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ETH Strategy

Ben Strack

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



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A couple days after Fed Chair Jerome Powell’s widely watched Jackson Hole speech feels like a great time for a high-level update — particularly as macro’s effect on crypto markets has increased over time.



We still don’t know what the Fed will do at its Sept. 17 meeting. But to many, Powell’s comments<a href="https://blockworks.co/news/powell-jackson-hole-speech"> had a dovish tilt</a>, leaving the door open for an interest rate cut next month.&nbsp;



If we look at CME Group’s FedWatch tool — based on 30-Day fed funds futures prices, as of midday Monday — many think a 25-basis point cut is in the cards. The bottom section shows that expectation much higher than a month ago:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe5msJkgjwcgQzk35Zy54JcJpip_H08kmBGj0YVLnbuJa9JXHS6pm_iBF-5J3vvZoPtxflo7yL18ahyB7rq9avlATiGlJAUBUKNadGIi70_PQ5-RlTN-dMFmiT4o_GDUP0oCwYWtw?key=kC-qTijup8gbsaLTwUIxQQ" alt=""/></figure>



While an interest rate cut is generally good for risk assets like bitcoin, it’s a bit more nuanced than that. BTC surged above $117,000 on Friday before reversing course to below $111,000. The asset was trading for around $112,600 at 1:30 pm ET.



The broader trajectory of where crypto markets are headed will still depend on the macro backdrop, argued YouHodler markets chief Ruslan Lienkha.



“If inflationary pressures persist, the Fed may be forced into another prolonged pause, limiting the sustained impact of a single cut,” he told me. “Moreover, if a rate reduction is perceived as an emergency response to a recession, it could weigh on crypto alongside other risk assets.”



The best scenario? A cut that is part of a successful Fed effort to engineer a soft landing. “In that environment, bitcoin is likely to capture the bulk of institutional inflows, given its position as the most established digital asset,” Lienkha said. “Select altcoins could outperform in percentage terms due to their higher volatility and lower liquidity, amplifying upside moves when capital flows broaden beyond bitcoin.”



Speaking of institutional flows, crypto investment products saw more than $1.4 billion leave their coffers last week, <a href="https://coinshares.com/us/insights/research-data/fund-flows-25-08-25/">according</a> to CoinShares — the highest weekly outflow total since March. Within that data, we saw early-week pessimism around the Fed’s stance appearing to drive the outflows, before a recovery later on (mostly with ether products) around Powell’s remarks.



While $625 million flowed into US ETH ETFs on Thursday and Friday combined, $217 million exited BTC funds on those two days. Month-to-date net inflows for ETH and BTC ETFs are at +$2.5 billion and -$1 billion, respectively, “marking a notable change in investor sentiment toward the two assets,” noted CoinShares’ James Butterfill.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXczLfoFS0xWkjQ0VJyMSKiq57KR0UvHhJAvfpTjHbo3KLwkcEkm0Tys9Vf6ZXrZed91pdNPCm9Ni0jPESDVk3BHH6C758XDuCITCGy2P9SMuD-yJ_CbEYX8ixca2T2ewtiHdTg-?key=kC-qTijup8gbsaLTwUIxQQ" alt=""/></figure>



What did asset allocators take away from Friday?&nbsp;



CK Zheng, co-founder of crypto hedge fund ZX Squared Capital, called Powell’s pivot to possibly start cutting rates “significant” for risky asset classes.



His year-end target for bitcoin is between $125,000 and $150,000. He expects ETH to finish the year between $6,000 and $7,000. (It hovered around $4,600 Monday afternoon).



Globe 3 Capital CIO Matt Lason said that any rate cut signal confirms the hedge fund’s bullish positioning given how important more liquidity is in crypto. He expects the intensity of the ongoing crypto bull market to be strongest in Q4.&nbsp;&nbsp;



The expected rate cuts spurred Globe 3 Capital to rotate more of its holdings into smaller cap tokens “as we are seeing early signs of the long-awaited alt coin season,” Lason added.



What should we expect beyond Q4? 50T Funds founder Dan Tapiero weighed in this weekend on X, citing Morgan Stanley research:



<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">This bull mkt does not end with 82% of those surveyed by Morgan Stanley saying they do not own cryptocurrency. Tiny long exposure in btc and eth vs &#39;22. All of these metrics will make new highs in price and ownership during this cycle. 2026 will be a boom year. <a href="https://t.co/P5QaGFfd5E">pic.twitter.com/P5QaGFfd5E</a>&mdash; Dan Tapiero (@DTAPCAP) <a href="https://twitter.com/DTAPCAP/status/1959477135011094716?ref_src=twsrc%5Etfw">August 24, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Zheng said he foresees bitcoin dominance continuing to drop after the <a href="https://blockworks.co/news/genius-act-passes-house">GENIUS Act signing</a>, estimating the stablecoin market to 10x (from ~$270 billion) in the next few years. Coinbase’s latest simulations suggest the stablecoin market cap could reach $1.2 trillion by the end of 2028.&nbsp;



We know crypto markets move fast, but I think these “where-we-stand” snapshots are worth it. Even if it all changes in a few weeks, days or hours.



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<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Checking in on crypto markets as the Jackson Hole dust settles

Kate Irwin

This is a segment from The Drop newsletter. To read full editions, <a href="https://blockworks.co/newsletter/the-drop" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Crypto gaming has seen plenty of multimillion-dollar raises, but in many cases, that funding and hype hasn’t amounted to much. It’s not a guarantee of future success, by any means.&nbsp;



Funding in the crypto gaming sector is also <a href="https://dappradar.com/blog/state-of-blockchain-gaming-in-q2-2025">down 93%</a> year-over-year, meaning there isn’t as much of an appetite for funding large dev teams or splashy marketing budgets right now.



But builders are still finding ways to ship projects with lean teams, turning visions from the GameFi trenches into reality.



Jakpot Games, which is building out its Solana-based site with just three people in its core team, is one of those projects. Their arcade-like platform launched last week, letting players spend the platform’s JAKPOT token to try their hand at getting a high score in one of a few different browser-based games.&nbsp;



Rex Runner and Speed Racer, which both involve speeding through pixelated environments, are the two titles currently on offer.&nbsp;



Currently, each Jakpot tournament has a countdown — meaning players have anywhere from 12-24 hours to try to reach the top of a game’s leaderboard in order to win some tokens.



<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">To cap off the weekend, we extended our tournament over 440,000 <a href="https://twitter.com/search?q=%24JAKPOT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$JAKPOT</a> on the line pure skill, pure competition less than $1 to enter <a href="https://t.co/TKc0bvNImK">pic.twitter.com/TKc0bvNImK</a>&mdash; Jakpot Games (@JakpotGames) <a href="https://twitter.com/JakpotGames/status/1959766461842612605?ref_src=twsrc%5Etfw">August 24, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Users connect to the site via crypto wallet tool Privy, and buy the platform’s token using SOL.



85% of every pot is split among the top scorers. 10% goes to the team’s vault for marketing and development, and 5% rolls over into the next round’s pot, Jakpot cofounder Gannon Breslin, who previously authored The Drop, explained to me in an interview.&nbsp;



Like many gaming upstarts, Jakpot has already had to fend off an onslaught of cheaters who sought to unfairly exploit the platform for financial gain.



“They cheated in ways we didn’t even imagine possible,” Breslin said, adding that continuously monitoring and expanding upon their existing anticheat is a top priority.&nbsp;



Since its launch last week, Jakpot has seen 7,316 games played, 16.1 million game credits transferred, and 26.7 million JAKPOT paid out in total.&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">footballdotfun is awesome, and i&#39;m glad its leading the charge for gamefi seaon however, the game is still speculation which is more betting then not outright skill<a href="https://twitter.com/JakpotGames?ref_src=twsrc%5Etfw">@JakpotGames</a> is pure skill with $ on the line 19 hours left with 255,000 in the pot <a href="https://t.co/n9TOZHRnAd">pic.twitter.com/n9TOZHRnAd</a>&mdash; Gannon Breslin (@gannonbreslin) <a href="https://twitter.com/gannonbreslin/status/1959909285292593307?ref_src=twsrc%5Etfw">August 25, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



As often happens with low-cap tokens, JAKPOT’s <a href="https://dexscreener.com/solana/bpehdmdgf92pd4h6bqscaagrzdfpat8tpbas9s2bmti8">price</a> has fallen significantly from its all-time high. 26.7 million JAKPOT was worth over $53,000 just a few days ago, but would now be worth about $15,000.



“We’re 10,000 times more focused on people playing the game than the market cap,” Breslin said of the token.&nbsp;



The team is planning to add a “Degen” mode soon with higher token buy-ins per play to raise the stakes for those who want it.



They’re also building out custom game lobbies and are actively exploring which games they might add to their platform next (I suggested DOOM).&nbsp;



As the Jakpot team continues to build, they’ll have to compete for Crypto Twitter’s attention with the likes of the latest trend-of-the-moment Football.Fun, plus the Abstract gaming ecosystem and existing gaming platforms like Remix.



It’s never easy in the trenches.&nbsp;



Disclosure: Gannon Breslin is the prior owner and writer of The Drop newsletter, which was acquired by Blockworks.



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



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<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



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Gaming

Solana-based Jakpot Games launches pay-to-play arcade

This article was generated with the assistance of AI and reviewed by editor&nbsp;<a href="mailto:jeffrey@blockworks.co" target="_blank" rel="noreferrer noopener">Jeffrey Albus</a>&nbsp;before publication.



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A coalition of the world’s leading stock exchanges has urged regulators to crack down on tokenized stocks, warning that blockchain-based assets could threaten investor protection and market stability.



In a letter sent on August 22 to the U.S. Securities and Exchange Commission’s Crypto Task Force, the European Securities and Markets Authority, and the International Organization of Securities Commissions’ Fintech Task Force, the World Federation of Exchanges (WFE) said tokenized equities mimic shares without conferring legal ownership or shareholder rights.



Reuters, which reviewed the letter, <a href="https://www.reuters.com/sustainability/boards-policy-regulation/stock-exchanges-urge-regulators-crack-down-tokenised-stocks-2025-08-25/">reported</a> that the WFE described the tokens as imitations of listed equities that could mislead investors and expose issuing companies to reputational fallout if the products collapse. The trade group said some issuers have already voiced concerns about their shares being replicated without consent.



Tokenized equities allow investors to buy digital tokens that track the value of a company’s shares, but unlike traditional stockholders, token buyers do not gain voting rights or protections under securities law.



As Jamie Alcock <a href="https://www.ft.com/content/c8379d47-7f80-4ee6-8e9d-69b379cea027">argued</a> in the Financial Times earlier this month, these instruments provide only “synthetic exposure” to underlying assets rather than enforceable ownership. Proponents argue the tokens could lower trading costs and enable around-the-clock markets, but regulators have repeatedly stressed that securities laws still apply.



Platforms such as Robinhood and Coinbase have begun experimenting with these offerings, with Robinhood launching tokenized equities for European customers earlier this year and Coinbase seeking U.S. regulatory approval.



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<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Coinbase

Global stock exchanges call for crackdown on tokenized stocks

Macauley Peterson

Cap Labs’ new stablecoin cUSD has seen rapid adoption since launch, climbing to $67.85 million in circulation over the past week, <a href="https://defillama.com/stablecoin/cap-cusd">according</a> to DefiLlama. 



Etherscan <a href="https://etherscan.io/token/0xcccc62962d17b8914c62d74ffb843d73b2a3cccc">shows</a> 2,735 holders of the token to date. The jump signals strong demand for Cap’s yield-layered digital dollar model, which combines regulated reserve assets with EigenLayer-powered credit underwriting.



Built atop the newly launched Cap Stablecoin Network (CSN), cUSD is designed as a 1:1 redeemable stablecoin backed by assets like <a href="https://blockworks.co/tag/paypal">PayPal’s</a> <a href="https://blockworks.co/price/pyusd">PYUSD</a>, <a href="https://blockworks.co/tag/blackrock">BlackRock</a>-managed <a href="https://blockworks.co/news/buidl-collateral-tokenization">BUIDL</a>, and <a href="https://blockworks.co/tag/franklin-templeton">Franklin Templeton’s</a> BENJI. The yield-bearing version stcUSD — minted by staking cUSD — is enabled by a three-party system of lenders, operators, and restakers.



Cap’s core innovation lies in its structure: operators borrow stablecoins to deploy yield strategies, restakers underwrite the operator’s credit risk, and lenders (stcUSD holders) earn a floating yield, currently around 12%, depending on market demand and operator performance. While restaker collateral provides protection against operator default, stcUSD holders are still exposed to fluctuating yield dynamics.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcu_7EBXZi3VItlG_gUlP9ZdT_spy2QXjOEzbUMHu7GkZFHRrKyJZ9-tlygRXK5q_omNcVAeG6WuoQ6iSAgmzzZFOSBYsP0chFvaZY1O5vP7YJeK2iehw-MHotrGOt4ZVsJb5OyEA?key=1HSKtor9sNS05yY8kpZnCg" alt=""/><figcaption class="wp-element-caption">cUSD’s impressive growth; Source: <a href="https://defillama.com/stablecoin/cap-cusd">DefiLlama</a></figcaption></figure>



Unlike many past stablecoin launches, Cap’s model is carefully tuned to comply with the <a href="https://blockworks.co/tag/genius-act">GENIUS Act</a>, the sweeping US stablecoin legislation that prohibits interest-bearing payment tokens. Speaking at the Stablecoin Summit in Cannes <a href="https://youtu.be/fxd5wXtAaC8?si=45kDRI1mmi8Zt56U">in June</a>, Cap Labs founder Benjamin Lens was blunt:



“They said no yield, and it’s pretty clear — there’s no way around it. They do not want stablecoins giving yield to retail investors,” Lens said.



Thus, stcUSD is a separate <a href="https://blockworks.co/tag/erc-4626">ERC-4626</a> vault token, which users can mint by staking cUSD. The yield is generated through a marketplace of borrowing and restaking, not directly from Cap Labs.



“Genius Act covers companies that are generating yield on behalf of users and giving them to the users,” Lens said in Cannes, whereas Cap is “an immutable open protocol like <a href="https://blockworks.co/tag/ethereum">Ethereum</a>, like Bitcoin.”



Combined with the fact that the percentage of any one stablecoin backing cUSD is limited to 40%, Lens thinks they have a compliant mechanism. “This is the standard that we&#8217;ve agreed to with Templeton and BlackRock for our integration with them,” Lens told Blockworks, noting it’s the same arrangement that UStB (from Ethena) made in partnership with BlackRock.



<h2 class="wp-block-heading">Restaking evolution</h2>



Cap’s design aligns with a trend emerging on <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a>: the financialization of Actively Validated Services (AVSs). Traditionally, AVSs on EigenLayer offered infrastructure services — like oracles or bridges — with risk limited to uptime or correctness. But a new wave of AVSs is using EigenLayer to underwrite financial guarantees.



Cap is one example highlighted by EigenLayer founder Sreeram Kannan. “A staker can stake and promise that an operator [like Susquehanna] is going to make a 10% APR,” Kannan told Blockworks. “You can underwrite financial risk using EigenLayer, which is a very new kind of risk, which requires much, much more active curation and monitoring,” he said.



What makes this possible is EigenLayer’s recent rollout of a new feature, complementary to slashing, which <a href="https://blockworks.co/news/restaking-use-cases-reframed">went live in April</a>.&nbsp;



While slashing enables restakers to be penalized for backing underperforming operators, <a href="https://docs.eigencloud.xyz/products/eigenlayer/concepts/slashing/redistribution">redistribution</a>, launched in late July, allows slashed funds to be redirected back to the impacted AVS — such as Cap’s lending vault — rather than burned.



That change turns EigenLayer into a programmable risk distribution layer, capable of enforcing structured finance contracts entirely onchain.



“With financial AVSs, slashing is the core logic,” Kannan said. “A liquidation is an example — if the hurdle rate is not met — slash and move the money out.” That’s easier than slashing some infrastructure AVSs like a ZK or TEE coprocessor, where it’s harder to adequately express the slashing logic onchain, he added.



According to a research note from Serenity Research and Catalysis <a href="https://serenityresearch.substack.com/p/serenity-premium-cap-money-and-cusd">published</a> Sunday, Cap’s model resembles a CDS-like structure: Restakers sign off-chain legal agreements to cover operator defaults, post collateral onchain, and are liquidated if their guarantee fails. Cap currently lists market makers like Fasanara, GSR, and Amber as operators, with Gauntlet and <a href="https://blockworks.co/tag/symbiotic">Symbiotic</a> restakers providing credit protection.



Cap Labs’ operating company, which handles smart contracts, social media and frontend, is based in Panama, Lens said.



“There are currently no plans to geofence the US. Since we&#8217;re functionally an autonomous, overcollateralized lending market, we&#8217;re taking a similar precedent to <a href="https://blockworks.co/tag/aave">Aave</a> and <a href="https://blockworks.co/analytics/morpho">Morpho</a>,” he said.



As Cap’s model gains traction, it could preview a broader shift in the restaking ecosystem: from securing infrastructure to enabling onchain credit underwriting, with slashing and redistribution forming the enforcement rails for next-gen financial AVSs.



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<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



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EigenLayer

Cap Labs attracts capital with EigenLayer-backed credit model

This article was generated with the assistance of AI and reviewed by editor&nbsp;<a href="mailto:jeffrey@blockworks.co" target="_blank" rel="noreferrer noopener">Jeffrey Albus</a>&nbsp;before publication.



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Galaxy Digital, Multicoin Capital, and Jump Crypto are <a href="https://www.bloomberg.com/news/articles/2025-08-25/galaxy-jump-multicoin-seek-1-billion-for-buying-solana-token?embedded-checkout=true">seeking to raise</a> $1 billion to acquire Solana (SOL). If successful, the effort would establish the largest corporate treasury dedicated to the token to date.



According to Bloomberg, the three firms plan to acquire a publicly traded company and convert it into a dedicated digital asset treasury vehicle, with Cantor Fitzgerald serving as lead banker.&nbsp;



The initiative, which has reportedly received support from the Solana Foundation, is expected to close in early September 2025.



Announced on the same day, Sharps Technology <a href="https://www.prnewswire.com/news-releases/sharps-technology-inc-announces-over-400-million-private-placement-seeking-to-establish-the-largest-solana-digital-asset-treasury-strategy-302537587.html">said</a> it priced an over-$400 million private placement aimed at building its own Solana-focused treasury strategy. The Nasdaq-listed company said the plan would involve purchasing SOL both on the open market and directly from the Solana Foundation at a discount.



Investors in the Sharps placement include ParaFi, Pantera, FalconX, Republic Digital, CoinFund, Arrington Capital and other digital asset institutions. The transaction is scheduled to close later in August, subject to customary conditions.



Combined, the two efforts represent a potential $1.4 billion influx into Solana markets, significantly larger than existing treasuries held by companies such as Upexi — worth close to $400 million at current prices — and DeFi Development Corporation, valued near $240 million.



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



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<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
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Galaxy

Galaxy, Jump, and Multicoin align on $1B Solana treasury initiative

David Canellis

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



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Last week, we spent some time exploring what the rest of the cycle might look like.&nbsp;



Another reason that this time is different: Crypto has never been in a bull market with an agreeable SEC.



How wild this cycle might’ve looked without Gensler at the helm for the first half.



Don’t get me wrong — having a securities regulator back off on stuff like ETFs (bonus points for in-kind redemptions), liquid staking and staking-as-a-service is grand.&nbsp;



But ICOs are the Holy Grail for the crypto space. The job’s not finished until they’re back.&nbsp;



Hester Peirce, the SEC Commissioner who was earlier to crypto than practically anyone at the agency, is acutely aware that financial accessibility is at the heart of what makes crypto “crypto.”



“Obviously I’m someone who believes very strongly in the dispersion of knowledge across society, and in the fundamental value of every human being, and the ability of every human being to contribute something unique to society. And I think that concept really links up very well with crypto,” Peirce told Yano on today’s Empire podcast.



“[Crypto] is trying to bring the ability of people to engage with one another, peer to peer, and really to draw on people who society might before have shut out. If you have a centralized intermediary, what happens is that that intermediary — either of its own accord or because the government tells it to do so — shuts certain people out.”



We already know that the answer is open-source protocols that “anyone can access and use on the same terms as everyone else,” as Peirce put it. And we already have them.&nbsp;



Still, freedom of access does not come with freedom of consequences for offering token sales to US investors. At least, until the SEC finalizes a clear framework for token sales.&nbsp;



“I mean, the goal is to get a framework in place that would allow people to do ICOs, to do airdrops, in a way that they understood was compliant with the securities laws, and then I think you would see that kind of thing happening here, so that certainly is why we’re working expeditiously to try to get something done,” Peirce said.



<iframe loading="lazy" width="560" height="315" src="https://www.youtube.com/embed/2OFzH92_DwI?si=VBcXTZ4iGBkbbR0Z" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>







OK, but what will that framework look like? Crypto Mom didn’t go into detail, but some of her comments earlier on in the podcast might hint towards where it’s going:



“The definition of ‘security’ is very broad. We think often of just stocks and bonds, but you also have investment contracts which are intended to capture anything where someone says, ‘Hey, give me some of your money. I&#8217;ll take it, pool it with other people&#8217;s money. You don&#8217;t have to do anything. I&#8217;ll do all the work and you&#8217;ll get profits based on the work that I do.’



“That&#8217;s something that investment contracts were designed to capture. And that&#8217;s how a lot of these token-distribution events look an awful lot like investment contract transactions. And so trying to figure out: ‘Okay, then, the token was sold as part of that transaction, but it doesn&#8217;t always carry that investment contract with it. How do we think about how long the obligations of the person selling the token should last to the people buying it?’ That&#8217;s really what we&#8217;re wrestling through.”



To me, the most telling part was that Peirce zoomed in on the SEC’s mandate to capture “the capital-raising transaction” when regulating digital assets, “but not saddling the token with securities laws for the rest of its life.”



Compare that with recent comments from SEC chair Paul Atkins, when he said that “there are very few, in my mind, tokens that are securities, but it depends on what’s the package around it and how that’s being sold.”



Something tells me that Atkins might consider many more tokens to be securities had the low-float airdrop meta never taken hold — and those airdrops were ICOs instead.&nbsp;



At this point, it could be another few years until token launches are considered safe enough to really proliferate. Just in time for the next bull market, I guess.



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Empire Newsletter

Hester Peirce on the SEC’s next moves in crypto

Byron Gilliam

This is a segment from The Breakdown newsletter. To read more editions, <a href="https://blockworks.co/brand/the-breakdown">subscribe</a>



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



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“I believe that at the end of the century…one will be able to speak of machines thinking without expecting to be contradicted.”



— Alan Turing, 1947
</blockquote>



Did the AI bubble just have its Burning Up moment? In March 2000, Barron’s published a cover story — <a href="https://www.barrons.com/articles/SB953335580704470544">Burning Up</a> — detailing how quickly internet stocks were going through cash, predicting that investors would be reluctant to give them more.



“When will the Internet Bubble burst?” the article began. “For scores of &#8216;Net upstarts, that unpleasant popping sound is likely to be heard before the end of this year.”



Incredibly, the article was published within 10 days of the Nasdaq’s peak after a five-year, 570% rally — and the start of a 78% crash.



In hindsight, the Barron’s story looks less like coincidence and more like a catalyst: By spotlighting the cash burn, it helped cut off the flow of investor money keeping the bubble inflated.



Now, investors are having similar doubts about keeping the AI bubble inflated after a <a href="https://mlq.ai/media/quarterly_decks/v0.1_State_of_AI_in_Business_2025_Report.pdf">report from MIT</a> concluded that “95% of organizations are getting zero return” on their generative AI spend.



Shares of Palantir fell as much as 20% this week in response, with Nvidia and AMD down 8% and 11%, respectively.&nbsp;



If that turns out to be the beginning of the end of investors’ love affair with those types of AI stocks, the MIT report will surely get the blame.



“These [AI] tools primarily enhance individual productivity, not P&amp;L performance,” the report found, casting doubt on why companies would continue to invest in them.&nbsp;



The problem could be structural, too. Unlike human intelligence, the report finds that “most GenAI systems do not retain feedback, adapt to context or improve over time.”&nbsp;



If that makes companies decide to stop buying AI services from software providers, software providers will stop buying cloud services from the hyperscalers, and the hyperscalers will stop buying GPUs from the chipmakers.



That would be traumatic for investors, of course — and for the whole of the US economy, which has arguably been kept afloat by the hyperscalers’ giant investments in data centers and energy.



But we should remember that this is an investment bubble and not necessarily a bubble in AI itself.



Consider that Alan Turing conceived of artificial intelligence in the 1930s, a decade before the first working computer even existed.



The current investment bubble, if that’s what it is, has dramatically accelerated the realization of Turing’s vision, but his vision is hardly dependent on it.



As the internet before it, AI might do even better after its investment bubble has popped.&nbsp;&nbsp;



If big corporations give up on AI, other more innovative companies will make the most of the infrastructure they leave behind.



When Procter &amp; Gamble <a href="https://www.wsj.com/articles/p-g-slashed-digital-ad-spending-by-another-100-million-1519915621">said</a> in 2018 it was cutting spending on Facebook ads because it wasn’t getting a return on them, many took it as an indictment of Facebook.



In truth, it was an indictment of Procter &amp; Gamble, whose failure to figure out how to use online ads made room for new competitors who did.



The MIT study that so worried investors this week may similarly have surveyed corporations that just don’t know what to do with a new technology.



But it’s not just corporations — the latest iteration of ChatGPT has widely been considered a <a href="https://www.wired.com/story/openai-gpt-5-backlash-sam-altman/">disappointment</a> because it’s not as much of a step-change improvement as previous versions were.



But the new version is also <a href="https://x.com/VraserX/status/1958211800547074548">creating</a> “original research-level mathematics” that human mathematicians could not come up with themselves.



And AI is also designing physics experiments that a human physicist never would: “The outputs that the thing was giving us were really not comprehensible by people,” one researcher told <a href="https://www.wired.com/story/ai-comes-up-with-bizarre-physics-experiments-but-they-work/">Wired</a>. “They were too complicated, and they looked like alien things or AI things. Just nothing that a human being would make.”



If physicists don’t quite know what to make of AI, it’s no wonder that corporations are struggling to.



Even Alan Turing did.



“Machines take me by surprise with great frequency,” Turing<a href="http://www.loebner.net/Prizef/TuringArticle.html"> wrote in 1950</a>, in response to skeptics who said machines will only ever do what we tell them to.&nbsp;



The surprise may not be that the bubble bursts — it presumably will, eventually — but that AI, like the internet, will just be getting started when it does.



Let’s check the charts.



Palantir v. Cisco:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfpdC8lZDBfYU2JmKbwdUzXremQB1Bog9t5sZEQHHV-iQhzCuCGe8nL6HbTKPXnSMCYakxzr0WPT11Bztu1Sbxr8h7_vyerIywXO7Q3AQoOy8wcmVlHePj3l8mXdCkFnAIq7F21YA?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



John Authers notes that the run-up in Palantir dwarfs even the historic Cisco move in 1999. Appropriately, Cisco is finally approaching its all-time highs from 2000, thanks to a <a href="https://x.com/TheTranscript_/status/1958665424926908793">booming AI business</a>.&nbsp;



The data center boom:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfM0BP_nL2cgo7x14LBIvFFEeEMjQMk4hpvfWDrzb4pNNtBMrcT8rGccal7W-ezLj5xcWNTEkWXjnGX91_fWrXcr9M8v0mH_MarffmKCOlwag0Mp9npymuEbmabToc-5yjiKvKRmA?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



The US will soon be spending more on data centers than it does on office buildings.



Back to school:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXckLcJse5hiHG9h2SsdUvgSOKNCqRayUXKajDvakK3FtspTPS4exITjRwCcl2VqTrVqhifnRFuEA5Pu2C9Kzr2Z4tZqX3qxCQgb6Hps9Dfx2hJ6pd6y0GvSfbD06iCghoSwWKY4iw?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



<a href="https://awealthofcommonsense.com/2025/08/the-human-toll-of-artificial-intelligence/">Ben Carlson</a> notes that a steep drop in OpenAI usage coincided with the end of the school year. Investors will have to hope that AI finds a better use case than students outsourcing their homework.



The US is exporting government debt and AI investments:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc_B80UyE5BFWpNQG7B45L5JLvSbswLfAqpVXo572gtvKRrnq6VQGeYHBuH80ZswkzVWIVmHZEanxDpvTluEptIPyvWAZv8-ub5EqyufpPXWu_Ft1Q3uZFWnQtVfxckf6NkRIpxTA?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



Brad Setser <a href="https://x.com/TheTranscript_/status/1958665424926908793">explains</a> that the AI bubble is funding the US’s current account deficit. The blue area above is thought to be mostly investment flows into US equities. The green area is mostly government debt.



Generation degen:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfneb0L_4F-MCgmS-cuKvizPgcCbedzmRvgXCxzaq_WdVkVoNEM8kWD1MYOSN_zjTQZaOkpSjAl64dYoawASJMAd30JFouxHq6GjyT-NdxWOqFU7wItdxxcZD86nJM73-PR4EtO?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



This fun chart from BofA (via @MikeZaccardi) suggests millennials are driving the surge in trading volumes on US stock exchanges.



Someone is buying all the debt, too:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdQ167816WkD_62ZgKXjGPUXRSqJbDLOAEcvtVE_tZmec4idAgdpz4NIQSHWsD62DTwD1nOTz62q0XdqckGQk8r_tcQ0P1BITUNMjjm8kvJMqGTK-DYuEaqliSQ0RbI-nCFbb6IFw?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



Despite all the hand-wringing over unsustainable government deficits, investors are pouring more money into bond funds than ever before.



The market is ignoring the indicators:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdlSgvapTTOitDNOmnDu1QDPm_kyyXarTeSIA5MLm0jQk2qK0Xh7yCl_8Uuo9TpuyySd6yqwoNCxtw5IMGbR-CtZjMeYCQj6WFMAxB-KLrpjCm7K5y-yJT-IrfGaMhxowmHbg1yHw?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



The Conference Board’s Index of Leading Economic Indicators (in blue) has turned sharply lower. But stocks (in red) have continued to go higher.



The long view:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeh8Mhat59fzKS3leZkrnleRLsdozphl45yFfVIxj4oKkPDCi2Ux2mEHUWaRiLWVSyPzkROOfDwqu2Yozwz2EwEULO5AtcYeq8ypLOenwhyHz9CUxj-A9Pjxq2vhRcE6vPrizPo?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



It’s always tempting to try to time the next investing bubble, but here’s a reminder of the opportunity cost: Adjusted for inflation, the S&amp;P 500 is up 5,462% over the past five decades.



Past performance is no guarantee of future performance, of course, and the AI investment bubble may well be due to pop. But Alan Turing might advise you to let yourself be surprised.



Have a great weekend, naturally intelligent readers.



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The Breakdown Newsletter

Friday charts: Bubbles then, and now

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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There will soon be a lot more avenues to get crypto exposure.&nbsp;



Like, a lot.&nbsp;



That’s good for choice, sure — even if those options will be consolidated down the line once we get a better sense of where the space is headed. I wrote earlier this week about the demand for crypto equities (and how some <a href="https://blockworks.co/news/evaluating-crypto-stocks-ipos-on-deck">are evaluating those</a>) as more such stocks (like <a href="https://blockworks.co/news/circle-shares-nyse-day-one">Circle</a> and <a href="https://blockworks.co/news/bullish-closes-89-ipo-nyse">Bullish</a>) hit major exchanges.&nbsp;&nbsp;



This IPO chapter is set to collide with regulatory clarity around more crypto ETFs, setting up an all-around boom in how people can access the segment within their brokerage accounts.&nbsp;



I imagine not all these ETFs (i.e. those looking to hold SOL, XRP, DOGE and even TRUMP) will see a whole lot of demand, particularly not right away. So for fund issuers, these next months and years will be about experimentation.&nbsp;



21Shares filed for three more ETFs yesterday. One would offer broad crypto exposure via tokens themselves, ETFs, derivatives and equities. Two others offer leveraged exposure to dogecoin and SUI via derivatives.



<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">Looks like this 21Shares ETF would invest in crypto ETPs, futures, equities. Active management &quot;lets us move beyond simple exposure and deliver strategies that adapt in real time to a rapidly evolving market.&quot; &#8211;<a href="https://twitter.com/Fede_Brokate?ref_src=twsrc%5Etfw">@Fede_Brokate</a>, head of US business (and ex-BlackRock exec). <a href="https://t.co/rCSIEgebFG">pic.twitter.com/rCSIEgebFG</a>&mdash; Ben Strack 🟪 (@strack_ben) <a href="https://twitter.com/strack_ben/status/1958525507655335937?ref_src=twsrc%5Etfw">August 21, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“With both active and leveraged ETFs, we’re moving past replication into the next chapter of crypto investing — research-driven, forward-looking and built to give investors new ways to capture long-term growth across the digital asset ecosystem,” 21Shares’ Federico Brokate said in a statement.



Brokate previously worked at BlackRock as an iShares business strategy director — helping the world’s largest asset manager get its bitcoin ETF, IBIT, off the ground. He shifted to lead 21Shares’ US business in mid-2024.



I <a href="https://blockworks.co/news/21shares-us-crypto-etf-adoption-outlook">chatted</a> with Brokate a few months before Trump’s election win. Among his points was how a solana ETF would “sit really nicely” in a portfolio alongside BTC and ETH funds.&nbsp;



Fast forward a year and the SEC again, just last week, delayed its decision on 21Shares’ proposed SOL product (and other similar proposals). Signs point to solana funds and <a href="https://x.com/NateGeraci/status/1957993497912332734">single-asset ETFs</a> holding other crypto assets gaining approval once the SEC greenlights a set of so-called “generic listing standards.” Perhaps October.&nbsp;



Crypto investment product AUM hit an all-time high of $244 billion on Aug. 13, according to CoinShares. Here’s a look at this year’s impressive flows (before this week, during which capital has leaked from BTC and ETH products): <img loading="lazy" decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd7qxBRxxMh4TYTg5uvIjm2tZYYkN28aQluSNOZKqgc1LMsnD9tZ_BOVRN9RCfFUfPnswABaimwOz_9IDXXfZquD7XMEVcq9n7USt1JIUyWI-jZBXP7Es25xuLxBpFaBNpxsoziSg?key=_vmt4Y3LYDVg_0FeFnbkkg" width="624" height="469">



Another point Brokate made last August? Advisers in the US are likely going to one day be the biggest buyer of crypto ETFs. Those financial pros don’t want to have to pick winners and losers.&nbsp;



As Hashdex CIO Samir Kerbage told me: “When multiple assets become investable, crypto index investing will be the natural path forward — offering diversification, risk mitigation and a simpler way for advisers and investors to gain exposure to the crypto economy.”



Hashdex has sought to expand the investment universe for its crypto index fund that currently just holds BTC and ETH. Crypto index funds by Grayscale and Bitwise <a href="https://blockworks.co/news/sec-greenlights-grayscale-crypto-fund-etf">gained SEC approval</a> — but the agency issued stay orders to prevent them from listing for now.



You might recall Bitwise’s Ryan Rasmussen <a href="https://blockworks.co/news/evaluating-crypto-stocks-ipos-on-deck">telling me</a> earlier this week that index funds will be all the rage on the crypto stock side too as more segment firms go public.



Investors just want easy and ample access to a market poised to benefit from more institutional adoption and (buzz phrase incoming) regulatory tailwinds. From an index of 10 crypto tokens to dogecoin leverage, there will be plenty to choose from.&nbsp;



With how nascent this industry is, issuers might as well try to bring to market as many tools as possible. They can always cull their lineups later on once we see how the industry evolves.



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ETFs

Issuers keep filing ahead of expected crypto ETF launch frenzy

A proposal to pre-mint 60 million crvUSD to bootstrap Curve’s new Yield Basis AMM is sparking debate across the <a href="https://gov.curve.finance/t/pre-mint-crvusd-allocation-to-yield-basis/10774">governance forum</a> and social media, raising deeper questions about the DAO’s authority, risk management, and how to safely scale the protocol’s stablecoin footprint.



Yield Basis, led by Curve founder <a href="https://blockworks.co/tag/michael-egorov">Michael Egorov</a>, is a new Curve-native AMM that uses constant leverage to eliminate impermanent loss in Bitcoin pools. To launch its first three pools — wBTC, cbBTC and tBTC — Yield Basis is asking for a 60 million crvUSD allocation, which it says would be borrowed and paired with BTC to create LP positions on <a href="https://blockworks.co/tag/curve">Curve</a> without selling the stablecoin into the market.



CrvUSD currently has a market cap of about $127 million, placing it around the 25th-largest stablecoin. Among decentralized stablecoins, however, it’s the third-largest behind <a href="https://blockworks.co/price/usds">USDS</a>/DAI and <a href="https://blockworks.co/price/gho">GHO</a>.



Proponents argue the <a href="https://blockworks.co/news/michael-egorov-yield-basis-protocol">Yield Basis</a> design solves a key bottleneck for scaling <a href="https://blockworks.co/price/crvusd">crvUSD</a>: demand-side absorption.&nbsp;



“In a way, the pre‑mint is just a borrowing cap,” community member Llamaste <a href="https://gov.curve.finance/t/pre-mint-crvusd-allocation-to-yield-basis/10774/5">wrote</a>, since crvUSD is paired with BTC inside Curve pools rather than sold. Other backers compare the mechanism to Curve’s existing <a href="https://docs.curve.finance/crvUSD/pegkeepers/PegKeeperV2/">PegKeepers</a>, which also hold pre-allocated crvUSD that doesn’t count toward circulating supply.&nbsp;



But some are more skeptical.



TokenBrice, a builder of the DeFi transparency tool <a href="https://www.defiscan.info/">DeFiScan</a>, <a href="https://x.com/TokenBrice/status/1958071708776104004">called it</a> “a proposal suggesting to mint out-of-thin-air, unbacked, 60M crvUSD,” adding that this kind of “upgradability risk” contributed to Curve’s “Stage 0” rating in DeFiScan’s decentralization framework. That designation reflects Curve’s powerful DAO permissions, including the ability to arbitrarily mint crvUSD or assign control of key contracts.



Curve contributor Saint Rat, who helped draft Curve’s DeFiScan profile, defended the DAO’s structure but acknowledged the optics.&nbsp;



“The Curve DAO could choose to mint $1 trillion crvUSD… but that would kill the DAO,” they <a href="https://x.com/saint_rat/status/1958416971223245111">wrote</a>. Still, perception matters.



One way to contain the risk: structure the ask more explicitly as a credit line. Multiple governance commenters, including benoxmo, krypthye, and Saint Rat, have called for a capped, on-demand facility that only mints crvUSD when needed, with explicit per-pool limits and a kill-switch controlled by DAO governance.



Risk mitigation remains a core concern. The June 2025 <a href="https://www.halborn.com/blog/post/explained-the-resupply-hack-june-2025">Resupply exploit</a>, which led to nearly $10 million in losses due to a “donation attack” on a crvUSD-adjacent vault, was cited by several participants.&nbsp;



“[Resupply] was audited, yet a vulnerability was missed,” Saint Rat <a href="https://gov.curve.finance/t/pre-mint-crvusd-allocation-to-yield-basis/10774/6">warned</a>, asking what backstops would exist if Yield Basis is exploited while holding an active crvUSD balance.



In response, Yield Basis contributor ybllama <a href="https://gov.curve.finance/t/pre-mint-crvusd-allocation-to-yield-basis/10774/9">said</a> the system has undergone six audits and is currently running a <a href="https://audits.sherlock.xyz/contests/1102">Sherlock contest</a>. They reiterated that crvUSD is only minted when BTC is deposited, and that caps would be enforced at launch.



Still, the proposal as written does not include a first-loss insurance vault or an explicit risk fee paid to the DAO for underwriting systemic exposure. Several in the thread are now urging those additions, alongside telemetry dashboards and staged rollout — for instance, starting with WBTC only.



Yield Basis is being launched as a separate protocol with its own token (YB), which also raises some hackles, given that crvUSD bears the systemic exposure. Supporters counter that Curve will receive a portion of YB emissions to use for vote incentives in crvUSD/USDC and crvUSD/USDT pools, which should reinforce liquidity and fee generation for veCRV holders.



Yield Basis may offer a novel way to scale crvUSD, but several commenters argued that if Curve bears so much risk, the governance structure must evolve to reflect that.&nbsp;With veCRV <a href="https://blockworks.co/news/curve-governance-votes-on-6m-team-funding-proposal">voting power</a> already fragmented across liquid lockers and participation trending low on high-stakes votes, the outcome may hinge on whether the proposal is revised to include stricter constraints and safety levers.



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<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Curve

Curve debates 60M crvUSD pre-mint for Yield Basis amid governance pushback

This article was generated with the assistance of AI and reviewed by editor&nbsp;<a href="mailto:jeffrey@blockworks.co" target="_blank" rel="noreferrer noopener">Jeffrey Albus</a>&nbsp;before publication.



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Ethereum researchers <a href="https://blog.ethereum.org/2025/08/22/protocol-update-002">published</a> a new protocol update today, outlining a multi-pronged strategy to expand blob throughput for layer-2 scalability while maintaining decentralization and censorship resistance.



Following on <a href="https://blog.ethereum.org/2025/08/05/protocol-update-001">from</a> Protocol Update 001, this update details how PeerDAS, the centerpiece design for the upcoming Fusaka upgrade, will permit nodes to sample rather than fully download blob data. This enables up to eight times higher throughput without significantly increasing hardware requirements.



Between major upgrades, “Blob Parameter Only” (BPO) forks will incrementally raise blob limits, while bandwidth optimizations like cell-level messaging <a href="https://blog.ethereum.org/2025/06/03/checkpoint-3">reduce</a> redundant data transfers.



According to AllCoreDevs discussions, Fusaka is targeting an early November mainnet launch, just <a href="https://blog.ethereum.org/2025/03/05/devconnect-2025">ahead</a> of Devconnect Buenos Aires. PeerDAS (EIP-7594) has been confirmed as Fusaka’s headliner, and a BPO mechanism (EIP-7892) has been scheduled for inclusion.



Fusaka testing is already underway on devnets, with client teams preparing for public testnet deployments through September and October before mainnet activation. 



Meanwhile, developers are <a href="https://blog.ethereum.org/2025/07/29/checkpoint-5">preparing</a> Glamsterdam, the subsequent network upgrade expected around mid-2026, which will further extend PeerDAS with advanced networking and pipelining techniques.



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<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Ethereum protocol update details plan to boost transaction capacity with blobs

This article was generated with the assistance of AI and reviewed by editor&nbsp;<a href="mailto:jeffrey@blockworks.co" target="_blank" rel="noreferrer noopener">Jeffrey Albus</a>&nbsp;before publication.



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Federal Reserve Chair Jerome Powell’s <a href="https://www.federalreserve.gov/newsevents/speech/powell20250822a.htm">keynote</a> at the Jackson Hole Economic Symposium delivered a cautiously optimistic signal that seems to have renewed momentum across crypto markets.&nbsp;



Bitcoin <a href="https://blockworks.co/price/btc">rebounded</a> to trade near $115,800, up around 2% in the last 24 hours, responding to Powell’s implicit dovish lean on monetary policy. ETH and other major tokens are also showing strength, reflecting renewed investor interest heading into what could be a pivotal September Federal Reserve meeting.



Markets had pulled back in the days leading up to the speech, with BTC dipping below $112,000 and ETH <a href="https://blockworks.co/price/eth">sliding</a> over 4%. Traders positioned defensively amid uncertainty, but Powell’s measured tone, emphasizing flexibility and data reliance, appears to have reassured markets enough to trigger a modest relief rally. Price action suggests crypto remains highly sensitive to shifts in central bank policy expectations.



Interest rate easing typically increases liquidity and investor risk appetite, which could further boost capital flows into DeFi platforms, stablecoin infrastructure and tokenized financial instruments. Institutions and retail alike may view this environment as more conducive to launching and scaling in Web3.



However, market watchers caution that Powell’s approach was more observant and data-driven rather than decisively dovish, <a href="https://www.reuters.com/business/view-feds-powell-opens-door-september-easing-2025-08-22">suggesting</a> any further rallies could hinge on forthcoming economic data and Fed communication.

Powell’s Jackson Hole speech sparks renewed momentum amid rate‑cut hopes

<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Investing is about beliefs in the future, and what to do when they’re wrong.”&nbsp; — Rohit Krishnan
</blockquote>



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



<a href="https://dba.xyz/fundamentals-vs-flows/">Fundamentals vs. flows</a>



The crypto investor Jon Charbonneau explains that crypto investing is just investing.



Whatever the asset class, he argues, there are only two basic ways to approach investing: forecasting fundamentals or predicting flows.



Fundamental investors form beliefs about future cash flows: “The whole point of fundamental investing is that you don’t need other people to agree with you” (aka the Warren Buffett way).



Flow investors form beliefs about future trading flows: “You’re just hoping someone else will buy it from you at an even higher multiple” (aka the greater fool theory).



These are familiar concepts, but it’s helpful to see them framed so thoughtfully in the context of crypto.



Either approach can work, Charbonneau says, but things get muddled if you don’t know which one you’re taking.



For example, is ETH a fundamental investment or a flows one?&nbsp;



It seems to be a little of both, which makes the investment case more complex: “It requires taking more leaps of faith around human behavior and market psychology.” That sounds difficult.&nbsp;



The simplicity of Bitcoin’s flows-based investment thesis, by contrast, has been so successful that it “can straddle the line of ‘fundamental investing’ and ‘greater fool investing’ depending on how you quantify monetary utility.”



I personally think “monetary utility” is mostly fake news, but I also think bitcoin has probably hit escape velocity and can now be considered a fundamental investment, like gold.&nbsp;



Crypto investing more generally may be at a similar inflection point.&nbsp;



“Historically, it has paid off to be primarily flows-driven as a crypto investor,” Charbonneau notes. “Looking forward though, I believe that focusing more on fundamentals&#8230;could finally produce more alpha as the industry matures.”



That would be good news because, as Charbonneau adds, “narrative trading” is a zero-sum game (I’d call it negative sum), while “allocating capital to projects capable of generating cashflows can be a positive-sum game.”&nbsp;



Charbonneau highlights digital asset treasury companies as flows-based investments, so it’s perhaps ironic that they’re catching on with TradFi investors at the same time that fundamentals are catching on in crypto.



“Crypto investing is becoming relatively more fundamentals-driven,” he says, while “TradFi investing is becoming relatively more flows-driven.”



“Someday they’ll converge, and we’ll just be talking about investing.”



Let’s hope they meet somewhere on the fundamentals side of center.



<a href="https://ritholtz.com/2024/02/transcript-david-einhorn/">Rethinking the value game</a>



To Charbonneau’s take on fundamental investing, I would add that people who think they are investing on fundamentals are often investing on flows.&nbsp;



Last year, David Einhorn declared that &#8220;markets are fundamentally broken,&#8221; because his standard playbook of buying a stock at, say, 10x earnings and then selling it at 15x earnings was no longer working.



&#8220;The competitors have effectively left the field,&#8221; he explained.



That sounds like good news — it’s always good to have less competition, right? But fewer competitors gave Einhorn fewer opportunities to play his preferred game of &#8220;anticipating the anticipations of others.&#8221;&nbsp;



So he was forced to find a new game: “We can’t count on other long-only investors to buy our things after us,” he <a href="https://www.bloomberg.com/news/newsletters/2024-02-09/uk-house-prices-perk-up-but-stresses-remain">explained</a>. “We’re going to have to get paid by the company.”



Charbonneau and Buffett would approve.



<a href="https://youtu.be/n02QEe2AHnY?si=GpAeUlAvcGPWZKXn&amp;t=355">The revenue meta</a>



Luca Netz is also hopeful that crypto investing will become more fundamentals-driven: “The days of no revenue being worth billions of dollars has to be over,” he told Laura Shin. “I think this is going to be the era of result-driven success and less speculative success.”



This, he says, will help crypto build “disruptive technologies that change the world&#8221; and not just “pseudo-disruptive technologies that you tell a story around.”



Let’s hope so.



Note: Netz runs a cartoon-penguin business based on an NFT collection and an affiliated memecoin.



<a href="https://blockworks.co/analytics/treasury-companies/bitcoin-treasury-companies">Chanos is winning</a>



MSTR is down 21% over the past month, vs. bitcoin down just 2.5%.



That has taken MSTR’s all-important “mNAV” metric to just 1.34x (i.e., the stock is worth 34% more than the bitcoin it holds).



The falling mNAV represents a profit for short-seller Jim Chanos and a problem for Michael Saylor.



Saylor has said that Chanos doesn’t understand Strategy’s business model, but his <a href="https://x.com/saylor/status/1957413273122287738">decision</a> to continue selling stock at current levels seems like a tacit admission that the investment case for MSTR remains circularly dependent on the premium investors are willing to pay for it.



I’m not sure how investors should think about this.



The Ethereum DAT BTCS, for example, now trades at 0.65x NAV — does that make it a better or worse investment than, say, the Ethereum DAT BMNR at 1.35x NAV?



You usually want to pay as little for a stock as possible, but if the value of that stock is a function of people paying more for it, maybe you want to pay more?



I really don’t know. But falling multiples are certainly not good for existing shareholders.



Metaplanet (the Japanese version of Strategy) now trades on <a href="https://metaplanet.jp/en/analytics">1.95x NAV</a>, down from 8x just two months ago.



What’s the math on breaking even if you bought the stock at 8x NAV and you’re getting diluted by new sales at 1.95x?



Flows-based investing is hard.



<a href="https://reducibleerrors.com/prediction-markets/">The case against prediction markets</a>



Trader-philosopher <a href="https://x.com/AgustinLebron3">Agustin Lebron</a> says prediction markets are 1) bad at being markets and 2) bad for society.



They fail as markets, he explains, because every participant is trying to do the same thing: to make money trading.



This is different from financial markets, which work because “different participants have different risk preferences.”&nbsp;



Differing preferences means that both sides of a trade can benefit — like an airline buying a futures contract from an oil company, for example.



In prediction markets, where the buyer and seller have the same motivation, trades are zero-sum (just like the flows-based investing).



Supporters of prediction markets say they provide a service by giving people better information.&nbsp;



But Lebron (who, no, does not play for the Lakers) argues that “most or all of the supposed value of [prediction markets] for hedging evaporates under closer inspection.”



In short, he argues there’s no risk that can be effectively hedged by betting on something like a presidential election.



And since there’s no benefit from hedging, “prediction markets only work when there is a steady supply of dumb money.”



Casinos, sports betting and memecoins have proved there is a steady supply of dumb money, so I’d note that prediction markets might well be a successful market.&nbsp;



Lebron hopes they don’t, though, because “the very existence of the prediction market influences and hence distorts the underlying event that&#8217;s being predicted.”



He cites the example of someone who claims to have bet on Zoran Mamdani to win the New York City mayoral race and then funded Mamdani’s campaign to win the bet.&nbsp;



I’m not sure how likely or repeatable that is, but it illustrates the feedback loops that might amplify the kind of chaotic events that people like to bet on.



As a result, Lebron warns that, if prediction markets get big enough, “they might just kill our society.”



Let’s hope everyone does some fundamental investing instead.



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



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<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



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Thursday links: Investing, revenue meta, DATs, prediction markets

This is a segment from The Drop newsletter. To read full editions, <a href="https://blockworks.co/newsletter/the-drop" target="_blank" rel="noreferrer noopener">subscribe</a>.



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



Did Shopify dropping Ye push him to promote his own crypto payments processor — and memecoin?



The rapper formerly known as Kanye West’s X account, which has been frequently purged after bizarre bouts of antisemitic and incoherent tweets <a href="https://www.adl.org/resources/article/unpacking-kanye-wests-antisemitic-remarks">for years</a>, is now promoting “YZY Money.”&nbsp;



Earlier this year, Shopify stopped powering payments for Ye’s Yeezy apparel website after the rapper began selling swastika t-shirts, resulting in the website’s temporary disappearance.&nbsp;



A Shopify spokesperson <a href="https://www.latimes.com/entertainment-arts/story/2025-02-11/ye-kanye-west-swastika-shirt-yeezy-demonetized-shopify">said</a> at the time back in February that the Yeezy site “did not engage in authentic commerce practices and violated our terms.”



Shopify’s legal counsel ultimately <a href="https://thelogic.co/news/shopify-takes-down-kanye-west-nazi-tshirt-store/">clarified</a> that the Yeezy Shopify site was taken down due to a risk of fraud to consumers, not because of the Nazi swastika itself.&nbsp;



Details of an internal Slack memo from Shopify legal counsel described the t-shirt as a “vile, disgusting, and inexcusable” stunt. They also said it “was not a good faith attempt to make money” and “brought with it the real risk of fraud.” 



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1208" height="1461" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=1024&amp;h=1024" alt="" class="wp-image-106456" style="width:460px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=1208 1208w, https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=248 248w, https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=847 847w, https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=212 212w, https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=216 216w, https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=181 181w, https://blockworks-co.imgix.net/wp-content/uploads/2025/08/image-3.png?w=66 66w" sizes="auto, (max-width: 1208px) 100vw, 1208px" /></figure>



Now there’s a YZY memecoin, Ye Pay, and the YZY Card.&nbsp;



Let’s all take a moment and ask ourselves: What could go wrong?



The memecoin is live and a contract address is visible on the Yeezy website and the rapper’s X account.&nbsp;



But RugCheck’s <a href="https://rugcheck.xyz/tokens/DrZ26cKJDksVRWib3DVVsjo9eeXccc7hKhDJviiYEEZY">analysis</a> of the token cautions: DANGER.



“The contract creator can make changes to the token contract such as contract metadata, disabling sells, changing fees, unrestrictive minting of more tokens, transferring tokens etc.,” a <a href="https://www.coingecko.com/en/coins/yzy">warning</a> from RugCheck that appears on CoinGecko reads.



The YZY Money website <a href="https://money.yeezy.com/">claims</a> the whole point here is to “put you in control, free from centralized authority.”



But of course, if you buy in, it’s helping Ye free you of some of your cash.



Here’s a look at the “YZYNOMICS” of this token:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd4ZzMdPLKlnDQOYcSmb_Jrei4o70d8toUSEo-KwgrFZWqswpQXMr_thukdECZ29QTCPMtskxjNIryS3maeuldAIGeEE3ewQ56Frk5omNo5RklnhkqIZcR1W9lecnu4lPPss72s9g?key=1ULqmJqXnQH-tthM7R4w4Q" alt=""/></figure>



The YZY Money website suggests Ye Pay is a “payments processor” that will be available to other online merchants.&nbsp;



The non-custodial Yzy Card is not currently available, but a waitlist has seemingly been opened for it. It’s envisioned as a way to spend YZY and Solana-based USDC.



The Yeezy site currently accepts credit card and debit card payments, as well as USDC on Solana. It promises that payments in the YZY token are “coming soon.”



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXecqOzJiUFVezYLRxwd37g6nTFIzmdGz4HmqNlLI8MYtWaQYbJP_FZb5SgCTzbJRr1WvptsppQTlJNmGE5QFap4syOzjwKNY3Pzxz0lFXqNKJ3nbLBd5AomUl-4_nH9IMahY7jMKQ?key=1ULqmJqXnQH-tthM7R4w4Q" alt=""/></figure>



Symbolically, all of this is the last thing crypto needs. Crypto does not need more <a href="https://www.nytimes.com/2025/02/07/arts/music/ye-takes-back-apology.html">Nazis</a>,<a href="https://www.nytimes.com/2025/02/07/arts/music/ye-takes-back-apology.html"> </a>self-described <a href="https://prasad.dyson.cornell.edu/doc/USATd.12Jan24.pdf">or otherwise</a>.&nbsp;



Do we really want figures like Ye being the spokespeople of our industry? Do we want this to be the thing your Average Joe thinks about when he thinks about crypto?



Crypto still has a bad PR problem — and moves like this will only make that worse.



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The Drop newsletter

Kanye West’s YZY memecoin is the last thing crypto needs

Felix Jauvin

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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As we reach the end of August, all eyes are once again on the Grand Tetons.&nbsp;



Not because of its striking views, but because the annual Woodstock of central banking is about to go down.&nbsp;



Tomorrow morning, Fed Chair Jerome Powell will deliver his keynote speech. Historically, these speeches have served as key inflection points for the Federal Reserve’s thinking on monetary policy from a high level. More importantly, it’s an opportunity for Powell to speak for himself and not on behalf of the whole FOMC committee.



There are two key catalysts to consider as we await tomorrow&#8217;s speech.&nbsp;



The first: any indication about whether a rate cut will come in September.&nbsp;



Right now, CME futures project a 71% odds of a cut, down from 92% odds last week: 



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdxi8FHpRLLE0Ds3c6oBluGhKF7Rj6c57hFUDN2RsI3bHGduMaRqvJK9owVNicqYccB_UCn3tE4c56dmvt_2MEaCwNANYvqkPGwxchlRA5jr0LwFH-FLn3G9vCmhzMk_QrYHIEp?key=Nxka_Imr3e70r4FrpKLjbA" alt="" style="width:692px;height:auto"/></figure>



The crux of this consideration is a very weak jobs report last month, combined with inflation that seems to keep surprising to the upside and shows no signs of returning to the Fed’s 2% target.&nbsp;



Andy Constan <a href="https://x.com/dampedspring/status/1958145296195579914">tweeted out</a> a helpful framework of how to think about the probabilities of what could happen here:



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdFsxHS3n3ZWRCOoDBtJe7GRElR0a1UVi-bp9aRcEV4ImAmbPLQUuMDCWt9mmOhBqS3EP3X9mB5OS6BMlvfzi1tUZlGfYE9Vl_TQeBmEU__nJWoLdVfJsHma79vBOCf1n1Kv53rLg?key=Nxka_Imr3e70r4FrpKLjbA" alt="" style="width:615px;height:auto"/></figure>



The second potential catalyst: The Fed will publish the results of its five-year monetary policy framework review.&nbsp;



In its last review in 2019, the FOMC introduced its flexible average interest targeting (FAIT), which targeted an average of 2% of inflation over the long term. With inflation running above its 2% target for nearly five years now, this framework is expected to be retired and a return toward a hardline target of 2% is anticipated.&nbsp;



Underlying this shift are implications around what the Fed perceives to be the neutral rate.&nbsp;



Right now, the Fed sees the current federal funds rate as slightly above neutral. This opens the possibility of Fed cuts without an easing stance. If the Fed were to move its neutral rate higher, such a move could indirectly imply that it no longer thinks the cuts are restrictive and thus dampen expectations of imminent reductions.



Personally, I believe the FOMC meeting minutes from July lay the groundwork for a hawkish surprise tomorrow.&nbsp;



The minutes were outright hawkish and hinted at a committee that is not inclined to cut at all: 



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdQ_p01JGnqvfSZriRG3RTUhYb90af9JwOMQIic-Ufq35sV6J7MjeVGSun6f363lQQFY8d7LvzF_qY-GSxprB8RZOSLMVyHi92vzTbtW711F3SHuQLKLHeJjEj4ebFtU-FxO5miXg?key=Nxka_Imr3e70r4FrpKLjbA" alt=""/></figure>



That said, these minutes were written before the weak jobs report that sparked expectations of rate cuts in September, so they could be seen as stale. I disagree with that notion.&nbsp;



These minutes can be tweaked up until right before they are released and every FOMC member needs to sign off and approve them —&nbsp;including non-voting presidents and <a href="https://blockworks.co/news/powell-resolute-amid-rate-dissents">the dissenters</a> from the last meeting.&nbsp;



I believe that despite the weak jobs report from last month, the inflation story is still so volatile that Fed officials were keen to still showcase these hawkish minutes. Knowing that these were going to be the last breadcrumbs of monetary policy stance before Powell’s Jackson Hole speech, I believe they hint at a committee that is much less committed to a September rate cut compared to what markets currently believe.



Let’s see how much of that ends up being correct tomorrow or whether I’ll be eating crow.



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Economy

Could FOMC minutes be hinting at a hawkish Jackson Hole speech?

DBS, Singapore’s largest bank, has taken a notable step onchain by moving its structured-note tokenization efforts onto <a href="https://blockworks.co/tag/ethereum">Ethereum</a> mainnet.&nbsp;



The bank announced Thursday that it will issue crypto-linked structured notes as $1,000-denominated tokens, distributed through three digital investment platforms: ADDX, DigiFT, and HydraX.



This is DBS’s first use of Ethereum’s public blockchain for token issuance, expanding beyond earlier experiments on permissioned networks. The bank framed the launch as part of a larger strategy to “scale this ecosystem by fostering responsible innovation” and meet demand for more flexible portfolio tools, according to Li Zhen, Head of Foreign Exchange and Digital Assets, Global Financial Markets at DBS.



Unlike traditional structured notes, which typically require a $100,000 minimum investment and are tailored individually, tokenization breaks instruments into smaller, fungible units. DBS said this “bite-sized” format should make structured notes more liquid and accessible to accredited and institutional investors.



Still, the extent of that liquidity is bounded. Compared to crypto-native structured products — such as <a href="https://blockworks.co/news/boros-pendle-tokenizes-funding-rates">yield instruments from Pendle</a> — DBS’s notes will not circulate freely across Ethereum’s open ecosystem.



Kelvin Tan, who heads tokenization at DBS’ global financial markets group, said the aim is to help investors “manage their portfolios across platforms with greater precision and agility.”



“Tokenising a structured note on the Ethereum public blockchain provides eligible accredited and institutional investors with greater flexibility to transfer and trade individual ‘bite-sized’ tokens between whitelisted wallets across different platforms, compared to an entire structured note,” Tan told Blockworks.&nbsp;



That design reflects how banks are approaching Ethereum: as settlement rails and programmable infrastructure rather than an open market. Tan acknowledged the bank will not deposit tokens in decentralized liquidity pools, a contrast with DeFi tokens, which often circulate unrestricted.



DBS also sees Ethereum as a foundation for future features.&nbsp;



According to Tan, “the Ethereum public blockchain gives DBS the flexibility to explore future on-chain use cases for the bank&#8217;s tokenised structured notes. This could include atomic settlement of token issuances with stablecoins, as well as wrapping tokens for re-distribution across other blockchains.”



For now, distribution remains confined to accredited and institutional investors via DBS’s selected partner platforms. That ensures compliance with KYC and AML requirements, but it also highlights the difference between bank-issued and DeFi-native instruments. Standards such as ERC-1400 and ERC-3643 exist to allow issuers to embed compliance into token behavior. However, DBS has not disclosed whether it’s using one of these established frameworks, or a custom, proprietary contract.



But the bank did say the demand for such instruments is rising.&nbsp;



In the first half of 2025, its clients traded more than $1 billion of crypto options and <a href="https://blockworks.co/news/solana-tradfi-degen-products">structured notes</a>, with volumes up nearly 60% quarter-on-quarter. The tokenized offering extends access to accredited and institutional investors who are not already DBS clients.



The bank’s first issuance is a cash-settled crypto-linked participation note, designed to deliver payouts when cryptocurrency prices rise while capping potential downside. Beyond that, DBS plans to tokenize equity-linked and credit-linked notes.



Singapore’s financial sector has been at the forefront of tokenization efforts under the country’s <a href="https://blockworks.co/tag/project-guardian">Project Guardian</a> initiative. While open finance broadly thrives on open liquidity and permissionless composability, DBS’s experiment on Ethereum highlights both the promise and the limits of tokenization when banks come onchain.



Updated 8/21/2025 at 4:00 p.m. ET to clarify that DBS&#8217; tokenization is not part of Singapore&#8217;s Project Guardian.



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Banking

DBS taps Ethereum for tokenized structured notes, but trading stays fenced

Donovan Choy

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



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The Solana ecosystem revolves heavily around the aptly named Jupiter protocol, and for good reason.



They’re an ambitious team trying to do damn near everything in DeFi.



In 2021, Jupiter launched a DEX aggregator on Solana, the dominant venue today for routing order flows to DEXs and <a href="https://blockworks.co/news/solanas-proprietary-amms">prop AMMs</a>. Alongside the aggregator, Jupiter founder meow also launched Mercurial DEX, rebranded today as Meteora.



A perps DEX followed in 2023, then a memecoin launchpad in 2024, and then a majority stake <a href="https://blockworks.co/news/jupiter-majority-stake-moonshot">acquisition</a> in the Moonshot memecoin trading platform earlier this year. There’s also the upcoming omnichain network “<a href="https://meow.bio/jupnet.html">JupNet</a>,” which plans to aggregate liquidity across chains.&nbsp;



But all eyes this week are on Jupiter Lend, the superapp’s first formal foray into the Lending vertical.



<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">jupiter lend public beta coming this week 👀👀👀 devs had a last-minute idea to make it even better, can&#39;t wait to show you all&mdash; Jupiter (🐱, 🐐) (@JupiterExchange) <a href="https://twitter.com/JupiterExchange/status/1958228036555313204?ref_src=twsrc%5Etfw">August 20, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Jupiter’s lending product is built on Fluid’s liquidity/risk engine. If you’ve never heard of Fluid, it’s a protocol that took the Ethereum world by storm over the past year.



To see the promise of Jupiter Lend requires a baseline understanding of how Fluid actually works. It’s not the most straightforward product, but here’s the <a href="https://blockworks.co/news/defi-superapp-competitor-to-aave-uniswap">gist</a>.



Fluid (previously Instadapp) is an integrated application consisting of DEX, lending and borrowing. All three draw from a unified liquidity layer, which enables unique features that just aren’t possible on other DEXs or lending protocols.



For instance, a borrower on Fluid can denominate their debt to serve as liquidity for Fluid DEX (what the team calls “smart debt”), rather than letting it sit idle as posted collateral.



This, in effect, puts a borrower’s debt to “work.” As traders on the DEX side are paying fees to trade, that lets borrowers earn fees to reduce their debt. It’s somewhat unintuitive, for it inverts the logic of how we commonly think of debt as an unproductive asset that needs to be paid down.



This is how Fluid opens up billions of dollars in “TVL” that isn’t actually TVL, at least not in the conventional DeFi sense. Which leads to memes like these:



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeD-OeW5i3Mb0RfbF0-sfWmO04iAlUfag15JjUB1Nv9PbJe3drG1tqWZNLwmpO7B5NxH9gGFg2CDfrDbmYxCdKk4thi6BK75EPHxLYtflMIEI56kJ4DMeRqrIzhUUu_jg-6l1wd?key=oyKFHnWHafLE8mY6xJPfeA" alt="" style="width:671px;height:auto"/></figure>



Fluid also has perhaps one of the most advanced liquidation engines in DeFi. Its borrowing vaults bucket positions into “ticks,” which liquidates positions partially as markets move, rather than in one fell swoop.&nbsp;



Again, Fluid’s tight integration allows liquidations to simply settle as ordinary swaps on its own DEX.



This combo drastically reduces slippage and penalties (~0.1%). And the end result is that it enables abnormally high loan-to-value (LTV) ratios of 90-95% on its lending product. For context, even highly liquid assets like WBTC/WETH have LTVs of 70-85% on Aave.



As a testament to Fluid’s success, its lending has $1.4 billion in active loans since its launch on Ethereum less than a year ago, per Blockworks Research data.



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdBGcx0EQFgjZUbmUK6e7lza9DjxgN5oMfIKeN2nIVeuP08SL4dp_bvQfSQYoDOEi2VW_sVOgZB-lUoYNSXqHmdKMXM5het0ycDcUhkNsQeh8DMyycRQPAgT2AVdjGjTeXo9bXt?key=oyKFHnWHafLE8mY6xJPfeA" alt="" style="width:668px;height:auto"/></figure>



And you can see strong traction on its DEX product too.



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcLRTxoWd7arKoZfXozpSlcyQ4GEjyDlRH-vnYgrimJHpBpioI69b-SA2Ha4p1oI4rC24MlHM29tRHb45W9lCtC-wsawuFeIHVzjKylboFEyoutMHLy9BiRMpqppFcOEsYx5tzJDA?key=oyKFHnWHafLE8mY6xJPfeA" alt="" style="width:677px;height:auto"/></figure>



Jupiter founder meow has a close relationship with the Fluid founders. You can read more about that <a href="https://meow.bio/fluid">here</a>.



It’ll be interesting to see how well Jupiter can replicate Fluid’s success in the SVM world. Kamino has a stronghold on that market, but market leader positions in DeFi are fleeting. Definitely one of the major battles to watch on Solana.



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<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

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