Injective Quants

Ben Strack

I recently chatted with Ledn CEO Adam Reeds about crypto-backed loans. Spoiler: He expects the category could exponentially boom.&nbsp;



One thing he mentioned to me was, “Price is the best marketer.”&nbsp;



BTC’s price rose nearly 40% in November — fueled by the victory of <a href="https://blockworks.co/news/revisiting-trumps-crypto-promises-after-his-election-win">pro-bitcoin Donald Trump</a> and scores of crypto-friendly Congressional candidates. It more recently broke the $103,000 barrier.&nbsp;



Ledn, for much of this year, did roughly $1 million per day of crypto-backed collateral financing (mostly BTC). This allows clients to borrow cash without having to sell their BTC or ETH. The company was doing about 2.5x that amount in November, Reeds noted.&nbsp;



“The last cycle institutions did the work and they said this is interesting, what about this bitcoin thing?” he said. “Things take time. You’re in an organization with several hundred or several thousand people; you don’t build consensus overnight.”



Read more: <a href="https://blockworks.co/news/btc-new-all-time-high-100k">Bitcoin sets new all-time high above $100K</a>



Reeds noted previously seeing retail investors with FOMO (fear of missing out) on crypto. This time the institutions seem to be feeling that fear, the CEO added.



Financial services giant Cantor Fitzgerald said in July that it <a href="https://www.cantor.com/cantor-fitzgerald-to-launch-bitcoin-financing-business/">planned</a> to launch a bitcoin financing business. CEO Howard Lutnick, recently selected by Donald Trump <a href="https://blockworks.co/news/trump-nominates-commerce-dept-leader">to lead the Commerce Department</a>, said at the time the firm intended to launch with $2 billion of lending.&nbsp;



Reeds said he estimates the global bitcoin-backed loan market (<a href="https://blockworks.co/news/retail-adoption-crypto-cycle">on the retail side</a>) to currently be between $1 billion and $2 billion.&nbsp;



“The analogy I like is, ‘What if this was like real estate mortgages on the residential side?’” Reeds said. “Well, 60% of homes have a mortgage on them, and what if 60% of bitcoin effectively had a mortgage on it? Suddenly the market’s like $400 billion.”



“That’s with bitcoin at $95,000,” he added. “What if bitcoin’s at $250,000? All of these things start to change.”



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



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Blockworks: What has changed at Ledn <a href="https://blockworks.co/news/crypto-impacts-since-election-outcome">since the US election</a>?



Reeds: We have been approaching more traditional credit funds that would, for example, finance student loan packages — things like that, that are more alternatives.



I would say the gap we’re seeing is that in this market pullback over the last couple years (post-Covid), there was a lot of attractive yield opportunities. So even though institutions kind of get that bitcoin is a pretty safe [asset] (the ones that are forward-thinking), there’s still so much attractive yield to go after…that it’s a bit challenging to say this is why you should finance bitcoin.&nbsp;



But that’s changing. I think as the interest rates come down a bit, now we’re starting to see more interest because people are a bit worried that they’re not going to get the same yield opportunities they did over the last 24 months.



Blockworks: Why are more traditional finance players beginning to recognize bitcoin as good collateral? Reeds: Obviously <a href="https://blockworks.co/news/tokens-new-era-crypto-regulation">regulatory clarity</a>. But I think specifically on the financial side, people [are] getting smart about how to fit it in in traditional buckets.&nbsp;



Most institutions have rules and allocations as to where they can place capital, and it’s hard for them to just buy physical bitcoin.



What MicroStrategy is doing is really smart in saying, ‘OK well there’s a pool of capital out here that can buy convertible bonds. And there’s another pool of capital here that can be MicroStrategy equity. And if I allocate that appropriately … I can <a href="https://blockworks.co/news/mstr-coin-price-targets">maximize how much</a> I can attract in the markets by sizing it and pricing it accordingly.’



So they’re getting really smart about that, and I think we’re excited to do the same thing on the pure lending side, because we’re spending a lot of time thinking about how we tap into more traditional financial setups.



Read more: <a href="https://blockworks.co/news/cme-data-institutional-crypto-moves">CME data suggests institutions are field-testing new crypto moves</a>



Blockworks: What might be some other outstanding obstacles for institutions looking to get more involved in the crypto space?



Reeds: I think the biggest thing that gets in the way is the information knowledge gap on some pretty basic stuff.&nbsp;



For example, custody is not standardized. The next closest thing is saying these are custodians that the ETFs use. And if the [US Securities and Exchange Commission] has approved them for ETF custodians, then that’s pretty safe and we’re using the same custodians; Ledn uses BitGo.&nbsp;



But there’s no stamp on the custodian that says this is the Grade-A custodian, this is the Grade B. And that’s what [traditional finance] needs; [traditional finance] needs someone else to say this is OK so that they feel OK with it.&nbsp;



So I think we’re forcing them to think about too many things, which is adding friction to the equation. And the same goes with liquidity providers or trading venues.



I think that’s where regulation will help, and just more news. If you can say, ‘OK maybe it’s not regulated, but Cantor [Fitzgerald] did it this way,’ then it adds credibility to the explanation in the way we’re getting it done.



Blockworks: What might be your price prediction for bitcoin long-term?



Reeds: &nbsp;What’s interesting about it is…obviously there are fundamentals around user adoption and numbers like that, but there are no sales forecasts or traditional financial analysis of bitcoin.&nbsp;



So if we push BTC to a price of $250,000, well then $150,000 is a bear market. Every time you have these new lows, then it hits a new step function and we get to the next level. So I don’t think $1 million is unreasonable.



A modified version of this article first appeared in Tuesday&#8217;s 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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Ledn CEO details path to crypto-backed lending boom

Macauley Peterson

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/research">subscribe</a>.



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M^0, a decentralized stablecoin infrastructure layer, is setting a new standard for stablecoin design with its innovative modular architecture, revenue and distribution model. Its first distributor, Noble, is pulling back the curtain on the Noble dollar, USDN, in a bid to shake up the market and disrupt entrenched players.



For the entire history of stablecoin issuance, Tether has been the dominant issuer. Its market share on Ethereum dipped to 30% in 2022 — following growth in Circle’s USDC and Binance’s BUSD — but thanks to its near monopoly on the <a href="https://blockworks.co/tag/tron">Tron</a> blockchain, Tether’s market cap has reigned supreme in the stablecoin space.



With <a href="https://blockworks.co/tag/tether">Tether</a> ostensibly healthier than ever, it maintains a significant moat — but maybe not an insurmountable one. Robbie Petersen of Delphi Digital noted the importance of M^0’s approach in August, writing that “[M^0] could be best positioned to challenge the <a href="https://blockworks.co/news/tether-competes-stablecoin-project-increase">Tether monopoly</a>.”&nbsp;



<h2 class="wp-block-heading">A new framework</h2>



Unlike traditional stablecoin issuers, M^0 operates a multi-issuer protocol, creating a decentralized system where issuers follow protocol rules rather than centralized mandates. Its canonical stablecoin, M, serves as a core building block for custom-branded stablecoins. Known as M-extensions, the Noble dollar is its first.



This system offers issuers full programmability, allowing these branded M-extensions to distribute yield as they see fit — whether to liquidity pools, users or other stakeholders. According to Greg Di Prisco, co-founder of M^0, this structure provides scalability, safety and liquidity unmatched by traditional issuance models.



“We don&#8217;t believe that [a centralized issuer model] can possibly scale. You can&#8217;t have one company controlling the entire world&#8217;s money supply as stablecoins continue to grow. So, we built a protocol that enables a multi-issuer process,” Di Prisco told Blockworks.



Petersen noted the core issue in stablecoins today is that dapps “capture none of the value they create on behalf of stablecoin issuers.” Under M^0’s model, US Treasury yield can become “not only a meaningful source of revenue for apps, but possibly even the principal source.” This transformative potential could lead to a new business model, he argues: “Selling stablecoin distribution as a service (SDaaS).”



Noble intends to pass on 100% of the USDN native yield to holders of the token — at least initially — according to Jelena Djuric, co-founder and CEO of Noble.



&#8220;Our entire growth strategy has been keeping things as frictionless as possible,” Djuric told Blockworks, noting that Noble has no transaction fees to use any of its stablecoins. “We want to keep it like that, and the beauty [of] Cosmos and <a href="https://blockworks.co/tag/ibc">IBC</a> is that it’s low fee and it’s fast — we wouldn’t want to compromise that in any way,” she said.



Noble has <a href="https://blockworks.co/news/circle-moves-usdc-to-cosmos">previously been known</a> for bringing USDC to IBC-connected chains, and generally improving the cross-chain routing of Circle’s stablecoins. But Djuric said USDN will complement USDC on the Noble chain, describing M^0 as “if <a href="https://blockworks.co/tag/circle">Circle</a> and <a href="https://blockworks.co/tag/makerdao">MakerDAO</a> [<a href="https://blockworks.co/news/maker-rebrands-as-sky-dai-will-be-changed-to-usds">now Sky</a>] joined forces and had a baby.”



<h2 class="wp-block-heading">Modularity meets interoperability</h2>



M^0 aims to meet the needs of appchains and fintech providers that want to launch their own branded stablecoins without worrying about the collateral backing, or interoperability — both are baked into the protocol underpinning M.



“All of the collateral management is done for them,” Di Prisco said. “The big difference here between other [issuers] like <a href="https://blockworks.co/tag/paxos">Paxos</a>…is that with Paxos, you’re going through months of negotiations, paperwork, legal documents, lawyers — [but] because we’re a protocol and fully onchain, [we] can give you your own branded stablecoin in minutes,” he said.



Issuers maintain bankruptcy-remote <a href="https://www.investopedia.com/terms/s/spv.asp">SPVs</a>, and are only allowed to hold 0-to-180-day T-bills that are marked to market. Their actual collateral balance is also checked daily.&nbsp; “They effectively can&#8217;t cheat as long as we maintain the right incentives in the ecosystem,” Di Prisco said.



All M-extensions will be fungible by default, although brand partners have some leeway about exchanges with other distributors.



For Noble, this modular design allows them to maintain a focus on ecosystem expansion. With the anticipated IBC Eureka upgrade — facilitating connections with non-Cosmos-based chains — plus integration into wormhole-supported chains, USDN will benefit from a large addressable market.



“You want to go between <a href="https://blockworks.co/tag/osmosis">Osmosis</a> and dYdX in one click with two separate tokens? You can do that on Noble,” Djuric explained.



The Noble Dollar will launch with a points campaign tied to a future Noble token, further bootstrapping adoption.



But the launch of multiple stablecoins <a href="https://blockworks.co/news/new-stablecoin-entrants-payments-focus">like Agora</a> and M^0, which provide inherent yield, cements the idea that in the future, all stablecoin applications will start with a base yield. Whether this model will truly topple the non-yield bearing incumbents remains to be seen.



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M^0 and Noble set sights on Tether’s $136B empire

Katherine Ross

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



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Crypto is “really exciting,” former SEC Commissioner Paul Atkins said in a <a href="https://www.youtube.com/watch?v=eLNFa14msRc">podcast interview</a> last year.&nbsp;



In that same interview, he noted that the FTX collapse just happened to occur in crypto but essentially, fraud is fraud. He compared Sam Bankman-Fried’s actions to Bernie Madoff’s.&nbsp;



Aside from public appearances, it’s clear that Atkins — who, in case you somehow missed it, is <a href="https://blockworks.co/news/trump-nominates-new-sec-chair">officially President-elect Donald Trump’s pick</a> to take over the SEC — is not only knowledgeable about crypto but has been active in the space for years.



On paper, Atkins looks pretty pro-crypto, but I was curious to get some idea of who Atkins is and what he’s like. Which, of course, could give some readthrough on how he’d lead the SEC if he were to take the helm — which, as my colleague Casey Wagner <a href="https://blockworks.co/news/trump-nominates-new-sec-chair">pointed out</a> — won’t be for a while because he has to get through the nomination process. The deal’s not done yet, so temper your expectations.&nbsp;



He’s been a part of Securitize’s advisory board since 2019, Securitize CEO Carlos Domingo told me.&nbsp;



“He&#8217;s definitely going to bring a different attitude toward the space that is less about enforcement actions and litigation and more about figuring out what&#8217;s the right regulation for letting this industry flourish,” he continued. Domingo knew of Atkins from his SEC days and from his work as co-chair for the Token Alliance which was <a href="https://digitalchamber.336.thegrove.co/initiatives/token-alliance/">launched</a> by the Chamber of Digital Commerce.&nbsp;



Atkins, Domingo said, is likely going to be “less controversial” and he’s more likely to have “a dialog with the industry participants to figure things out … Not having this animosity toward the industry, but somebody can sit with people and understand, you know, what needs to be done, so that there is investor protection and there is a certain type of regulation, but at the same time, the industry can actually grow.”



In the Free the People podcast episode I mentioned above, Atkins said it was “too bad” that a lot of crypto companies “couldn’t comply” with the current rules “the way they’re written.” He also praised Hester Peirce, who he previously worked with.&nbsp;



“If the SEC were more accommodating and would deal straightforwardly with these various firms, I think it would be a lot better” for crypto companies to work directly in the US instead of going overseas, Atkins said.



While Domingo’s sad to be losing Atkins as an adviser, the US is gaining a “really good” potential leader of the SEC, he said.



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What SEC chair nominee Paul Atkins has previously said about crypto

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



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A dream is a wish your heart makes… unless that dream is bitcoin topping $100k, which happened <a href="https://blockworks.co/news/btc-new-all-time-high-100k">late in the night</a> for some of us.&nbsp;



With $100k breached, bitcoin is the “seventh most valuable asset in the world by market cap, just behind the likes of Google and Amazon,” GSR’s Brian Rudick pointed out.&nbsp;



Since November, we’ve seen bitcoin nearly double to hit $100k. And this climb hasn’t been without its challenges.



“Most investors are underestimating the price potential from continued global flows into bitcoin, whether from companies adding to their balance sheet or inflows into ETFs. There’s substantial interest in getting off zero, and there’s a market structure that is very different from traditional finance, which can lead to panic buying, pushing prices up quickly. The outlook for crypto is incredibly strong and returns are likely to outperform other risk assets,” Galaxy’s Chris Rhine said.



<a href="https://blockworks.co/news/btc-price-levels-to-watch">We’ve already gone over the price targets to watch</a>, per Ledn’s John Glover, but I wanted to review one more time given bitcoin’s ability to stay above $100k. If it can quickly gain momentum to top $125k, then we could see a top of $160,000. But if we’re hanging around $100k, kind of like what we’ve seen so far, then $125,000 is the magic number.&nbsp;



Oh, and if you need a laugh this morning, might I suggest checking out this 2019 tweet from notorious goldbug Peter Schiff:



<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">Keep dreaming. Bitcoin is never going to hit $100,000!&mdash; Peter Schiff (@PeterSchiff) <a href="https://twitter.com/PeterSchiff/status/1192802503856984064?ref_src=twsrc%5Etfw">November 8, 2019</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Anyway, putting bitcoin aside (stay with me here), I wanted to take a quick look at some other things to watch this month from K33’s Vetle Lunde.&nbsp;



First and foremost: Lunde said any December dips may be buying opportunities.&nbsp;



“The underlying momentum is not to be messed with. I view hypothetical adverse reactions to surprising employment data or unchanged interest rates at the FOMC as opportunities for aggression. The market is well poised to peak near Trump’s inauguration, where I’ll look to de-risk properly. Until then, my allocation reigns long and strong,” he wrote in a note.&nbsp;



Lunde, who penned the note pre-$100k, is of the mind that we’ll see bitcoin “well into the $100,000’s.”



But a top hit could occur next month, which may track with what we heard from Glover if — and while technical analysis is a good thing to watch, it’s not a crystal ball — we see the levels in his reading of the Elliott Wave Theory.



“The average distance between BTC’s first cycle ATH and its last ATH during its past three cycles is 318 days. Under the assumption that average trajectories hold, a peak would occur on January 17. This is not unlikely, given that Trump’s inauguration will take place on January 20,” Lunde wrote.&nbsp;



Thankfully, bitcoin’s holding above $100k for now, so we can all bask in the six-figure glory.



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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 bitcoin’s $100K breakout is just the start

David Canellis

We’ve hit a milestone moment for bitcoin.&nbsp;



A single bitcoin is now worth $100,000 as crypto prepares for President-elect Donald Trump to take office next month. After the fresh all-time high, bitcoin is truly in price discovery mode — all-time highs have now been smashed against <a href="https://blockworks.co/news/bitcoin-close-to-all-time-high-against-gold">gold and benchmark stock market indexes</a>.



It certainly has been a huge year for bitcoin, which started in January around $42,000. It’s now more than doubled that figure.



Bitcoin’s price has continued to climb since surpassing $100,000, and as of press time, is trading around $103,000 on Coinbase, according to TradingView <a href="https://www.tradingview.com/chart/?symbol=COINBASE%3ABTCUSD">data</a>.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1786" height="1154" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=1024&amp;h=1024" alt="" class="wp-image-95059" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=1786 1786w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=398 398w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=404 404w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=339 339w, https://blockworks-co.imgix.net/wp-content/uploads/2024/12/BTCUSD_2024-12-04_23-07-28.png?w=80 80w" sizes="(max-width: 1786px) 100vw, 1786px" /><figcaption class="wp-element-caption"><a href="https://www.tradingview.com/chart/?symbol=COINBASE%3ABTCUSD">Image Credit: TradingView/BTC</a></figcaption></figure>



The development came hours after the Trump transition formally announced its nominee for SEC chair Gary Gensler’s job: <a href="https://blockworks.co/news/trump-nominates-new-sec-chair/">Paul Atkins</a>, a former SEC commissioner and current consultancy CEO whose firm has worked with crypto clients.&nbsp;



Bitcoin hitting the milestone underscores “BTC as the revolutionary asset its advocates have long championed. You cannot afford to ignore an asset that capitalized itself from $0 to $2 trillion in 15 years,” Galaxy’s Alex Thorn told Blockworks.



Bitcoin has achieved multiple milestones in 2024, from the <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">launch of the bitcoin ETFs</a> to the <a href="https://blockworks.co/tag/bitcoin-halving">halving</a>. At this point, it’s hard to keep track of how many all-time highs it carved out this year so far. 



Then there are all of the bullish indicators around bitcoin hoarder MicroStrategy and the bitcoin ETFs.



MicroStrategy boosted its latest debt offering from $1.75 billion to $2.6 billion last month, citing high demand. The raise is its largest to date, and ended up <a href="https://www.microstrategy.com/press/microstrategy-completes-3-billion-offering-of-convertible-senior-notes-due-2029-at-0-coupon-and-55-conversion-premium_11-21-2024">rounding</a> out to $3 billion.



The firm will, of course, be <a href="https://blockworks.co/news/marathon-buying-btc-momentum">spending the cash on more bitcoin</a>, even if it means <a href="https://empire-31ed59.beehiiv.com/p/buying-the-top-forever?utm_source=empire-31ed59.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=buying-the-top-forever&amp;_bhlid=c4cefe09e51e30b94fa732007447380132cfe581">buying the top</a>, co-founder and former CEO Michael Saylor has previously said.



Prior to bitcoin reaching $100,000, GSR’s Brian Rudick said that the firm believed bitcoin could continue <a href="https://blockworks.co/news/bitcoin-could-hit-100k-within-weeks">to push higher</a> after topping six figures. 



“For instance, Trump is likely to appoint pro-Bitcoiners to key agency and <a href="https://blockworks.co/news/donald-trump-cabinet-selection">cabinet positions</a>, which can push prices higher. SEC Chair Gensler may resign and the SEC may inform recipients of Wells notices that it will no longer pursue enforcement, or reduce charges / settle existing cases,” Rudick explained. Gensler, on Thursday, <a href="https://blockworks.co/news/gary-gensler-resigning">announced that he’d be leaving the SEC</a> when Trump takes office in January. 



“Further, the impact of having a comprehensive digital assets framework in the US, should it occur, cannot be understated, and would likely ignite a new wave of participation and development, propelling the industry to new heights. And, other countries such as China, wanting to remain competitive in light of the US’s newfound openness, may unban crypto or become more accommodative to the space.”



The $100,000 level values bitcoin at roughly $2 trillion, which — as Rudick pointed out — makes “it the seventh most valuable asset in the world by market cap, just behind the likes of Google and Amazon.”



Whether the six-figure record converts to a <a href="https://blockworks.co/news/waiting-for-altcoin-season">fully-fledged altcoin season</a> is the next obvious question for market participants.



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Bitcoin sets new all-time high above $100K

Jack Kubinec

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



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The crypto asset manager Grayscale joined the Solana ETF fray yesterday.



NYSE Arca filed a 19b-4 form notifying the SEC that it hopes to list and trade shares of Grayscale’s existing Solana Trust. With Grayscale in, only BlackRock, Fidelity, ProShares and Ark are among the major crypto ETF issuers yet to file for Solana ETFs. But all these prospective Solana ETF issuers may have an achilles heel: The ETFs as currently proposed would <a href="https://blockworks.co/news/lightspeed-newsletter-spot-solana-etf-filing">not offer</a> investors staking rewards.



This omission isn’t necessarily by choice — SOL ETF issuers followed the precedent set by ether ETFs, which <a href="https://blockworks.co/news/proposed-ether-etfs-not-staking-eth">excluded staking rewards</a> to comply with SEC guidelines. The details of the conversations between ether ETF issuers and the SEC remain unclear. However, it seems <a href="https://clsbluesky.law.columbia.edu/2024/08/08/should-ethereum-etfs-include-staking/#:~:text=The%20primary%20obstacle%20to%20allowing,liquidity%20and%20can%20deter%20investors.">likely</a> that the SEC had concerns about staking rewards being <a href="https://blockworks.co/news/staking-eth-no-security">classified as securities</a> and the potential slashing risks associated with staked ETH.



So when firms started filing for Solana ETFs, they left staking out from the jump. Throughout Solana’s unfolding ETF saga, issuers have repeatedly told me that the benefits of getting <a href="https://blockworks.co/news/bitwise-ceo-solana-ncredible-emerging-asset">regulated exposure</a> to Solana’s price action directly in one’s brokerage account make the products attractive despite their lack of staking rewards.&nbsp;



But the opportunity cost of cutting out staking is much higher for Solana than for Ethereum. Ethereum’s current staking APR is 3.4%, <a href="https://ethereum.org/en/staking/">according</a> to the Ethereum Foundation. Solana’s average staking APR over the past week has <a href="https://dune.com/21co/solana-key-metrics">been</a> 11.4%, according to data from 21.co. SOL’s staking reward isn’t always that high, but even in the relative doldrums of August it was yielding over 8%.



The lack of staking rewards would leave SOL ETF buyers diluted by Solana inflation, which happens when validators receive tokens for running the blockchain. As Dan Smith <a href="https://www.youtube.com/watch?v=FES9-WXxfHc">explained</a> on a recent episode of the Lightspeed podcast, those token emissions get passed onto Solana stakers via staking rewards, so only non-stakers lose value from SOL inflation.



Leah Wald, <a href="https://blockworks.co/podcast/lightspeed/2449ecc6-8595-11ef-940d-738b11db87b2">CEO of Sol Strategies</a>, said Solana’s appeal is broader than just staking yield, but noted that “staking is undeniably a value-add.” <a href="https://blockworks.co/news/lightspeed-newsletter-sol-strategies-rebrand">Sol Strategies</a>, which is publicly traded in Canada, stakes Solana and runs a Solana validator.



This could all change of course, since perhaps Donald Trump’s presumptive SEC chair nominee Paul Atkins will be more lenient on issuers and allow staking rewards to stand in applications. Todd Ruoff, CEO of decentralized AI shop Autonomys, said the Trump Administration is “likely to approve staking options in the near future.”&nbsp;



There’s no guarantee of that happening, so in a sense, the current question on Solana ETFs is this: Will investors take a 10% lower return to get access to a regulated investment wrapper?



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Grayscale excludes staking rewards as it joins SOL ETF filing fray

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When Coinbase CEO Brian Armstrong speaks, the crypto industry tends to listen.



His recent X post reminded me of what Twisted Sister first sang out in 1984: “We’re not gonna take it anymore.” (I would only hear this years later, after my birth).&nbsp;



If you didn’t see, here’s the post:



<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">We&#39;ve let all the law firms we work with know, that if they hire anyone who committed these bad deeds in the (soon to be) prior administration, we will no longer be a client of theirs. Senior partners at these law firms seem unaware of the crypto industry&#39;s position on this.… <a href="https://t.co/k8R6NtfTV1">https://t.co/k8R6NtfTV1</a> <a href="https://t.co/RT0k408i9f">pic.twitter.com/RT0k408i9f</a>&mdash; Brian Armstrong (@brian_armstrong) <a href="https://twitter.com/brian_armstrong/status/1863774342267781222?ref_src=twsrc%5Etfw">December 3, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



You see that Armstrong called out the hire of Gurbir Grewal, who had been the SEC’s enforcement division director since 2021. He <a href="https://blockworks.co/news/sec-enforcement-director-departure">departed the agency</a> in October and later that month joined the litigation and arbitration group at Milbank LLP.



The law firm stated in a news release that the commission brought more than 2,400 enforcement actions during Grewal’s tenure, including “more than 100 enforcement actions addressing noncompliance in the crypto space.”&nbsp;



A Milbank spokesperson did not return my request for comment.&nbsp;



Despite what the X post might suggest, a person familiar with the matter clarified that Milbank has never actually worked for Coinbase.&nbsp;&nbsp;



You might remember too that McGuireWoods in August <a href="https://blockworks.co/news/former-sec-leader-resurfaces-at-law-firm">hired David Hirsch</a>, ex-head of the SEC’s crypto assets and cyber unit. Coinbase’s relationship with that firm is unclear, and a McGuireWoods representative didn’t immediately comment.&nbsp;



Armstrong’s post was meant to spark conversation and give some transparency about how the publicly traded crypto exchange is thinking about this.



Coinbase chief legal officer Paul Grewal told me that not all law firm leaders keep close tabs on crypto and might not understand how “deeply personal” the SEC’s <a href="https://blockworks.co/news/sec-crippling-digital-assets">enforcement actions</a> felt to industry players.&nbsp;



“This was more than just, we have a good-faith disagreement about the law, so let’s resolve this in an amicable way,” he said. “It has felt for three and a half years that this industry has been under attack [and] unfairly attacked.”



Of course, companies can hire whoever they want. But the point is that so too can Coinbase (and others) choose who it works with.



Armstrong’s post “did catch people’s attention in the big law world,” Grewal noted. We’ll see if it moves the needle at all in terms of who firms choose to hire. Either way, the message was sent.



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A crypto CEO’s warning to law firms 

Casey Wagner

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After 16 years, Paul Atkins may be returning to the SEC.&nbsp;



President-elect Donald Trump this afternoon officially named Atkins as his pick to chair the SEC. Atkins worked with SEC Chairs Richard C. Breeden and Arthur Levitt in the 1990s as chief of staff and counselor, respectively. He later served as an SEC commissioner from 2002 to 2008, beginning his term shortly after Enron’s accounting fraud scandal and leaving a month before Lehman Brothers collapsed.&nbsp;



Since then, Atkins has worked as the CEO of his consulting firm, Patomak Global Partners. Its clients include banks, crypto companies and securities markets participants.&nbsp;



Atkins is no stranger to Washington, or to the nomination process. It only takes a simple majority to confirm <a href="https://blockworks.co/news/donald-trump-cabinet-selection">cabinet nominations</a>, and with Republicans holding 53 Senate seats, Atkins should be a shoo-in.&nbsp;



But I wouldn’t be surprised if Atkins faced some tough questions (likely mostly from Democrats) during his confirmation hearings about his private sector business interests — particularly those related to crypto.&nbsp;



Why? Let’s rewind to 2022.&nbsp;



Two years ago, thanks to a successful FOIA request from nonprofit <a href="https://blockworks.co/news/watchdog-files-sec-lawsuit">whistleblower</a> Empower Oversight, hundreds of emails between top SEC officials were released. Ripple, which at this point was about 16 months into its lawsuit with the SEC over the <a href="https://blockworks.co/news/sec-files-ripple-appeal-precedent">status</a> of its XRP token, found these correspondences especially interesting.&nbsp;



The emails, dated from May 2017 to December 2020, revealed that SEC officials were divided on which tokens violated securities laws, and which issuers should therefore be the targets of enforcement actions. They also highlighted a potential conflict of interest involving William Hinman, who served as director of the SEC’s division of corporation finance from May 2017 to December 2020.



Hinman was prohibited from engaging in SEC matters that could impact his former employer, law firm Simpson Thatcher, in which Hinman still held a financial interest while he worked at the SEC. Simpson Thatcher had a financial interest in Ethereum, which was (and has been since) <a href="https://blockworks.co/news/sec-drops-ethereum-consensys-investigation">spared</a> from an SEC enforcement action.&nbsp;



I covered all of this in much more detail for <a href="https://blockworks.co/news/sec-emails-highlighting-alleged-conflict-of-interest-set-to-take-center-stage-in-ripple-trial">Blockworks</a> back in 2022. But the bottom line is these emails were embarrassing for the SEC, which fought to have them sealed in its case against Ripple. The documents ultimately brought context and transparency to the lawsuit, and while they weren’t enough to toss the case entirely, they did help Ripple secure its <a href="https://blockworks.co/news/empire-newsletter-ripple-sec-legal-battle">partial win</a> in the summary judgment.&nbsp;



So, given this history, I’d imagine certain senators — many of whom have advocated against perceived “pro-crypto” legislation in the past — will be interested to learn more about which companies Atkins has been involved with and what, if any, his financial exposure is.&nbsp;



We’re months out from confirmation hearings, though. And Atkins has yet to make a public statement regarding his nomination (he also has not responded to Blockworks’ request for comment), so there is much more information to come. We’ll be following along closely.



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Donald Trump nominates former SEC Commissioner Paul Atkins to chair agency 

Donovan Choy

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/research">subscribe</a>.



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In an open-source industry where applications can and are easily forked, “aggregation theory” — the investor thesis that the winner should build on top of and integrate as many applications as possible — caught on as a promising idea during <a href="https://blockworks.co/news/will-defi-summer-return">DeFi summer</a>.



Middleware DeFi aggregators like 1inch, Matcha, Summer.fi (previously Oasis) and Instadapp have all pursued this idea to the fullest, but aggregation theory largely hasn’t panned out (<a href="https://blockworks.co/news/solana-venue-jupiter-released-mobile-app">Jupiter</a> in Solana world is an exception).



Ethereum DEX aggregators have not outcompeted Uniswap, even though in theory they should.



Instadapp was one such DeFi aggregator that built aggressively on top of blue-chip DeFi protocols like Uniswap, Maker, Aave, Compound and Curve.



After two years in development, Instadapp has reinvented itself. From being the builders of a classic aggregator product, Instadapp has evolved into a platform with a full-fledged DeFi product: <a href="https://blog.instadapp.io/fluid/">Fluid</a>, while the original Instadapp sits separately as a yield aggregator product.



Instadapp’s pivot has been quite successful: Fluid currently has <a href="https://defillama.com/protocol/fluid#information">$1.2 billion</a> in TVL across its money market, while the Fluid DEX on Ethereum is seeing about $428 million in 7-day <a href="https://fluid.instadapp.io/stats/1/dex">trading volumes</a> — currently the third-largest DEX behind Curve and Uniswap.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcMZiKJga7OqGcEVy2KUHp2AMk6sToemt9B_ZZKVFUAbk9mAxaCh6bEIGJgLh2wte33w4BJuDJqLBBMSjqPEJtLy37X3Kr1ZXsAyoiGrJBoTj_EXPQVZtvMjs0lwNX6XMBto1LXXQ?key=FNOYQp3t0h1phfdaGMWESlwr" alt=""/></figure>



Let’s backtrack for a minute. What is Fluid?



The first thing to know is that Fluid is not one app, but a superapp ecosystem. Fluid’s pooled liquidity layer forms the foundation of the protocol, on top of which sits its own DEX (<a href="https://blog.instadapp.io/fluid-dex/">launched</a> in early November), money market and other vault applications.



Fluid’s suite of applications borrows aggressively from many of DeFi’s market-tested primitives such as Uni v1’s auto rebalancing, Uni v3 concentrated liquidity, Aave’s utilization rate curves, Maker vault’s debt ceilings and more.



But it also brings to the table a slew of original DeFi innovations — namely more capital-efficient ways of liquidity provision — through its “smart collateral” and “smart debt” features.&nbsp;



For instance, smart debt lets borrowers denominate their debt into trading pairs as liquidity for a Fluid DEX trading pool.



By doing so, traders on Fluid DEX can trade between assets on somebody else’s debt. From the borrower’s perspective, you can maintain an active loan while simultaneously earning fees from traders to offset your original debt, thereby making debt a productive asset.



In sum, “smart debt” creates liquidity in an entirely opposite direction by which LPs seed liquidity in an AMM pool (i.e., deposit liquidity in two tokens and receive an LP token).



Smart debt has allowed trading pools like <a href="https://fluid.instadapp.io/stats/1/dex">USDC-USDT</a> with $20 million of liquidity to emerge on Fluid DEX, while technically being worth $0 in TVL.



“Smart collateral” on the other hand allows LPs to take their LP positions from lending, and rehypothecate them as collateral for AMM liquidity on the Fluid DEX. This allows LPs to earn DEX trading fees on top of lending fees.



This is not technically new — DEXs in the past, such as Cream Finance, have experimented with enabling the use of LP tokens as collateral — but Fluid is managing to execute it more efficiently.



“In Fluid DEX v2, we plan to allow users to select their ranges on both collateral and debt, which will be a breakthrough,” Instadapp chief operating officer DMH told Blockworks.



Fluid’s governance is governed by the INST token. The token has historically languished as a dead token, until a recent 4x pump in the last month.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXepfbvmvMtnZYT2o6qDYzL-mDQyyu9IochNVZcSYvv8-AF4lgbMazYIkJ5l4JFk1_4BOKT3zQ2h_ibGRDbYG7Mlnjo9nmOmwOIohMIG0REJ7jpmFYzNJ47BIO98RPh-qqIFvlIW?key=FNOYQp3t0h1phfdaGMWESlwr" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://coinmarketcap.com/currencies/instadapp/">Coinmarketcap</a></figcaption></figure>



A new governance proposal <a href="https://gov.instadapp.io/t/rebranding-and-growth-plan-for-fluid-protocol/985">published</a> yesterday is seeking to convert INST to FLUID at a 1:1 ratio without any dilution or total supply changes.



Upon hitting a target of $10 million in annualized revenues, Fluid will commence a token buyback program to create value accrual for the token.



Finally, the proposal also wants to spend 12% of tokens to fund growth initiatives like pursuing CEX listings, market making and fundraising and seeding an additional 5% of tokens for FLUID liquidity across DEXs.



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DeFi superapp Fluid is coming for Aave and Uniswap’s lunch

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



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If crypto were an ocean, Terra was a whirlpool the size of a Maelstrom.



And by all accounts, when that Maelstrom collapsed in on itself, in May 2022, the chaos sucked the liquidity right out of crypto markets for a solid year.



Stablecoins were crypto’s primary liquidity machine at the time and massive chunks of the market simply pulled the plug.



Tether withstood a month-long <a href="https://blockworks.co/news/the-historic-significance-of-tether-16b-bank-run">$16 billion</a> “bank run” on USDT, while Circle net burned over $30 billion USDC between June 2022 and November 2023.&nbsp;



At the same time, Paxos was <a href="https://blockworks.co/news/binance-stablecoin-busd-flipped-by-cardano-polygon">winding down Binance stablecoin</a> BUSD — redeeming about $20 billion worth of stablecoins over a 12 month period. A period that coincidentally ended just as bitcoin’s current run was heating up in late 2023.



Looking back, it’s clear that liquid staking and restaking tokens may have helped plug the leak as the <a href="https://blockworks.co/news/vaneck-casts-doubt-on-do-kwons-rescue-plan">rolling liquidations</a>, <a href="https://blockworks.co/news/genesis-reveals-exposure-to-bankrupt-three-arrows-capital">bankruptcies</a>, and <a href="https://blockworks.co/news/sbf-trial-day-1">fraud cases</a> played out.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdQFPopBlCwonOA6t3cV7OZ2dPdM03hc10wCHP5-GASwAvmw3cgXGOKXmRRVwNDOVIetMV3MCZsbSnGPEMWBT6sW5yH0isIwLQiJfBbiazuAhS0-ecG0Mt4-SYK9qYmKQFdHRkqfg?key=uBjjNWx3OQs7lRKtSA8a1oj1" alt=""/></figure>



This chart plots the market cap of stablecoins (blue) alongside liquid staking (purple) and restaking (pink) tokens since Q1 2021.&nbsp;



Combining the three token classes forms what I’ve called crypto’s liquidity engine.



Notice that as tens of billions of dollars were being drained from crypto via stablecoin redemptions — starting with Terra and into the middle of the chart — liquid staking tokens expanded to mitigate those losses.&nbsp;



It kept crypto’s liquidity engine on an even keel for a solid 10 months, with liquid (re)staking tokens taking off at the first hint of a reversal of the stablecoin redemption trend.



Terra is now a blip in crypto market history. Stablecoin supplies have just set a new all-time high close to $194 billion (about $6 billion higher than just before Terra), while liquid staking and restaking tokens are also at a fresh combined peak of $92.5 billion.



That makes crypto’s liquidity engine nearly $300 billion deep — with apparently no Maelstrom in sight.



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How crypto’s liquidity engine grew after Terra’s collapse

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Bitcoin Jesus will not go quietly into the night…or pay $50 million in alleged unpaid taxes.&nbsp;



Roger Ver, who was <a href="https://blockworks.co/news/roger-ver-tax-fraud-charges">arrested in Spain</a> in April of this year, is arguing that the Department of Justice’s tax fraud charges are “unconstitutional.”&nbsp;



The DOJ filed a “defective indictment,&#8221; Ver’s lawyers <a href="https://storage.courtlistener.com/recap/gov.uscourts.cacd.915322/gov.uscourts.cacd.915322.21.0.pdf">say</a>, that misquotes communications between Ver and his legal teams and — stop me if you’ve <a href="https://blockworks.co/news/nft-artists-sue-sec-regulatory-uncertainty">heard this one before</a> — “hangs on a semblance of regulatory clarity that never existed.”



Ver’s defense claims that Bitcoin Jesus tried to get ahead of the murky tax code in 2014 (which, to be fair, is still a bit unclear 10 years on) by hiring an unnamed law firm to consult on his decision to leave the US. As part of that, they conducted a hypothetical scenario where Ver sold all of his holdings, but the thing is, as Ver’s lawyers explained, he couldn’t sell his bitcoin back in 2014.&nbsp;



“On March 2, 2014, however, such a sale was likely impossible as a technological matter and catastrophic as a matter of market value. At the time, BTC was a thinly traded market with a limited number of active traders,” the filing said. And, unfortunately, the only marketplace to really sell off large amounts of bitcoin was Mt. Gox — which had just collapsed.&nbsp;



So Ver, along with multiple tax experts and attorneys, had basically tried to calculate unrealized gains and exit taxes with all that in mind. Per his lawyers, Ver was also exploring the cost if he was personally on the hook for bitcoin held by his companies.



Obviously, with this being a tax case, there’s a lot of back and forth about the unrealized gains, and Ver’s previous communications regarding his bitcoin sales and how he recorded his bitcoin holdings. But essentially, the motion to dismiss falls back on the fact that the current tax code — and by current, I also mean the framework that existed in 2014 — didn’t really account for crypto.&nbsp;



The indictment relies “on impermissibly vague laws that, at all relevant times, provided no basis for a person of reasonable intelligence to understand the proper application of tax laws to digital currencies; and they rely on the government’s persistent trampling on basic rights and notions of fair play,” his team argued.



The timing of this filing is what’s really interesting. Ver is set, as of right now, for a trial in lower Manhattan starting in early February of next year that could see him potentially extradited to the US. <a href="https://blockworks.co/news/empire-newsletter-trump-presidential-ticket">We’ve talked endlessly</a> about the incoming administration and its seemingly favorable view of crypto and Manhattan prosecutors, to this point, are <a href="https://www.google.com/search?q=manhattan+us+attorney+to+reduce+crypto+cases+prosecutor&amp;rlz=1C5CHFA_enUS1087US1087&amp;oq=manhattan+us+attorney+to+reduce+crypto+cases+prosecutor&amp;gs_lcrp=EgZjaHJvbWUyBggAEEUYOTIHCAEQIRigATIHCAIQIRigAdIBCDkxNTNqMGo5qAIAsAIB&amp;sourceid=chrome&amp;ie=UTF-8">already reducing the amount of crypto cases</a> they go after.



Whether or not Bitcoin Jesus can succeed in getting his case tossed is up to the judge at this point, but I bet his team feels there couldn’t have been a more perfect time for this filing.



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Roger Ver ready to fight over $50M in BTC taxes

Squid has unwrapped a decentralized intent-based liquidity protocol that promises cheaper, faster, and more efficient cross-chain swaps.



The Cross-Chain Order Routing and Auction Layer (CORAL), which went live today, uses a request-for-quote (RFQ) system, enabling users to execute swaps across chains with minimal costs and near-instant finality.&nbsp;



CORAL’s intents handle swaps natively, unlocking market maker order book pricing similar to CoWSwap. This approach eliminates slippage and ensures optimal execution by directly engaging with liquidity providers during the transaction process.



“With CORAL, we’ve removed the borders between chains [to] allow liquidity to flow with minimal friction,” said Fig, Squid’s co-founder.



The new protocol builds on the successful Squid 2.0 upgrade, which focused on abstracting away complex cross-chain transaction flows with multiple hops.



Read more: <a href="https://blockworks.co/news/squid-upgrade-cross-chain-abstraction?utm_source=blockworks-research.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=solving-multichain-pain-points">Squid sinks its tentacles into cross-chain abstraction</a>



One interesting property of the design is that <a href="https://blockworks.co/news/zk-rollups-cheaper-with-scale?utm_source=blockworks-research.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=solving-multichain-pain-points">like a zk rollup</a>, the more transactions come through, the cheaper it becomes for the end user.



That’s because the architecture allows for batching intents, which &#8220;saves a significant amount of gas and delivers users the best execution possible for their swaps,&#8221; Fig said.&nbsp;



This makes it “the cheapest decentralized intent protocol” on the market, even edging out market leaders like Across Protocol, he said. By reducing the per-order gas overhead, “as you scale, it becomes basically free.”



Across Protocol uses more complex <a href="https://app.blockworksresearch.com/unlocked/across-protocol-based-on-intents">cryptographic batching processes</a>, while CORAL leverages Axelar’s secure general message-passing protocol. Like Across, this approach pushes all bridge and routing risks to market makers, who handle the backend complexities of asset transfers. Users receive native assets on their destination chain, eliminating the need for wrapped tokens or trust in external validators.



CORAL’s flexibility goes beyond swaps. It allows developers to build complex DeFi applications using pre- and post-hooks, enabling actions like depositing cross-chain-swapped assets into yield farms with one click.



“I think we’re on a trajectory to have all the assets on one or two chains,” Fig said. “This tech allows you to hold native assets and not really have to bridge them.”



The protocol is now live on major chains including Ethereum, Arbitrum and Base. Plans to integrate Solana, Sui and Aptos are slated for January, and Cosmos-based chains through <a href="https://blockworks.co/tag/ibc?utm_source=blockworks-research.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=solving-multichain-pain-points">IBC</a> later in 2025.



Also on the road map: the ability to aggregate multiple messaging protocols, such as Hyperlane, which will add support for another 40-50 EVM-compatible blockchains. These additions will create a “network of networks,” significantly enhancing interoperability.



Altogether, Squid is positioned as a front-runner in <a href="https://blockworks.co/newsletter/research/issue/post_07a45426-69f7-4e72-9bb6-c84e92857ebd">achieving true chain abstraction</a>, where users interact with assets seamlessly, regardless of their originating chains.



“Cross-chain swaps are now as cheap as single-chain swaps, so we can really move toward full chain abstraction, where users don’t need to think about which chain their assets are on,” Fig said.



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Squid greases cross-chain liquidity

Despite platforms such as Twitter and Telegram and their vocal audiences, there is a significant gap in direct, in-depth feedback between protocols and the crypto community. This often leads to a mismatch between products launched and their fit in the market.



However, as Web3 matures, it’s realizing that in order to build better products with real use cases, it must truly understand its consumers and their needs on a deeper level.



<h2 class="wp-block-heading">A Call to the Crypto Community</h2>



Web3 marketing studio, SCRIB3, is inviting participants from all corners of the crypto industry to take part in an industry-first focus group. Whether you&#8217;re a developer building the next killer dApp, a user exploring different blockchain ecosystems, an active Discord member, or a token holder invested in the future of your favorite projects – your voice matters.



This focus group aims to bring together a diverse range of perspectives in order to:



<ul class="wp-block-list">
<li>Identify common challenges for different blockchain networks</li>



<li>Bridge the feedback gap between project teams and consumers</li>



<li>Discover the unique hurdles faced by Layer 2s and other infrastructure</li>



<li>Optimize go-to-market strategies for leading protocols </li>



<li>Foster innovations that benefit the entire industry</li>
</ul>



<h2 class="wp-block-heading">Driving Innovation Through Collaboration</h2>



SCRIB3 is going beyond just a focus group, pushing for an industry-wide collaborative effort to fix the industry based on real user experiences, expert insights and informed opinions from crypto natives.



Through answering a few simple questions you can provide nuanced feedback to help drive user-centric development and directly influence how blockchain platforms evolve to meet real-world consumer needs.



Please fill out the survey below for the chance to participate in a focus group where all participants will be compensated for their time.&nbsp;



Share your thoughts and help set a new industry standard.



<a href="https://nh6td5cc2h1.typeform.com/SCRIB3FG">Take the survey</a>.



This content is sponsored 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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New Focus Group Aims to Gather Real User Insights on Crypto Infrastructure

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



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Coinbase is <a href="https://blockworks.co/news/binance-coinbase-transaction-revenue-sol">making a lot of money</a> from Solana traders these days, but the influx of demand is also causing some headaches for America’s largest crypto exchange.



Coinbase is receiving more Solana send and receive requests “than ever before,” according to an employee, and so-called dusting attacks have become commonplace, causing Coinbase to take longer than usual to show SOL transactions on users’ accounts. This gets at an interesting problem Solana faces: While the blockchain processes data very quickly, the venues that need to make use of that data sometimes struggle to keep up.



Coinbase’s struggle is with data indexing, which is the process of taking blockchain transaction data — which comes as a jumble of bits — and putting it in a format that things like crypto exchanges can read.&nbsp;



When a blockchain produces as much data as Solana does, this can get demanding and pricey.&nbsp;



To contextualize how much data Solana produces, Blockworks Research data lead Dan Smith pointed to an experiment run by Eigen Labs to show the capacity of its EigenDA data product. Eigen Labs posted every block from 19 blockchains for a period of time in September, representing roughly 20 terabytes of data, and Solana accounted for a staggering 97% of the total. Coinbase’s indexers currently “can’t keep up” with Solana demand, a protocol specialist at the exchange <a href="https://x.com/ann_droo/status/1863432918590181788">wrote</a> on X.



Making matters worse, dusting has become “constant” on Coinbase, the protocol specialist <a href="https://x.com/ann_droo/status/1863789971913494981">wrote</a>.&nbsp;



Dusting refers to sending tiny amounts of crypto to many wallet addresses in hopes of tracking them. I moved SOL around on Coinbase while writing this article, and my wallet received two different dust transactions. This “dust” is trivial to the sender, but it can become a big strain for Coinbase’s data load.



And Solana’s indexing challenges run deeper than just volume.



Solana indexing is particularly difficult compared to Ethereum because the former lacks a uniform interface for smart contracts, which are the computer programs that run on the blockchain.&nbsp;



“[W]hen you look at your transactions across many of these [Solana] programs, the data is just a jumble of bytes which are not human readable,” Tristan Frizza, founder of Zeta Markets, said.



Since there’s no established way to read the data, it becomes difficult for indexers, block explorers, or data platforms like Dune to break down what different Solana transactions are actually doing.&nbsp;



Helius CEO Mert Mumtaz said the Solana development platform will be rolling out three new features in the next two months that he estimated could solve 80% of Solana’s “read layer issues.”



But until then, exchanges will keep having to index a blockchain that is seeing record demand.



Time to man the battle stations, Coinbase.



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Coinbase indexers buckle under SOL demand, ‘dusting’ attacks

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



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A fund issuer has adjusted several of its crypto ETFs to accommodate those seeking a different type of exposure to the space. They’re crypto futures funds that had lost some luster when spot products became available — but now feature a twist.&nbsp;&nbsp;



Bitwise officially converted three of its futures-based ETFs to “Trendwise” products that rotate between crypto and US Treasurys based on crypto market price trends.&nbsp;



Essentially the funds will stick to investing in crypto futures when the 10-day exponential moving average of the price of BTC or ETH is above the 20-day EMA (when prices are gaining momentum), the company said Tuesday. They would rotate into Treasurys when the opposite is occurring.



In other words, the strategies consider price momentum in an effort to boost risk-adjusted returns while reducing downside risk.



Bitwise launched its BTC futures ETF in March 2023. It brought to market an ETH futures offering (and one holding both BTC and ETH futures contracts) in October 2023. A year later from the latter launches (just weeks ago), the firm then revealed these planned adjustments.



The fund strategy changes are a few of the latest examples of crypto ETF innovation. As <a href="https://blockworks.co/news/planned-crypto-etfs-post-options">we’ve written about</a> previously, a number of issuers have filed for so-called buffer or covered call strategies, for example, after the listing of <a href="https://blockworks.co/news/bitcoin-etf-options-trading-begins">bitcoin ETF options</a>. Others seek to bring new crypto assets (<a href="https://blockworks.co/news/vaneck-files-for-solana-etf">solana</a>, <a href="https://blockworks.co/news/forward-guidance-newsletter-xrp-etf-filing">XRP</a>, <a href="https://blockworks.co/news/canary-capital-litecoin-etf">etc</a>.) into the ETF wrapper.&nbsp;



WisdomTree <a href="https://www.sec.gov/Archives/edgar/data/2046791/000121465924019800/wtxrp112224s1.htm">published</a> plans for a planned XRP fund on Monday — following <a href="https://blockworks.co/news/bitwise-files-for-spot-xrp-etf">Bitwise</a>, 21Shares and Canary Capital.



Though US spot bitcoin ETFs have been the category’s chief asset gatherers — with $31 billion of <a href="https://farside.co.uk/bitcoin-etf-flow-all-data/">net inflows</a> since their <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">January launches</a> — the crypto space appears poised to evolve and grow as more investors come in (and potentially under the oversight of more <a href="https://blockworks.co/news/trump-lenient-crypto-regulation">crypto-friendly</a> regulators).&nbsp;



With that, there should be plenty of demand for more nuanced products, and those with a focus beyond the largest crypto asset.



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A new kind of crypto ETF weighs market trends

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



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



Congressional leaders are back on the Hill today for the final weeks of the session, and they have their work cut out.&nbsp;



The current federal spending plan expires on Dec. 20, but a government shutdown seems unlikely (at least at this point). Both Republicans and Democrats have expressed interest in passing a continuing resolution that would fund the government through March.&nbsp;



The upside for the GOP is they get to put off making bigger decisions until they have control of both chambers. The downside is President-elect Donald Trump probably doesn’t want Congress tied up in appropriation bills when he’s trying to get nominations through the Senate and pass tax, immigration and <a href="https://blockworks.co/news/unpacking-trump-potential-tariff-policies">tariff policies</a>.&nbsp;



For Dems, the Senate would prefer to focus on getting as many of President Biden’s judicial nominations confirmed before the end of the year. Plus, funding bills need a 60-vote threshold in the Senate, and Republicans only have 53 seats. So Democrats are hardly ceding all their power.&nbsp;



A three-month stopgap, for better or for worse, is probably what is going to happen. For those looking to see significant crypto policy movement in the first quarter of 2025, this isn’t great news.



Still, industry officials seem confident that the second Trump administration will bring a new era of crypto policy to the US. Coinbase chief policy officer Faryar Shirzad told CNBC this week that he sees versions of the <a href="https://blockworks.co/news/house-passes-act-fit21-with-bipartisan-support">FIT21</a> bill and the <a href="https://blockworks.co/news/stablecoin-bill-bipartisan-support">Clarity for Payment Stablecoins Act</a> moving “fairly quickly” next year.&nbsp;



There’s no denying that a Republican majority in the House and the Senate (narrow as it may be) bodes well for getting crypto policy over the finish line. But at the end of the day, it comes down to what lawmakers — namely, committee heads — want to prioritize.&nbsp;



We could see some action from Trump in the form of executive orders, especially should he hire a “crypto czar,” a potential position <a href="https://blockworks.co/news/donald-trump-speaks-bitcoin-2024">Blockworks first reported on</a> in July. The crypto czar would likely have a team, potentially made up of industry execs and interested parties, we’ve heard from people close to the matter. If you’re looking to read the tea leaves on who might make up this new crypto policy council, I’d start with Trump’s top industry donors.&nbsp;



In terms of agency actions, the Senate will need to confirm SEC Chair Gary Gensler’s successor, plus a replacement for resigning Commissioner Jaime Lizárrage.&nbsp;



<a href="https://x.com/EleanorTerrett/status/1863803574121050306">Rumor</a> has it that Trump could name his pick to lead the SEC today. One <a href="https://unchainedcrypto.com/trump-taps-paul-atkins-for-next-sec-chair-making-good-on-his-crypto-promises/">outlet</a> reported that Trump already asked former SEC Commissioner Paul Atkins to head the agency (citing those “familiar with discussions”), but that Atkins has not yet accepted. Atkins did not immediately return Blockworks’ request for comment.&nbsp;&nbsp;



Another name that has come up in SEC chair speculation is Brian Brooks, an ex-acting comptroller of the currency.



The next SEC chair would probably replace Sanjat Wadhwa, who currently works as acting director of the division of enforcement. This has potential to really shake up how the SEC <a href="https://blockworks.co/news/sec-crippling-digital-assets">pursues</a> enforcement actions and which actors it chooses to target.&nbsp;



As for ongoing enforcement actions, I’ve said before that I’m skeptical we’ll see the SEC just drop these cases as the process is a bit more complicated than that. But stranger things have happened.&nbsp;



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