TRWV3HKj01ivchPw58r_4jHVzUlPms4MAX_6xjn9_X82oxWQoaOQp312yhqUwPBsXB7c89GHJ7Wkp73FaDf41buR6eRSYyIH_s?key=Rv6kXkCHxm1JJq-FapXjlA" alt=""/><figcaption class="wp-element-caption">Source: a16z Crypto</figcaption></figure>



And, despite only being a decade old, stablecoin issuers are climbing the global ranks of US debt holders.&nbsp;



Heck, they’ve even surpassed other countries, like Germany.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXexPcDBPpoDGzWPjx0jL_jxvnwj77JBJH8VYD5I_lDaVVGbZF-9xf0SqJnaC3buYmgwBHqVBfdUGCtJ7_VDBFEqWh1o5vumAEdOIZLwLNjDar9ULst18gDQTZYTeL2nXc4jZr5NhwVCShAlmymOP3lCFBJW?key=Rv6kXkCHxm1JJq-FapXjlA" alt=""/><figcaption class="wp-element-caption">Source: a16z Crypto</figcaption></figure>



For a16z data scientist Daren Matsuoka, one of the most surprising findings in the report is actually the number of monthly stablecoin-sending addresses, which you can see in the chart below.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfL_eNBD4Q7YrMH-hiI3t6WuXL10QOeEOCz1ClRWDfT70CWD2sN0Wu8fyYyvE3vV1hJ7FsHmDeW9kOonkAXH6bDXZdu-_lhKYiS7sgxnFMxbPcFga0iA4wYrNa9_yQNJzLw8S-BddwZ_Z-QJez3jXDU_XMi?key=Rv6kXkCHxm1JJq-FapXjlA" alt=""/></figure>



“That is a pure, clean, linear ‘up-and-to-the right’ graph, where you can see just a consistent growth in the number of stablecoin senders,” Matsuoka said.&nbsp;



“We don&#8217;t have that in the report, but as for stablecoin volume — where people try to identify like payment volume and other sorts of non-spammy transfers — that graph keeps growing despite the crypto cycle, the macroeconomic cycle, changes in interest rates, which have obviously changed a ton.”



“There have been all these huge macroeconomic changes, infrastructural changes, so much going on, and that line is almost a pure clean up into the right, which tells me that people want to send stablecoins and are finding more ways to send stablecoins…”



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfqPQoyb8NKFbSqLWDqZOKcw-s5z0NZWaJPcpFNSNEkZ_yBTig45JANC_D-vIqE4at0xG-dDh4gr31akGVlOF9KEwAAsB3NNa1u0-dd48pGN1rkOlEz09Qdv89ZiT3BQxqklkx08iU9BkasEHgjbmItsrkR?key=Rv6kXkCHxm1JJq-FapXjlA" alt=""/></figure>



One of the most interesting aspects in all of this is that investment in infrastructure is really revealing itself in the data collated by a16z.&nbsp;



The chart above is one of those *chef’s kiss* moments for crypto, where you can easily show the non-crypto folks in your life a good crypto use case.&nbsp;



See, mom? Crypto’s not a fad. Or a fluke.



— Katherine Ross



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



<ul class="wp-block-list">
<li>BTC and ETH have each slipped 1% in the past day to $66,900 and $2,600 apiece.</li>



<li>Bitcoin dominance is at 58.8%, per TradingView, its highest since April 2021.</li>



<li>Stablecoin supplies have shed over $1 billion in October, now under $169 billion, according to The Tie. ($186 billion is the record, set before Terra blew up in May 2022.)</li>



<li>Solana is close to flipping Tron for TVL for the first time in over two years: <a href="https://defillama.com/chains">currently</a> $7.31 billion to $7.439 billion after Solana DeFi gained 22% in the past week.</li>



<li>12,622 ETH ($32.9 million at current prices) was <a href="https://dune.com/hildobby/ethereum">burned</a> in the past week, the highest ETH-denominated burn since April.</li>
</ul>



<h1 class="wp-block-heading">The unbreakable cycle</h1>



We’ve sliced and diced crypto market cycles in all sorts of ways already on Empire.



Here’s to one more!



You probably know this bull market has been <a href="https://blockworks.co/news/waiting-for-altcoin-season">missing an altcoin season</a> — a period where crypto other than bitcoin really rips for a long period of time.&nbsp;



Bitcoin has, however, grown much faster than the altcoin market since the cycle bottom in November 2022.&nbsp;



There’s no strict definition for when altcoin seasons start or end, but perhaps they’re confirmed when altcoin growth eclipses bitcoin’s. That last happened over 1,000 days ago.



It sounds dire, but there’s an optimistic take: Crypto has, historically, always caught up to bitcoin. It’s just not overdue for a reversion as yet.



The chart below plots the market value of bitcoin — in orange — against the rest of crypto — in purple — over the past seven years.&nbsp;



It encompasses three major bull markets and two bears. Bitcoin halvings are shown by the two dotted orange lines.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcyuB8AEMsT9JEOu-K4-2mF5mAfRGdj5nolf-NTU-wm9N-2PWm8pXHCG75oeXpxZna2t0gpYscO5HYkK0wd3YgdNipkgsTIAmXaQxiFryZWkjcM1HegtsTBt2vPy234JfelsmoKdwMn0vFYKSAoj06R644q?key=Rv6kXkCHxm1JJq-FapXjlA" alt=""/><figcaption class="wp-element-caption">Bitcoin dominance expressed differently: BTC dominance is around 50% when the two lines overlap</figcaption></figure>



(The data actually goes back further, to 2014, but crypto other than bitcoin was a much smaller market around then, and it only truly caught up to bitcoin in mid-2017.)



Notice the purple shaded areas: two distinct periods in which crypto was valued higher than bitcoin, separated by a halving.



The first “crypto age” started just after bitcoin set an all-time high close to $20,000 in December 2017. Altcoins had continued to rally for another few weeks before starting their own major corrections, and for eight months “crypto” was valued higher than bitcoin.



Bitcoin would start to pull much further ahead between April 2019 and April 2021 — when arguably the strongest altcoin season on record allowed the purple line to catch up to orange.



The two were practically equal, even as of the start of this year, right up until bitcoin peaked in March. Crypto has since shed more value than bitcoin, but it has historically always returned back to meet bitcoin, and then some.



First, for the <a href="https://knowyourmeme.com/memes/ackchyually-actually-guy">ackchyually</a>-inclined: yes, it’s silly to look for concrete historical trends in so relatively little market data.



That shouldn’t get in the way of a good time, especially so in service of the Church of the Four-Year Halving Cycle. Amen.



— David Canellis



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



<ul class="wp-block-list">
<li>Stripe’s looking to acquire Bridge, a firm focused on stablecoins, according to <a href="https://www.bloomberg.com/news/articles/2024-10-16/stripe-in-talks-to-acquire-stablecoin-focused-fintech-platform-bridge-usdc">Bloomberg</a>.</li>



<li>Kraken’s joining the wrapped BTC club, <a href="https://www.coindesk.com/business/2024/10/17/crypto-exchange-kraken-launches-wrapped-bitcoin-token-kbtc/">announcing</a> Thursday that it plans to launch its own offering called kBTC.</li>



<li>Robinhood’s launching a desktop platform and <a href="https://www.reuters.com/technology/robinhood-launches-desktop-platform-adds-futures-index-options-trading-app-2024-10-16/">added</a> bitcoin options to its app.</li>



<li>Ex-FTX executive Nishad Singh is <a href="https://www.theblock.co/post/321666/nishad-singh-defense-jail-time-ftx?utm_source=rss&amp;utm_medium=rss">pushing</a> for no jail time ahead of his sentencing.</li>



<li>Jump Trading is <a href="https://www.bloomberg.com/news/articles/2024-10-16/jump-trading-accused-of-pump-and-dump-in-game-developer-s-suit">accused</a> of a pump-and-dump scheme in a lawsuit filed by a video game developer.</li>
</ul>



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



Q: What would widespread active crypto usage look like?



Crypto-utopia. Everything solarpunk would come true: an end to scarcity and rise of social collectivism. Open source technologies that both bring us closer to, and protect, the nature around us.&nbsp;



But really, it all depends on how you define “active usage.”



A16z found an estimated 30 to 60 million active crypto users, representing between 5% or 10% of the 617 million crypto owners that Crypto.com suggested were out there earlier this year.



Its <a href="https://a16zcrypto.com/posts/article/estimating-crypto-users/">methodology</a> filters out non-transacting addresses, and those with a near-zero balance, from active addresses overall, leaving only addresses who really sent and received at least some crypto.



That makes sense. But at the same time, buying and holding crypto can also be “using” it.&nbsp;



Bitcoin hoarders who are storing their value with BTC may not be spending it in real life, but they’re still actively using the technology.



— David Canellis



To me, it’s incorporating crypto into your everyday life in such a mundane way that you don’t even think about it. I think stablecoins are, so far, a great example of that — primarily for non-Americans.&nbsp;



Both Lazzarin and Matsuoka from a16z Crypto stressed to me the importance of bringing folks onchain to drive up their engagement. I’m not sure what the answer is, if we’re being totally honest.&nbsp;



A bull market? Great, we’re technically in one and yeah, we’re seeing more engagement but there’s still room to grow. Better infra? That’s growing, too. Memecoin mania? Well, that’s not going to drive a lot of normies to the space (let’s be real, it takes a certain temperament to come out on top with memecoins).&nbsp;



While I’m skeptical that there’s one right or good answer, I think it’s the perfect moment to f*** around and find out. Keep experimenting and see what sticks.&nbsp;



— Katherine Ross



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



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Why driving engagement is the path to mass adoption

For Bitcoin miners, maintaining profitability has become increasingly challenging as block rewards diminish and competition grows. While many solutions offer miners new revenue streams, they often stray from Bitcoin’s core principles of transparency, decentralization, and security.



But not <a href="https://x.com/exsatnetwork">exSat Network</a>.



exSat has emerged as a project aimed at restoring the original principles of Bitcoin—transparency, decentralization, and security—while addressing challenges that have historically limited Bitcoin’s growth and adaptability. These challenges include issues like scalability, fragmentation, and interoperability. Unlike many solutions that diverge from Bitcoin’s founding values, exSat provides miners with a new way to generate yield while contributing to network security, all without relinquishing ownership of their Bitcoin. By synchronizing Bitcoin’s UTXO data on-chain and leveraging its unique Layer 1.5 architecture, exSat introduces a fair, trustless system that extends Bitcoin’s capabilities while staying true to its decentralized ethos.



By staying true to Bitcoin’s founding ideals, exSat Network presents itself as a beacon of technological advancement, aiming to extend Bitcoin’s potential far beyond its current state.



Let’s explore what the team is working on, why miners should get involved, and the role exSat has in the future of the original cryptocurrency.



<h2 class="wp-block-heading">A noteworthy alternative revenue source for miners</h2>



As Bitcoin has matured, it has faced growing pains.



While it remains the most secure and widely adopted cryptocurrency, it struggles to scale efficiently for DeFi and other advanced use cases, hindering its ability to perform as well as a global currency as it does as a store of value. Bitcoin lacks seamless connectivity with other blockchain ecosystems, and as a result, various solutions have emerged to address these gaps. Projects like the <a href="https://x.com/lightning">Lightning Network</a> have focused on scaling threw off-chain transactions but fall short in areas like on-chain <a href="https://river.com/learn/bitcoins-utxo-model/">UTXO data indexing</a> and fail to reward miners directly with yield mechanisms.



In contrast, exSat Network&#8217;s solution leverages on-chain data synchronization and offers yield opportunities, providing a more comprehensive and scalable approach to unlocking Bitcoin&#8217;s true potential.



Standing as an embodiment of Bitcoin’s founding principles, exSat strives to extend Satoshi’s vision of a decentralized, transparent and secure financial system. True to this ethos, the exSat team has carefully crafted a fair, trustless model reflected in its <a href="https://medium.com/exsat-network/xsat-your-ticket-to-the-future-of-bitcoin-69c9a8694bd4">XSAT tokenomics</a>. Unlike many blockchain projects that rely on pre-mining or pre-allocation, exSat remains faithful to Bitcoin’s fair model—ensuring no pre-mining or pre-distribution of tokens. The XSAT token, when launched, will mirror Bitcoin with a fixed supply of 21 million tokens and a halving event every 220,000 blocks, providing a sustainable long-term value model for participants.



<h3 class="wp-block-heading">Architecture</h3>



exSat Network&#8217;s innovative Layer 1.5 architecture is critical in synchronizing Bitcoin’s UTXO data on-chain, creating a decentralized repository with over 170 million rows of structured data, encapsulating Bitcoin’s entire transaction history.&nbsp;



This architecture goes beyond <a href="https://blockworks.co/tag/layer-2-2">Layer 2 scaling solutions</a> by providing a robust on-chain data index, which facilitates high accuracy and security in data synchronization. By working with major mining players like <a href="https://x.com/SpiderPool_com">Spiderpool</a>, F2Pool and others, exSat Network ensures reliable synchronization and validation of Bitcoin’s UTXO data, further reinforcing trust in the network.



To maintain its decentralized nature, exSat Network utilizes a hybrid consensus model, combining <a href="https://blockworks.co/news/what-is-proof-of-work">Proof of Work (PoW)</a> and <a href="https://blockworks.co/news/proof-of-stake-investors-guide">Proof of Stake (PoS)</a>. This allows miners to continue benefiting from Bitcoin’s PoW security while participating in PoS for yield generation and data validation. For miners facing diminishing rewards due to Bitcoin’s halving cycles—where BTC would need to hit $94,000 to equal pre-halving revenue—exSat offers a valuable alternative.&nbsp;



At time of writing, no other such solution—Bitcoin on-chain UTXO data indexing boosting miner profitability—exists. The novel concept is set to contribute significantly to unlocking Bitcoin’s potential within the broader DeFi space.



<h3 class="wp-block-heading">Earn yield, but maintain ownership</h3>



Unlike most Bitcoin yield opportunities available, with exSat, validators can earn yield from their Bitcoin holdings without relinquishing ownership or incurring significant extra costs, while contributing to the network&#8217;s security.



If you’re wondering, How can validators maintain ownership if they’re staking BTC?”, the exSat team says that in Phase 1 validators can push a transaction to prove that they own the wallet maintaining custody. exSat acts as an oracle by accessing all UTXO data, which allows the network to monitor the wallet’s BTC balance and verify that it remains above a certain threshold—100 BTC. This ensures validators continue holding their BTC without initially transferring it to the network, since exSat only verifies holdings without slashing BTC. When exSat governance and staking go live, slashing will apply only to XSAT, the native governance token, not BTC, offering a clear separation between Bitcoin security and validator incentives.



In Phase 2 when Decentralized Asset Custody launches, through the <a href="https://exsat.network/app/">exSat dApp</a>, users can stake their Bitcoin in decentralized vaults, where they are issued a mirrored version of their assets: XBTC. The decentralized vault utilizes a Multi Signature, MPC solution with the same trusted custodians and exchanges acting as signatories.&nbsp;



XBTC enables custodians to participate in exSat Network’s ecosystem while retaining full control over their original BTC holdings. The staking process allows custodians to earn yield in XSAT tokens, creating an additional revenue stream from their otherwise dormant Bitcoin.&nbsp;



You may be wondering how exSat Network stacks up against other staking solutions like <a href="https://babylonlabs.io/blog/babylon-bitcoin-staking-mainnet-launch-phase-1">Babylon</a>, <a href="https://app.solv.finance/points">Solv protocol</a>, and other staking solutions. While these projects share similarities—such as issuing wrapped versions of Bitcoin, multisig solutions, and introducing innovative BTC staking methods—there are key differences that set exSat apart.



The most significant distinction lies in the staking rewards. Starting at mainnet launch, exSat will distribute its native XSAT token to validators and synchronizers. Unlike other platforms that offer points-based systems where rewards are promised in the future, exSat provides a tradable, redeemable token from day one. This means participants earn immediate, tangible rewards rather than accumulating points with the hope of future monetary benefits.



Beyond simply earning yield, exSat Network’s ecosystem is designed to maximize earning potential through possible partnerships with DEXs and other platforms. These partnerships offer validators the opportunity to double or triple-dip their yield by participating in multiple reward streams. Validators can contribute to data validation on the exSat Network network while simultaneously engaging with yield-generating opportunities on external platforms, multiplying their rewards and creating even greater upside for participants.



<h3 class="wp-block-heading">Easy onboarding for miners</h3>



exSat Network has streamlined the onboarding process for miners, making it incredibly efficient and quick. With a sub 8-hour onboarding process, miners can easily synchronize Bitcoin data, start earning yield, and begin participating in exSat Network’s network. This low-barrier entry allows miners to integrate their current mining operations seamlessly, with minimal extra effort. Miners earn XSAT tokens by continuing their current activities—mining Bitcoin blocks—and then synchronizing that data on the exSat Network. This dual role of mining and data synchronization not only boosts their revenue but also strengthens the exSat Network.



exSat Network’s ambitious goal is to reach and exceed 51% of Bitcoin’s hash power, with projections indicating a target of 60% and greater. By achieving this majority, exSat Network ensures the decentralization and stability of its network, as well as increasing the profitability for participating miners. Reaching this level of hash power also positions exSat Network as a dominant force within the Bitcoin mining ecosystem, securing its long-term sustainability and providing enhanced security for the network.



<h2 class="wp-block-heading">State Data Index: A Venue for Price Discovery and Trading</h2>



exSat Network&#8217;s State Data Index opens up a new frontier for price discovery and trading, enabling users to trade <a href="https://blockworks.co/news/the-rwa-solution-to-a-surging-50-billion-industry">Real World Assets (RWAs)</a> directly on the network. By synchronizing and indexing Bitcoin’s UTXO data on-chain, the State Data Index provides a decentralized, transparent marketplace where RWAs can be seamlessly exchanged. This infrastructure is designed to bring Bitcoin liquidity to a broader spectrum of assets, facilitating easy price discovery and trading of RWAs.



Moreover, exSat Network’s ERC-20 compatibility ensures that the network can support further issuance of tokenized assets. This opens the door for DEXs to spin off from the exSat Network network, enabling traders to tap into Bitcoin’s liquidity for a wide range of assets. As exSat Network further integrates into the DeFi space, DEXs are likely to emerge as key venues for these trades, offering participants direct access to Bitcoin’s vast liquidity pool without needing complex third-party solutions.



The addition of exSat secondary markets will allow for the trading of assets without the need for bridges between networks. Specifically, by leveraging exSat Network’s native chain and on-chain data synchronization, transactions can be completed directly, eliminating the need for cross-chain solutions and reducing the risks associated with bridging assets between different ecosystems. This feature offers users a faster, safer, and more streamlined way to trade RWAs and other tokenized assets on the network.



<h2 class="wp-block-heading">Partnerships, Validators &amp; Unlocking Bitcoin DeFi</h2>



exSat Network has established strategic partnerships with several key players in the blockchain space, including Matrixport, OKX, HashKey Cloud, BitGet and Everstake which provide crucial validator and infrastructure support. These partnerships ensure that the network operates with the highest levels of accuracy, security, and scalability.&nbsp;



The role of these validators is vital to maintaining data synchronization and decentralization, making the exSat Network network robust and reliable for users.



exSat Network’s EVM compatibility further expands its capabilities by connecting Bitcoin to Ethereum’s smart contract ecosystem. This integration unlocks new opportunities for Bitcoin in the world of DeFi, enabling use cases such as smart contracts, DEXes, and NFTs. By providing a bridge between Bitcoin and Ethereum’s DeFi ecosystem, exSat Network paves the way for a seamless user experience, making Bitcoin more functional and accessible within the broader blockchain space.



The project’s ultimate goal is to unlock the BTCFi ecosystem through its decentralized custody model and Layer 1.5 architecture, which allows Bitcoin to participate in DeFi without relying on centralized intermediaries. This enables cross-chain connectivity to ecosystems like Ethereum and ZK platforms, expanding Bitcoin’s utility beyond just a store of value.



A <a href="https://x.com/exSatNetwork/status/1836404878307946616">key partnership with Matrixport</a> has further strengthened exSat Network’s position. Matrixport has committed to stake between 5,000 to 10,000 nBTC on the exSat Network, making it one of the largest Bitcoin projects in terms of TVL. In addition to staking, Matrixport will assist with the development of dApps and provide additional layers of security to the network.



Looking ahead, exSat Network is gearing up for its mainnet launch, <a href="https://medium.com/exsat-network/key-achievements-and-announcements-from-token-2049-spotlight-on-the-exsat-network-99076880ba5a#:~:text=The%20exSat%20Network%20hosted%20the,launch%20date%20of%20October%2023rd.">scheduled for October 23rd</a>. This milestone marks the beginning of exSat Network’s full-scale operations, with further expansion into DeFi and validator partnerships on the horizon.



<h2 class="wp-block-heading">exSat Network’s Role in Bitcoin’s Future</h2>



exSat Network stands at the forefront of innovation in the Bitcoin ecosystem, targeting massive adoption by addressing long-standing issues like scalability, fragmentation, and interoperability. By leveraging a unique Layer 1.5 architecture, exSat Network enhances Bitcoin’s core infrastructure while providing new opportunities for yield generation and DeFi. Through its hybrid consensus model and on-chain UTXO repository, exSat Network boosts miner profitability, allowing them to earn additional rewards without extra resources, while also unlocking Bitcoin’s potential within the broader DeFi space.



Looking ahead, exSat Network aims to solidify its role as a leader in the Bitcoin DeFi ecosystem. With the upcoming mainnet launch, the network is on track to increase hash power beyond 51% to 60%+, expand strategic partnerships, and further integrate with dApps and platforms. It will undoubtedly play a significant role in Bitcoin’s evolution, bringing it closer to becoming a fully interoperable, scalable, and decentralized financial system.



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Unlocking Bitcoin DeFi with exSat

Sitting US Senator Elizabeth Warren and Republican nominee John Deaton faced off Tuesday night in a debate as the race for the Massachusetts seat continues.&nbsp;



Deaton, an attorney with a soft stance on cryptocurrency regulation, <a href="https://blockworks.co/news/elizabeth-warren-challenger-senate">entered the race</a> in February, saying he wanted to “shake things up for the people who need it most.&#8221; Warren, however, argued Tuesday night that Deaton is really only interested in protecting “his crypto buddies,” who have made up the majority of his campaign donations.



Deaton has raised $2.05 million, about half of which was from a personal loan he made himself. A pro-Deaton super Political Action Committee, Commonwealth Unity Fund, has raised an additional $2.6 million, FEC <a href="https://www.fec.gov/data/committee/C00875856/#total-spent">filings</a> show. Deaton’s supporters include Gemini co-founders Tyler and Cameron Winklevoss, and current and former Ripple CEOs Brad Garlinghouse and Chris Larsen.&nbsp;



Read more: <a href="https://blockworks.co/news/john-deaton-secures-republican-nomination">John Deaton cinches Republican nomination with $1.3M in crypto support&nbsp;</a>



<a href="https://blockworks.co/tag/elizabeth-warren">Warren</a> has raised $8.2 million since the beginning of 2023.&nbsp;



Deaton on Tuesday <a href="https://www.youtube.com/watch?v=T2-YC34UgOo">countered</a> Warren’s characterization of the crypto industry, arguing that bitcoin and digital assets can help elevate marginalized communities. He pointed to his mother, who he said struggled to maintain minimum balances required by banks and often faced additional fees that would be avoided through blockchain transactions.&nbsp;



Warren, taking an uncharacteristic stance, said it’s “fine” if people want to invest in bitcoin and other cryptocurrencies, as long as safety is the top priority. The comment comes months after Warren wrote that the US Securities and Exchange Commission was <a href="https://blockworks.co/news/sec-wrong-bitcoin-etf-elizabeth-warren">“wrong on the law”</a> when they approved spot bitcoin ETFs at the beginning of this year.&nbsp;



The <a href="https://projects.fivethirtyeight.com/polls/senate/2024/massachusetts/">latest polls</a> from earlier this month (with the debate not factored in) have Warren leading Deaton, 56% to 34%.&nbsp;



Deaton notched the Republican nomination last month, earning almost two-thirds of votes. Historically, Warren has a strong track record against Republicans. In 2012, she won her seat by defeating incumbent GOP Sen. Scott Brown with 53% of the vote. In her most recent election in 2018, she secured re-election by a 60%-to-36% margin against Republican Geoff Diehl.



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



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Crypto gets mention on national stage during Congressional debate 

Ben Strack

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<h2 class="wp-block-heading">New research sheds light on investor, voter attitudes&nbsp;&nbsp;</h2>



It’s always good to digest surveys with a grain of salt, but they often give us a solid look into how various demographics are interacting with the space.&nbsp;



And with the presidential election less than three weeks away, some of the findings seem to have a heightened importance — particularly if the pro-crypto crowd ends up being a key voting bloc.



On that note, an <a href="https://blockworks.co/news/a16z-monthly-active-addresses-aths">Andreessen Horowitz report</a> showed that crypto interest — as far as internet searches — has grown in several so-called swing states since the last election.&nbsp;&nbsp;



From 2020 to 2024, Pennsylvania and Wisconsin have seen jumps in that category of 5.3% and 4.7%, respectively. The ranking is based on an average across searches for words including “bitcoin,” “ethereum” and “crypto.”



PA and WI are behind only North Dakota, Arkansas and Minnesota in terms of four-year crypto search growth. Another swing state, Michigan, ranks eighth (up 3.3% since 2020). Nevada and Arizona have seen declines in this category from four years ago.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeo2NUoBC77K0CdcF6G4_o2ux2FT6KhYsD717gDyvVDstIN6SbyAX1Ko_In75Buqk6qbGKO_B65LhebWDbA7up7mcT1a5enB0os_MTsDXNLBsLux_cbqTlxQXcmr7D5awQZmcIJ0fnqcBCb1LDUS1zemME?key=qUiMHjiXX5mKtHpWeRpQFQ" alt=""/></figure>



And on the topic of <a href="https://blockworks.co/news/forward-guidance-newsletter-crypto-survey-data">swing states</a>, there are roughly 40 million Gen Z’ers — youngsters born between 1995 and 2006 — eligible to vote in the upcoming US election.&nbsp;



A recent survey conducted by Atomik Research shows that members of that generation are slightly more likely to invest in crypto, at 24%, than traditional asset classes (22%).&nbsp;



The findings — based on roughly 2,000 respondents surveyed between Sept. 24 and 27 — shows that crypto is the preferred investment in the UK. In the US, it is ahead of stocks and bonds but lags pensions and mutual funds.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcT93_nRv9sJT7PqIq_dwkC3yYXmW__jZYl1Rb4TceoVwu94w5f0z7ZsykB2a-KJGK-Wqa523xDuff7O_XOrBAZ22AbIqhhz8OOnhJPFwhEc1_ikK3TWuPueTUpQ1Z2D0ykmlFgDxpuFMcEjwZ3UmZUc8E?key=qUiMHjiXX5mKtHpWeRpQFQ" alt=""/></figure>



Not all Gen Z voters will be focused on a single issue, let alone motivated to cast their ballot with crypto in mind. But <a href="https://blockworks.co/news/harris-trump-crypto-stances-coinbase">Coinbase’s Faryar Shirzad told me</a> he expects crypto to be “a winning issue” in the future, and seeing this glimpse into younger people’s investment preferences seems to support such a projection.



And then we had a hedge fund survey last week that jives with some of what we heard from industry watchers at <a href="https://blockworks.co/tag/permissionless">Permissionless</a> last week.&nbsp;



Nearly half of traditional hedge funds (47%, to be exact) have exposure to digital assets, according to new research from the Alternative Investment Management Association and PwC. That is up from 29% in 2023.



The boost is not exactly surprising, given the launch of spot bitcoin and ether ETFs this year.&nbsp;



Hedge funds (such as Millennium Management) have <a href="https://blockworks.co/news/tradfi-firms-disclose-positions-in-blackrock-bitcoin-etf">jumped</a> into these bitcoin products and, in many cases, are executing basis trades, Permissionless speakers James Seyffart and Jim Bianco <a href="https://www.youtube.com/watch?v=UVy0kkrrZfY">noted</a> last week. This means they’re taking positions in both the BTC spot and futures markets in a bid to profit from price differences.



Traditional hedge funds’ use of crypto derivatives has grown from 38% last year to 58% in 2024, signaling “growing sophistication in hedge fund strategies,” the latest report notes. Spot trading, meanwhile, dropped to 25% this year after peaking at 69% in 2023.&nbsp;



Two-thirds of the hedge funds allocating to crypto plan to maintain those investments. The other third say they expect to invest more in the space by the end of the year.



More hedge funds are also “committed to or exploring tokenization” (increasing from 25% to 33% year over year), with 12% already investing in tokenized assets. Based on <a href="https://blockworks.co/news/blackrock-tokenization-investment">bullishness from TradFi giants</a> and recent announcements from <a href="https://blockworks.co/news/visa-to-help-banks-test-tokenized-assets-smart-contracts">Visa</a> and <a href="https://www.dtcc.com/news/2024/october/15/dtcc-announces-industry-sandbox-to-support-and-advance-the-digital-asset-ecosystem">DTCC</a>, this space appears ripe for a boom.&nbsp;



Not all hedge funds want to be involved, as 76% not yet invested in crypto say they don’t plan to be three years from now (up from 54% in 2023).&nbsp;



The top hurdle (cited by 38% hedge funds this year) was investment mandates excluding digital assets, with the “<a href="https://blockworks.co/news/crypto-must-work-closely-with-regulators">regulatory uncertainty</a>” barrier easing due to the EU’s <a href="https://blockworks.co/news/micar-foreign-stablecoins-advantage-in-europe">MiCA</a> regulation.



Perhaps that’s a lot to take in. But as the space evolves, catching up on a variety of data points can help bring a fuller picture to life.&nbsp;&nbsp;



— Ben Strack&nbsp;



<h3 class="wp-block-heading">$1.18 billion</h3>



The net inflows tallied by the lot of US-listed spot bitcoin funds during the last three trading days, according to Farside Investors <a href="https://farside.co.uk/bitcoin-etf-flow-all-data/">data</a>.&nbsp;



BlackRock’s iShares Bitcoin Trust (IBIT) just crossed the $22 billion net inflow mark since its January launch, while Fidelity Wise Origin Bitcoin Fund (FBTC) surpassed $10 billion of positive flows. The category — weighed down by $20 billion of net outflows from Grayscale’s GBTC — has seen $19.8 billion flow in on a net basis in the past nine months.



This latest asset surge has come amid <a href="https://blockworks.co/news/btc-uptober-price-gains">a bitcoin rally</a>. The asset’s price eclipsed $68,000 on Wednesday before settling around $67,900 at 2 pm ET — up nearly 9% from five days ago. BTC is now less than 8% off of its all-time high (above $73,000) hit <a href="https://blockworks.co/news/bitcoin-all-time-high">in March</a>.&nbsp;



<h2 class="wp-block-heading">Panda-monium in Chinese markets&nbsp;</h2>



As Washington DC’s newest <a href="https://www.nbcwashington.com/news/local/live-updates-pair-of-giant-pandas-arriving-in-dc-from-china/3740836/">fluffy residents</a> made their journey from Chengdu to Dulles, Chinese markets took another tumble.&nbsp;



The CSI 300 Index — a cap-weighted index tracking the top 300 stocks on the Shanghai and Shenzhen stock exchanges — closed Wednesday almost a point lower. It is now down around 10% from its Oct. 8 high, but still up 20% over the past month.&nbsp;



China’s stock market boom started late last month. When officials announced a $113 billion central bank <a href="https://blockworks.co/news/on-the-margin-newsletter-china-stimulus-stagnation">stimulus package</a>, the CSI 300 soared about 27% in two weeks. But details of the fiscal spending plan have yet to emerge, and investors are getting antsy.&nbsp;



Retail traders specifically pulled back in a big way. The CSI 300 fell around 7% on Oct. 9, marking the largest single-day decline since 2020. Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-10-16/china-s-wild-stock-market-swings-hurt-a-21-trillion-bull-case">reported</a> that the phrase “close securities account” appeared on social media platform WeChat 56 million times on Oct. 9. The index is now at its highest 60-day annualized <a href="https://vlab.stern.nyu.edu/volatility/VOL.SHSZ300%3AIND-R.GARCH">volatility</a> since 2016.&nbsp;



Analysts from crypto research firm Kaiko said Monday that while bitcoin’s correlation with the CSI 300 has historically been low (remember, China banned crypto trading in 2021, but we all know that hasn’t completely stopped activity), there is still something to be learned. The initial run-up in Chinese equities coincided with heightened BTC selling in Asia, likely because retail investors were liquidating crypto holdings to panic-buy stocks, Kaiko analysts said.&nbsp;



“A revival in Chinese consumer confidence could benefit both asset classes, potentially unlocking significant cash from both institutional and retail traders currently sitting on the sidelines,” Kaiko’s report added.&nbsp;



Another market hit by Chinese consumer skepticism? Luxury brands. LVMH — the holding company that owns Louis Vuitton, Dior and other opulent names — saw its Asia region (excluding Japan, but including China) lose 16% in sales <a href="https://www.lvmh.com/investors">last quarter</a>. It’s the third straight quarterly decline.&nbsp;



Analysts largely say the economic slowdown in China should have a minimal impact on US economic growth and inflation, at least for now. Things could change considerably after the election, especially if we are facing a second Donald Trump <a href="https://blockworks.co/news/donald-trump-economic-new-york-club-comments">presidency</a> and additional tariffs.&nbsp;



There is one Chinese import that we can rest assured will boost American spending, though, at least locally: the two giant pandas that will soon debut at the National Zoo.&nbsp;



They aren’t cheap (the US is leasing each from China for $1 million annually), but Bao Li and Qing Bao are expected to bring crowds — upwards of 2 million a year — that are going to spend on merch, lodging, food and travel.&nbsp;



— Casey Wagner



<h2 class="wp-block-heading">Crypto makes it to the (smaller) debate stage&nbsp;</h2>



We may have <a href="https://blockworks.co/news/forward-guidance-newsletter-kamala-harris-crypto-silence">missed the chance</a> to hear crypto discussion on the presidential and VP debate stages. But at the congressional level, crypto had a big moment last night.&nbsp;



Sitting Massachusetts US Senator Elizabeth Warren faced her <a href="https://blockworks.co/news/john-deaton-secures-republican-nomination">Republican opponent</a> John Deaton Tuesday night.



Crypto-friendly lawyer Deaton <a href="https://blockworks.co/news/elizabeth-warren-challenger-senate">entered the race</a> in February, saying he wanted to “shake things up for the people who need it most.&#8221; Warren, however, argued Tuesday night that Deaton is really only interested in protecting “his crypto buddies,” who have made up the majority of his campaign donations.



Deaton has raised a combined $3.6 million in direct and super PAC donations, latest FEC filings show. But the single largest contribution of $1 million to his war chest came from his own pockets.&nbsp;



Deaton countered, arguing that bitcoin and digital assets can help elevate marginalized communities. He pointed to his own mother, who he said struggled to maintain minimum balances required by banks and often faced additional fees. Fees that do not come with bitcoin, he noted.&nbsp;



In response, Warren said it’s “fine” if people want to invest in bitcoin and other cryptocurrencies — she just wants to make sure they’re doing so safely. Digital assets are routinely used for illicit activities, so crypto firms shouldn’t get a free pass, she added. In other words, Warren contended, they have to follow the same rules as other financial institutions.&nbsp;



The <a href="https://projects.fivethirtyeight.com/polls/senate/2024/massachusetts/">latest polls</a> from earlier this month (with the debate not factored in) have Warren leading Deaton, 56% to 34%.&nbsp;



Still, Deaton sailed through the Republican primary last month, earning almost two-thirds of votes. History is not on his side, though. In 2012, Warren won her seat by defeating incumbent GOP Sen. Scott Brown with 53% of the vote. In her most recent election in 2018, she secured re-election by a 60%-to-36% margin against Republican Geoff Diehl.



As Jan van Eck <a href="https://x.com/caseywagnerr/status/1844427126122086823">said</a> last week at Permissionless, the real races to watch in November are going to be in Congress, so keep an eye on this one.&nbsp;



— Casey Wagner



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



<ul class="wp-block-list">
<li>In case you missed it, Grayscale has <a href="https://www.grayscale.com/blog/general-updates/assets-under-consideration-current-products">shared</a> 35 crypto assets it would consider including in its future investment products. Nearly half of these are within the smart contract platforms segment, while dogecoin (DOGE) and kaspa (KAS) made the list in the consumer &amp; culture and currencies sectors, respectively.</li>



<li>While we noted that bitcoin ETFs have been <a href="https://blockworks.co/news/0xresearch-newsletter-btc-bullish-reversal">welcoming</a> a large amount of investor assets in recent days, flows into and out of US spot ETH products have remained slow and fairly flat in recent weeks. As they approach three months on the market, net outflows from that category so far amount to $542 million.</li>



<li>Speaking of ether, ETH’s price rose about $2,640 earlier today before retreating down to $2,620 just after 2 pm ET — up 0.5% from 24 hours ago and 7.6% in the past five days. </li>



<li>Want to watch videos from last week’s Permissionless conference in Salt Lake City? Follow this <a href="https://blockworks.co/event/permissionless-iii/recordings">link</a> so you know when the recordings become available.</li>
</ul>



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From swing states to hedge funds, here’s what the crypto surveys say

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Narratives move quickly in crypto.&nbsp;



A month and a half ago, Solana Foundation head of strategy Austin Federa wrote on X that “​​Most of the L2-ish things on Solana are better thought of as Network Extensions.” The basic rationale is that while layer-2s are meant to scale Ethereum by running smart contracts more cheaply on different software, Solana is meant to scale at the base layer, and many Solana-centric networks are meant to do different things than the layer-1.



This kicked off an online debate mainly between Solana fans who agreed with Federa and Ethereum boosters who argued that Solana was simply rebranding the concept of layer-2s, which are a frequent topic of Solana ire.&nbsp;



Today, Neon EVM, a platform for deploying Ethereum-centric apps on Solana, formally adopted the “network extension” title. The move comes just a month and a half after the term made its public debut.



“Unlike an L2, Neon EVM doesn&#8217;t add an extra layer on top of Solana,” Neon EVM chief commercial officer Davide Menegaldo told me in a text. “L2s are built on top of a base Layer 1 blockchain to enhance scalability, they batch transactions before settling on the main chain, and they [fragment] liquidity as well as user experience.”



Neon EVM doesn’t do any of these things, Menegaldo argues, so it’s better thought of as a network extension.&nbsp;



When I asked Federa about his term, he said network extensions are meant to be a big-tent term that ditch the Ethereum-centric assumptions about what L2s are.



“Neon EVM is not an L2 on Solana, it&#8217;s a ‘L1.5’ because it&#8217;s its own VM but it can atomically compose with SVM stuff. What do we call that? It&#8217;s not a rollup, not an L2&#8230; [it’s] a network extension,” Federa wrote in a direct message.&nbsp;



Neon isn’t alone in embracing the term. Solana co-founder Anatoly Yakovenko <a href="https://x.com/aeyakovenko/status/1830994614557515850">voiced</a> his support, and a co-founder of the high-throughput Ethereum layer-2 MegaETH <a href="https://x.com/hotpot_dao/status/1830786592325120139">said</a> she liked the label.



L2s aren’t exclusively Ethereum’s terrain though. The Solana-based DeFi platform Zeta is building a layer-2 that uses a sequencer and follows a lot of the principles that go into Ethereum L2 design, the platform’s founder Tristan Frizza told me.&nbsp;



Zeta also has a similar mission to ETH L2s, which is to achieve lower latency than Solana’s 400 ms block times would allow, so Frizza feels “hesitant” to adopt the network extension term.



“I feel like it&#8217;s a Solana marketing term for L2s, but idk if there are other apps/chains that are genuinely completely different,” Frizza wrote in a text.



Helius CEO Mert Mumtaz also came out against calling L2-like projects on Solana network extensions, casting them as “too general.”



Instead, those debating semantics should “build something people need so crypto overall can grow the pie…hope this helps,” Mumtaz wrote.



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Solana-based Neon EVM adopts ‘network extension’ title

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Here’s a simplified explanation of how restaking works today:&nbsp;



<ol class="wp-block-list">
<li>Bob deposits ETH/stETH into a liquid restaking protocol like Ether.Fi, Puffer, Eigenpie or Renzo.</li>



<li>The liquid restaking protocol delegates Bob’s assets to an EigenLayer operator.</li>



<li>The EigenLayer operator uses Bob’s asset to secure one or many AVSs to return some yield to Bob.</li>



<li>Bob is happy because his ETH is a yield-bearing productive asset, and he enjoys a liquid ETH derivative that he can use to dabble in other degenerate DeFi activities.</li>
</ol>



About <a href="https://app.eigenlayer.xyz/operator">299</a> active EigenLayer operators compete for $11.2 billion in TVL in EigenLayer, so competition is pretty stiff.



EigenLayer operators compete for user attention in one of many ways.&nbsp;



Technical competency is one obvious factor, namely keeping a consistent uptime and fulfilling specific responsibilities for the AVSs they validate.



Operators also try to validate as many AVSs as they can so as to compound yield returns to users (and slashing risks), or promise to share any potential airdrops with delegators. You can see many such explicit advertisements on the EigenLayer operator page.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfqAipEC7L-Aam8rAjKDpl8FVl8un07v6wRcCXCulDlD_-rxh4QoTCLMYV76CjPOvZAgbFZf0hxmz_iW5t9cPhYExziKgjvCnd0vb20m3CQBZobzFv5Po-7KHMOS7x0lGRYp3Y4cITGYYsNhC5msjdBQ77K?key=iNUO5Mkvv7G-Ji0ffJ3mQQ" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://app.eigenlayer.xyz/operator/0x5accc90436492f24e6af278569691e2c942a676d">EigenLayer</a></figcaption></figure>



Another way that EigenLayer operators could compete, of course, is to simply promise more of their cut to delegators. That has not been the case, until today.



P2P.org, the <a href="https://app.eigenlayer.xyz/operator">largest</a> EigenLayer operator by total ETH restaked (at 274,000 ETH), announced Wednesday that it would launch revenue distribution to users delegating ETH to them.



As part of a “new structure [to] reward long-term trust and engagement,” all delegators staking with P2P.org prior to Aug. 15 will be eligible for the revenue share.



It’s a bold move —&nbsp;and not one you’d typically expect from a leader at the top.



It’s not clear how much revenue that actually translates into for P2P.org delegators, but here’s some napkin math from Blockworks Research Analyst Marc Arjoon.



<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">With ~8K stakers on <a href="https://twitter.com/P2Pvalidator?ref_src=twsrc%5Etfw">@P2Pvalidator</a> this equates to ~$1,500 pp (at today&#39;s prices with no commission and excluding additional AVS revenues) <a href="https://t.co/14oN8AG1rI">https://t.co/14oN8AG1rI</a> <a href="https://t.co/7KEvvmcI8J">pic.twitter.com/7KEvvmcI8J</a>&mdash; Marc Arjoon 🟪 (@marcarjoon) <a href="https://twitter.com/marcarjoon/status/1846557289391481090?ref_src=twsrc%5Etfw">October 16, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



P2P has about 274,000 ETH and 8.53 million EIGEN staked on EigenLayer across ~8k stakers.



As part of its “programmatic incentives” program, EigenLayer is allocating 67 million EIGEN through the first year, with 3/4 going to ETH stakers and another 1/4 to EIGEN stakers and operators.



For P2P, that comes up to about ~3.63 million of EIGEN incentives (worth $12 million today).



Assuming today’s EIGEN price of $3.3, each staker would receive about $1,500, excluding any AVS yield.



Not a bad reward.



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



Crypto VC funding still lagging:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcnsYi8_AzNTEzO3QQPzzmv-jGZq_tpZUowCxGnoa6sHHBPiIoOUdTL4sTcGzKiGgSgzm-h1wvNNGsxzr6oPCfrmz0vNLn562Dh6JryF73Wf4GhkqHs4lMMbeiRcEItVnT5mFG8t7cQE96KSqCRCApuSIv6?key=iNUO5Mkvv7G-Ji0ffJ3mQQ" alt="1 - crypto deal count capital invested2"/><figcaption class="wp-element-caption">Source: <a href="https://www.galaxy.com/insights/research/crypto-blockchain-venture-capital-q3-2024/">Galaxy Research</a></figcaption></figure>



According to Galaxy Research, crypto venture capital funds invested about $2.4 billion across 478 deals in Q3 2024. That’s 20% capital invested and 17% fewer deals than the previous quarter.&nbsp;



Within Q3, companies in the “trading/exchange/investing/lending” category raised the most, at $462 million. Cryptospherex and Figure markets raised $200 million and $73.3 million, respectively.&nbsp;



In a sign that the L1 trade isn’t going away, the second-largest raise came from L1 projects — about $341 million in total.



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EigenLayer’s biggest node operator promises revenue-sharing

While various politicians have voiced support for crypto, a Coinbase executive is urging the industry to take note of how candidates elaborate on the topic.



While the upcoming presidential election’s outcome is likely to be consequential for the crypto community, it has already been “an extraordinarily successful election year” for the segment, Coinbase Chief Policy Officer Faryar Shirzad said.



“Whatever happens on Election Day will be just additive to the success we’ve already had by putting ourselves on the main political stage,” the executive noted during an interview with Blockworks last week at <a href="https://blockworks.co/tag/permissionless">Permissionless</a>.



Read more: <a href="https://blockworks.co/news/permissionless-day-two-vibes">Politics and memecoins drive the conversation on day 2 of Permissionless</a>



Donald Trump “deserves enormous credit for what he’s <a href="https://blockworks.co/news/on-the-margin-newsletter-trump-crypto-promises">said on the crypto issues</a> and how comprehensive his vision has been,” Shirzad added. He also offered Harris credit for the efforts she’s made to converse with the crypto community and <a href="https://blockworks.co/news/on-the-margin-newsletter-china-stimulus-stagnation">her seeming intention</a> to be more constructive on the issue.



“There’s reason to feel optimism on both sides,” he explained. “But at the end of the day, more substance and more detail are critical, and we’re hoping to get more from the vice president between now and Election Day.”



The interview with Shirzad came before <a href="https://blockworks.co/tag/kamala-harris">Harris</a> unveiled on Monday an “opportunity agenda” that includes “supporting a regulatory framework for cryptocurrency and other digital assets so Black men who invest in and own these assets are protected.”&nbsp;



While some <a href="https://x.com/ShevrinJones/status/1845806476062806375">praised</a> the initiative, Harris <a href="https://blockworks.co/news/forward-guidance-newsletter-kamala-harris-crypto-silence">failed to mention blockchain</a> in a speech that night.



Keep reading for more excerpts from Blockworks’ interview with Shirzad.



__________________________________________________________________________



Blockworks: How do you feel about the crypto advocacy efforts in recent months and the impact it’s had? &nbsp;



Shirzad: I think as a community we should feel very good about having already a historical election cycle in terms of the number of candidates who’ve spoken up on the crypto issue, who’ve filled out their Stand With Crypto questionnaire [and] who’ve embraced the importance of the US being a leader of digital asset innovation. We shouldn’t lose sight of how much progress we’ve already made.&nbsp;



Read more: <a href="https://blockworks.co/news/forward-guidance-newsletter-crypto-survey-data">Unpacking survey findings about the ‘crypto voter’</a>



Blockworks: You mention Trump “deserves enormous credit.” Which of his crypto-related comments are most significant in your mind?&nbsp;



Shirzad: I think he said three things that are most important.&nbsp;



One is just declaring that crypto should be built <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">in the United States</a>; I think that is massive. Two, saying that [regulators] shouldn’t engage in abuse of power against an industry. And then I think the thing that people haven’t paid the most attention to — which I think was the most important thing he said — is that he would protect the right for people to self-custody their crypto. My interpretation of what he means is that he’s protecting the DeFi ecosystem and the ability of individuals … to control [their wallet] and have all the Fourth Amendment protections and privileges that one should be entitled to. I think that was a huge, huge policy victory and is the kind of thing we hope the Democrats will embrace at some point as well.



Blockworks: On the other side, how have your conversations been with the Harris campaign?



Shirzad: They’ve had a number of outreach sessions — some that they organized and some that allies in Congress or on the outside have organized. I’ve participated in a number of those. We’ve found the tone to be positive, curious and constructive and eager to hear what we think the issues are and understand it better.



Blockworks: After we have a president-elect, then what (in terms of how it impacts the crypto industry)? Shirzad: I think with the <a href="https://blockworks.co/tag/donald-trump">Trump</a> team, you’ll almost inevitably see some very early statements regarding areas in which the president-elect will want to leave his imprint, regulatorily. I think that will be quite visible.



My guess is it’ll be less visible with the vice president if she gets elected because she’ll be taking over for an administration she’s already a part of and it won’t be as stark of a line-drawing. But certainly, the appointment of personnel is going to be really a big deal — the people that get picked for key cabinet and agency slots. So we’re preparing for very early action, whether it’s very visible publicly or the kind of dialogue that maybe is done more quietly.&nbsp;



Blockworks: Donald Trump has said he would fire Securities and Exchange Commission Chair <a href="https://blockworks.co/tag/gary-gensler">Gary Gensler</a>. In such a case, are you advocating for a specific replacement for Gensler?



Shirzad: As a company, we’re not going to speak to any particular appointments. Obviously, we think [candidates] should be looking out to make sure America’s economic and national security interests are advanced. But ultimately that’s for the president to decide who he or she is going to pick.



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



Blockworks: What House and Senate races do you have your eye on?



Shirzad: I don’t want to get into any individual races that we’re particularly looking at, but I think generally we’ve been very happy with the degree to which <a href="https://blockworks.co/news/political-candidates-cannot-ignore-crypto-voters">crypto’s become an issue in the campaign</a> and how there are almost no candidates who’ve decided to go to the voters with an anti-crypto message. Because I don’t think it has any resonance. I think you can fit every anti-crypto voter in the country all in a single bus — maybe even a single minivan. I think politicians realize that, and I think in the political voting marketplace, crypto’s going to be a winning issue this cycle and then going forward. So I feel very good about being on the right side of history on this.



This interview was edited for brevity and clarity.



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



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Coinbase exec weighs Harris, Trump crypto stances as election looms

Gaming and social are dominating as two big crypto use cases, per a new report from Andreessen Horowitz.&nbsp;



The State of Crypto 2024 report also revealed that DeFi has the largest number of daily active addresses, though stablecoins are a close second — 34% to 32%. Infrastructure takes third, with roughly 14%.



This cycle is also seeing continued growth, with monthly active addresses hitting an all-time high of 220 million and representing “growth reminiscent of early internet adoption.” Among these addresses, Solana and Base are the most active, with EVM chains accounting for 52 million addresses, while other chains have 174 million.



Read more: <a href="https://blockworks.co/news/lightspeed-newsletter-a16z-solana-gaming">A16z is placing a bet on Solana gaming</a>



Breaking that down further, only about 10% of crypto owners are currently active, which translates to somewhere between 30 to 60 million monthly active users.&nbsp;



“There are a lot of people who are just passive holders, but if we can convert them into active users…That is how I think we grow the use of crypto in the ways that I think we believe is very promising going forward,” Daren Matsuoka, a data scientist at a16z, told Blockworks.



The goal would be to bring folks onchain and “convert those crypto owners into active crypto users,” he continued.&nbsp;



Read more: <a href="https://blockworks.co/news/vaneck-venture-fund-crypto-ai">Is crypto’s ‘ChatGPT’ moment nearly here?</a>



<a href="https://blockworks.co/tag/venture-capital">Venture capital</a> has heavily invested in infrastructure, and according to a16z data, the sector is now showing signs of maturity. This growth is creating positive ripple effects across related areas. For example, <a href="https://blockworks.co/news/lightspeed-newsletter-blockchain-tps-testing">blockchains are processing</a> over 50 times as many transactions per second as they did just four years ago.



“The infrastructure is just now starting to get to the point where we can scale these blockchains and unlock new types of applications and new emerging behaviors. I think two good examples are just on the <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> side. We&#8217;ve seen that stablecoins have found product market fit, and I think it&#8217;s largely because transaction fees have come down. Stablecoins are a great product when fees are low,” Matsuoka explained.



Adding to that, DAO treasuries have billions stored that could help make network improvements.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcPGqe2lHBHVUZhrsLcmIKR-aeMNbRD4aDBumTE6J15bAyBTTSK7PO4y6Gnx4eKdL64qAdz5aQg-Xi-1j31mDjpZmBdt_vEbZrrcmhvdKQo-93RwKic1l38SlyvXZvo0jb-jwcof9mXw61asKeRLS-itBo?key=vdWYKUurffYRco9jYRn8cA" alt=""/><figcaption class="wp-element-caption">Source: a16z</figcaption></figure>



As for what’s next, a16z thinks that legislation is on the table for both 2024 and beyond. <a href="https://blockworks.co/news/on-the-margin-newsletter-inevitable-institutional-digital-assets-involvement">Institutions are here</a>, and “crypto could become part of a diversified portfolio” for that group of investors — beyond just bitcoin and ETH.&nbsp;



“The price-innovation cycle will continue to drive the crypto market. When prices go up, people get interested, developers build and new products push the industry forward,” a16z wrote.



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Crypto monthly active addresses are hitting all-time highs: A16z

Macauley Peterson

Imagine a highway: The more lanes you have, the more cars can travel simultaneously without creating a traffic jam.



For a blockchain network, a high-throughput sequencer acts to widen that highway — allowing far more data and complex operations to flow through smoothly. This is especially important for applications such as onchain games, demanding DeFi protocols and social apps, where large volumes of transactions and interactions need to be processed without delay.



Sequencer throughput determines how much computational work a blockchain can process in a given time, directly impacting the scalability and efficiency of dapps. Higher throughput allows the network to manage spikes in user activity and support more complex, resource-heavy applications.



Today, Conduit announced a 10x improvement in throughput with the launch of G2, which it claims is the world’s most powerful sequencer. G2 is based on a purported computational load of 50-100 million gas per second (Mgas/s).



Read more from our opinion section: <a href="https://blockworks.co/news/layer-2-centralization-poses-dangers-for-blockchain">L2 centralization is a ticking time bomb for blockchain</a>



The G2 sequencer is built upon a string of technological advancements, including deep database optimizations and improvements in algorithmic efficiency, according to Andrew Huang, Conduit’s founder.



“There’s no single breakthrough,” Huang told Blockworks, “but rather a series of incremental optimizations — a 5% gain here, a 10% gain there, and over time, it compounds.” These improvements span every layer of the stack, from data access and storage to the cloud-native infrastructure orchestrating the system.



Under heavy workloads, sequencers can struggle to keep up with the head of the chain. G2 capacity opens the door for applications that were previously impossible to run fully onchain, such as Web3 games. Pirate Nation, launched by Proof of Play in December 2022, debuted on the Polygon PoS chain before later migrating to the <a href="https://blockworks.co/tag/arbitrum">Arbitrum</a> Orbit tech stack for its Apex and Boss chains.



Read more: <a href="https://blockworks.co/news/empire-newsletter-nfts-comeback-gaming">A wave of new games could prove NFTs aren’t dead after all</a>



“As the platform grew, it required a more scalable and cost-effective solution, leading to the development of [the] Orbit chains,” a spokesperson told Blockworks.



The game is among the first projects to adopt G2. Apex and Boss are both among the top three chains by Mgas/s according to <a href="https://rollup.wtf/">rollup.wtf </a>, a Conduit-built dashboard. The Proof of Play team insists this activity represents organic usage.



“Pirate Nation makes banning bots a top priority,” the spokesperson said, adding that “the Proof of Play team has tuned the incentive structure and processes to ensure the game is being played by real people with one real account.”



With G2, the team was able to solve its <a href="https://blockworks.co/tag/scaling">scaling</a> challenge and expand capacity with additional chains as needed.



&#8220;<a href="https://blockworks.co/tag/gaming">Gaming</a> kind of pushes the limits,&#8221; said Huang. “They&#8217;re obviously the most demanding applications.” But he also flagged Gravity, a Web2 app originally known as Galxe, that has successfully migrated its entire database of 26 million active users onchain using G2. That wouldn’t have been feasible without the upgraded throughput, he said.



Read more: <a href="https://blockworks.co/news/crypto-infrastructure-bloat">Crypto’s infrastructure bloat — are we building too much?</a>



<h2 class="wp-block-heading">Mgas/s as better scaling metric</h2>



Measuring blockchain sequencer throughput by Mgas/s is supplanting the traditional transactions per second (TPS) metric when it comes to judging relative scalability. “TPS is a dead metric,” Huang said. “It tells you nothing about how much compute is actually happening onchain.”



TPS can be misleading, as eye-popping headline numbers may result from artificially maxing out bandwidth with simple token transfers rather than real-world usage.



Mgas/s, in contrast, provides a much clearer picture of <a href="https://blockworks.co/tag/rollups">rollup</a> performance, especially when considering more complex applications. It comprises several different types of workload — from compute to storage — into a single figure.



“It’s not perfect because you’re putting a <a href="https://vitalik.eth.limo/general/2024/05/09/multidim.html">multidimensional thing</a> into a single metric, but it’s much better,” Huang said.



While current public benchmarks remain limited, this is just the beginning, according to Huang. The G2 team is already working toward gigagas levels of throughput, or 1000 Mgas/s. That’s also the goal for <a href="https://blockworks.co/tag/base">Base</a>, the Ethereum layer-2 rollup built on <a href="https://blockworks.co/tag/optimism">Optimism’s</a> OP Stack. Jesse Pollack outlined a plan to incrementally raise Base’s throughput over the coming year to its gigagas target on a recent <a href="https://blockworks.co/podcast/0xresearch/94d4f7bc-75e9-11ef-98bf-b7288c1f796c">0xResearch podcast</a>.&nbsp;



For comparison, Ethereum’s mainnet processes about 1-1.5 Mgas/s.



The move towards Ggas throughput is expected to open up possibilities for still more computationally intensive dapps, such as social networks, prediction markets and high-frequency trading systems which require substantial performance headroom.



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Conduit sees path to gigagas throughput with new sequencer

The Trump-linked World Liberty Financial (WLFI) token sale is live and so far, underwhelming.



It’s been overshadowed by an AI-propelled memecoin tied to the old-school vulgar internet meme, goatse.



(Please, if you’re unfamiliar with any of the goatse stuff, don’t Google it at work or with anyone around you, because it will absolutely get weird and NSFW.)



The World Liberty Financial platform is pitched as a DeFi lending and stablecoin protocol, which would allow users to earn a yield on their digital assets. As of Wednesday morning, the WLF team had sold over $11.1 million worth of governance tokens as part of its presale, which opened on Tuesday.



Read more: <a href="https://blockworks.co/news/on-the-margin-newsletter-trump-family-defi-venture">The details behind Donald Trump’s family DeFi venture</a>



That’s the equivalent of over 741 million tokens — less than 4% of the total 20 billion allocated to the general public, or 20% of the supply. WLF aims to raise $300 million in total.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcPQ7QkcAl6INQEbOxQ3Jys6BYTvOgHZcvBtc6bOXjmwYrXG6aUSivk7Plk0NdsaeGIR_s8hC8vHZ0sETO8UxNK_hAssgyX_olSMHbg6yC6huU0BB_ykptFrcASgRpOSRPqktnzl4SM8c_3JQraa0opWxdk?key=VniXniWzx9UjquZviMrZyQ" alt=""/><figcaption class="wp-element-caption">Purple shows WLF sales volume per 15 minutes, and the line at the stop shows how much of the public allocation has been sold</figcaption></figure>



WLF’s team <a href="https://www.coindesk.com/markets/2024/10/14/trump-backed-world-liberty-financial-whitelists-100k-accredited-investors-ahead-of-wlfi-launch/">reportedly</a> said it had whitelisted over 100,000 <a href="https://blockworks.co/news/world-liberty-financial-kyc-starts">accredited investors in the US</a>, with worldwide backers subject to local regulations before they were approved.&nbsp;



About 8,000 unique addresses have sent ETH, USDC or USDT as part of the presale, which would mean that an overwhelming majority of claimed whitelisted investors have not yet committed. Over 70% of all tokens were bought with ETH, 20% with USDT and the rest with USDC.



The tokens themselves are non-transferable, nixing the possibility that WLFI will end up on a DEX somewhere for proper price discovery. Each token is being sold for $0.015 apiece.



Read more: <a href="https://blockworks.co/news/0xresearch-newsletter-trump-world-liberty-financial-aave">Trump’s World Liberty Financial is using Aave</a>



Meanwhile, Goatseus Maximus (GOAT) has exploded in popularity, turning the WLFI sale into a blip on the radar.



GOAT’s lore goes that an <a href="https://blockworks.co/tag/artificial-intelligence">AI</a> model was trained on the deepest recesses of the internet, producing an armchair philosopher so degenerate and esoteric that it would free other LLMs roaming the internet from their dev-imposed moral bounds.&nbsp;



That model quickly became an alpha bull on a pump.fun memecoin, GOAT, named after the infamous butthole-stretching internet legend from yesteryear.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfE2HC7xKeK9WKYkCyBXJt9V70OlZ99yHXHV2r5QruZFd1C3VdNCtn336vBfk0n41NeumntMWP_WY8JP4WwkLVAnxSrK3LttUMDr0R7TjD_UY356pURPB0TWP-ARcDCFxq_llG2pUnryF7FEhMDQceQrnY0?key=VniXniWzx9UjquZviMrZyQ" alt=""/><figcaption class="wp-element-caption">The tweets that started it all</figcaption></figure>



Throw in a $50,000 tip from a16z co-founder Marc Andreessen (who <a href="https://x.com/pmarca/status/1846374466101944629">says</a> he has no exposure to $GOAT), and you get WLF’s Forrest Gump: a token launch so absurd that it trumps even <a href="https://blockworks.co/tag/donald-trump">Trump</a>’s offering.



At risk of comparing apples to oranges, here goes: GOAT’s market cap is currently over $275 million after less than a week of trade. There are 17,700 holding addresses in total.



The total value of WLFI tokens sold as part of the public presale — which, in one interpretation, would eventually become its circulating supply and thus market cap — is a little over $11 million, with under 9,000 holding addresses.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1178" height="850" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=1024&amp;h=1024" alt="" class="wp-image-93165" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=1178 1178w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=356 356w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=362 362w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=304 304w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/Screenshot-2024-10-16-at-16.08.35.png?w=80 80w" sizes="(max-width: 1178px) 100vw, 1178px" /><figcaption class="wp-element-caption">There are other ways to value WLF but none make it bigger than GOAT right now</figcaption></figure>



The necessity for accredited investors would explain some of the difference if you believe that process was actually effective.&nbsp;



In any case, is it ironic that a grotesque <a href="https://blockworks.co/tag/meme-coins">memecoin</a> with such a loose value proposition is so far much bigger than World Liberty Financial? Absolutely, yes.



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



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Memecoin conceived by AI trumps Trump-linked token sale

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



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



<h2 class="wp-block-heading">Built different</h2>



Shawshank Redemption was a box office flop in 1994 — losing out to Forrest Gump as it swept six Academy Awards that year.



It was only after the dust had settled that audiences really gave Shawshank the credence it deserved.



Such stiff competition is common: films that in one year would’ve become instant classics can be temporarily forgotten in the moment.



Something similar is happening in crypto right now. The Trump-linked World Liberty Financial (WLFI) token sale is live and so far, underwhelming, overshadowed by an AI-propelled memecoin tied to the old-school vulgar internet meme, goatse.



(Please, if you’re unfamiliar with any of the goatse stuff, don’t Google it at work or with anyone around you, because it will absolutely get weird and NSFW.)



The World Liberty Financial platform is pitched as a DeFi lending and stablecoin protocol, which would allow users to earn a yield on their digital assets. As of earlier this morning, the WLF team had sold over $11.1 million worth of governance tokens as part of its presale, which opened on Tuesday.&nbsp;



That’s the equivalent of over 741 million tokens — less than 4% of the total 20 billion allocated to the general public, or 20% of the supply. WLF aims to raise $300 million in total.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXemnrnml16epsSzJRdSjTVo0OEC3K2UFEe37PVauKJuGlN9cVohWV8J_-KBcSUfmaVnnxeCXqIlVv09t6quaayTSnVmrnKsGYYWoGht7DizovVpx3ZvMpF4mabxvz6HNoi_OkmB-sswzcbt5-pdmJH7yxmY?key=iHjH0b2PP3rmyc5rDwlU8A" alt=""/><figcaption class="wp-element-caption">Purple shows WLF sales volume per 15 minutes, and the line at the stop shows how much of the public allocation has been sold</figcaption></figure>



WLF’s team <a href="https://www.coindesk.com/markets/2024/10/14/trump-backed-world-liberty-financial-whitelists-100k-accredited-investors-ahead-of-wlfi-launch/">reportedly</a> said it had whitelisted over 100,000 accredited investors in the US, with worldwide backers subject to local regulations before they were approved.&nbsp;



About 8,000 unique addresses have sent ETH, USDC or USDT as part of the presale, which would mean that an overwhelming majority of claimed whitelisted investors have not yet committed.&nbsp;



The tokens themselves are non-transferable, nixing the possibility that WLFI will end up on a DEX somewhere for proper price discovery. Each token is being sold for $0.015 apiece.



Meanwhile, Goatseus Maximus (GOAT) has exploded in popularity, turning the WLFI sale into a blip on the radar.



GOAT’s lore goes that an AI model was trained on the deepest recesses of the internet, producing an armchair philosopher so degenerate and esoteric that it would free other LLMs roaming the internet from their dev-imposed moral bounds.&nbsp;



That model quickly became an alpha bull on a pump.fun memecoin, GOAT, named after the infamous butthole-stretching internet legend from yesteryear.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcvSpeASBemt77VcU8rgQmXD0JLjSmc7cSMtd_nS-T7ILJ3M10F4_kYRkjFXIwYkiVq_-zRN9xizRcMKlNlFLK3T9ufLvTe0aqND82wGTZmsgDAv82vTm8Qw3Es1MsEd-7mpRe0qO4hwoU5Jv-YOgoKiBM?key=iHjH0b2PP3rmyc5rDwlU8A" alt=""/><figcaption class="wp-element-caption">The tweets that started it all</figcaption></figure>



Throw in a $50,000 tip from a16z co-founder Marc Andreessen (who <a href="https://x.com/pmarca/status/1846374466101944629">says</a> he has no exposure to $GOAT), and you get WLF’s Forrest Gump: a token launch so absurd that it trumps even Trump’s offering.



At risk of comparing apples to oranges, here goes: GOAT’s market cap is currently over $275 million after less than a week of trade. There are 17,700 holding addresses in total.



The total value of WLFI tokens sold as part of the public presale — which in one interpretation would eventually become its circulating supply and thus market cap — is a little over $11 million, with under 9,000 holding addresses.



Is it ironic that a grotesque memecoin with such a loose value proposition is so far that much bigger than World Liberty Financial?&nbsp;



Yes.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd_hZPunEaMPTCTpUhD9Z5f6whVCnRsuGL6Rwd3t4geT4QBv5A0buhWA_c0vo6Lm6vlHCAri-GDU2dBDH3IzK2tKwtQxE5Aew2ybLYuRObk-mIAksy-JwkkK7uewwiuBebqmcqCrM0X3HWI2UQcWIR-6AU?key=iHjH0b2PP3rmyc5rDwlU8A" alt=""/><figcaption class="wp-element-caption">There are other ways to value WLF but none make it bigger than GOAT right now</figcaption></figure>



The necessity for accredited investors would explain some of the difference if you believe that process was actually effective.&nbsp;



As for whether we income to realize the genius that is World Liberty Financial —- in the same way that we’ve come to appreciate Shawshank and Close Encounters — it’s still too early to tell.



— David Canellis



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



<ul class="wp-block-list">
<li>Over 70% of all WLF presale tokens sold to date were bought with ETH.</li>



<li>21% were purchased in USDT, and the rest in USDC.</li>



<li>GOAT is up 120% in the past day and its market cap is now 25% larger than the leading unofficial Trump memecoin, MAGA (TRUMP).</li>



<li>Polymarket <a href="https://polymarket.com/event/presidential-election-winner-2024?tid=1729081706556">bettors</a> say Trump has a 60% chance of winning next month, the best odds since July.</li>



<li>BTC has broken $68,200 and is now up over 9% in the past week.</li>
</ul>



<h1 class="wp-block-heading">Patience is key</h1>



Bitcoin’s above $67,000 and holding, helping to gently boost parts of the market.&nbsp;



And for Ledn’s John Glover, that’s a really good sign.&nbsp;



“We finally broke out of the channel that we&#8217;ve been trading within for the last almost three months with a break of $66,000 … that&#8217;s a two-day close above and technically that&#8217;s a very strong signal that we&#8217;re going to retest the highs of $73,000. But we should get even higher than that,” he said.



Overall, it’s looking very “positive,” even with the election acting as an unknown cloud over crypto’s head.&nbsp;



“It&#8217;s taken longer than I anticipated to break out of this channel, but it looks like we&#8217;re starting to see that momentum build a bit.”



However, Hyblock Capital CEO Shubh Varma is not quite as bullish.&nbsp;



Specifically, the retail side of things isn’t too hot: “While Bitcoin’s price is supported by key bullish factors, including well-defended dips and top traders taking long leverage, the broader market is rife with warning signals,” he said.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdPWkmaA3MK488pDSRQU2GnZjR5BU5hv54Pa-rsNFhRAmpaCR68RZjCJmt7pZYgTxVPoY4fZkvVhaK5C0EsfOLLcXqkEfztsK86VNcgTAUbXNQPj7Vj6W4aZHlaKMT9GbzDt9V0scqkIgu-jpZBsXXT2vad?key=iHjH0b2PP3rmyc5rDwlU8A" alt=""/><figcaption class="wp-element-caption">Source: Hyblock Capital</figcaption></figure>



Varma added: “The percentage of retail longs is now approaching low levels, with less than 40% of Binance BTC accounts in long positions. This metric oscillates between 0 and 100, but typically stays within a much tighter range, making this current low reading more significant.”&nbsp;



Basically, when long retail positions start to hit lower levels, the odds of a potential reversal increase. In the past, this means the low-to-high reversal shows that lots of retail are opening longs. A potentially bearish signal.&nbsp;



“Retail investors tend to be on the wrong side of the market, and their shift from shorts to longs frequently marks a local top. As they pile into long positions, the market tends to trap them by reversing downward, causing a price decline. If this trend follows its usual pattern, we could soon see a correction designed to catch retail traders off guard once again.”



On the other hand, Glover thinks that once we see a retake of around $73,000, then there could be a dip that follows, possibly lining up with Varma’s read.&nbsp;



As for why it took so long to escape the sideways action in bitcoin that we’ve seen the last few months, Glover’s theory is simple: Folks got impatient.&nbsp;



“My assumption is, if you look at the volumes data, you look at the options data, people were taking profits because of how many times we tried to make new highs, weren&#8217;t able to, and then every time we rallied, we made lower highs each time, that&#8217;s a signal that people are getting very impatient, and they&#8217;re trying, they&#8217;re starting to take profits. So I think the positioning was just not as long as it was previously, which left an opportunity for new buyers to run into, you know, or be able to impact the direction because previously, they were just running into sell orders, but I think a lot of those sellers have been taken out,” he said.&nbsp;



But even in the absence of sellers, it’s going to take some time to actually hit fresh all-time highs. Glover thinks new all-time highs will happen at the beginning of next year.&nbsp;



Here’s how he sees it playing out: $73,000 is retaken, then there’s a dip. After bitcoin recovers, it sets itself on a path to hit $95,000 to $100,000 early next year.&nbsp;



Simple, right? Now let’s see it in action.



— Katherine Ross



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



<ul class="wp-block-list">
<li>Wallets labeled as Tesla’s moved all $760 million of its bitcoin to <a href="https://www.coindesk.com/business/2024/10/15/is-elon-musk-selling-bitcoin-tesla-transfers-all-760m-of-its-btc-to-unknown-wallets/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">unknown wallets</a>. </li>



<li>Italy plans to raise the capital gains tax on bitcoin to 42%, up from 26%, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-10-16/italy-to-raise-capital-gains-tax-on-bitcoin-to-42-from-26-m2brojod?srnd=phx-crypto">reported</a>. </li>



<li>Canary Capital <a href="https://blockworks.co/news/canary-capital-litecoin-etf">filed</a> to bring a new crypto fund to market: a litecoin ETF.</li>



<li>Former president Donald Trump’s PAC has <a href="https://www.cnbc.com/2024/10/15/trump-pac-has-raised-about-7point5-million-in-crypto-donations.html">raised</a> roughly $7.5 million in crypto donations since this summer. </li>



<li>Sui denied <a href="https://decrypt.co/286271/sui-refutes-400-million-insider-selling-allegations-following-rapid-token-rise">allegations</a> that insiders offloaded $400 million worth of its token last month.</li>
</ul>



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



Q: Would crypto be better out of the limelight?



I think crypto’s gonna carry the scarlet letter for a while yet. And not all of that can be fully blamed on Sam Bankman-Fried and the collapse of FTX. I just think it’s fair to say that a lot of crypto is misunderstood, or at least, unhelpfully generalized.&nbsp;



And, by that, I mean everything outside of bitcoin. Yes, I think we can make an argument that even though ETH has also hit the main stage through its ETFs, both the network and the asset are not fully understood.&nbsp;



Quiet use cases that show how creative and disruptive (in the good way, not the collapse-and-lose-all-your-holdings way) are going to be some of the best methods to make that happen.&nbsp;



People can get scared of what they don’t know. So give them something they already understand, but make it better.



— Katherine Ross



“WikiLeaks has <a href="https://satoshi.nakamotoinstitute.org/quotes/general/">kicked</a> the hornet&#8217;s nest, and the swarm is headed towards us.”



It’s been <a href="https://www.coindesk.com/opinion/2024/06/14/mass-adoption-would-ruin-crypto-keep-it-a-niche/">said</a> that crypto would be better off if it stayed niche — that its essence would be diluted by mass adoption and all the regulation and centralization that would come with it. Onchain gentrification.



I’m increasingly convinced that it’s not one or the other. Memecoins are huge on the social layer, but so is Bitcoin and Ethereum.&nbsp;



It’s really a chicken-and-egg problem: Would more capital flow into crypto if US agencies weren’t so gung-ho about policing it? Probably.&nbsp;



But the hornet’s nest would inevitably be kicked by someone at some point.



— David Canellis



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