Serum is a decentralized exchange (DEX) built on the Solana blockchain by Serum Foundation; the foundation was created by FTX and Alameda Research. Serum features an on-chain central limit order book (CLOB), unlike many other DEXs that run on automated market-makers (AMM).

Serum

Kevin Ho

As the blockchain ecosystem grows, so does the demand for flexible, customizable tech.



Scalability is about making technology more accessible to Web3 builders and consumers. If developers can build scalable applications, they can reach more users without increasing their costs significantly or needing to multiply their resources. For those wishing to bootstrap a chain with limited resources, layer-3s could serve as a promising opportunity.



By cutting down on overhead operational and onboarding costs, layer-3s are quickly becoming an important piece of the blockchain ecosystem to give developers greater flexibility and growth opportunities.&nbsp;



When layer-3s started trending, they were met with initial skepticism. Building on top of a layer-2 could add complexity and unnecessary fragmentation, and adding more layers could make the ecosystem of apps more challenging to navigate, leading to a lack of interoperability.&nbsp;



But as more use cases emerge, the clearer it becomes: Layer-3s can lower barriers to entry for new chains and lower onboarding costs for users with minimal security tradeoffs.&nbsp;



<h2 class="wp-block-heading">The accessibility of layer-3s&nbsp;</h2>



Data availability costs continue to drop with increases in blob size and alternative data availability layers. The cost to operate a chain then increasingly becomes the cost to submit data commitments and state roots for withdrawals.&nbsp;



The fixed overhead cost to operate a layer-3 is thus significantly less than the fixed overhead cost to operate a layer-2. Submitting data commitments and output roots to a layer-2 is significantly less expensive than the cost to submit those same transactions to Ethereum Mainnet.&nbsp;



Additionally, when a layer-2 chain is newly launched, depositing tokens into that chain as a new user can be expensive. It requires both acquiring tokens on the layer-1 and then depositing those tokens from layer-1 to layer-2 — a total of two layer-1 transactions. During Ethereum Mainnet fee spikes, we’ve seen these transactions get prohibitively expensive for new users. With a layer-3, onboarding for a new user will only be two layer-2 transactions, which is a small fraction of the cost.



Read more from our opinion section: <a href="https://blockworks.co/news/important-trend-in-crypto-memecoins">The most important trend in crypto? It’s always been memecoins</a>



This presents application developers and chain operators with new, more cost-effective options to bootstrap usage and onboard new users.



We’re already seeing this trend with Base as an example; the chain has driven outsized demand and has expanded support for layer-3s building on top of it.



The entire blockchain ecosystem can benefit from layer-2’s commitment to the burgeoning layer-3 ecosystem, with even more developers able to leverage the power of layer-2 tech stacks.&nbsp;



<h2 class="wp-block-heading">Key features fueling the rise of layer-3s&nbsp;</h2>



From my vantage point, demand for layer-3s is surging and two features have quickly become the most highly requested.&nbsp;



The first is custom gas tokens, which allow developers to use a layer-2 token as the native gas token for a layer-3. Custom gas tokens are great for community development — if there’s an existing community rallied around a layer-2 token, using it as the native token to pay for gas is a concrete next step towards building an ecosystem. Custom gas tokens can enable new use cases like in-game currencies for gaming ecosystem chains and token grants which directly subsidize developer and user fees



The second sought-after feature is alternative data availability, or alt-DA. This gives developers the option to select the DA layer of their choosing, greatly reducing transaction costs with the goal of minimizing security tradeoffs.&nbsp;



Combining a layer-3 with alt-DA can give developers low overhead costs to post to the layer-2. This is in addition to sustainably low data availability costs, all adding up to the cheapest possible deployment of a layer-2 tech stack.&nbsp;&nbsp;



As layer-3s gain momentum, I expect many of these chains to launch with both custom gas tokens and alt-DA.&nbsp;



<h2 class="wp-block-heading">Powering the layer-3 future&nbsp;</h2>



Developers have more options than ever before, and it’s “choose your own adventure” when it comes to deploying a layer-2 or layer-3. All have their pros and cons, and there’s room for all to succeed.&nbsp;



While deploying a standard configuration, layer-2s will always be the most battle-tested, forward compatible way to launch a chain. However, layer-3s increase the accessibility of launching a new chain with ultra low cost. I see key features like custom gas tokens and alt-DA as important to the growth and adoption of layer-3s, which are in turn important for driving innovation forward with a shared vision for scaling Web3.&nbsp;



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


<div class="wp-block-post-author-biography">Kevin Ho is a co-founder of Optimism and a member of the product team at OP Labs, where he oversees protocol development and contributes to the Optimism Collective. OP Labs’ mission is to accelerate adoption of Ethereum with the most secure, decentralized open source tech stack, the OP Stack. OP Labs also provides resources and support to the developer community building and deploying on the Superchain. </div>


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Layer-3s are the future of scalability

Jack Kubinec

Jeff Albus

Howdy!



Happy Friday, folks. New York seems to be holding its collective breath today as the Knicks are about to play the Pacers for a trip to the conference finals.&nbsp;



Solana seems less nervous today, since the memecoins are already back online after yesterday’s shenanigans.



Let’s get into it, shall we?



— Jack Kubinec



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<h2 class="wp-block-heading">The Pump.fun exploit makes no sense&nbsp;</h2>



Solana’s highest-grossing protocol by revenue was exploited for millions of dollars-worth yesterday, but no one seems particularly upset.



Pump.fun, the Solana memecoin app, lost nearly $2 million after a rogue employee with admin privileges used their access to the project’s withdrawal authority and a number of flash loans to buy up tokens. The employee then <a href="https://blockworks.co/news/pump-fun-flash-loan-attack">siphoned out the liquidity</a> held in its bonding curve contracts, Pump.fun <a href="https://x.com/pumpdotfun/status/1791235050643636303">detailed</a> in a postmortem Thursday evening.&nbsp;



Usually, platforms being exploited creates pretty bad PR — both for the project, and in some cases, its underlying blockchain.&nbsp;



That doesn’t seem to have been the case so far. Pump.fun redeployed its contracts and resumed trading the same day it was exploited, and DeFiLlama <a href="https://defillama.com/protocol/pump?revenue=true">data</a> shows the platform’s revenue was higher Thursday — the day of the exploit — than the day before.&nbsp;



Pump.fun has been a big driver of <a href="https://blockworks.co/tag/solana">Solana</a> activity overall. The platform has been the highest-revenue protocol not named Ethereum over the past 30 days, hauling in $3 million more than DeFi heavyweight Uniswap Labs, <a href="https://defillama.com/">according</a> to DeFiLlama.



The app said on X that it was “working with some of the most esteemed security folks in the space,” but it didn’t say which esteemed security folks, and a representative for Pump.fun&nbsp; declined to comment. The project’s code is still closed-source.



Solana investors also responded with a collective shrug to the exploit of Pump.fun. Solana traded mostly sideways throughout the day Thursday before climbing to a monthly high near $170 after Pump.fun released its postmortem, <a href="https://www.coingecko.com/en/coins/solana">according</a> to CoinGecko. Solana was trading at around $167 at press time, a level it hadn’t seen since April 12.&nbsp;



Even the apparent exploiter, who took credit for the hack in a colorful <a href="https://x.com/STACCoverflow/status/1791134470071865576">series</a> of X posts criticizing the Pump.fun team for mistreating them and custodying user funds, didn’t seem to garner much ill will from Solana’s community. They went on a series of X spaces Thursday afternoon where speakers broadly praised the exploiter’s actions. They’ve variously been compared to crypto’s <a href="https://x.com/retiredroadman/status/1791161269422047624">Robin Hood</a> or Edward <a href="https://x.com/Mayosapien420/status/1791211659693896134">Snowden</a>.&nbsp;



Sometimes markets aren’t all that rational, I guess, but also, as <a href="https://blockworks.co/news/having-fun-pump-fun">we have previously written</a> regarding Pump.fun: “Sometimes, the grift is itself entertainment.”



If <a href="https://blockworks.co/tag/meme-coins">memecoins</a> exist mainly for fun rather than for profit, then perhaps a memecoin platform being exploited isn’t so catastrophic — so long as the exploit was entertaining. And in this case, boy was it.&nbsp;



–&nbsp;Jack Kubinec



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



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/v0v8kERAgv8laZ_tB5BkN9AHU9YDI9rTP2fnfm-9qcMxo0TxGJKT8ctLHO1_sayuKGfsf4we94E7j4nyEKaxP93QGLx7lyRnpzmsay1OI_HuYxK0haHiETXtsoT9Fiy1-R4zS5ne-c-Xf7iOBShbxm0" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://analytics.step.finance/performance">https://analytics.step.finance/performance</a></figcaption></figure>



Another big week for Solana, with unique active programs increasing by 1,611 and total on-network instructions surging to nearly 4.6 billion. In other words, more developers are deploying and maintaining applications within the ecosystem, leading to higher computational demand.&nbsp;



Concurrently, Solana surpassed <a href="https://blockworks.co/tag/ethereum">Ethereum</a> in daily transaction revenue on May 12, driven by a significant spike in fees. This surge provides further evidence of Solana’s ability to attract high-value transactions <a href="https://blockworks.co/news/empire-newsletter-no-12">despite congestion</a>.&nbsp;



Although the increase in fees has raised concerns about potential deterrence in the past, we continue to see heightened demand for Solana-based services.



–&nbsp;Jeff Albus



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



Island DAO kicks off today in Chania, Crete. But don’t be fooled by the name — it seems to be more of a coworking meetup than a decentralized autonomous organization.&nbsp;



The event — aimed at apparently transforming a beachfront villa into a Solana coworking paradise — has <a href="https://x.com/_Dean_Machine/status/1791441329588678658">sparked</a> <a href="https://x.com/IslandDAOx/status/1791430717206823166">interest</a> on social media as <a href="https://x.com/rexstjohn/status/1790042910429184113">attendees</a> <a href="https://x.com/Milimalism/status/1791360344188653921">arrive</a> on the island.&nbsp;



It might be good that the gathering seems to be mostly isolated to this one location, given that digital nomads are known to have a significant impact on the places they congregate.&nbsp;



But for visitors who are true students of history, Crete will add a rich cultural backdrop to the gathering. The island is deeply connected to the ancient Minoan civilization, believed by some to have inspired Plato’s tales of Atlantis. In fact, locals claim the Atlantis story may recount a volcanic disaster that occurred on the nearby island of Thira, known today as Santorini (a theory that this editor wholeheartedly believes.)



This gathering is sure to be exciting for the Solana tribe, but it’s vital to tread lightly, preserving the island’s beauty and heritage. If DAO members are mindful of their impact, the island can remain a welcoming destination long into the future. Γεια μας!



–&nbsp;Jeff Albus



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



A text from Justin Vlahos, portfolio manager at Coral DeFi:



<img loading="lazy" decoding="async" width="512" height="686" src="https://lh7-us.googleusercontent.com/fMW7usDPWU2t6TD98A8KepOEQMQ82uSHQfcdu0CxiOCXyyeus09WYVbH7PZXXdSzX1un7zwWQ9PEWRV696jqj0GToQ-GtvaXYgGPfi3Z4Fptv3D5-PlrfQRGG2TpDBLr6xFXoQLpY6wtHzJ_JtRlJdQ">



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Lightspeed Newsletter: The Pump.fun exploit draws yawns and jeers

Casey Wagner

Bitcoin and ether extended their rallies Friday, a sign pointing to sustained higher prices ahead, according to some analysts.&nbsp;



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) was up around 2% over the past 24 hours at time of publication to trade around $67,000, according to data from Coinbase. The largest cryptocurrency is now up more than 10% over the past seven days to hit the highest price since late April. Researchers from Matrixport attribute the run to favorable macroeconomic conditions.&nbsp;



US inflation eased slightly in April, according to the latest consumer price index report released Wednesday, which showed prices were up 0.3% last month, slightly below expectations of a 0.4% increase.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/crypto-voting-political-strategy">Don’t dismiss the misunderstood techno-optimist voter</a>



“The trigger for the post-CPI pump this week was a marginally lower-than-expected inflation number that catapulted [b]itcoin +7% higher,” Matrixport analysts wrote in a note Friday. “However, the buying occurred relatively [gradually], indicating a persistent buyer in the market instead of a fast re-pricing, as we usually see when economic data causes a huge surprise.”&nbsp;



Ether (<a href="https://blockworks.co/price/eth">ETH</a>) also posted a rally this week, gaining close to 7%, per Coinbase. The cryptocurrency is now trading back above the $3,000 level after hovering around $2,900 last week.&nbsp;



US equities on Friday were relatively flat after a week of returns. The S&amp;P 500 is up 1.2% over the past five trading days while the Nasdaq Composite has gained 1.8%.&nbsp;



Wednesday’s inflation print was enough to assure markets that the Federal Reserve will refrain from raising interest rates in June. Traders still widely anticipate that central bankers will opt to hold rates steady, according to Fed fund futures data from CME Group. Now that an increase is off the table, markets can breathe a sigh of relief, Matrixport analysts said.&nbsp;



Even after three Fed officials — Cleveland Fed President Loretta Mester, New York Fed President John Williams and Richmond Fed President Thomas Barkin — on Thursday in separate speeches insisted that rate cuts are a long way off, traders were undeterred.&nbsp;



“Interestingly, the total number of expected cuts has not moved — CME futures are still pricing in two before December,” Noelle Acheson, author of the Crypto is Macro Now newsletter, said. “Rather, it’s the timing that is in question, with a slight increase in hopes the first comes in July and 70% odds it comes in or before September.”



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Cryptocurrencies rally, stocks trade sideways as traders speculate interest rate decision 

Kristin Smith

American citizens, and perhaps citizens of the broader Western world, are nervous about the future.&nbsp;



Voters continually express wariness and pessimism about new and emerging technologies, from fears about <a href="https://www.mitre.org/news-insights/news-release/mitre-harris-poll-finds-lack-trust-among-americans-ai-technology">self-driving cars</a> to apprehension about the impact of <a href="https://today.yougov.com/topics/technology/survey-results/daily/2023/04/03/ad825/2">AI</a>. This pessimism naturally bleeds into the political realm, leaving more than four in five voters with <a href="https://www.pewresearch.org/politics/wp-content/uploads/sites/4/2019/06/PP_2019.06.19_Political-Discourse_FINAL.pdf">the impression that</a> “the tone and nature of political debate in the United States has become more negative in recent years.”&nbsp;



The chance for a change in political perspective — one that both supports technological development while also assuaging fears about said development —&nbsp;looks bleak. On the other hand, it may take just that — a simple change in perspective — to unlock a new era of openness and excitement focused on the benefits of new technology, rather than dwelling on its potential pitfalls.&nbsp;



A good place to start is with another often maligned sector: digital assets and blockchain technology.



The steelman case for digital assets goes something like this: Sovereign global citizens should have more power over their financial lives and digital identities, bolstered by privacy-supportive tools that uncouple those individuals from the power of Big Banks and Big Tech.&nbsp;



If you don’t believe that these two entities should have as much power as they do over our lives, then you should at least be curious about decentralized networks and protocols that purport to provide an antidote to that power. While there are undoubtedly many who trade and invest in digital assets only for the money, this too is simply a choice, and adding choice to people’s lives should be uncontroversial.



Unfortunately, it is often the strawman version of digital assets technology that filters into our political and cultural mainstream.&nbsp;



Given the overblown assertions about the <a href="https://subscriber.politicopro.com/article/2024/02/treasury-official-says-hamas-crypto-financing-was-likely-less-than-reported-00141452?source=email">role that digital assets play in facilitating illicit finance</a> and supporting extremist groups, the impression a casual observer might take away is that this technology has no redeeming features.&nbsp;



But embracing digital asset technology does not mean a free-for-all with zero regulation and rules that leave consumers fending for themselves. Instead, it means a more open-minded acknowledgement of the technology as a starting position, rather than a definition assessed solely by digital assets’ risks and shortcomings.



The anti-technology, pessimistic perspective is evident at many critical junctures of our economy, including green technology, power production and housing construction.&nbsp;



Take nuclear power as one example. The Sierra Club, one of America’s most important environmental advocacy groups, is <a href="https://www.sierraclub.org/nuclear-free">staunchly against the technology</a>, foreclosing on a tech-driven, ready-to-go partial solution to rising emissions. But opposition to nuclear power is driven by a misunderstanding of the risks. Indeed, the view is often backwards considering that nuclear power <a href="https://archive.is/o/kbfuz/https://ourworldindata.org/safest-sources-of-energy">causes fewer deaths</a> than even wind energy installations per unit of electricity produced, and also <a href="https://archive.is/uwsfS">produces fewer carbon emissions</a> than solar power projects. So while many politicians, (on the left at least) would be proud to have the endorsement of the Sierra Club, we’d wager that far fewer would line up for one from the Nuclear Energy Institute.&nbsp;



There are signs that this knee-jerk, “all new technology is potentially harmful” perspective may be changing. In California, for example, <a href="https://www.gov.ca.gov/2023/09/18/charging-ahead-california-achieves-yet-another-ev-goal-ahead-of-schedule-as-more-dollars-go-to-communities-to-support-transition/">recently passed legislation</a> both encourages the purchase and easy use of electrical vehicles and <a href="https://www.latimes.com/environment/story/2023-12-14/california-energy-officials-vote-to-extend-diablo-canyon-operations">supports</a> the ongoing operation of nuclear power plants in the state. Similarly, Texas is <a href="https://www.eia.gov/state/analysis.php?sid=TX">one of the leading producers</a> of renewable energy in the country and also <a href="https://www.cnbc.com/2023/09/26/where-are-bitcoin-miners-in-2023-texas.html#:~:text=Texas%20dominates%20the%20U.S.%20bitcoin,largest%20mining%20pool%2C%20Foundry%20USA.">houses</a> the most digital asset mining operations of any state.&nbsp;



Both policies put forward by these respective state legislators are pro-environment and pro-technology, and show what is possible when a politician assesses the objective benefits of the latter in service of the former. This position is also an example of what we might redefine as the “techno-optimist’s” view of society.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/crypto-congress-gensler-legislation-sec">It’s time for Congress to protect the crypto henhouse</a>



As the blogger Noah Smith <a href="https://www.noahpinion.blog/p/techno-optimism-for-2024">described it</a>: A techno-optimist “voter may be more attuned to the idea that society is a technology itself [and that] society is the user experience (UX) of other technologies; it determines how individual humans experience the power that technology yields.” This view says: We have the tools, how can we best use them?



That brings us back to how digital assets fit into this “techno-optimist” view, and how politicians might view both the technology and those voters who believe in it. Polling <a href="https://theharrispoll.com/briefs/millennials-lead-american-optimism-for-the-future/">points to the rough outline</a> of a constituency that is attuned to the potential benefits of new technology, including the development of the digital assets ecosystem in the United States.&nbsp;



A <a href="https://www.axios.com/2022/04/05/axios-momentive-poll-young-people-are-the-biggest-techno-optimists">recent survey</a> found that nearly one in four Americans under 25 are interested in digital assets; the same age cohort that is most interested in self-driving cars, smart home devices, drone delivery and electric transport. While this might not surprise many (young people are interested in cool new technology), it is in the best interest of our elected officials to cultivate that interest and incorporate those voters into a long term political strategy.



Too often we’re influenced by techno-doomers, those individuals <a href="https://www.noahpinion.blog/p/degrowth-we-cant-let-it-happen-here">who are convinced</a> that new advancements will destroy our world. Or, techno libertarians who don’t want society to exert any control over those same technologies.&nbsp;



We must tread the middle path, re-orienting the current consensus view of worry about technology’s ability to improve our lives, and cultivate the techno-optimists amongst us.&nbsp;



If we fail to do that now, we risk two things: our ability to make the best use of the technology we have now and will invent in the future, and more ordinarily, a durable pro-future voting bloc in coming elections.



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


<div class="wp-block-post-author-biography">Kristin is CEO of Blockchain Association, the Washington DC-based trade association representing nearly 100 of the digital asset industry’s leading companies.
</div>


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Don’t dismiss the misunderstood techno-optimist voter

Katherine Ross

A Nigerian court has refused Binance executive Tigran Gambaryan’s bail application, a family spokesperson told Blockworks.



The bail was denied on the grounds that the court believed Gambaryan could “jump bail,” though, per the spokesperson, he lacks a passport. The court was previously assured that Gambaryan wouldn’t flee. However, his colleague — Nadeem Anjarwalla — notably <a href="https://blockworks.co/news/binance-executive-escapes-nigerian-custody">escaped Nigerian detention</a> earlier this year.&nbsp;



“I truly cannot believe that my innocent husband is now — on his 40th birthday — having to face a trial for charges that he has nothing to do with. The whole world is watching what he is being put through and I just pray that common sense and justice will prevail and that Tigran will be allowed to come home to us,” Yuki Gambaryan, his wife, said in a statement.



The court also ruled that keeping Gambaryan in custody would help to speed up the trial he faces. Gambaryan is being held at the Kuje Correctional Facility.



The bail hearing wasn’t the only case heard involving Gambaryan on Friday. The courts also heard the government’s charges of tax evasion, which were filed against both <a href="https://blockworks.co/tag/binance">Binance</a> and Gambaryan.&nbsp;



Read more: <a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">Nigerian court postpones another Binance case to May 17</a>



In the tax evasion case, the court adjourned until May 22 for arraignment after prosecutors filed an amended charge.&nbsp;



The court adjourned until May 23 in the case charging Binance and Gambaryan with money laundering, following a request from Gambaryan’s lawyers.&nbsp;



The first witness, Nigerian Securities and Exchange Commission’s Abdulkadir Abbas, took the stand in the case and will be cross-examined by Gambaryan’s lawyers when the court’s in session next week.



“We are deeply disappointed that Tigran Gambaryan, who has no decision-making power in the company, continues to be detained,” a Binance spokesperson told Blockworks.



“Tigran has been dedicated to public service and fighting crime for most of his life. These charges against him are completely meritless. He should be freed while discussions continue between Binance and Nigerian government officials.”



Binance came <a href="https://blockworks.co/news/nigerian-government-binance-fine">under scrutiny</a> by <a href="https://blockworks.co/tag/nigeria">Nigeria</a> earlier this year. Gambaryan and his colleague Anjarwalla <a href="https://blockworks.co/news/binance-comments-on-exec-nigeria-detention">flew to meet with the government</a> and were later detained.&nbsp;



Binance has since <a href="https://blockworks.co/news/binance-ends-support-nigeria-naira">ended support</a> for the Nigerian naira.



Garba Umar of Interpol Africa said earlier this month that the <a href="https://blockworks.co/news/nigeria-court-postpones-binance-case">agency drafted paperwork</a> for Nadeem Anjarwalla, though a red notice — which informs law enforcement that the individual is wanted for arrest — has yet to be filed.&nbsp;



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Binance executive denied bail in Nigeria

Ben Strack

Bitcoin miners have spoken after the halving.&nbsp;



Many have said they are looking to wade deeper into the high-performance computing (HPC) space in a world of lower BTC rewards.&nbsp;&nbsp;



HPC proved an oft-heard acronym out of the mouths of industry executives in recent weeks as the segment’s companies reported first-quarter results — and more importantly, detailed future growth strategies.&nbsp;



Sure, miners continue looking to improve efficiency and reduce costs via upgrading hardware and mining algorithms, noted BlocksBridge Consulting founder Nishant Sharma.&nbsp;



But the <a href="https://blockworks.co/news/bitcoin-halving-2024-occurs">per-block rewards drop from 6.25 BTC to 3.125 BTC</a> on April 19 has kept companies focused on building out their ex-mining revenue streams.



“A trend that started before [the] halving and appears to be gaining traction among bitcoin miners is repurposing bitcoin <a href="https://blockworks.co/tag/mining">mining</a> infrastructure for HPC and other [AI] applications,” Sharma told Blockworks.



This is not exactly a new trend. Hive Digital Technologies was among the first to get serious about this pivot by tweaking its company name in July 2023. It noted at the time that its 38,000 Nvidia GPUs — or graphics processing units — have the capability to do AI workload.



It remains early days, as Hive realized $900,000 of HPC-related revenue in the fourth quarter.&nbsp; The company has not reported revenue marks for the first three months of 2024.&nbsp;



But others have.&nbsp;



<h2 class="wp-block-heading">Starting to realize HPC-related revenue</h2>



Bit Digital, Iris Energy and Hut 8 are among the miners that have started reporting the revenue earned from the HPC business line.



“I believe more companies will start doing so after their AI/HPC ventures become operational,” Sharma said.&nbsp;



Bitcoin mining giant <a href="https://blockworks.co/tag/hut-8-mining">Hut 8</a> reported $3.3 million in revenue under its “high-performance computing, colocation and cloud” umbrella — roughly 6% of the revenue it generated during the quarter.&nbsp;



CEO Asher Genoot called the company’s HPC business “sub-scale” in March, noting its infrastructure would need more investment to handle AI machines.



Read more: <a href="https://blockworks.co/news/hut-8-diversification-around-bitcoin-halving">Bitcoin miner Hut 8 doubles down on diversification, discipline around halving</a>



But the company earlier this quarter launched a new <a href="https://blockworks.co/tag/artificial-intelligence">AI</a> vertical under a “GPU-as-a-service model,” he noted on Hut 8’s Wednesday earnings call. It purchased 1,000 Nvidia GPUs and secured a deal with an unnamed AI cloud platform.&nbsp;



Genoot said he expects revenue generated from the new vertical to start in the year’s second half, with a forecasted annual rate of roughly $20 million.



“Today, we believe bitcoin mining generates the highest return on investment into large scale stranded load interconnection assets,” the Hut 8 CEO added on the call. “However, we also see a massive opportunity in the broader <a href="https://blockworks.co/tag/energy">energy</a> infrastructure sector as demand grows across new use cases like AI.”



Read more: <a href="https://blockworks.co/news/renewable-energy-bitcoin-mining-halving">The Bitcoin halving is over — greener mining is coming</a>



A bit further along on the HPC revenue journey was Bit Digital, which saw about $8 million in revenue — 27% of its total first-quarter revenue — come from HPC.



That business started generating revenue in January. Bit Digital disclosed the new unit — focused on supporting generative AI workstreams — in October, noting it had bought 132 integrated HPC platforms and 1,056 GPUs for $35 million.&nbsp;



Meanwhile, Iris Energy is also still building out its AI cloud services business.&nbsp;



The Australia-based miner generated $600,000 in revenue from that segment during the first quarter after commissioning 248 Nvidia GPUs to customer Poolside AI.&nbsp;



It bought 568 additional Nvidia H100 GPUs for $22 million in February. Those were expected to be delivered this quarter.&nbsp;&nbsp;&nbsp;



<h2 class="wp-block-heading">Other HPC-centric aspirations</h2>



Though others — such as Core Scientific, Stronghold Digital Mining and Terawulf — don’t yet have a dedicated HPC revenue line listed, that doesn’t mean they aren’t committed. Or at least mulling what it could do for their business.&nbsp;



<a href="https://blockworks.co/tag/core-scientific">Core Scientific</a>’s “significant advantage” over industry peers is its exclusive control over its in-demand high-power data center infrastructure, CEO Adam Sullivan said during an earnings call last week.



That HPC segment is “the next major growth opportunity for our business,” he added.



Core Scientific said in March that it would lease up to 16 megawatts (MW) of capacity in its Austin data center to cloud provider CoreWeave, with possible revenue from the deal exceeding $100 million. More than 500 MW of the miner’s total 1.2 gigawatts of contracted power can be utilized for alternative compute workloads, executives noted.



Read more: <a href="https://blockworks.co/news/post-bitcoin-halving-mining-strategies">Rival miners Marathon, Core Scientific each think they have an edge over peers</a>



Stronghold Digital Mining opened up the possibility of selling its assets, or the company outright, on its May 2 earnings call.&nbsp;



<a href="https://blockworks.co/news/stronghold-digital-mining-potential-sale">CEO Greg Beard wanted listeners to know</a> that its 130 MW of energized data center capacity could expand to more than 400 MW — with a possible focus on supporting AI and machine learning.



Meanwhile, Maryland-based mining company Terawulf is finalizing the design for the HPC section at its Lake Mariner Facility in New York. It has committed a 2 MW power block capable of deploying thousands of GPUs.&nbsp;



Joe Flynn, an analyst at Compass Point Research &amp; Trading, estimated in a May 14 research note that Terawulf could generate up to $1.5 million of yearly revenue, per megawatt, from HPC co-location services.&nbsp;



He added: “We continue to prefer miners that own and operate their own infrastructure, and believe there is optionality for [Terawulf] to pursue AI/HPC opportunities that would lead to a re-rating of the stock from long-term and more predictable free cash flows.”



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From BTC to HPC: Miners signal evolving focus after the halving

David Canellis

Michael McSweeney

<h2 class="wp-block-heading">What’s in a vote?</h2>



Meet the US Senate’s new Democratic crypto caucus —&nbsp;sort of.



Yesterday saw Congress’ upper chamber side with the House on a measure aimed at scuttling crypto accounting guidance created by the Securities and Exchange Commission. As Blockworks’ Casey Wagner reported Wednesday, <a href="https://blockworks.co/news/senate-vote-sab-121">the vote</a> resulted from a behind-the-scenes lobbying campaign involving Republicans and industry advocates.



In the end, a dozen Democrats crossed the aisle for the 60-38 vote. When the House <a href="https://blockworks.co/news/senate-passes-resolution-to-overturn-sab121">voted last week to undo</a> Staff Accounting Bulletin 121, 21 Democrats joined Republicans.&nbsp;



What to make of this group, and the relatively swift speed at which this effort took shape?&nbsp;



Some of the group have been public about their crypto positions for some time. Sen. Kirsten Gillibrand of New York, of course, <a href="https://blockworks.co/news/lummis-gillibrand-crypto-regulation-bill">co-authored legislation</a> with Sen. Cynthia Lummis of Wyoming. Others, including Sens. Cory Booker of New Jersey and Kyrsten Sinema of Arizona, have expressed support for the US crypto industry in the past.&nbsp;



On the other hand, some yes-voting members have taken positions less popular with the industry; Sens. Bob Casey of Pennsylvania, Mark Kelly of Arizona and John Hickenlooper of Colorado have all scored “very anti-crypto scores” from Stand With Crypto’s political rankings.&nbsp;&nbsp;



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>



One has to wonder how much the Biden White House’s veto threat factored into the Democrats’ decision to “vote their conscience” —&nbsp;that is, not align behind a particular yea-or-nay group strategy.&nbsp;



Remember, several of the votes in question were cast by senators up for reelection this fall: Gillibrand, Casey and Tester. For these members, at least, the vote provides a way to create some daylight between them and an unpopular incumbent.&nbsp;



The glass-half-empty interpretation: Biden’s stated plan to veto the bill made it a somewhat “safer” bill to vote on, given the preordained outcome.&nbsp;



Of course, it’s always possible that Biden will reverse course and side with a decidedly bipartisan movement in Congress, but given that it’s an election year, such a move would be a surprising one.



I think there’s more going on here than political machinations, however. Despite the memes to the contrary, there’s always been Democrat support for crypto issues, albeit not at the fervor expressed by Republicans.&nbsp;



It’s possible, quibbles aside, that the <a href="https://blockworks.co/news/us-voters-holding-crypto">popularity of crypto</a> has broken through and created a moment when Congress actually, against the odds, saw fit to move forward with crypto legislation. Sure, it took the form of an opposition measure, and yeah, it amounts to a won’t survive-a-veto messaging bill when Congress is essentially done working for the year. But they did it by a wider-than-expected margin, and that means something.



The upcoming election is about much more than crypto. But this week’s vote may mean that the next session of <a href="https://blockworks.co/tag/congress">Congress</a> could see real movement on crypto issues.&nbsp;



And who knows —&nbsp;there’s still a few more months to go. Maybe Lummis’ and Gillibrand’s bill will get the attention and debate it has long deserved.



—&nbsp;Michael McSweeney&nbsp;



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



<ul>
<li>The US bitcoin ETF segment saw positive inflows, including GBTC, notching a total flow of $257 million per Farside <a href="https://x.com/FarsideUK/status/1791315497616597386">data</a>.</li>



<li>BTC and ETH are up to $66,300 and $3,000, <a href="https://www.coinbase.com/price/ethereum">respectively</a>.&nbsp;</li>



<li>Roughly $55 million of shorts were liquidated in the past 24 hours, per Coinglass <a href="https://www.coinglass.com/LiquidationData">data</a>.</li>



<li>Pepe and WIF are down around 3% to start Thursday, as memestocks and <a href="https://blockworks.co/tag/meme-coins">memecoins</a> continue to lose momentum, <a href="https://www.coingecko.com/en/crypto-gainers-losers?top=100">according</a> to CoinGecko.</li>



<li>GameStop closed down 30% on Thursday and is <a href="https://www.marketwatch.com/investing/stock/gme?mod=search_symbol">looking</a> weak ahead of the opening bell Friday.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">The cutest of pumps</h2>



There are some things crypto just does better.



Want to transfer value almost instantly to the other side of the globe, for a fraction of the cost of boring-ass fintech unicorns like Wise and Revolut? Use Tether on a network like Tron or Polygon: frictionless, fast and easy.



How about raising funds for a new venture? <a href="https://blockworks.co/news/cryptos-best-use-case-buying-goats-twitter">Like a goat farm</a>. All good —&nbsp;you can easily source liquidity and donations from around the world on social media and buy tons of goats, no questions asked.



It turns out crypto also does wanton pointless pumping much better than the stock market.



The normie crowd has come back around to meme stocks, about three years after the original /r/wallstreetbets craze. GameStop has pumped up to about 550% and dumped by nearly half over the past few weeks, all because that Roaring Kitty guy tweeted some silly cryptic on Twitter.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/Z6UC5YkUleJdfUI7rRGCJX0NU1gKKD0CyHbYR6zFI3a2E_e3yHRMTwaQ76W81CHAaVX8O2If_n7cs5RGSiRbRzkQWu7jo92DZ-7ro0sgP3h-jMLitLPqVErBx8ZngQ6_5ryUbv9muVaZ4gFGNO_fv8k" alt=""/><figcaption class="wp-element-caption">What goes up mostly comes down and stays down when it comes to meme stocks</figcaption></figure>



Other popular memestocks from the COVID era of free helicopter money (stimulus packages) haven’t yet had the same treatment, for better or worse.



Whether AMC, Virgin Galactic and Kodak Eastman get their second moment is anyone’s guess. Still, GameStop’s recent 550% is cute compared to what happens around these parts. So is its peak-2021 pump of more than 5,400% (54x).



In the past five years — the same period as memecoin mania #1 and #2 — DOGE, FLOKI, WIF, BONK and SHIB have all, at their most, multiplied in price hundreds of times. SHIB however takes the cake, exploding by 80,000x (8 million percent).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/uOLY_MAQDeiv_TbmlQGmYXRt2uKgVnslatj1TXYa3Qbhzp9eYDrljsEY0lMKX8-YJFkTUgeDHczlmhRl3otm5H1KWVbUtZqJEAdBy60DP9VMlXESAekjJwNebtzTtVF6tujOkpN9R5daipNyMkWPVSc" alt=""/><figcaption class="wp-element-caption">Bitcoin, ether and Coinbase stock for scale (wink, wink)</figcaption></figure>



Sure, there are some caveats: Many memecoins start trading from near zero, so any real market movement sends prices practically off the chart. Hard to compare that with already-listed stocks within the same timeframe. And stock market circuit breakers do tend to put a damper on things.



But don’t let that get in the way of a good time.&nbsp;



DOGE, for instance, was launched in 2013 and it still went parabolic in 2021, far more than GameStop, Nikola or Hertz ever did.



In fact, if SHIB was included in the chart below, it would turn the entire meme stocks sector into a tiny, little, insignificant bubble.&nbsp;



Sounds about right.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/D1Bqo2AJ8gM71TfR7rgka4BrTB2gEGidKUayDLMQkHqg2cK-uBHmP-mySkhw2RaH0C9pr5ue1t0AMG3gqEQt9TY1hu7aTzjpnsJiPomLyjG3X-o-0wDWFS-xHjfZNdB9yggSqpZ7InaZ59sJLqcHZow" alt=""/></figure>



— David Canellis



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



<ul>
<li>Hong Kong’s bitcoin and ether ETFs saw <a href="https://www.bloomberg.com/news/articles/2024-05-16/hong-kong-s-shaky-crypto-etf-debuts-dent-global-hub-aspirations">outflows</a> earlier this week, shaking confidence in their debut.</li>



<li>Following yesterday’s exploit, Pump.fun <a href="https://x.com/pumpdotfun/status/1791235050643636303">said</a> the attacker was a “former employee.”&nbsp;</li>



<li>The Senate <a href="https://blockworks.co/news/senate-passes-resolution-to-overturn-sab121">passed</a> the resolution to overturn SAB 121, though President Biden has said he plans to veto it.</li>



<li>A Dolce &amp; Gabbana customer is <a href="https://www.bloomberg.com/news/articles/2024-05-17/dolce-gabbana-metaverse-fashion-offering-leaves-shopper-fuming">suing</a> the fashion firm after it delivered NFT outfits late, Bloomberg wrote.</li>



<li>Biden’s order to stop a Chinese-tied mining operation came days after CleanSpark bought the sites, CoinDesk <a href="https://www.coindesk.com/policy/2024/05/16/biden-order-to-halt-china-tied-bitcoin-mine-beside-nuke-base-came-as-us-firm-just-bought-it/?_gl=1*1gqt4hf*_up*MQ..*_ga*Mzg0Nzg2NDMxLjE3MTU5NDUwOTk.*_ga_VM3STRYVN8*MTcxNTk0NTA5OS4xLjAuMTcxNTk0NTA5OS4wLjAuNzY3MDMzNTIw">reports</a>.</li>
</ul>



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



Former Alameda CEO Sam Trabucco has been notably absent from the aftermath of FTX’s downfall, though his name tends to pop up when discussing the collapse itself.&nbsp;



<a href="https://blockworks.co/tag/caroline-ellison">Caroline Ellison</a>, his co-CEO prior to his departure, <a href="https://blockworks.co/news/caroline-ellison-testimony-hidden-gems">took the stand</a> at Sam Bankman-Fried’s trial though Trabucco didn’t appear once. He also hasn’t been publicly accused of any wrongdoing.



But yesterday, Trabucco broke his silence in a letter to the court <a href="https://blockworks.co/news/ftx-ryan-salame-pleads-guilty">ahead of ex-FTX executive</a> Ryan Salame’s sentencing hearing.&nbsp;



Trabucco’s letter is over three pages long and is….interesting, to say the least. Not only do we learn a lot about Salame’s home life (he hung 80 photographs of his new partner in his home after dating for a month) but we also get some insight into Trabucco’s time at <a href="https://blockworks.co/tag/alameda-research">Alameda</a>.&nbsp;



Simply put: Trabucco seemed unhappy with the hours and work at Alameda, calling Salame his “lifeline” through the “hardest period of my life.”



Obviously, we can’t know what happened behind closed doors and there are still many questions that remain unanswered about Trabucco’s role and the millions of dollars he walked away with.&nbsp;



But he’s made one thing clear: He’s a loyal friend.



— Katherine Ross



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Empire Newsletter: Crypto’s day in Congress

Oklahoma passed a bill earlier this week that protects state residents&#8217; right to self-custody digital assets.&nbsp;



The bill will go into effect on November 1, 2024.&nbsp;



OKHB3594 was signed into law by Governor Kevin Stitt. It was sponsored by four Republicans — State Senators Bill Coleman and Dana Prieto and State Representatives Brian Hill and Cody Maynard.



Under the bill, Oklahoma bans restricting or outlawing the use “or the self-custody of digital assets using a self-hosted wallet or a hardware wallet,” a <a href="https://www.billtrack50.com/billdetail/1679126">page</a> for the bill said.&nbsp;



Oklahomans can also mine crypto both at home and industrially, though they have to comply with local noise ordinances.&nbsp;



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>



“Anyone engaged in home digital asset mining, or digital asset mining business, <a href="https://blockworks.co/tag/staking">staking</a>, or staking as a service shall not be required to obtain a money transmitter license,” the bill said.



Additionally, “discriminatory electricity rates for digital asset <a href="https://blockworks.co/tag/mining">mining</a> businesses are outlawed as well.”



Residents can use crypto to pay for goods and services and are protected from paying additional taxes.



“Digital assets used as a method of payment may not be subject to any additional tax, withholding, assessment or charge by the state or local government that is based solely on the use of the digital asset as the method of payment,” the bill continued.



Satoshi Act Fund CEO Dennis Porter called the bill “groundbreaking” and said it was designed to protect “fundamental bitcoin rights.”



Read more: <a href="https://blockworks.co/news/senate-passes-resolution-to-overturn-sab121">Senate passes resolution to overturn SAB 121</a>



“The idea that &#8216;We the People&#8217; cannot hold our own assets is antithetical to American values. Without the ability to manage our wealth, we lose control of our destiny and the chance to create better futures for our families. This law ensures that everyone can secure not only their<a href="https://twitter.com/hashtag/Bitcoin?src=hashtag_click"> </a>[bitcoin] but all their assets,” he <a href="https://twitter.com/Dennis_Porter_/status/1790529917199003836?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1790529917199003836%7Ctwgr%5E002d355318eceab900f394228dbf92f1ca308e65%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fwww.coindesk.com%2Fpolicy%2F2024%2F05%2F15%2Fsweeping-bitcoin-rights-bill-becomes-law-in-oklahoma%2F">wrote</a> in a post on X.



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Oklahoma passes bill protecting ‘fundamental bitcoin rights’

Solayer, a startup building a product akin to EigenLayer on Solana, opened restaking deposits Thursday afternoon.



The invite-only deposit period was capped at $20 million dollars. Users could natively restake SOL on Solayer, or deposit the liquid <a href="https://blockworks.co/tag/staking">staking</a> products mSOL, bSOL, JITOSOL, and INF. With the private access launch, Solayer becomes a horse in the race to build a restaking ecosystem on the Solana blockchain.&nbsp;



Few Solana restaking protocols have gone live, with the exception of Picasso, which runs its own <a href="https://docs.picasso.network/technology/restaking/vaults">version</a> of Solana restaking.&nbsp;



Read more: <a href="https://blockworks.co/news/robinhood-solana-staking-europe">Robinhood enables Solana staking for customers in Europe</a>



Perhaps in a testament to the hype surrounding these protocols launching, Solayer hit its $20 million cap within 45 minutes of opening withdrawals, a member of the Solayer core team confirmed to Blockworks. And it’s not just degens placing bets on the new restaking protocol. Solayer is looking to raise $8 million at an $80 million valuation led by Polychain, CoinDesk <a href="http://.com/business/2024/05/01/restaking-gold-rush-spreads-to-solana-from-ethereum-with-jito-and-others-joining-in/">reported</a>.&nbsp;



Still, little is known about the company. Solayer <a href="https://solayer.org/blog/stage-1-genesis-epoch-is-live">said</a> the protocol has “been in the works since [the] end of 2023” in a blog post. It called the first deposit period “epoch 0,” and restaked assets will be locked in the protocol until “epoch 3.” A roadmap Solayer <a href="https://solayer.org/blog/introducing-solayer-stage-1-release-roadmap">posted</a> Wednesday said that a liquid restaking token called sSOL would launch in epoch 6.&nbsp;



A Solayer team member did not say how long each epoch would last but confirmed sSOL being an LRT.&nbsp;



Read more: <a href="https://blockworks.co/news/risks-restaking-overrated-ethereum">The risks of restaking are extremely overrated</a>



Restaking refers to using the staked tokens securing proof-of-stake blockchains to secure another layer of applications — or essentially staking staked tokens a second time. This extends the security of the blockchain’s base layer and puts idle staked assets to use, creating additional yield opportunities. By distributing security responsibilities across multiple layers, restaking enhances network resilience and maximizes the utility of staked tokens.



<a href="https://blockworks.co/tag/solana">Solana</a> is secured by a combination of proof-of-stake and proof-of-history, meaning restaking could be applied to the network.



The concept was pioneered on Ethereum by EigenLayer, which has raised over $150 million in venture funding and secured over $14 billion in total value locked (TVL), <a href="https://defillama.com/protocol/eigenlayer#information">according</a> to DeFiLlama.



Read more: <a href="https://blockworks.co/news/investors-betting-on-eigenlayer">Funding Wrap: Investors place more EigenLayer bets</a>



And now, the concept has made its way to Solana.



“In the coming year, we are excited about and hope to lead the movement of ‘scaling out’ of the Solana base chain,” Solayer wrote in a blog post.



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Solana restaking protocol Solayer soft-launches deposits

The US Senate on Thursday passed Joint Resolution 109, which seeks to overturn the Security and Exchange Commission’s Staff Accounting Bulletin (SAB) 121. The legislation now heads to President Joe Biden’s desk, where it is expected to be vetoed.&nbsp;&nbsp;&nbsp;&nbsp;



Twelve Democratic Senators voted in favor to pass the resolution Thursday: Kirsten Gillibrand of New York, John Hickenlooper of Colorado, Gary Peters of Michigan, Jon Tester of Montana, Kyrsten Sinema of Arizona, Mark Kelly of Arizona, Jacky Rosen of Nevada, Bob Casey of Pennsylvania, Cory Booker of New Jersey, Ben Ray Luján of New Mexico, Ron Wyden of Oregon and Majority Leader Chuck Schumer of New York.&nbsp;



SAB 121, introduced in March 2022 and enacted the following month, states that digital asset custodians should <a href="https://blockworks.co/news/sec-staff-call-for-crypto-entities-to-show-liability-on-balance-sheet">report a liability and “corresponding assets”</a> on their balance sheets for all custodied cryptocurrencies. The practice, SEC staff <a href="https://www.sec.gov/oca/staff-accounting-bulletin-121">said</a>, is intended to guard against the “significant risks and uncertainties associated with safeguarding crypto assets.”&nbsp;



Last week, in the Republican-controlled House, 21 Democrats voted in favor of passing the resolution. The White House <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">said</a> last week that should the legislation make it to President Joe Biden’s desk, he would veto it.&nbsp;



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>



“SAB 121 was issued in response to demonstrated technological, legal and regulatory risks that have caused substantial losses to consumers,” the Biden administration wrote in a statement. “By virtue of invoking the Congressional Review Act, it could also inappropriately constrain the <a href="https://blockworks.co/tag/sec">SEC</a>’s ability to ensure appropriate guardrails and address future issues related to crypto assets including financial stability.”



The president has ten days, excluding Sundays, to veto or sign off once it reaches his desk.&nbsp;



Rep. Wiley Nickel, D-N.C., who co-sponsored the resolution, on Wednesday <a href="https://nickel.house.gov/uploadedfiles/nickel_sab121_letter_to_sec.pdf">asked</a> SEC Chairman Gary Gensler to repeal SAB 121 ahead of the Senate vote.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/senate-gensler-sec-overturn-sab-121">It’s time to overturn SAB 121</a>



“Today&#8217;s Senate vote to repeal SAB 121 sends a clear bipartisan message: Congress will not stand idly by as <a href="https://blockworks.co/tag/gary-gensler">Gary Gensler</a> and the SEC deliberately sidestep the statutory rulemaking process and overstep their regulatory authority,” Nickel said Thursday in a statement.&nbsp;



The SEC did not immediately respond to Blockworks’ request for comment.



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Senate passes resolution to overturn SAB 121

Pump.fun was attacked Thursday by an exploiter who seemingly used flash loans to buy out the bonding curve.&nbsp;



In a post on X, Pump.fun said that it was “aware” that the contracts were compromised and were investigating.&nbsp;



“We have upgraded the contracts so the attacker cannot siphon any more funds. The TVL in the protocol right now is safe,” the team said. “We’ve paused trading — you cannot buy and sell any coins at the moment. Any coins that are currently in the process of migrating to Raydium cannot be traded and will not be migrating for an indefinite period of time.”



Igor Igamberdiev, head of research at Wintermute, analyzed the situation in a series of posts on X, saying that the key was compromised, “though the possibility of an inside job remains.”



<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">5/6 &#8211; liquidity withdrawal initiated by 5PXxuZ and subsequent return of enough SOL to the exploiter to repay the flash loan and donation to a random account instead of creating a pool on Raydium <a href="https://t.co/SIWhzNs3OJ">pic.twitter.com/SIWhzNs3OJ</a>&mdash; Igor Igamberdiev (@FrankResearcher) <a href="https://twitter.com/FrankResearcher/status/1791164335806394820?ref_src=twsrc%5Etfw">May 16, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Igamberdiev <a href="https://twitter.com/FrankResearcher/status/1791173010679824492">said</a> that the amount lost by Pump.fun is “at least” 12,000 SOL, or roughly $2 million.



An account on X going by Stacc seemed to take credit for the attack, writing “I’m about to change the course of history” in a <a href="https://twitter.com/STACCoverflow/status/1791134470071865576">post</a>.&nbsp;



Stacc seemed to imply in his posts that he didn’t intend to keep the stolen funds, but rather planned to transfer the “remaining balances of bonding curves” to some token users.&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">1. slerf holders 2. stacc holders 3. saga holders 4. risklol holders. This ~80m airdrop may cause a solana fork n it may cause an awful lot of sourpuss rich kids everywhere but it certainly stops the evil here. Probably shoulda went for the bonuses, eh? /x&mdash; 🔥🪂staccoverflow ; j&#39;arrête ; (@STACCoverflow) <a href="https://twitter.com/STACCoverflow/status/1791134479072809365?ref_src=twsrc%5Etfw">May 16, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It’s not clear as of publication how Stacc was able to execute the attack, or if they’re distributing the balances to random people.&nbsp;



As Blockworks previously reported, Pump.fun lets <a href="https://blockworks.co/news/having-fun-pump-fun">developers launch tokens</a> without seed liquidity for a couple of dollars. Its revenue comes from users buying and selling tokens.&nbsp;



Tokens that exceed market caps of $69,000 can then be listed on the Raydium DEX. 



This is a developing story.



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Pump.fun pauses trading after apparent flash loan attack

While we now have a better sense of who is, or was, invested in bitcoin ETFs, how these products are being used is a different story.&nbsp;



Various institutions have been filing so-called 13F filings in recent weeks, giving a glimpse into the buyers of the spot bitcoin ETFs that <a href="https://blockworks.co/news/bitcoin-etf-performance-first-four-months">attracted big demand after their January launches</a>, and the size of the positions.&nbsp;



Advisers and their clients are considering allocations anywhere from 1% to 10%, financial professionals told Blockworks — sometimes pairing bitcoin ETF holdings with exposure to crypto stocks, ETH and other assets.&nbsp;



And what might these positions be taking the place of? That depends.



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>&nbsp;



An April 25 filing showed Tennessee-based Fielder Capital held roughly $23 million worth of the Bitwise Bitcoin ETF (BITB) and the Grayscale Bitcoin Trust ETF (GBTC) combined, as of March 31.



The <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETF</a> holdings of Kansas-headquartered United Capital Management’s amounted to roughly $35 million at that date.&nbsp;



Some have put even more money in.



Wolverine Asset Management and Envestnet had about $54 million and $42 million worth of the Fidelity Wise Origin Bitcoin Fund (FBTC), respectively, under its control.&nbsp;



Hightower Advisors disclosed owning $68 million worth of BTC funds.



We also found out that the State of Wisconsin’s Investment Board <a href="https://blockworks.co/news/wisconsin-discloses-blackrock-ibit-shares">bought 2.4 million shares</a> of BlackRock’s iShares Bitcoin Trust (IBIT) and over a million shares of GBTC.&nbsp;



Oh yeah, and hedge fund <a href="https://blockworks.co/news/empire-newsletter-bitcoin-etf-shareholders">Millennium Management revealed owning about 20 million IBIT shares</a> worth more than $844 million.&nbsp;



While a bunch of the bigger players didn’t return requests to discuss these positions, some smaller firms did. Let’s jump in.



<h2 class="wp-block-heading">Mulling an appropriate allocation size</h2>



“Our view has been [that crypto] deserves to be part of a holistic portfolio,” Fielder Capital Chief Investment Officer Stephen Korn told Blockworks.



Korn said he and members of his firm were “crypto skeptics” for a while before becoming more interested in the space in 2020.



The firm began allocating capital from its high-net-worth and ultra-high-net-worth clients to a private crypto fund run by Galaxy Digital, as well as GBTC, which at that point was available over the counter to accredited investors.



Its most recent 13F disclosure — showing a nearly $15 million position in BITB — reflects a more recent switching out of GBTC into the significantly cheaper Bitwise fund for certain clients, Korn noted. Some Fielder Capital clients remain invested in GBTC, with filings showing the firm held Grayscale ETF shares amounting to about $8 million.



Fielder Capital works with roughly 110 families and manages roughly $800 million in assets.&nbsp;



The “vast majority” of the firm’s clients have crypto exposure, Korn said.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



“When a new client has come on — unless they’re strongly opposed — we’ve taken that position generally between 1.5% to 2% toward overall crypto,” he explained.



A crypto allocation, when made, could be as low as 1% in the case of clients around retirement age, for example. Others may have a crypto position appreciate to as high as 5% in a portfolio before the firm may choose to “trim it back,” Korn explained.&nbsp;



“We assume it can go to zero, and we want to make sure that if it goes to zero, it’s still appropriate from a client standpoint,” he said of crypto positions. “But we size all positions holistically on an overall portfolio basis.”



The allocation size between 1% to 5% for most Fielder Capital clients seems to be a popular choice for those putting money toward the space, according to a survey by the Digital Assets Council of Financial Professionals.&nbsp;



The findings showed that 87% of the advisers who recommend an allocation to crypto are suggesting a position between 1% and 5%.



As allocations go beyond 5%, “the impact on maximum drawdowns began to increase rapidly,” according to an August study by Bitwise Asset Management.



Read more: <a href="https://blockworks.co/news/bitcoin-boosts-60-40-portfolios">Bitcoin allocations trend positive for 60/40 portfolios: Bitwise</a>



Clients of Kansas-based United Capital Management may be a bit deeper into crypto than those of most other firms, with allocations of up to 10%, according to CEO Chad Koehn.



United Capital Management held about $22 million worth of FBTC as of March 31, filings show. It also owned shares of the ProShares Bitcoin Strategy ETF (BITO) amounting to about $13 million.



Koehn has been interested in bitcoin for nearly all of the asset’s 15-year history. He recalled getting exposure via GBTC in 2013 when bitcoin was at about $600.&nbsp;



“We pretty much bought and sold that like a stock,” he told Blockworks.



Things have evolved though, as GBTC would ultimately convert to an ETF in January. It would be <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">joined by nine other spot bitcoin funds</a>.



Just days before the Jan. 11 launches, Koehn swapped client positions in GBTC with shares of BITO out of fear the Securities and Exchange Commission might not let Grayscale’s ETF come to market.



United Capital Management later on swapped a majority of its BITO exposure for FBTC, noting that it liked Fidelity’s decision to custody its own bitcoin.



In all, Koehn said his firm holds about $50 million worth of “Web3” positions, which includes the bitcoin ETF shares. That represents nearly 10% of the $530 million or so assets that United Capital Management has under its discretion.



The firm has leeway to include crypto exposure in portfolios labeled between moderate and aggressive, the CEO explained. The majority of those $50 million worth of crypto-related positions is spread across roughly 500 clients.



<h2 class="wp-block-heading">Bitcoin ETFs’ portfolio role, and what it’s paired with</h2>



Bitcoin has become known to many as a digital store of value — often likened to gold — that does not rely on institutions and exists outside of the fiat currency system.&nbsp;



“Even if you strip that away, as a portfolio asset it’s pretty amazing,” Bitwise Chief Investment Officer Matt Hougan said during a panel <a href="https://www.youtube.com/watch?v=Uw4EE104ARE">discussion</a> last month. “It has low correlations to other traditional assets, it’s liquid, it has high return potential.”



In that way, he added, BTC is similar to early-stage venture capital or private equity, albeit without the liquidity restraints.



“We’re definitely trying to capture growth,” Koehn said of his firm’s bitcoin ETF positions. United Capital Management pairs exposure to those funds with allocations to the stocks of Coinbase, MicroStrategy and bitcoin miners like Marathon Digital and CleanSpark.



David Warshaw, founder of The Wealth Plan, said while he likes the 1% to 5% crypto allocation range for interested clients, the next questions are which crypto assets to include and what the position will be replacing.&nbsp;



Warshaw’s clients typically have a relatively small position to gold, he said — meaning he might instead choose to swap a portion of a client’s equity position to put toward crypto.&nbsp;



“But obviously if an adviser has a 10% gold allocation, it might make sense to take from that,” he explained. “I think that might be the asset class that is most comparable.”



The Long Island-based financial profession, whose firm manages about $65 million in assets for 125 households, has selected several of the spot bitcoin ETFs as options for his clients.



Beyond that, Warshaw uses <a href="https://blockworks.co/news/crypto-smas-hyperdrive">the Eaglebrook Advisors platform</a> for clients also interested in ether. For others who want even more crypto exposure, he utilizes a multi-coin strategy by Arbor Digital.



Fielder Capital clients with a crypto allocation remain also invested in gold, Korn said.&nbsp;



Like The Wealth Plan, the firm also doesn’t limit crypto-interested clients to BTC. A client’s crypto allocations generally have a 75% to 25% bitcoin-to-ether split.



Fielder Capital gains ether exposure via Fidelity, or the Grayscale Ethereum Trust — <a href="https://blockworks.co/news/grayscale-eth-trust-ethe-filing-vaneck-proshares">a product Grayscale is trying to convert to an ETF</a>.



Read more: <a href="https://blockworks.co/news/sec-decision-ether-etf-possibilities">Why the SEC could choose to deny ether ETFs, and what could happen next</a>



“We think about it as a small component of an overall portfolio that’s got a lot of potential upside in certain scenarios as governments potentially debase currency,” Korn said. “And then there’s the potential utility of some of the tokens, smart contracts…where we’ll see what happens.”



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



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How are advisers using bitcoin ETFs in client portfolios? It depends.

<h2 class="wp-block-heading">Out with a bang</h2>



The filing deadline for 13Fs was yesterday.



Millennium Management disclosed a huge position in BlackRock’s bitcoin ETF, holding roughly 20 million shares worth over $844 million.&nbsp;



Millenium also disclosed holdings in Fidelity, Grayscale, ARK and Bitwise, leading with nearly 13 million shares of Fidelity’s ETF. It owns roughly three million Grayscale shares, a mere 634,000 shares of Ark and 1.1 million shares of Bitwise’s ETF.



This makes Millennium the top holder of IBIT, but there’s a catch.&nbsp;



The thing is that this disclosure only shows the holdings on March 31. And I say that because Millennium is a multi-strategy hedge fund.&nbsp;



This isn’t to discount the sizable position they racked up — nearly $2 billion in bitcoin ETFs with $64 billion of assets under management — but this isn’t as straightforward as, say, Wisconsin. This kind of fund isn’t the buy-and-hold type, and could have shorted or sold off the position by now.



Read more: <a href="https://blockworks.co/news/vanguard-ceo-blackrock-bitcoin-etf">Yes, Vanguard’s new CEO supported BlackRock’s bitcoin ETF launch</a>



Sorry for the cold water there, but it’s easy to see such large numbers and get excited despite the fact that the reality is more complicated. However, I’d say that we still saw impressive holdings from an array of investment managers that are holding and some that may have just dipped their toes into the bitcoin ETF waters.&nbsp;



Let’s <a href="https://blockworks.co/news/wisconsin-discloses-blackrock-ibit-shares">go back to Wisconsin</a>. Earlier this week, the State of Wisconsin’s Investment Board (SWIB) bought 2.4 million shares of IBIT and over one million shares of GBTC. The board manages the Wisconsin Retirement System and State Investment Funds. It’s also more of a, shall we say, HODLer than a fund like Millennium.&nbsp;



Crypto Twitter went nuts about the filing, and rightly so. This is the kind of disclosure that can be used to see how investment managers are approaching bitcoin ETFs.&nbsp;



Outside of the flashy names, there were a <a href="https://blockworks.co/news/13f-filings-institutional-appetite-bitcoin-etfs">handful of very interesting disclosures</a>. For example, Hightower Advisors, a registered investment advisor, disclosed $68 million worth of bitcoin ETFs and manages over $100 billion in assets.&nbsp;



On Monday, <a href="https://blockworks.co/tag/bitwise">Bitwise</a> pointed out that, this time last week, there were roughly 560 disclosures reporting $3.5 billion worth of bitcoin ETF shares. Now that we’ve wrapped up, that figure could be a lot higher, especially if you count firms like Millennium. That alone puts investment managers at nearly $5 billion. To put that into perspective, US <a href="https://blockworks.co/bitcoin-etf">bitcoin ETFs</a> hold almost $59 billion in bitcoin.&nbsp;



When the 13Fs began to drop — roughly a month ago, we talked about how some analysts had warned that we might not necessarily see an appetite in this first slew of 13Fs (reminder that these forms are due on a quarterly basis) but clearly there’s interest.&nbsp;



This isn’t to say that they were totally wrong. The <a href="https://experts.bitwiseinvestments.com/cio-memos/whos-buying-bitcoin-etfs-according-to-13f-filings?_gl=1*17sch0n*_gcl_aw*R0NMLjE3MDkyMjM5NDEuQ2owS0NRaUE4NEN2QmhDYUFSSXNBTWtBdmtJVTFEZk12NW9TYnRoWWVGbkhUalppanJDR045TmlsQ2Jkd2x6R1QzZjRmWnRZNlBMUVBnWWFBakswRUFMd193Y0I.*_gcl_dc*R0NMLjE3MDkyMjM5NDEuQ2owS0NRaUE4NEN2QmhDYUFSSXNBTWtBdmtJVTFEZk12NW9TYnRoWWVGbkhUalppanJDR045TmlsQ2Jkd2x6R1QzZjRmWnRZNlBMUVBnWWFBakswRUFMd193Y0I.*_gcl_au*OTU4NjQ5MjI5LjE3MTM0NTY3NTI.&amp;_ga=2.110618821.1166902171.1715629445-825885356.1704924317">note</a> from Bitwise’s Matt Hougan earlier this week noted that professional investors own between 7-10% of all bitcoin ETF shares circulating. It’s still a retail game, but that could change by the next quarter and even the next year.&nbsp;



Hougan remains bullish, and rightfully so, because there is a factor of time here. To do the proper due diligence, a lot of these professionals will sit on the sidelines before they’re ready to jump in themselves.&nbsp;



New Hampshire state representative Keith Ammon, in a <a href="https://twitter.com/RepKeithAmmon/status/1789734542401552781">post</a> on X, expressed potential interest in his state looking into bitcoin ETFs as an investment.&nbsp;



The appetite is there, it just might take some time but we’re already seeing stunning (and sometimes unexpected!) positions from institutional managers.



13F season may be over for now, but the institutions are just getting started.



— Katherine Ross



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



<ul>
<li>Arbitrum’s number of daily active <a href="https://app.artemis.xyz/chains">addresses</a> has more than doubled in the past month, from 317,000 to almost 800,000 yesterday (and close to 1 million on Tuesday).</li>



<li>Base and Arbitrum are jostling for the top Ethereum layer-2 spot, together <a href="https://dune.com/hildobby/blobs">posting</a> 55% of all blobs to Ethereum right now.</li>



<li>EigenLayer’s TVL is back <a href="https://dune.com/hahahash/eigenlayer">above</a> 5 million ETH ($15 billion) after losing more than 55,000 ETH ($165.4 million) post-airdrop reveal.</li>



<li>BTC has blasted past $66,000 to three-week highs, up almost 7% as of 8am ET.</li>



<li>Only five tokens in the top 100 are down in the past 24 hours: PEPE, TON, FLOKI, TRON and LDO, with the former worst off at minus 5%.</li>
</ul>



<h2 class="wp-block-heading">What’s the opposite of hopium?</h2>



There is no altcoin season.



At least, not yet. Which is strange.



We’ve heard it before — this time is different. Bitcoin hit an all-time high before the halving, a glitch in the four-year crypto market cycle.&nbsp;



What that really means, nobody knows. But it’s definitely “different,” so it must count for something.



These four charts, too, must matter in that case. <img loading="lazy" decoding="async" src="https://lh7-us.googleusercontent.com/PUb3Axf-Gr63eBzcCkbfb__7hz4v9_VuDtzxXgowEmph1-sRkYgkDaletFNVlJAdHGwcM7YJOXpI4yQUN2ejYh3MnmUDmqlsIU2s3NuCwzhx7PCvzVh49szZ0zVmHuBxdkcDuCS_UIXJeM2yrZZtPWo" width="624" height="468">



Bitcoin may have set a new all-time high in March but the rest of the crypto market is still well below its 2021 top



There’s no real textbook definition for what constitutes an “altcoin season.” But here’s my attempt:&nbsp;



<a href="https://blockworks.co/tag/altcoins">Altcoin</a> season can potentially start when the market capitalization growth of the crypto sector — minus the top 10 digital assets — surpasses that of bitcoin’s, starting from the cycle low. Altcoin seasons are confirmed if that flippening lasts three months or more.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/nWnz3AZxpVuHCwim25khdDF1XMdq_66sJEuOGUoHPfaB4q05SGRL83PiLjpn1YmTUDizAmlSrd396XTN2jVIHPvcWmV1l2QA8OEPdeUFjJqanBEcFrv4l_Pt2dssjbaTJZ8hdwXJ8Aig2HI-X8V2lEU" alt=""/><figcaption class="wp-element-caption">Keep in mind, this chart is in log view. If it wasn’t, you could barely bake out bitcoin’s growth</figcaption></figure>



Above is the bull market that ran until 2018. Notice that ether season started in the earlier portion of the cycle, in January 2016 (although it had some advantage in that it was less than a year old).&nbsp;



Altcoin season started about six months later, and even persisted for more than a month after bitcoin set a price record close to $20,000.



The start of altcoin season in the next bull market, which ran well into 2021, was much harder to spot.



Going by our very official definition, an altcoin season began almost straight away but was cut short by a three-month long bitcoin stint.&nbsp;



A much more substantive altcoin season began in May 2020, resulting in the market capitalization of the non-bitcoin crypto sector (minus the top 10) multiplying by more than 70 times.&nbsp;



Bitcoin’s market cap otherwise managed about 20x from the 2018 bottom to the 2021 top.



<img decoding="async" width="624" height="470.43749999999994" src="https://lh7-us.googleusercontent.com/gclLdn17TmHTaH9EmTiG0Fkk9NQOeRXbczoq72LeB8Vx499ln6auql-IozKlhjbKeUD438Sz2evXs_0AHQ4aeskgb6JAY2Jig3YwLhw2SFkJYYgXtRnDFoNde4il8gLFHhBygQkyDDSvJ3x3m1jk1O0">



DeFi summer made for a spectacular altcoin season during the previous cycle



This time around, there hasn’t been an altcoin season at all.&nbsp;



Since bottoming <a href="https://blockworks.co/news/ftx-meltdown-timeline">due to the FTX crisis in late 2022</a>, the closest crypto has come was in August 2023, when the market cap growth of crypto (minus the top 10) eclipsed ether’s.&nbsp;



But considering how poorly ether has performed against bitcoin, that doesn’t really say much.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/GSPzXeKOY8uw_Xg5y68UYUlTN_eOanshsTOi8gI5fo7Npx47DWXPjKsUZrS57y1iZ9FhTh9cjuMXuxwxwxgP_GJU34DAPDgrBmXJpnf-D5v4J59BX0cXQC3qYo4quL3Il8zyLzkwiuozYfjIs6NxJZM" alt=""/><figcaption class="wp-element-caption">Right now, crypto is about a whole order of magnitude away from altcoin season</figcaption></figure>



Is all this bullish or bearish?&nbsp;



First, for the hall-monitor types: past performance is not indicative of future results, yadda yadda.&nbsp;



But in the previous two bull markets, altcoin season happened well before bitcoin hit all-time high. That hasn’t been the case during this cycle.



The bull case would posit that only means we’re in for a major altcoin season soon — followed by another, even bigger, bitcoin high.



Bears would otherwise say that the lack of altcoin season indicates that the most recent bitcoin bull run was a blip, a market mistake fueled by boomer investors who aped into ETFs, just because.



— David Canellis



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



<ul>
<li>Neel Somani, the Eclipse CEO accused of sexual misconduct, has <a href="https://twitter.com/EclipseFND/status/1790939437695996019">stepped down</a>, according to the Ethereum L2 startup. Vijay Chetty, formerly chief growth officer, has been named CEO.&nbsp;</li>



<li>CME Group plans to offer <a href="https://www.ft.com/content/bfae5894-8fa7-4131-86ce-7f8614065985">spot bitcoin trading</a> to its clients, the FT reports.&nbsp;</li>



<li>Alexey Pertsev, a Tornado Cash developer sentenced to 64 months in prison, has <a href="https://www.coindesk.com/policy/2024/05/16/tornado-cash-developer-alexey-pertsev-appeals-guilty-verdict/?utm_medium=referral&amp;utm_source=rss&amp;utm_campaign=headlines">appealed</a> the ruling, according to CoinDesk.&nbsp;</li>



<li>Coinbase is developing a product to <a href="https://www.bnnbloomberg.ca/coinbase-targets-crypto-demand-in-600-billion-australian-pension-sector-1.2073605">capture</a> potential demand in the market for Australian self-managed pensions, Bloomberg reports.&nbsp;</li>



<li>Canadian regulators <a href="https://www.osc.ca/en/news-events/news/joint-investigation-leads-fraud-money-laundering-charges-against-self-proclaimed-crypto-king-and">charged</a> a 25-year-old “Crypto King” with fraud and money laundering in connection with an investment scam.&nbsp;</li>
</ul>



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



The Department of Justice flexed its understanding of crypto in an indictment naming two brothers responsible for an attack on MEV bots last year.&nbsp;



There’s a lot to talk about when it comes to the 19-page <a href="https://www.justice.gov/opa/media/1351996/dl">indictment</a>, but I trust that CT has that covered (for now).&nbsp;



Instead, I want to turn your attention to a couple of paragraphs around the planning before and after the brothers executed the attack.&nbsp;



The DOJ alleges that the two “created and shared with each other online a document setting forth their plans.”&nbsp;



Read more: <a href="https://blockworks.co/news/doj-charges-brothers-mev-bot-attack">DOJ charges 2 brothers tied to $25M attack on MEV bots last year</a>



Excuse me, good sir, are we talking about a Google Doc to plan this attack?&nbsp;



Not only that, but the two supposedly conducted Google searches for crypto attorneys, how to launder crypto, “does the United States extradite to [foreign country]” and the charges they’d later end up facing.&nbsp;



(In case you feel like this sounds familiar, Nirvana Finance hacker Shakeeb Ahmed also <a href="https://blockworks.co/news/crypto-hacker-used-google-after-hack">turned to Google</a> to ask the important questions following his exploit.)



While I could say something about their use of Google (I hope they at least tried to use Incognito Mode), I’m selfishly thinking about my own Google search history and how truly embarrassing it would be to see that end up in an indictment.&nbsp;



Practice safe Googling habits out there, friends.&nbsp;



— Katherine Ross



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Empire Newsletter: Taking stock of who’s buying which bitcoin ETF

Rep. Mike Flood

Rep. Wiley Nickel

Gary Gensler’s Securities and Exchange Commission has made a name for itself with its hostility towards cryptocurrency. Time after time, over the last few years, his agency has repeatedly thrown up roadblocks to the common-sense regulation of digital assets and overstepped its regulatory authority.



One of the SEC’s most detrimental actions on digital assets came in the form of a seemingly innocuous memo known as Staff Accounting Bulletin 121 (or SAB 121). SAB 121 is significant because it requires publicly traded banks to place digital assets on their balance sheet. This change contradicts a basic rule of bank custody: that bank custodial assets are always held off-balance sheet.&nbsp;



As a result, banks are staying on the sidelines. These highly regulated institutions have successfully offered custodial services to the traditional financial system for decades. They are the experts in their field, and keeping them out of this market is making Americans less safe.



The recent approval of the bitcoin ETPs revealed a problem: The bitcoin within these ETPs is not held by banks, and most have the same custodian.&nbsp;



If Chair Gensler wishes to protect retail investors, he should take this problem seriously. Whether you love crypto or hate crypto, digital assets are here to stay. We need to ensure American investors receive the same protections they would with any other asset class.



The content of the Bulletin <a href="https://blockworks.co/news/sec-staff-call-for-crypto-entities-to-show-liability-on-balance-sheet">is a problem</a>, but the process<a href="https://blockworks.co/news/senators-oppose-sec-accounting-standards"> is arguably even worse</a>. First, Gensler’s SEC issued this bulletin without conferring with the banking regulators — an obvious misstep. Then, they attempted to circumvent the customary regulatory process by issuing a bulletin rather than a rule. Their process foul was so egregious that even the nonpartisan Government Accountability Office threw a flag on it, declaring that SAB 121 is effectively a rule for the purposes of the Congressional Review Act.



Last week, the US House of Representatives had the chance to change the course of federal policy and restore the role of Congress in the administrative rulemaking process. With the support of 207 Republicans and 21 Democrats, the House <a href="https://blockworks.co/news/house-committee-resolution-against-sab121">advanced our bipartisan resolution</a>, H.J. Res. 109, which repeals SAB 121 under the CRA.



Now, the Senate is <a href="https://blockworks.co/news/senate-vote-sab-121">slated to take up H.J. Res. 109</a>. We’re hopeful that this bipartisan, bicameral resolution will send a message — It’s time to adjust the SEC’s misguided approach to digital assets.&nbsp;



We need a repeal of SAB 121 for the future of our digital economy, the safe custody of cryptocurrencies and the good of the American investor.



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



Rep. Mike Flood, a Republican, represents Nebraska&#8217;s 1st Congressional District.



Rep. Wiley Nickel, a Democrat, represents North Carolina’s 13th Congressional District.



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



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It’s time to overturn SAB 121

The US Senate plans to vote on Joint Resolution 109 on Thursday, and sources on and around Capitol Hill say they believe the measure will draw enough Democrat support to pass.&nbsp;



<a href="https://www.congress.gov/bill/118th-congress/house-joint-resolution/109">Joint Resolution 109</a>, which passed the House of Representatives last week with <a href="https://blockworks.co/news/house-committee-resolution-against-sab121">bipartisan support</a>, aims to invalidate the Security and Exchange Commission’s controversial Staff Accounting Bulletin (SAB) 121.&nbsp;



SAB 121, introduced in March 2022 and enacted the following month, states that digital asset custodians should report a liability and “corresponding assets” on their balance sheets for all custodied cryptocurrencies.&nbsp;



While not an official agency rule, which would have required a public comment period, SEC staff <a href="https://www.sec.gov/oca/staff-accounting-bulletin-121">said</a> that SAB 121 is intended to guard against the “significant risks and uncertainties associated with safeguarding crypto assets.”&nbsp;



In the Republican-controlled House, 21 Democrats voted in favor of passing the resolution. In the Senate, the resolution needs a simple majority to pass, meaning at least two Democrats and all Republican Senators would have to vote in favor.&nbsp;



Four people familiar with the matter told Blockworks that multiple Democratic senators intend to vote in favor.&nbsp;



Longtime crypto advocate Sen. Kirsten Gillibrand, D-N.Y., told Blockworks that she will vote in favor of Joint Resolution 109 on Thursday.&nbsp;



“The rule was issued without proper consultation with the respective regulatory agencies or Congress and without going [through] a proper notice and comment period,” Gillibrand said.&nbsp;



“More importantly, it imposes an accounting approach that deviates from established standards, forcing financial institutions to count their customers’ digital assets as their own. This will limit options for consumers and leave them with less, not more consumer protection in cases of bankruptcy.”&nbsp;



Gillibrand last year co-signed a bipartisan <a href="https://financialservices.house.gov/uploadedfiles/2023-11-15_mchenry_lummis_sab_121_letter_-_final_11.15.pdf">letter</a> along with Sen. Cynthia Lummis, R-Wyom., and House Financial Services Committee Chair Patrick McHenry, R-N.C., opposing SAB 121 and asking the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration and Office of The Comptroller of the Currency to step in.&nbsp;



While Democratic Reps. Ritchie Torres of New York and Wiley Nickel of North Carolina also signed the letter, Gillibrand was the only senator from her party who supported the effort.&nbsp;



Nickel on Wednesday penned a <a href="https://nickel.house.gov/uploadedfiles/nickel_sab121_letter_to_sec.pdf">letter</a> to SEC Chair Gary Gensler, asking the agency head to withdraw SAB 121 ahead of Thursday’s Senate vote. Nickel later told Blockworks that as of mid-afternoon Wednesday, the SEC had not responded to the letter.&nbsp;



“I&#8217;m just trying to make the point and the case to Gary Gensler and the SEC that they&#8217;re not serving President Biden&#8217;s interests by turning this issue into a partisan political football,” Nickel said in an interview. “And my hope is that Gary Gensler will withdraw SAB 121 and work in a bipartisan way on the custodial banking piece.”&nbsp;



The White House <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">said</a> last week that should the legislation make it to President Joe Biden’s desk, he would veto it.&nbsp;



Gensler defended SAB 121 in December, saying it was “just a staff accounting bulletin,” and it is consistent with precedent set in US bankruptcy court.&nbsp;



“It basically addresses whether liabilities should be on balance sheet, and what we have found actually in bankruptcy court, time and again, many times now, that indeed bankruptcy courts have said that crypto assets are not bankruptcy remote,” <a href="https://blockworks.co/tag/gary-gensler">Gensler</a> said during a December 2023 appearance hosted by the American Bar Association.&nbsp;



The SEC did not immediately respond to Blockworks’ request for comment.



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Senate predicted to overturn SAB 121 in vote Thursday, Hill sources say

Howdy!



Web3 is helping pay for both my coffee and my cell phone plan. The latter is the subject of today’s newsletter.&nbsp;



Who said the millennial lifestyle subsidy was <a href="https://www.theatlantic.com/newsletters/archive/2022/06/uber-ride-share-prices-high-inflation/661250/">dead</a>?&nbsp;



— Jack Kubinec



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<h2 class="wp-block-heading">How high can Helium float?</h2>



It’s been more than five months since Helium Mobile debuted its nationwide cell plan, one of the most ambitious applications of what crypto folks call DePIN (decentralized physical infrastructure) to date.&nbsp;



For $20 a month, Nova Labs, the developer behind the Helium Network, <a href="https://blockworks.co/news/helium-cell-plan-goes-nationwide">began offering</a> US residents unlimited data plans.&nbsp;



Helium Network participants run hotspot nodes that emit cellular coverage, and they’re paid in Solana-based MOBILE tokens for operating these miniature cell <a href="https://www.fierce-network.com/wireless/helium-mobile-launches-20month-plan-nationwide">towers</a>. In places where no Helium data is available, Nova Labs purchases coverage from T-Mobile.&nbsp;



The product has <a href="https://dune.com/rawrmaan/helium-mobile">gained</a> nearly 90,000 subscribers since its launch, including this newsletter writer. Nova Labs CEO Amir Haleem told me these growth numbers are solid when put in context.



“It looked like in all of last year, AT&amp;T, Verizon, and T-Mobile only added something like 300-400,000 subscribers combined,” Haleem said, adding that Helium Mobile hopes to reach 300,000 subscribers by the end of the year.&nbsp;



Publicly available data seems to tell a different story: <a href="https://www.investopedia.com/att-q1-fy2023-earnings-preview-7482020">AT&amp;T</a>, <a href="https://finance.yahoo.com/news/verizon-communications-inc-vz-reports-182823453.html">Verizon</a>, and <a href="https://www.t-mobile.com/news/business/t-mobile-q4-2023-earnings">T-Mobile</a> each reported millions of new subscribers last year. Nova Labs did not immediately return a request for comment on the discrepancy.&nbsp;



As a user, I’ll say Helium’s coverage has been as good as any of my past cell carriers. Recently, I enabled discovery mapping, where Helium Mobile pays MOBILE tokens in exchange for location data in order to determine where it needs to create more coverage. On my first day, I earned $0.78-worth of MOBILE — or roughly ½ of a slice of pizza, in New York terms.&nbsp;



But there’s a question that’s followed the Helium Network for a while now: <a href="https://blockworks.co/news/where-is-the-revenue-helium-investors-inquire">Can this make money</a>? Nova Labs added another revenue stream in January when it partnered with the Spanish telecommunications company Telefónica. The company is offloading some of its mobile data in parts of Mexico to the Helium Network. As data usage increases globally, a new network like Helium’s could prove valuable to data providers.&nbsp;



Still, the sustainability of the network’s MOBILE token-based incentives are something of an open question. MOBILE’s price leapt more than 2,000% right after Helium Mobile went nationwide in December, <a href="https://www.coingecko.com/en/coins/helium-mobile">according</a> to CoinGecko. Helium Mobile has yet to face a serious stallout in subscriber growth, which could potentially put downward pressure on the token price.&nbsp;



Haleem thinks that the inefficiencies in legacy cellular coverage make Helium an “obvious” application for DePIN.



“It&#8217;s just wildly too expensive to keep deploying infrastructure the way it&#8217;s being deployed,” Haleem said. “It&#8217;s hundreds of billions or trillions of dollars to deploy towers all the time. It doesn&#8217;t make any sense.”



— Jack Kubinec



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



The Helium Mobile dashboard from Dune Analytics shows steady growth in newly minted subscriber NFTs, with 89,474 issued since January 2024.



<img loading="lazy" decoding="async" width="624" height="472" src="https://lh7-us.googleusercontent.com/IM3WOjmK3k0OI3QCRXqF1fRLgC5VDpegLcxS2XT5BNwls-tuh6bycCArtvhWr5tqksR5o3m9l78Jcr2hWRzzXxBxzqWwdVM1V9lEofG8LG4X2Ob577GmTer222r8GyuNSfwLDrdi8qr6YkssABcdcsg">



Initially, numbers soared, but enthusiasm flattened somewhat in recent weeks. On May 10, however, a spike occurred with 837 newly minted NFTs. This surge coincides with Helium Improvement Proposal 113, which increased rewards for Wi-Fi hotspots and reduced them for CBRS radios, incentivizing efficient coverage. The spike seemingly underscores the importance of user rewards on growth within the Web3 world. However, sustained long-term interest will likely depend on the quality of services, not just profit incentives.



— Jeffrey Albus



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



<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">For the first time ever on May 12, Solana generated more Total Economic Value than Ethereum in a single day <a href="https://t.co/nrCe7pMNjb">pic.twitter.com/nrCe7pMNjb</a>&mdash; Dan Smith (@smyyguy) <a href="https://twitter.com/smyyguy/status/1790429003553165393?ref_src=twsrc%5Etfw">May 14, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



On May 12, Solana surpassed Ethereum in daily economic value, recording $2.25 million in transaction fees and MEV — compared to Ethereum’s $1.98 million. The community has been abuzz since, with vibrant discussions spreading across social media.



In one X thread by <a href="https://twitter.com/smyyguy">Dan Smith</a> of <a href="https://www.blockworksresearch.com">Blockworks Research</a>, users pointed out the milestone’s intriguing timing. Users debated the significance of Ethereum’s L2 solutions, noting that reduced transactions on Ethereum’s L1 could reflect L2s working as intended rather than a decline in utility. This raised questions about whether L2 activity should be included in such metrics.



Mert Mumtaz, co-founder and CEO of Helius and co-host of the Lightspeed podcast, highlighted competitive dynamics, noting how other blockchain projects are targeting Solana developers with job offers. He has been vocal about the potential of Solana’s integrated approach and the limitations of Ethereum’s dominance.



Valuation disparities between Solana and Ethereum also fueled discussions, with some suggesting that Solana’s lower current valuation indicates significant potential for growth. This broader sentiment reflects a belief that Solana could see increased adoption and value as it continues to showcase its capabilities and attract more developers and users.



— Jeffrey Albus



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



A text from Arman Dezfuli-Arjomandi, a board member at the Helium Foundation:



<img loading="lazy" decoding="async" src="https://lh7-us.googleusercontent.com/HYP_lDuO3lOzrWi2Phdt2kTPkQiq_lqEfnsxZ6hxjYd7uWk5Y61Xu9nQBvcWaH2NlZtrACBVg1BWMi0RqagvfD2Vt5nc-Uc699QxaaZhzsXxi0iyBiPsaHNuPxFVf7KFOzJqXCrZnscnEJghDhG6_1s" width="624" height="611">



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