OX Coin

Jack Kubinec

Jeff Albus

Hiya!



Markets may be down slightly, but that’s not the main thing bumming me out today. Last night, I took a train all the way up to Queens just to see the Mets blow a 9th-inning lead. What even is a “Phillie?”



Anyways, let’s talk Solana.



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<h2 class="wp-block-heading">Pandora’s Box of L2s</h2>



Solana’s lack of layer-2s has long been a point of pride for some Solana supporters.&nbsp;



Rather than relying on a fragmented and expanding network of blockchains to scale à la Ethereum, why not just move to a blockchain fast and cheap enough to keep everyone in the same building?



But since fast things can always be faster, and cheap things cheaper, the layer-2 bug appears to be coming for Solana.&nbsp;



Zeta Markets announced a $5 million raise Tuesday, partially to build a DeFi layer-2 on Solana. Electric Capital led the round, which added to the $8.5 million Zeta Markets raised in a 2021 seed round led by Jump Capital.&nbsp;



Zeta Markets currently runs a regular derivatives DEX — the fifth-largest on Solana, <a href="https://defillama.com/protocols/Derivatives/Solana">according</a> to DefiLlama. By adding a layer-2 to the mix, it wants to make its DEX as fast as a CEX.



Zeta Markets founder Tristan Frizza told me that he’s always been a “monolithic chain maxi,” but when you’re letting traders take big leverage on derivatives, market makers want to see some really low latency.



“Solana does what, 400 millisecond block times? But these guys are used to like 10 milliseconds on Binance,” Frizza said.



Off-chain centralized exchanges can basically figure out the price of assets faster than decentralized exchanges, which are slowed down by the underlying blockchain’s throughput. In some cases, savvy arbitrageurs can exploit the momentary differences in price — <a href="https://blockworks.co/news/bell-curve-lvr-defi-liquidity-providers-unfair">to the detriment</a> of DEX liquidity providers.&nbsp;



So, there are justifiable reasons beyond snake oil sales for why Solana would want to build layer-2s. Still, it bears notice that Solana co-founder Anatoly Yakovenko — who invested in this Zeta Markets round — <a href="https://blockworks.co/news/lightspeed-yakovenko-layer-2-scaling">appeared on Lightspeed</a> in August asserting that having too many layer-2s can create massive composability and user experience problems. Other notable Solana ecosystem angel investors also took part in Zeta’s round.



Perhaps this signals that Solana’s thought leaders are softening toward rollups.&nbsp;



Zeta’s layer-2 is set to launch in the first quarter 2025, The Block <a href="https://www.theblock.co/post/294284/solana-dex-zeta-markets-token-funding-round">reported</a>. By then, I wouldn’t be surprised to see other Solana projects following suit.



— Jack Kubinec



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<h2 class="wp-block-heading">Zero In</h2>



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="963" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png" alt="" class="wp-image-85890" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=434 434w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=364 364w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-3.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /></figure>



Solana&#8217;s fee generation looks to be rapidly closing the gap with Uniswap. Over the past year, Uniswap&#8217;s fees stand at $751.193 million, while Solana&#8217;s reach $185.173 million; that&#8217;s about $14.446 million and $3.562 million per week, respectively.&nbsp;



However, Solana&#8217;s fees have risen sharply over the past week to $10.078 million, nearly matching Uniswap&#8217;s $12.260 million. Interest in the Solana network continues to increase, thanks at least in part to Solana&#8217;s high network uptime, low transaction fees, and ever-increasing user adoption in the DeFi and NFT segments.&nbsp;



If this trend continues, Solana could soon surpass Uniswap in fee generation. This rise suggests growing network usage and transaction volume, which — while positive for Solana&#8217;s ecosystem — could also mean higher costs for users​.



— Jeffrey Albus



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



If you&#8217;ve ever spent time exploring Solanaland, you&#8217;ve probably come across the term OPOS — Only Possible on Solana. And while this may sound exaggerated to the uninitiated, it is true that certain innovations are indeed only achievable within the Solana ecosystem. Well, for the most part&#8230; kind of&#8230; at least for now.



The idea isn&#8217;t so much that other blockchains can&#8217;t do what Solana is capable of, full stop. It&#8217;s more that there are a lot of things that other chains just can&#8217;t do quite so well.&nbsp;



For instance, Solana&#8217;s state compression technology drastically reduces the cost of storing data on-chain. That makes large-scale transactions far more feasible, and is why projects like Drip Haus are able to affordably distribute millions of NFTs to users across the ecosystem. Other blockchains, which famously struggle with scalability and high fees, would have a tough time developing similar projects.



Projects like Hivemapper and Helium also benefit from Solana&#8217;s high throughput and low costs in support of their decentralized mapping and community-powered 5G services. This is yet another area where transaction speeds and costs hinder the practical implementation of such large-scale decentralized applications for most other chains.



But while Solana holds the advantage in these areas for now, there is little reason to believe it will stay that way forever. Competing networks are assuredly taking notes on what is and isn&#8217;t working across Web3, and may soon develop similar or even superior capabilities. So the question is: Will Solana be able to keep up with these challenges over the long term? Anything is possible.



— Jeffrey Albus



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<h2 class="wp-block-heading">One Good DM</h2>



An excerpt of our chat with Sam Lehman, principal at Symbolic Capital:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="550" height="628" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png" alt="" class="wp-image-85886" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=550 550w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=263 263w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=225 225w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=229 229w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=192 192w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/Screenshot-2024-05-14-at-11.48.57-AM.png?w=70 70w" sizes="(max-width: 550px) 100vw, 550px" /></figure>



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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>.

Lightspeed Newsletter: Solana caught the layer-2 bug

Macauley Peterson

On-chain social network infrastructure Lens is getting a new home.



The new Lens Network will build upon the work of the original Lens Protocol as one of zkSync’s ZK Stack hyperchains.



Lens Lab develops the protocol under the umbrella of Avara, which also built DeFi giant Aave.



But <a href="https://blockworks.co/news/aave-companies-rebrands-avara">Avara CEO Stani Kulechov</a> told Blockworks that the non-financial use cases of crypto — citing identity and online social interactions — have the potential to be even bigger.



“The way I think about finance and social [spaces] is that there are a lot of people who have financial capital, but everyone on the planet has social capital — the content we create, the relationships we create and the identities we interact with,” Kulechov said.



Read more: <a href="https://blockworks.co/news/web2-social-media-kinda-sucks">Web2 social media kinda sucks. So why aren’t people using Web3 platforms?</a>



The ZK Stack chain will serve as a “central hub” for Lens, which, according to a blog <a href="https://app.t2.world/article/clw6l2z0018727620mc1dq26xr2">post</a> released Tuesday, will “seamlessly integrate with other EVM and non-EVM blockchains.”



A testnet release of the new network is still months away. The current version of <a href="https://blockworks.co/tag/lens-protocol">Lens</a> has been operational on Polygon’s PoS chain since May 2022.



The modular, open-source ZK Stack framework, <a href="https://blockworks.co/news/zksyncs-evm-era-opens-to-the-public">based on the zkSync Era code</a>, will provide Lens with horizontal scaling, connecting as many Lens chains as needed by zk bridges, according to Matter Labs CEO Alex Gluchowski.



“You can add one billion users and you will not lose any of the properties of verifiability,” Gluchowski told Blockworks. “Every single transaction of those millions and billions of users will be verified by every single Ethereum validator — which is the magic of zk,” he said.



Lens pioneered on-chain social infrastructure, but was initially conceived and developed at a time when <a href="https://blockworks.co/tag/zero-knowledge-rollup">zk rollup</a> technology was still seen as years away from production at scale.



Read more: <a href="https://blockworks.co/news/zksync-launches-op-stack-rival">ZkSync launches rival to Optimism’s OP Stack</a>



“We want to build something that enables open and fair social spaces that anyone can participate on a network level, and because of the ownership aspect that also means you can own your social capital,” Kulechov explained.



That’s not possible with today’s social networks. User-created content is owned by the platforms, giving users limited ways to monetize without locking them in or relying on advertisers.



“We see Lens as the forebearer of Ethereum values when it comes to social,” Gluchowski said. “Lens is the only network that is actually making users the owners of their identities and their content. Everything is happening on-chain.”



Read more: <a href="https://blockworks.co/news/empire-newsletter-crypto-users">Empire Newsletter: Here’s where all the crypto users really are</a>



That’s in contrast to <a href="https://blockworks.co/tag/farcaster">Farcaster</a>, where posts and interactions are primarily off-chain, as are user profiles, although they are linked to an on-chain Ethereum address.



Mainstream <a href="https://blockworks.co/tag/web2">Web2</a> social options like Facebook are <a href="https://blockworks.co/news/web3-web2-interoperability-mistakes">centralized and silo user-generated content</a>.



“Our mission is to change the relationship to be more fair [and] give more ownership and power to the users. Hopefully that user choice creates more open social spaces where users can choose algorithms and experiences as well, and there’s more competition on the application level,” Kulechov said.



The parties did not disclose any financial terms related to the move, or a strategy to incentivize users to migrate to the new version.



“We haven’t had any thoughts on migration incentives,” Kulechov said, adding: “I think people will organically migrate from the existing structure into the Lens Net fork down the line.”



But Kulechov noted that the phased approach to the rollout would include inviting users to migrate during a testnet phase and then be upgraded into the mainnet when ready.



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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>.

Lens Network to migrate to zkSync

Gísli Kristjánsson

A <a href="https://www.bloomberg.com/news/articles/2024-05-05/more-than-90-of-stablecoin-transactions-aren-t-real-study-finds">Bloomberg headline</a> recently claimed that &#8220;more than 90% of stablecoin transactions aren’t from real users,” sparking concern about the authenticity of transactions within the blockchain ecosystem.&nbsp;



This isn’t the first time that the digital assets industry has faced scrutiny about an apparent lack of authenticity in transactions. Last year, the SEC <a href="https://www.wsj.com/articles/some-binance-us-crypto-trading-was-a-mirage-the-sec-alleges-55a6e321?st=ruat3lr6wfei3rn&amp;reflink=desktopwebshare_permalink">accused</a> Binance.US of inflating trading volumes. Way back in 2019, a <a href="https://www.cnbc.com/2019/03/22/majority-of-bitcoin-trading-is-a-hoax-new-study-finds.html">study</a> by Bitwise found that 95% of spot bitcoin trading volume by unregulated exchanges was faked. Both findings have their detractors.



This isn’t the first moral panic around crypto’s legitimacy, and it won’t be the last.



However, a deeper dive into this “more than 90%” figure reveals a more nuanced narrative. A narrative, in fact, that oversells the fraudulent nature of crypto and severely undersells the transformative nature of blockchain technology.



The cited source for this headline, a collaboration between Allium and VISA, introduces a <a href="https://www.allium.so/post/visa-x-allium---making-sense-of-stablecoins">dashboard</a> that attempts to differentiate between &#8220;organic&#8221; stablecoin transactions initiated by end consumers and businesses versus transactions orchestrated by computer programs.&nbsp;



This differentiation, while well-intentioned, fails to grasp the unique execution model of blockchain technology.



Blockchain technology operates on a fundamentally different paradigm compared to traditional payment rails. At its core, blockchains are decentralized, immutable ledgers maintained by a network of nodes. Transactions on blockchains are executed through smart contracts, which are self-executing agreements with contract terms directly written into code.



Unlike centralized payment systems where transactions are initiated and validated by trusted intermediaries, blockchain transactions are triggered by external actions interacting with smart contracts. These actions can be programmatically executed by automated processes — commonly referred to as bots — without the need to extend any trust to the bots.



Read more from our opinion section: <a href="https://blockworks.co/news/cryptographer-expertise-web3">You’re still rolling your own crypto. You need to stop.</a>



Bots play a crucial role in facilitating efficient and secure transactions on blockchains. They serve various functions, from optimizing transaction fees to executing complex financial operations on behalf of users. They are not the equivalent of social media “bots” like those that now plague Elon Musk’s X.



With that in mind, let&#8217;s explore some practical examples of bot-initiated stablecoin transactions:



1. Gas payment services: With blockchain networks like Ethereum, users must pay gas fees to execute transactions. Paymasters are services that cover these gas fees on behalf of users, ensuring seamless transaction execution without requiring the user to own the underlying transactional token.



2. Recurring payments: Smart contracts can be programmed to execute recurring payments based on predefined conditions set by users. While authorized by users, the execution of these payments is automated through smart contract logic initiated by bots.



3. Coupon payments for tokenized bonds: In DeFi, tokenized bonds can automate coupon payments to bondholders through smart contracts, ensuring timely and transparent distribution of interest payments. Smart contracts are unable to initiate future coupon payments, so bots must be the initiators of the payments. Importantly, the bots are trustless in the sense that they never have custody of the funds being paid.



4. Intent-based trading: Users can express their trading intentions, e.g., swapping a token for a stablecoin, by providing a digital signature to a bot through user interfaces. Bots then leverage DEXs to identify the best trade routes and execute transactions on behalf of users, optimizing for efficiency and cost-effectiveness. The blockchain ensures that the bots are unable to do anything other than what was expressed by the user.



5. Rollups and layer-2 solutions: Scaling solutions like rollups enable off-chain transaction aggregation while settling final balances on the main blockchain. Bots can initiate transactions on these layer-2 solutions, streamlining transaction throughput and reducing costs.



<h2 class="wp-block-heading">No cause for alarm</h2>



The dominance of bot-initiated transactions in stablecoin flows is not a cause for alarm, but a testament to the disruptive capabilities of blockchains. It is a feature, not a bug.&nbsp;



Automation empowers developers to create sophisticated financial applications. For instance, imagine a future where flash loans are used for daily mortgage refinancing, facilitated entirely through automated smart contract execution initiated by bots. This level of automation reduces operational overhead and introduces unprecedented accessibility to financial services.



The dominance of bot-initiated stablecoin transactions is a sign of the maturation of blockchains into a robust infrastructure for automated financial interactions. Rather than viewing bots as a detractor of &#8220;real&#8221; transactions, we should celebrate their role in enhancing user experience and unlocking new use cases. Embracing automation on blockchains enhances efficiency and fosters innovation across diverse industries.&nbsp;



As we navigate the evolving landscape of blockchain-based payments, it&#8217;s essential to revisit our understanding of what constitutes a &#8220;real&#8221; transaction.



In traditional finance, payments are often equated with direct human interaction. However, blockchain&#8217;s execution model introduces a paradigm shift where transactions are initiated and executed through autonomous code.&nbsp;



That isn’t to say that fraudulent transactions don’t exist, or that trading volumes aren’t ever inflated — but a casual read-across from traditional finance to DeFi is rarely so easy.



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<div class="wp-block-post-author-biography">Gísli Kristjánsson is co-founder and CTO of Monerium, the first company to issue fiat onchain. He fell in love with programming at the age of 13. After working as a bonds broker, Gísli saw the inefficiencies of securities settlements firsthand and recognized the potential of Bitcoin. Prior to co-founding Monerium in 2015, Gísli founded and sold a platform to give users access to geo-blocked content. Fun fact: Gísli’s Ethereum address is among the 1% of the oldest addresses.</div>


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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>.

Stablecoins bots are a feature, not a bug

Ben Strack

The upcoming US presidential election may spur bitcoin out of its current “consolidation phase,” according to Galaxy CEO Mike Novogratz.



Crypto will likely stay politicized until more Democrats pivot their anti-segment stance, he argued, meaning a change in administration could be significant for the space.



Novogratz said during a Tuesday earnings call that, following the approval of spot bitcoin ETFs and last month’s block reward halving, he believes bitcoin could keep trading between $55,000 and $75,000 in the near-term.&nbsp;



The price of bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) was at about $61,450 at 12:30 pm ET Tuesday.



“I think that’s probably where we are — certainly for this quarter and maybe next quarter — until either the Fed starts cutting rates because the economy finally slows or we get through the election.”



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



The 2024 presidential election is likely to bring clarity to the crypto regulatory landscape as the segment has increasingly been politicized. Joe Biden and Donald Trump are set to face-off in a rematch as they did four years ago.



Just last week, the Biden administration said in a statement that <a href="https://blockworks.co/news/biden-backing-gary-gensler-resolution">the president would veto a resolution</a> invalidating Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) 121 if it reached his desk. The bulletin, introduced in 2022, says crypto custodians <a href="https://blockworks.co/news/sec-staff-call-for-crypto-entities-to-show-liability-on-balance-sheet">should report a liability and “corresponding assets”</a> on their balance sheets for all custodied cryptocurrencies.&nbsp;



“It just read to the crypto community as the Democrats saying no to crypto,” <a href="https://blockworks.co/tag/mike-novogratz">Novogratz</a> said of the Biden administration&#8217;s comments. “And it’s unfair; there are a ton of Democrats that are pro-crypto…but the power has been held by Elizabeth Warren on the Senate banking committee, [Gary] Gensler and a few others.”



The Galaxy CEO likened Democrats’ crypto opposition to party members bad-mouthing dogs.



“Can you imagine a party coming out and saying we don’t like dogs?” Novogratz said. “It’s just terrible politics, but that’s where we’re at.”&nbsp;



Forbes pegs the number of US dog owners at 65 million. There could be as many as 93 million crypto owners in America, according to recent <a href="https://www.security.org/digital-security/cryptocurrency-annual-consumer-report/">estimates</a> by Security.org.&nbsp;&nbsp;



Pair Biden’s veto possibility with Trump signaling he would be a pro-crypto president, and the differing attitudes become more highlighted. Trump invited Ryan Selkis, founder of crypto data platform Messari, to speak during an event last week at Mar-a-Lago.&nbsp;&nbsp;



“There was a shift in the Twitter space; there was a shift in people I spoke to saying, ‘Wow, Republicans good, Democrats bad,’” Novogratz said.



“I think that’s kind of dangerous thinking in that broadly, for our industry to thrive, you’re going to need bipartisan support,” he added. “Because you can’t go from one regime to the next and not know where you stand.”



Read more from our opinion section: <a href="https://blockworks.co/news/only-a-fool-would-vote-on-crypto-alone">Only a fool would vote on crypto alone</a>



After the House of Representatives approved the resolution to reverse SAB 121 in a 228-182 vote, it now moves onto the Senate. Along with across-the-board support from House Republicans, 21 Democrats backed it.&nbsp;&nbsp;



Novogratz said a prospective Senate vote would be the “first litmus test” on whether some Democrats would look to pivot their stance on crypto.&nbsp;&nbsp;&nbsp;



Though the House has passed several bills out of committee, like the<a href="https://blockworks.co/news/stablecoin-bill-bipartisan-support"> Clarity for Payment Stablecoins Act</a>, it has not held floor votes on them.&nbsp;



Sens. Cynthia Lummis,&nbsp; R-Wyom., and Kristen Gillibrand, D-N.Y., brought a <a href="https://www.congress.gov/bill/118th-congress/senate-bill/2281/all-actions">new</a> version of their Responsible Financial Innovation Act to the Senate floor last summer, but the bill has not progressed.



Read more: <a href="https://blockworks.co/news/crypto-bills-in-house-and-senate">Crypto bill update: What legislation is making its way forward?&nbsp;</a>



“We’re in an election year, and you’re having a hard time getting Dems and Republicans to do much together,” Novogratz said. “While, for us, this is unbelievably important…broadly it just doesn’t rise to the level of [being] important enough for the mass of Congress to care enough about.”&nbsp;



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Bitcoin may stay in a ‘consolidation phase’ until US election: Novogratz

Casey Wagner

As the 2024 election looms, crypto-focused legislation is starting to make its way through the US House. But roadblocks in the Senate still loom.&nbsp;



House members last week approved joint resolution 109 — which would invalidate the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) 121 — in a 228-182 vote. It’s the first time a crypto bill has made it to and passed the House in a floor vote.&nbsp;



The resolution now moves on to the Senate, where the Democrat majority makes it unlikely to pass, although there were 21 Democrats who voted against their party and in favor of the resolution in the House. If the legislation does make it past the Senate, however, the Biden administration has said the president will veto the resolution.&nbsp;



Read more: <a href="https://blockworks.co/news/biden-backing-gary-gensler-resolution">Biden backs Gensler as House advances resolution to power-check SEC&nbsp;</a>



​​“Limiting the <a href="https://blockworks.co/tag/sec">SEC</a>’s ability to maintain a comprehensive and effective financial regulatory framework for crypto assets would introduce substantial financial instability and market uncertainty,” the White House wrote in a <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">statement</a> last week.&nbsp;



The House has passed several crypto bills out of Committee, but has failed to bring the vast majority of them to the floor for a full vote. The <a href="https://blockworks.co/news/republicans-landmark-crypto-bill-clears-2-house-committees">Blockchain Regulatory Certainty Act</a>, the <a href="https://blockworks.co/news/stablecoin-bill-bipartisan-support">Clarity for Payment Stablecoins Act</a>, the Keep Your Coins <a href="https://www.congress.gov/bill/118th-congress/house-bill/4841/text">Act</a> and the Financial Technology Protection <a href="https://www.congress.gov/bill/118th-congress/house-bill/2969/text">Act</a> all survived markup, but have not been scheduled for a full vote.&nbsp;



The Financial Innovation and Technology for the 21st Century Act, known as the FIT act, last week advanced to the House Committee on Rules. It should be <a href="https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=409251">heading</a> for a floor vote later this month, House Financial Services Committee Chairman Patrick McHenry, R-N.C., said.&nbsp;&nbsp;



In the <a href="https://blockworks.co/tag/senate">Senate</a>, crypto-related bills, even those with bipartisan support, have yet to grab the interest of committee heads, who would need to add markups to their respective agendas.&nbsp;



The Digital Asset Anti-Money Laundering Act, backed by Elizabeth Warren, D-Mass., Roger Marshall, R-Kan., Joe Manchin, D-W.V., and Lindsey Graham, R-S.C., has been the topic of several Senate Banking Committee hearings, but has not been voted on or marked up.&nbsp;



“At the end of the day, <a href="https://blockworks.co/tag/elizabeth-warren">Elizabeth Warren</a> has a lot of power right now in the Biden administration, she&#8217;s got a lot of influence over who the appointees are,” Blockchain Association CEO Kristin Smith said last month at a Brown Rudnick event in New York. “But she hasn&#8217;t always been influential in actually getting legislation passed.”&nbsp;



Longtime collaborators Sens. Cynthia Lummis,&nbsp; R-Wyom., and Kristen Gillibrand, D-N.Y., last summer brought a <a href="https://www.congress.gov/bill/118th-congress/senate-bill/2281/all-actions">revamped</a> version of their Responsible Financial Innovation Act to the Senate floor, but the bill has not progressed.&nbsp;



The Senate received joint resolution 109 last week but has not yet scheduled a date to vote. Both the Senate and House are scheduled to recess on May 24 until June 3.



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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>.

Crypto bill update: What legislation is making its way forward? 

<a href="https://trondao.org/">TRON DAO</a> today announced that Google Cloud has joined its roster of Super Representative candidates on the TRON blockchain. <a href="https://tronscan.org/#/sr/representatives">Super Representatives</a> are responsible for producing blocks and packing transactions to help ensure blockchain governance on the TRON network.&nbsp;



This initiative builds on TRON’s collaboration with Google Cloud to make its data <a href="https://console.cloud.google.com/marketplace/product/bigquery-public-data/blockchain-analytics-tron-mainnet-us?hl=en-GB">available</a> on BigQuery, Google Cloud’s fully-managed, serverless data warehouse. Having TRON data on BigQuery equips developers with advanced analytics to dissect blockchain transactions and smart contract intricacies on the TRON network. 



It not only streamlines in-depth analysis for data-driven decision-making but also paves the way for more sophisticated decentralized applications (dapps). The scalability and cost-efficiency of BigQuery bolsters the TRON ecosystem, aligning with its vision of an accessible decentralized internet. 



TRON will also be using Google Cloud’s suite of solutions that empower the Web3 space including Compute Engine for scalable computing resources and Kubernetes Engine for managing containerized applications.



Dave Uhriyniak, Ecosystem Lead at the TRON DAO, expressed enthusiasm about this collaboration: &#8220;The initiative with Google Cloud represents a significant&nbsp; step for TRON DAO in our journey towards decentralizing the web and making blockchain technology more mainstream. Google Cloud&#8217;s becoming a Super Representative candidate underscores our shared vision for a secure, innovative, and decentralized future.&#8221;



“At Google Cloud, we’re committed to making it easy for developers to build Web3 products on our efficient, secure, and reliable infrastructure. We look forward to providing this infrastructure for the TRON ecosystem,” said Rishi Ramchandani, Head of APAC Web3, Google Cloud.



With its high-performance blockchain that supports smart contracts, dApps, and a wide array of digital assets, TRON facilitates fast, low-cost transactions, making it an attractive platform for developers and users alike.



This content is sponsored by TRON and does not serve as an endorsement by Blockworks. The veracity of this content has not been verified and should not serve as financial advice. We encourage readers to conduct their own research before making financial decisions.  



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TRON DAO adds Google Cloud as a Super Representative candidate on the TRON blockchain

Katherine Ross

Degen chain, a layer-3 blockchain, hasn’t produced a block in over 42 hours. 



According to the last post on Degen’s X account, a resync was expected to be completed at around 9 am ET, or 6 am PT. Yet hours later, the network remains stalled.&nbsp;



“Post-resync, they&#8217;ll test the chain to ensure all data affected by the reorganization is restored. We apologize for the downtime,” the last post — which went up earlier Tuesday — <a href="https://twitter.com/degentokenbase/status/1790267562137153780">said</a>.



Degen’s chain explorer <a href="https://explorer.degen.tips/">shows</a> that no transactions have happened today, and that the last transaction took place two days ago.



Third-party infrastructure provider Conduit’s last post is nearly 24 hours old.&nbsp;



Read more: <a href="https://blockworks.co/news/community-focused-layer-3-degen-chain">What is Degen chain? The L3 built for the memecoin community Degen</a>



“After a custom config change on Friday at [2 pm ET] 11 am PT, two Conduit chains, Degen and Proof of Play’s Apex, stopped posting batches for more than 24 hours. Upon resuming, the first batches triggered reorgs on both chains,” Conduit <a href="https://twitter.com/conduitxyz/status/1790065376975552549">said</a>.



“We’re working with both teams and Offchain Labs to restore service and minimize impact to users,” the post continued.



As previously reported by Blockworks, Degen chain was designed to let developers access the <a href="https://blockworks.co/tag/meme-coins">memecoin</a> community, and has become especially popular with <a href="https://blockworks.co/tag/farcaster">Farcaster</a> users.



“Degen, an ERC-20 token launched in January 2024, has reshaped the Farcaster ecosystem by enabling Casters to reward others with Degen for posting quality content,” Degen’s site <a href="https://www.degen.tips/">said</a>.



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L3 Degen chain stopped producing blocks 42 hours ago

The state of Wisconsin’s investment board disclosed holdings in BlackRock’s bitcoin ETF on Tuesday.&nbsp;



The 13F filing with the Securities and Exchange Commission shows that the board bought $99 million, or roughly 2.4 million shares, of IBIT. The <a href="https://www.sec.gov/Archives/edgar/data/854157/000106299324010116/xslForm13F_X02/form13fInfoTable.xml">filing</a> also revealed that the board holds roughly one million shares of Grayscale’s bitcoin ETF. 



According to its website, the agency is an investment organization that manages the Wisconsin Retirement System and the State Investment Funds alongside some smaller funds.



“SWIB has been successful in generating respectable returns and maintaining the trust of the beneficiaries and stakeholders of the funds we oversee,” the site said.&nbsp;



SWIB declined to comment on the holdings in the disclosure. 



Investment managers are required to disclose their holdings in 13F forms if they manage $100 million or more. The filings show what firms bought and held through the last quarter.&nbsp;



Read more: <a href="https://blockworks.co/news/13f-filings-institutional-appetite-bitcoin-etfs">What 13F filings tell us about institutional appetite for bitcoin ETFs</a>



Blockworks previously reported that BNY Mellon as well as BNP Paribas disclosed holdings, though both banks owned far less shares in comparison to Wisconsin’s disclosure on Tuesday.&nbsp;



Paribas disclosed roughly 1,000 shares, and BNY Mellon had 20,000 shares of IBIT and 7,000 shares of Grayscale.&nbsp;



Other investment managers have disclosed much larger holdings. Quattro Advisors, a Pittsburgh-based registered investment manager, disclosed 468,000 shares of IBIT, for example.&nbsp;



On Monday, Wolverine Asset Management <a href="https://twitter.com/MacroScope17/status/1790070606748131651">reported</a> that it owned 874,000 shares of Fidelity’s bitcoin ETF. So far, that’s the largest Fidelity position that’s been disclosed.&nbsp;



Investment managers have until mid-May to file their 13Fs. 



Updated May 14, 2024 at 3:05 pm ET: Noted that SWIB declined to comment, updated number of Grayscale shares.



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State of Wisconsin’s investment board discloses nearly $100M of BlackRock’s bitcoin ETF

A Dutch court found Tornado Cash developer Alexey Pertsev guilty on Tuesday, sentencing him to 64 months in prison.&nbsp;



Pertsev was accused of laundering $1.2 billion of crypto through Tornado Cash, per an <a href="https://www.coindesk.com/policy/2024/03/20/tornado-cash-dev-pertsevs-12b-money-laundering-allegations-detailed-ahead-of-dutch-trial/?_gl=1*wxsxj6*_up*MQ..*_ga*MTI0NjQxOTk0LjE3MTU2OTEzNjA.*_ga_VM3STRYVN8*MTcxNTY5NDA5OC4yLjEuMTcxNTY5NDEwMi4wLjAuMTg1MjMzMTU4MA..">indictment</a> earlier this year. He stood trial back in March.&nbsp;



“The court concludes that the suspect consciously accepted the significant chance that the charged Ether resulting from a crime was deposited in [crypto system], as a result of which he was guilty of laundering it,” a translated version of the <a href="https://www.coindesk.com/policy/2024/03/20/tornado-cash-dev-pertsevs-12b-money-laundering-allegations-detailed-ahead-of-dutch-trial/?_gl=1*wxsxj6*_up*MQ..*_ga*MTI0NjQxOTk0LjE3MTU2OTEzNjA.*_ga_VM3STRYVN8*MTcxNTY5NDA5OC4yLjEuMTcxNTY5NDEwMi4wLjAuMTg1MjMzMTU4MA..">ruling</a> said.&nbsp;



“In view of all this, the court was of the opinion that it was foreseeable from the start that Ether resulting from crime would be deposited in [crypto system] due to the concealing effect of [crypto system]. This has actually happened frequently and to a large extent. Concealment has de facto always been a core activity of [crypto system],” the ruling continued.



Read more: <a href="https://blockworks.co/news/empire-newsletter-doj-wallet-developers">The DOJ’s about-face on money transmitters</a>



Pertsev’s conviction comes as the US also looks to crack down on <a href="https://blockworks.co/tag/tornado-cash">Tornado Cash</a>. Government officials sanctioned Tornado Cash in 2022, and last year, the <a href="https://blockworks.co/news/roman-semenov-tornado-cash-ofac-list">US publicly targeted two co-founders</a> of Tornado Cash — Roman Storm and Roman Semenov — and charged them with money laundering and sanctions violations. Storm was arrested, though Semenov remains at large.&nbsp;



Semenov’s known email addresses and Ethereum wallet addresses were <a href="https://blockworks.co/news/us-treasury-bans-citizens-from-using-mixing-service-tornado-cash">added to OFAC’s list </a>last August.



Read more from our opinion section: <a href="https://blockworks.co/news/tornado-cash-privacy-prevention">Tornado Cash got wrecked, and we could have prevented it</a>



Storm is expected to face a trial in the US later this year. CoinCenter’s head of research Peter Van Valkenburgh said that the outcome shouldn’t impact Storm’s trial later this year.&nbsp;



<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">My preliminary thoughts on the Pertsev verdict in this thread. I&#39;m sad for Alexey and angry that the money laundering laws in the Netherlands have such a low threshold for intent, essentially mere negligence. Nothing in this ruling should prejudice or carry weight in Roman… <a href="https://t.co/t8ilOSeeCZ">https://t.co/t8ilOSeeCZ</a>&mdash; Peter Van Valkenburgh (@valkenburgh) <a href="https://twitter.com/valkenburgh/status/1790379572686442713?ref_src=twsrc%5Etfw">May 14, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“Some of this would be highly questionable under US constitutional law. Unlike in the SDNY case that focuses primarily on ongoing activities of the defendants, the Dutch ruling seems to come straight out and say that you can be criminally responsible merely for inventing a crypto system,” Van Valkenburgh <a href="https://twitter.com/valkenburgh/status/1790368771531538798">said</a> in a post on X.&nbsp;



Van Valkenburgh penned a note earlier this month on how the Department of Justice had turned its nose to previous guidance from the Treasury Department’s FinCEN on money transmitters, according to legal documents filed in the case against the Tornado Cash developers and also its <a href="https://blockworks.co/news/empire-newsletter-doj-targets-crypto-mixers">case against Samourai Wallet</a>.&nbsp;



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Alexey Pertsev found guilty of money laundering, faces 64 months in prison

David Canellis

Michael McSweeney

<h2 class="wp-block-heading">Memecoins show the way</h2>



What are brand-new projects to do in such a topsy-turvy market, one that’s either <a href="https://cointelegraph.com/news/altseason-is-coming-or-at-least-data-suggests-that-its-close">teetering</a> on the brink of altcoin season or about to veer off into another crypto <a href="https://www.coindesk.com/consensus-magazine/2024/03/28/is-this-the-end-of-bitcoins-4-year-bullbear-market-cycle/">winter</a>?



It’s been about seven months since a fake news tweet from Cointelegraph pushed crypto into overdrive. The market is clearly still confused.



The salacious tweet — which reported that the SEC had approved spot bitcoin ETFs for US markets — confirmed a major bitcoin rally that had been brewing all through 2023.



Bitcoin surged by two-thirds in the months between the post and <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">official SEC approval</a> in early January, and then by another 80% after the fact.



Crypto has since been outright messy. Memecoin, DePIN and computing marketplace projects have pumped, privacy coins have dumped, and ETH is <a href="https://blockworks.co/news/ether-etf-approval-unlikely-soon">stuck in no-man’s land</a> awaiting approval of its own spot ETFs a la BlackRock’s IBIT.



As Jason touches on in today’s <a href="https://open.spotify.com/episode/2ed8B3wRHkHndO6AKVIIJp">Empire podcast</a> episode, creative ways of issuing new tokens have emerged between this cycle and the last.&nbsp;



Startups and protocol stewards commonly run private token sales in funding rounds with venture capitalists — which apparently don’t piss off the SEC — before airdropping slices of the circulating supply to users and other early adopters (read: those pesky airdrop farmers).



No ICO means no SEC lawsuits, the thinking goes, while the supply ends up with folks who actively use the protocols they power. Seems like a win-win.



A byproduct of this New Style of doing crypto business is that token supplies are often drip-dropped into the market over a number of years. It’s now relatively routine for tokens to launch with less than 25% of the supply circulating — and in some cases much less.&nbsp;



The rest is kept by the team, early backers and other insiders to fund development, marketing and, eventually, provide ROI. What results is a number of low-float tokens with massively high fully-diluted valuations compared to their actual market caps, a blueprint largely perfected by Sam Bankman-Fried and Alameda Research with Serum and other “<a href="https://blockworks.co/news/sbf-altcoins-market-rally">Sam Coins</a>.”



It all begs the question of whether there’s any correlation between price performance and low-float supply dynamics.&nbsp;



There are individual cases: dYdX, for instance, had only 18% of the supply circulating when Cointelegraph’s fake news tweet confirmed the bitcoin bull market and has since released an additional 34% of the supply. dYdX’s price against bitcoin has collapsed by more than half in that time.&nbsp;



The airdropped Starknet token is another — it only has 7.3% circulating supply and its bitcoin ratio has also halved.



But after analyzing the current top 100 cryptocurrencies by market cap, as well as another two dozen or so tokens featured in the top 100 just before the bitcoin bull run really kicked off, broader correlation is harder to find.



Tokens at the top of the chart have high floats. Tokens to the right of the dotted line have beaten bitcoin. Brighter circles have increased their supplies more than darker ones. And larger circles have grown bigger market caps.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/nRc4hUAPOGTq59RH0UB8NOFr58wCM8QcpPFOICA4hRdI9wKz7n_Xi2DWaVLqG0zyFO3RiM36fGvtQqHPdTkGaSewMJKVCdt3V1YZ4QXyZrHX3BjKCR_YfLDSiRtc0qGAL-bAWTJdu6L5x2PATQVfznA" alt=""/><figcaption class="wp-element-caption">The cluster in the top left shows even the highest-float tokens have found it hard to beat bitcoin</figcaption></figure>



After removing a few outliers, about 40% of the top end of the market have outperformed bitcoin since October. At that time, the median circulating supply for tokens that have gone onto beat bitcoin was 70%. For underperformers, it was 79%. Not exactly a huge difference. Low float cryptocurrencies generally did as well as high floats.



Then, the median performance against bitcoin for tokens with circulating supplies of 80% or more was minus 21%. So, high-float tokens appear just as susceptible to losing significant ground as low-floats.



Even projects with some of the lowest floats — 19 tokens with under 25% of the supply circulating — on average have beaten BTC by 25%, while the median was almost 1% ahead.



But for standout performers, there does appear to be a link. Bitcoin ratios of nearly a dozen top cryptocurrencies have more than tripled since October. Their median circulating supply was 94% before the rally.



All those stars were memecoins and DePIN projects, which aside from Bittensor, all had a large majority of their supplies already circulating.&nbsp;



A great irony of crypto in 2024 is that perhaps, it’s time to treat <a href="https://blockworks.co/tag/meme-coins">memecoin</a> launches as the new standard moving forward.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/_zapj7HgDJOmNugHMiuF7M4ksxPS1R1lljG7zGynT5gpIg-QrL0ur5-IxQJa975PTtbwr4nydf1lNtWEeZu7rO-pLtYyftXyb3lBlo65yEpCTtIuAurHRu3iglMkODcs53joRZmz0GGZb1Ol2wHXfrU" alt=""/><figcaption class="wp-element-caption">And of course, WIF blows them all out of the water</figcaption></figure>



— David Canellis



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



<ul>
<li>Solana (a layer-1) and Uniswap (a DEX) are neck-and-neck for fees <a href="https://tokenterminal.com/terminal/metrics/fees">generated</a> in the past seven days — both $10 million.</li>



<li>Ethereum only has 174 validators waiting in the queue, down from more than 22,000 this time last month. Active <a href="https://www.validatorqueue.com/">validators</a> were at an all-time high yesterday: 1,014,915.</li>



<li>Bitcoin <a href="https://dune.com/cryptokoryo/runes">transactions</a> are more than 80% standard BTC transfers, plugging the gap left by lower interest in Runes and Ordinals.</li>



<li>Pepe’s leading the memestocks, gaining 18% over the past 24 hours, <a href="https://www.coingecko.com/en/crypto-gainers-losers?top=100">according</a> to CoinGecko.</li>



<li>GameStop’s stock is above $65 in premarket trading, on pace to shatter its 52-week high of $38.</li>
</ul>



<h2 class="wp-block-heading">Deja vu</h2>



He’s back.&nbsp;



I am, of course, talking about the man, the myth, the legend: Roaring Kitty.&nbsp;



The return of Keith Gill, the man behind the powerful online persona, sent memestocks and memecoins soaring on Monday.&nbsp;



We were left asking one big question: Is history repeating itself? The answer is…maybe?&nbsp;



We’re nowhere near the 2021 memestock mania, when GameStop’s stock rose to new heights. And it’s not just the retail investors who benefited from the memestock focus either back then or right now.&nbsp;



Pepe, Dogecoin, FLOKI, Dogwifhat and, of course, some random GME-themed memecoins (with no affiliation with the company) gained after Roaring Kitty posted a video suggesting his return.



That’s not even mentioning that GameStop’s market cap is back over $9 billion, or that the stock closed up 74% on Monday. AMC, another memestock favorite, closed up 78%.



A number of factors made 2021 unique. I’m not saying it’s impossible in this cycle, but the threads may be more similar instead of the exact same.



Memecoins dominate today’s market narrative, whereas 2021 saw NFTs booming —&nbsp;nowadays, not so much.&nbsp;



There are macro differences, too. Zooming out of crypto, interest rates are sky high with the Federal Reserve holding on to the 5.25%-and-5.50% range since the summer of 2023. Inflation still runs rampant. Retail investors simply aren’t seeing the same economic environment, not to mention the pandemic that was still a thing in 2021.&nbsp;



Back then, interest rates were so low that millennials could actually afford to buy houses.



The point is: We’re not coming out of lockdown, and we’re seeing crypto bounce back with some weakness after a rough bear market. Of course, that’s not going to stop folks who want to jump into either the memestocks or memecoins. But the conditions don’t look to be ripe enough for a repeat.&nbsp;



Just remember: Diamond hands may be forever, but these cycles tend to have a short — and volatile — lifespan.



— Katherine Ross



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



<ul>
<li>Tornado Cash developer Alexey Pertsev was <a href="https://twitter.com/KoosCouvee/status/1790346985733505040">found guilty</a> of money laundering by a Dutch court this morning.&nbsp;</li>



<li>A new crypto-focused political action committee <a href="https://blockworks.co/news/stand-with-crypto-pac-us-elections">launched</a>, according to Blockworks’ Casey Wagner.&nbsp;</li>



<li>A bitcoin mining company said to have ties to China was <a href="https://www.cnbc.com/2024/05/14/us-orders-chinese-backed-crypto-miner-to-sell-land-near-military-base.html">ordered</a> by the US government to divest land holdings near a nuclear missile base, according to CNBC.&nbsp;</li>



<li>Crypto prime brokerage Falcon Labs <a href="https://www.cftc.gov/PressRoom/PressReleases/8909-24?utm_source=govdelivery">settled</a> with the CFTC for $1.7 million. The regulator said Falcon Labs failed to register as a futures commission merchant.&nbsp;</li>



<li>OpenAI <a href="https://www.cnn.com/2024/05/13/tech/openai-altman-new-ai-model-gpt-4o/index.html">released</a> a new, upgraded AI model called ChatGPT-4o, according to CNN.&nbsp;</li>
</ul>



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



Here’s an interesting find: Speculators on the prediction market Polymarket seem to be giving US President Joe Biden similar chances at victory than challenger Donald Trump in a new, major national poll.&nbsp;



On <a href="https://polymarket.com/event/presidential-election-winner-2024?tid=1715684883221">Polymarket</a> right now —&nbsp;in a market that has earned more than $125 million worth of bets —&nbsp;Trump leads Biden 49% to 44%. Robert F. Kennedy Jr., meanwhile, pulls a mere 3% — one percentage point less than Michelle Obama, wife of former president Barack Obama.



Read more: <a href="https://blockworks.co/news/stand-with-crypto-pac-us-elections">Stand With Crypto PAC launches as industry interest in campaign funding ramps up&nbsp;</a>



Let’s look at the new New York Times poll from this week.



Trump leads in an array of battleground states, per the Times/Siena College/Philadelphia Inquirer <a href="https://www.nytimes.com/2024/05/13/us/politics/biden-trump-battleground-poll.html">poll</a>. In two of those states, Trump pulls 49% to Biden’s 42%. Biden fares best in Wisconsin, pulling 47% to Trump’s 45%.&nbsp;



Interestingly, RFK Jr. polled around 10% in each of the battleground states —&nbsp;a marker of strength for the independent candidate and much stronger than what the folks on Polymarket are saying.&nbsp;



The polls and prediction market aren’t moving in tandem, but at some points, they rhyme. To be sure, the crypto-powered Polymarket has been giving Trump strong chances for months. But it’s a fascinating lens for a major political matchup —&nbsp;I’ll be watching as the bets continue to develop. Stay tuned.&nbsp;



— Michael McSweeney



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Empire Newsletter: It’s memecoins all the way down

FTX is nearing the end of its bankruptcy proceedings almost two years after initiating the process. This comes just a few months after its founder, Sam Bankman-Fried, was sentenced to 25 years in prison.



The former crypto exchange is just one of a handful of crypto bankruptcies throughout 2022. With the creditor payback plan revealed last week, FTX looks like it’s getting close to the finish line, joining the likes of other crypto bankruptcies like Celsius.



Celsius, which exited bankruptcy back in January, was able to return roughly $3 billion to creditors. The bankruptcy plan, <a href="https://cases.stretto.com/public/x191/11749/PLEADINGS/1174909252380000000182.pdf">approved</a> by creditors, sought to return between 67% and 85% to creditors. The bankrupt lender also <a href="https://blockworks.co/news/bankrupt-celsius-estate-bitcoin-mining">spun out a bitcoin mining company</a> called Ionic Digital.&nbsp;



Read more: <a href="https://blockworks.co/news/ftx-bankruptcy-victim-compensation">FTX debtors scrap reboot plans</a>



FTX’s hopes to relaunch as an exchange were dashed earlier this year when lawyers representing the estate said that they were unable to secure a bidder.&nbsp;



BlockFi emerged from bankruptcy in October of last year, and <a href="https://blockfi.com/blockfi-coinbase-distribution-partnership/">announced</a> last week that some creditors would be able to withdraw through Coinbase. Notably, the firm and <a href="https://blockworks.co/tag/ftx">FTX</a> said that <a href="https://blockworks.co/news/blockfi-ftx-reach-tentative-settlement">they’d reached a tentative agreement</a> to settle litigation and disputes between the two former companies in March.



According to an April status report <a href="https://f16c0eccd54007287fb794f9a3d05f2a.cdn.bubble.io/f1712757720074x492073360255491700/1660.pdf">filed</a> by Voyager, FTX’s estate was also able to reach an agreement with the former lender. In May of last year, Voyager <a href="https://www.reuters.com/technology/bankrupt-crypto-lender-voyager-digital-predicts-35-customer-payout-2023-05-17/">predicted</a> that it would return 35% to customers.&nbsp;



But it may be like comparing apples to oranges when looking at FTX versus the other 2022 bankruptcies. Jonathan Groth, a partner at DGIM law, told Blockworks that FTX is a “special case” in comparison.&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-ftx-bankruptcy-finish-line">FTX bankruptcy almost across the finish line</a>



“This bankruptcy proceeding is a little differently situated than other bankruptcy and insolvency proceedings just because of the amount of assets that were located,” he said. Last week, the estate said it located between $14.5 billion and $16.3 billion in cash. Creditors are owed around $11 billion.&nbsp;



A bankruptcy, like <a href="https://blockworks.co/tag/celsius">Celsius</a>, may not be able to “realize the same benefit of asset location” that we’ve seen in FTX, Groth continued. “In any of these other insolvency proceedings where the estate and the fiduciary may be lucky enough to still hold some crypto assets, they may be able to benefit from this market upswing that we&#8217;re seeing.”



But there are a few other reasons why FTX stands out against the other bankruptcies, explained Erin Broderick, lead counsel for the FTX.com customer claim holders and a partner at Eversheds Sutherland.



“I think there&#8217;s a lot of things that make FTX unique [among] the crypto companies that went under. There was a lot of value in its user base…and the assets that they put onto the exchange…but also a confluence of other factors that contributed to the drastically different recovery prospects of today versus as of the petition date,” she said.



In addition to the top-level differences, there’s also the fact that FTX is the “first case, to my knowledge, that’s paid post-petition interest to a convenience class, demonstrating not only good outcomes for creditors overall, but also some rather novel treatment under the plan.”



Read more: <a href="https://blockworks.co/news/ftx-latest-creditor-payback-proposal">What’s next for FTX after the creditor payback proposal?</a>



Then there’s the fact that the crypto market seems to have entered into a bull market at the beginning of the year.&nbsp;



The run “helped on the asset side of the equation for recoveries [as] a number of the venture investments have had more value than perhaps realized as of the petition date. There&#8217;s also been a tremendous effort by the debtors on an asset recovery basis, whether it was cash or crypto that needed to come back into the estate,” Broderick said.



“So there&#8217;ve been a lot of recovery efforts that also have led to large amounts of cash coming into the estates,” she continued. “And on the liability side, the debtors have done a good job of negotiating settlements with creditors to increase recoveries to customers.”



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Why FTX is different from other crypto bankruptcies

The growth of tokenized financial products likely represents the tip of the iceberg, as the world’s biggest financial players continue to investigate the potential of blockchain technology.



This interest could lead to the proliferation of on-chain funds that might challenge the dominance of stablecoins, according to Colin Butler, Polygon Labs’ head of institutional capital.



Franklin Templeton launched its OnChain US Government Money Fund in 2021. It uses the Polygon and Stellar blockchains to process transactions and record share ownership.



<a href="https://blockworks.co/news/blackrock-tokenized-fund-trading-circle-usdc">BlackRock debuted its own tokenized offering</a> — the USD Institutional Digital Liquidity Fund — on the Ethereum Network in March. The world’s largest asset manager <a href="https://blockworks.co/news/blackrock-tokenization-investment">then led a funding round by Securitize</a>, a firm focused on bringing physical and traditional financial assets onto the blockchain.



The BlackRock and Franklin Templeton funds had amassed $375 million and $368 million in assets under management, respectively, as of April 30.



Their future asset growth will depend on how investors use them, Butler noted.



<a href="https://blockworks.co/tag/franklin-templeton">Franklin Templeton</a> got regulatory approval to allow institutional investors to transfer shares of its on-chain fund to other shareholders.



“What you could do is have a venture capital firm on one side sending yield-bearing digital assets to one of their crypto-native portfolio companies that don’t have banking relationships,” he said. “That’s one idea; I don’t know what sort of adoption that receives.”



Read more: <a href="https://blockworks.co/news/stablecoin-with-yield-franklin-templeton">A stablecoin with yield? Tokenized fund perhaps just the start for fund giant</a>



The <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> market is currently sized at about $160 billion. But unlike the Franklin Templeton fund, for example, stablecoins don’t offer users a yield.&nbsp;



“To the extent you can make them more permissionless and fit certain use cases, I can see these products chipping away at that existing [total addressable market], let alone the future TAM,” Butler said.



Keep reading for more excerpts from Blockworks’ interview with Butler.&nbsp;



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Blockworks: What sorts of conversations are financial institutions having with blockchains as they mull their presence in the <a href="https://blockworks.co/tag/tokenization">tokenization</a> space?&nbsp;



Butler: Trust and credibility are the most important factors for any Wall Street transaction. The entity looking to collaborate really needs to understand that the chain doesn’t go down.&nbsp;



Virtually 100% reliability is what they’re looking for, because you can’t have a transaction just kind of disappear and fall through the cracks.



When you’re a big player thinking of coming on-chain, you also have to think about future-proofing your solution. Because if you spin something up that’s kind of a sandbox or walled garden, and there’s no future connectivity, then you have a product that’s limited in scope and you’re going to have to re-engineer everything at some point.



Read more from our opinion section: <a href="https://blockworks.co/news/future-tokenization-permissioned-blockchains">The future of tokenization? Permissioned blockchains</a>



Blockworks: How might <a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s entrance into the tokenized fund space affect how others move ahead here?



Butler: They are a thought leader, a technology leader and an innovation leader, and so when they make an action there tends to be a lot of replication.



You should just assume that almost everybody in the top 20 globally [in assets under management] has a plan for blockchain adoption. I can’t tell you when those plans will be realized, but there’s only — from my personal knowledge — one or two of the top 20 that aren’t really materially invested…without a team or a roadmap.



When BlackRock comes, it accelerates the plans for all of these other players because now they know they have air cover to do it.



And each one has a different angle on it. It’s not just BlackRock did this and now everybody replicates. Everybody’s looking to do something slightly different or build on what’s been done before, because nobody wants to be the third fund to do the exact same thing.



But broadly speaking, fund tokenization on blockchain is a huge conversation at most of the large players.



Blockworks: Private markets investment firm Hamilton Lane and hedge fund manager Brevan Howard have tokenized funds on Polygon. Do you expect more where that came from?



Butler: Longer term the vision is for everybody from banks to large RIAs, and everyone in between, to distribute these tokenized assets.&nbsp;



Why it’s interesting is that these assets are not available in any other format. So they’re going to go with both hands after that, because it enables a growth trajectory that they currently don’t have.&nbsp;



There’s deep financial incentives for the providers of financial products and the distributors, such as banks, to participate in this new ecosystem. That’s why people are so motivated to participate and come on-chain.



Blockworks: What do you make of the latest effort by Visa, Mastercard, JPMorgan, Citigroup and others <a href="https://blockworks.co/news/tradfi-blockchain-trials-mass-adoption">aimed at using a shared ledger technology to settle tokenized assets</a>?&nbsp;



Butler: Many of the players listed in that announcement have been working on this for so long. I would say mentally they’ve been very serious about it for the last two years, and to me, it takes about two years to get to the point of approval for production use cases at major financial institutions.



That’s why I think that while you may have seen announcements similar to this maybe two years ago, qualitatively it’s very different because of the stage that a lot of the global financial institutions are at internally.



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Tokenized funds could chip away at stablecoin market, Polygon exec says

There’s a new crypto Political Action Committee (PAC) on the scene.&nbsp;



Coinbase-initiated nonprofit Stand With Crypto announced it is launching a new PAC Friday.&nbsp;



The associated PAC, which means only individual Stand With Crypto members can contribute up to $5,000 each, plans to back “candidates who support the crypto community,” the nonprofit <a href="https://x.com/standwithcrypto/status/1788950211252891790">said</a> on X Friday.&nbsp;



Stand With Crypto, a 501(c)(4) nonprofit organization, <a href="https://blockworks.co/news/coinbase-nonprofit-crypto-policy">launched last summer</a> as an effort to give crypto fans more access to information about policy makers and candidates, leaders said.&nbsp;



“This is a grassroots, organic bottom-up effort,” Kara Calvert, Coinbase’s head of US policy, said in August 2023 when announcing the new initiative.&nbsp;



“It can provide a lot of tools to people, they can learn about the members of Congress, they can access a scorecard, they can access a legislative action portal…it will really give them the tools that they need to engage with their members of Congress,” Calvert added.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/only-a-fool-would-vote-on-crypto-alone">Only a fool would vote on crypto alone</a>



While federal law makes contributions to the PAC tricky, companies and individuals are free to make donations to the nonprofit itself. Crypto payments operation Moonpay on Monday announced a $1 million pledge, an effort the company said was inspired by upcoming elections.&nbsp;



“Today, two things are abundantly clear: This year&#8217;s election will define the future of our industry in the United States, and it is our responsibility to step up and stand alongside those organizations that want to positively advance crypto innovation for everyone,” Ivan Soto-Wright, Moonpay CEO, said in a statement Monday.&nbsp;



Stand With Crypto’s PAC comes on the scene as crypto-focused Super PAC trio Defend American Jobs, Fairshake and Protect Progress continue to dish out cash. The three groups have collectively deployed $31,752,033.81 so far this calendar year, according to Federal Election Commission filings.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-super-pacs-election-primaries">Crypto PAC-backed candidates sweep in US election primaries&nbsp;</a>



The PACs made a big financial push during the March Congressional primary cycle, doling out more than $10.1 million to fund advertisements against Rep. Katie Porter, the incumbent Democrat from California who ultimately lost her bid for the late Sen. Dianne Feinstein’s seat.&nbsp;



The trio is also backing Alabama Democrat Shomari Figures, who is vying for a US House seat in November. Protect Progress donated close to $2 million during his primary campaign in March and April, filings show.&nbsp;



Stand With Crypto has not yet filed contribution and disbursement forms with the FEC, but has revealed its first five endorsements: Figures; Jim Banks, a Republican running for Senate in Indiana; Jim Justice, a Republican running for Senate in West Virginia; Eddy Morales, a Democrat running to represent Oregon&#8217;s Third District; and Troy Downing, a Republican running to represent Montana&#8217;s Second District.



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Stand With Crypto PAC launches as industry interest in campaign funding ramps up 

The financial world prefers quarterly reviews. But US spot bitcoin ETFs have been alive for one-third of a year, and now seems as good a time as any for a look back.&nbsp;&nbsp;



The sample size captures bitcoin hitting a new all-time high and seeing some corrections since the Jan. 11 ETF launches.



Oh yeah, and adding a fourth month captures the demand (or lack thereof) for bitcoin ETFs after per-block rewards for mining the asset were cut in half last month.



One headline number: US spot bitcoin ETFs have notched net inflows of about $11.7 billion.



Another noteworthy stat: Those inflows occurred despite the Grayscale Bitcoin Trust ETF (<a href="https://blockworks.co/tag/gbtc">GBTC</a>) enduring net outflows of $17.6 billion.



Profit-taking by ETF investors, as well as the Federal Reserve’s likely higher-rates-for-longer posturing, have resulted in a demand drop-off for BTC in recent weeks, according to analysts. Bitcoin’s price (<a href="https://blockworks.co/price/btc">BTC</a>) — at roughly $63,000 Monday at 12 pm ET — is down about 6% from a month ago.



Industry watchers had said it would be hard to sustain the pace of some of the most successful ETF launches of all time.



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



The category’s inflow total once stood above $12.5 billion before a month-plus of outflows brought the category back down to Earth.



Net money exiting the funds over the last five weeks (since April 8) stands at $931 million, according to Farside Investors <a href="https://farside.co.uk/?p=997">data</a>. Last week’s positive flows of $117 million broke a four-week bleeding streak.&nbsp;



Crypto exchange-traded product (ETP) volumes — the majority of which come from US spot <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETFs</a> — have continued to slide, CoinShares research head James Butterfill wrote in a Monday report. The offerings saw volumes of roughly $8 billion last week, compared to the $17 billion average in April. “These volumes highlight ETP investors are participating less in the crypto ecosystem at present, representing 22% of total volumes on global trusted exchanges, relative to 31% last month,” Butterfill added.



<h2 class="wp-block-heading">Even BlackRock, Fidelity see demand slow&nbsp;</h2>



Perhaps as expected, <a href="https://blockworks.co/news/blackrock-fidelity-etf-flows-race">products by BlackRock and Fidelity were able to capitalize</a> on their renowned brands and deep client networks out of the gate to attract the most investor assets.



BlackRock’s iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) so far have net inflows amounting to $15.5 billion and $8.1 billion, respectively.



Both offerings enjoyed unprecedented inflow gains for new ETFs.



FBTC saw net inflows during its first 63 days before the streak ended on April 12. The takeaway: It saw about $8 billion of net money enter the fund in those first 63 days, and just $94 million in the 21 trading days since.&nbsp;



<a href="https://blockworks.co/news/blackrock-bitcoin-etf-inflows-streak">IBIT’s run lasted 71 days</a>, before the fund notched a zero in that category on April 24.&nbsp;&nbsp;&nbsp;



So, the fund’s net inflows were nearly $15.5 billion in the first 71 trading days. They are $24 million in the last 13 trading days.



<a href="https://blockworks.co/tag/blackrock">BlackRock</a>’s bitcoin ETF looked poised to pass GBTC in assets under management weeks ago. But the recent demand slowdown has kept Grayscale’s fund in the lead — at about $17.6 billion to $16.6 billion, as of market close on Friday.



IBIT’s trading volumes were roughly $3.6 billion last week, a Blockworks analysis of Yahoo Finance data shows. That gave it a daily average of $720 million, down from a nearly $1.1 billion daily volume average the week before.&nbsp;&nbsp;



GBTC saw its lowest weekly outflow since January from May 6 to May 10, at $171 million. The fund saw its first daily net inflow, gaining $63 million on May 3.&nbsp;



Read more: <a href="https://blockworks.co/news/gbtc-posts-first-net-inflows">Bitcoin ETF snapshot: GBTC surprise helps end sector’s seven-day outflow run</a>&nbsp;



Still, like IBIT, the <a href="http://grayscale">Grayscale</a> fund’s daily volumes average dipped to $338 million last week, according to Yahoo Finance data — down from a daily mark of $446 million from April 29 to May 3.



Financial advisers are expected to contribute massively to future inflows, with <a href="https://blockworks.co/news/13f-filings-institutional-appetite-bitcoin-etfs">some revealing in recent filings</a> that they already hold millions of dollars worth of positions in various BTC funds.



<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">The new high water mark (ex APs/market makers) for bitcoin ETF holdings has arrived. Boston-based Bracebridge Capital has reported owning $262m of <a href="https://twitter.com/search?q=%24ARKB&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$ARKB</a>. It&#39;s also the biggest owner of <a href="https://twitter.com/search?q=%24IBIT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$IBIT</a> too with $81m in that ETF. They also own $20m of <a href="https://twitter.com/search?q=%24GBTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$GBTC</a>. They went wild basically. <a href="https://t.co/RzdpwE2D0k">pic.twitter.com/RzdpwE2D0k</a>&mdash; Eric Balchunas (@EricBalchunas) <a href="https://twitter.com/EricBalchunas/status/1789993013587947765?ref_src=twsrc%5Etfw">May 13, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Christopher Jensen, crypto research director at bitcoin ETF issuer Franklin Templeton, <a href="https://blockworks.co/news/franklin-templeton-institutional-bitcoin-etf-allocation">told Blockworks in an April interview</a> that more institutional investors are considering including bitcoin within long-term investment portfolios.



“There are lots of platforms, there are lots of institutions that are interested and are doing work,” Jensen said at the time. “So we don’t think the flows for the ETPs are done even though they’ve cooled off in recent weeks.”



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Strong start, slowing demand: The first 4 months of US spot bitcoin ETFs        

Tal Zackon

Since Bitcoin’s inception, crypto has faced more than its fair share of ups and downs.



In more recent years, the collapse of “trusted” crypto institutions such as FTX, 3AC, Celsius (and even Mt. Gox) crippled the industry and caused huge trust issues. This level of distrust was echoed across every single Web3 business that held client funds, causing huge market downturns.



But a solution was put forward to solve the issue of trust across crypto as one bastion of hope: proof-of-reserves (PoR).&nbsp;



The problem is that proof-of-reserves is absolutely useless.



<h2 class="wp-block-heading">A false promise of transparency</h2>



Once upon a time, PoR was hailed as a breakthrough in transparency within the crypto space. PoR promised to shine a light on the reserves of the big names we trusted, giving stakeholders the peace of mind needed to navigate the murky waters of digital assets.&nbsp;



Although there were vocal critics of PoR, it still managed to take hold as the de facto standard for auditing the reserve capabilities of exchanges and other crypto service providers. Proof-of-reserves attestations became the go-to solution for bringing back transparency and trust to the broader investor market.



After the FTX collapse, big exchanges such as Binance, Gate.io, KuCoin, Poloniex, Huobi, OKX, Deribit and Bybit all rushed to unveil plans for showcasing PoR snapshots.&nbsp;



But herein lies the problem: A snapshot doesn’t show the whole picture.



<h2 class="wp-block-heading">The failures of proof-of-reserves</h2>



How can we be sure that these exchanges, which are now claiming to conduct PoR audits, are being fully transparent?&nbsp;



We can’t.&nbsp;



The major problem lies with PoR’s static nature and its failure to reflect the dynamic and fast-paced world of crypto: PoR only provides a snapshot of reserves at any given point in time rather than a real-time view.



Furthermore, the system is susceptible to manipulation and exploitation, as evidenced by past fiascos our industry faced.&nbsp;



It&#8217;s also unsuitable for auditing intricate smart contract interactions and token movements, a crucial aspect for the industry.



Being forced to rely on these single-point-in-time snapshots is like trying to assess a bank&#8217;s financial health based solely on a single account statement without considering the full transaction history — unviable. A snapshot is incapable of showing any real context.



Simply put, PoR systems fail in every aspect of their original purpose.&nbsp;



It&#8217;s just not enough to verify through a screenshot that assets exist at a particular point in time. We need real-time transparency and a historical audit trail to ensure the integrity of crypto exchanges and custodial services through traceability of transactions and movements, not a picture that can be easily adjusted and manipulated for the company’s benefit.



<h2 class="wp-block-heading">An industry wake-up call</h2>



So what&#8217;s the solution? It’s simple: better data.&nbsp;



Ultimately, every blockchain has all of the data for every transaction that has ever happened. The issue with digital assets isn’t the lack of data, but instead that the data is going into a contextual blackhole.



Read more from our opinion section: <a href="https://blockworks.co/news/future-tokenization-permissioned-blockchains">The future of tokenization? Permissioned blockchains</a>



The industry needs to shift its focus on understanding why transactions are being made, both historically and in real-time, in order to build real audit trails that can provide usable insights to auditors, regulators and tax authorities. With this shift, gaining transparency for the state of exchanges&#8217; customer funds will be far easier to achieve. It will bring a new wave of trust and accountability to the market, especially for the end-users who are investing their hard-earned money.



Blockchain analytics, on-chain monitoring tools and real-time auditing solutions will all support the future of transparency within our industry. But they all need to be underpinned by accurate, contextual data to offer continuous assurance, real-time insights and a level of transparency that PoR could only dream of.



<h2 class="wp-block-heading">It’s time for a change</h2>



While the collapses of FTX, Celsius and Three Arrows Capital occurred before proof-of-reserves became broadly implemented, we are left to wonder whether a robust and truly transparent system could have shielded the crypto industry from such significant setbacks.



As an industry, we should all push harder to build trust and create systems that enable auditors, regulators and tax authorities to satisfy investors&#8217; thirst for transparency.&nbsp;



If we can’t bring real context to the world of blockchain data, then we’ll be stuck with useless solutions like proof-of-reserves for the foreseeable future.



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<div class="wp-block-post-author-biography">Tal Zackon is the CEO and Co-Founder of TRES, a Web3 financial data platform, focused on simplifying Web3 financial operations such as accounting, taxation, and audit. TRES was founded in 2022 and is backed by some of the most respected names in Web3, including Circle, Blockdaemon, Moonpay, Alchemy angels from Fireblocks and Chainalysis, and more. 

Prior to founding TRES, Tal was an angel investor and venture capitalist. He has also served as a Board Observer for Portis, 4M Analytics, Dataloop AI, Zero Networks and as a board member at Vayo. Other previous positions include Principal at F2 Venture Capital, Head of Growth at superwise.ai, General Manager at The Junction by F2 VC and Founder &amp; General Manager at Project Upload. </div>


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Proof-of-reserves never cut it — and never will

The DAO governing Jito, the Solana-based liquid staking service, will consider a proposal to spend 7.5 million of its native JTO token on liquidity mining. That’s equivalent to roughly $29 million at current prices, and it’s 3.1% of the 240 million JTO held in the DAO’s treasury.



It’s the second-ever governance proposal for Jito DAO, and follows the lucrative JTO airdrop it carried out in December. The <a href="https://forum.jito.network/t/jip-2-incentive-budget-and-framework-for-strategic-growth/294">proposal</a> was penned by DeFi research firm Gauntlet, one of 17 Jito Foundation-supported delegates which recently parted with Aave’s DAO following disagreements between the two sides.



Read more: <a href="https://blockworks.co/news/gauntlet-discontinues-work-at-aave">Why Gauntlet is leaving Aave after 4 years as ‘risk steward’</a>



Jito runs Solana’s <a href="https://defillama.com/chain/Solana">largest</a> liquid staking service by total value locked (TVL), per DeFiLlama. 78% of Solana validators run its Solana validator fork, called Jito-Solana. The protocol partly distributes maximal extractible value (MEV) rewards, mostly in the form of tips paid to validators by traders hoping to get their transactions to land, to holders of its JitoSOL liquid staking token.



Notably, the MEV collected by validators via Jito has surpassed the MEV paid to Ethereum validators in recent days.&nbsp;



Read more: <a href="https://blockworks.co/news/solana-mev-validators-ethereum">MEV collected by validators is now higher on Solana than on Ethereum</a>



Some of Jito’s recent TVL growth came from a points system that earned on-chain users allocations in the JTO <a href="https://blockworks.co/tag/airdrop">airdrop</a> and drove funds to the protocol.&nbsp;



But after the points-based incentives ended, Jito spent minimally on incentive programs. Notably, Jito’s minimal incentive spend comes as <a href="https://blockworks.co/tag/solana">Solana</a> liquid staking competitors Marinade and Blaze make significant incentives investments, Gauntlet wrote in the proposal.&nbsp;



To stay competitive in a post-points world, Gauntlet recommends Jito spend some of its treasury on “a variety of liquidity mining strategies.” It does not specify precisely what those strategies would be. The funds would be managed by three members of the Jito Foundation and two members of Jito Labs.



Read more: <a href="https://blockworks.co/news/jito-airdrop-value">What to know about Jito&#8217;s $165M JTO airdrop</a>



At the time of writing, the governance proposal was yet to garner any comments from the community. Per Jito’s governance <a href="https://www.jito.network/docs/governance/constitution-of-the-jito-foundation/#jito-improvement-proposals-jips">docs</a>, the proposal has to stay open for 30 days before being submitted to the DAO’s voting platform.



In a message to Blockworks, Jito Foundation delegate Ian Unsworth expressed his support for the proposal and said it was “awesome to see some intentional thinking around liquidity incentives.”



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