Stratis is a blockchain platform and consultancy for enterprise businesses.

Stratis

Donovan Choy

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/0xresearch" target="_blank" rel="noreferrer noopener">subscribe</a>.



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



The 13-year-old design software company Figma IPO’d on the NYSE yesterday.



As I write this edition, Figma’s stock is trading at $115. That’s a ~250% pop from its $33 opening price — above Circle’s June <a href="https://blockworks.co/news/circle-shares-nyse-day-one">IPO pop of 168%</a>, and far above the average 17% day-one IPO pop of past decades.



Great success! But according to the Crypto Twitter commentariat, that’s “<a href="https://x.com/j0hnwang/status/1950957474359488614">legalized theft</a>.”



Specifically, theft by the investment bankers from the retail public.



The general idea underlying this criticism is that:



Investment banks deliberately underprice IPOs below fair value, then allocate shares to their preferred hedge funds and clients. These guys flip them for an easy profit at the expense of unsophisticated retail investors that naively buy into the IPO hype once the stock is already trading higher.



Retail investors lose because IPO offer prices are determined by private markets (as opposed to, say, Hyperliquid pre-launch perps that allowed price discovery pre-PUMP ICO).



Plus they <a href="https://x.com/nearcyan/status/1951012496380404021">don’t</a> get to buy in early — Wall Street does.



This status quo isn’t all that different to memecoins.



Recall the Javier Millei-affiliated <a href="https://blockworks.co/news/libra-latest-solana-memecoin-episode">LIBRA memecoin launch</a> in February. As my colleague David Canellis <a href="https://blockworks.co/news/libra-memecoin-sausage-gross">wrote</a>:&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8230; anyone launching a memecoin in 2025 must fight against unseen forces that nobody has figured out how to beat: onchain snipers who will bid up fresh memecoins at the drop of a hat, only to dump them soon after on anyone buying into the pump they created, usually killing the project in the process.
</blockquote>



It was kind of an open secret in crypto anyway.



But in TradFi, it’s all perfectly legal as per capital market rules. Namely, the Securities Act of 1933, which forces companies to lock in a fixed public offer price before trading.&nbsp;



Like the genesis of most government regulations, the Securities Act wasn’t intended to enrich Wall Street at retail’s expense: It started out as well-meaning and targeted real abuses by bucket shop salesmen in the 1930s.



But today’s capital market laws hard-wire pricing power and share-allocation discretion into the traditional IPO.



<h2 class="wp-block-heading">Project Crypto</h2>



SEC Chair Paul Atkins unveiled yesterday <a href="https://www.sec.gov/newsroom/speeches-statements/atkins-digital-finance-revolution-073125">Project Crypto</a>, an initiative <a href="https://blockworks.co/news/sec-chair-atkins-project-crypto">meant to achieve</a> “President Trump’s vision of making America the crypto capital of the world.”



It reads almost like a Christmas wishlist for the industry: most crypto assets will not be securities, create exceptions and safe harbors for ICOs and airdrops, protect software engineers, protect self-custody, make onchain software part of securities markets, etc.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The SEC&#39;s new &quot;Project Crypto&quot; is the most bullish thing I&#39;ve seen in a long time from a regulator. Read the speech, it&#39;s incredible: * Almost all tokens are not securities * Want to discourage decentralization kabuki theater * Americans should not get excluded by IP/VPN blocks…&mdash; Haseeb ＞|＜ (@hosseeb) <a href="https://twitter.com/hosseeb/status/1950966199116009656?ref_src=twsrc%5Etfw">July 31, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



But the devil’s always in the details.



And no one scrutinizes the details, except for the lobbyists and lawyers at the policymaking table.



How will this wishlist interact with existing laws? What will they morph into 10 or 50 years from now?



No one knows — just like how no one could’ve expected the Securities Act of 1933 to enable “legalized theft” today.



Government regulations are bad not because they were badly designed or that policymakers are evil per se, but because they are created and exist in a set of institutions that are static.



We like to think of the “government” as a precise machinery that voters can modulate to create laws that thwart specific problems. We like to think the government would remove laws that are deemed bad.&nbsp;



But democracy is more messy in practice. In reality, policymakers are saddled up with special interests, and uninformed voters dominate elections.



It’s what economist Mike Munger calls a “<a href="https://fee.org/articles/unicorn-governance/">unicorn problem</a>.”



Atkins’ words today are a breath of fresh air in the post-Gensler era. But don’t be surprised when today’s rules eventually harden around whoever learns to game them best. It’s just politics.



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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>

0xResearch Newsletter

Imagine if Figma’s IPO had Hyperliquid’s pre-launch perps

David Canellis

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



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When it comes to Bitcoin mantras, “not your keys, not your coins” is as pure as it gets.



But there are levels to it. Sure, you might be self-custodying, but you might still be required to trust a wallet explorer, for example, to tell you your BTC balance.



Run your own full node, however, and you’ll only ever need to trust your own copy of the Bitcoin ledger.



So here&#8217;s one of Bitcoin’s oldest cautionary tales about why the above still matters, a decade and a half later.



Picture this: It’s mid-2011, and there are two major exchanges to buy and sell bitcoin: Mt. Gox, operating out of Japan with about 80% global market share, followed by TradeHill, based in California.



Eastern Europe had its own primary venue: Bitomat from Poland.&nbsp;



Bitomat’s trading volume was small compared to Mt. Gox, only about 17,000 BTC per <a href="https://web.archive.org/web/20110604053716/http://bitcoincharts.com/markets/">month</a> — far below Mt. Gox’s 1 million BTC (worth $7.5 million at the time). But it was still enough for Bitomat to be considered the third-largest bitcoin trading platform in the world.



Until trouble struck.&nbsp;



On August 1, 2011, Bitomat’s admins disclosed the worst had happened: They had accidentally deleted the wallet.dat file for the platform’s hot wallet, immediately losing access to its users&#8217; bitcoin, which coincidentally amounted to 17,000 BTC.



The exchange itself had been paused for about a week by that point. Bitomat’s administrator, Bartek Szabat, had noticed that the main server — powered by an Amazon EC2 virtual machine — had been running at full capacity, and opted to boost its allocation of RAM.&nbsp;



That would’ve required the virtual machine instance to be rebooted.&nbsp;



But the admin had forgotten to enable persistent storage in the cloud server’s configuration settings. So, when the server was rebooted after adding more RAM, the local storage of the virtual-machine instance itself, which contained the exchange’s only wallet.dat file, was wiped, taking the private keys of Bitomat’s users along with it.&nbsp;



Amazon Web Services was unable to recover the file.



In an open letter to the Bitcoin community, Szabat asked for help in investigating the situation (the post has been automatically translated and edited for clarity):&nbsp;



“At the moment, I am unable to clearly determine the cause of crashes. I suppose that it is the result of actions of third parties, which are causing the server to crash to hide their illegal activities, or intentionally wanting the website to disappear,” he wrote.&nbsp;



“If my suspicions are confirmed, I will tell the police and prosecutors, [and] at the same time, take possible action through which it would be possible to recreate lost data. But I need to interact with the server&#8217;s owner [Amazon Web Services], and that, as I mentioned above, is difficult…&nbsp;



“At the same time, I am counting on your help in solving the problem. I realize that the situation is very difficult, and you fear for the fate of your BTC. We are constantly working on a solution to the crisis, and I&#8217;m open to your suggestions.”



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeB6CCaazWIdtzRy4vveH17ALpny7F86E8JlkG3ChzCKRO6OnyDAKCdZEFr1nkZGWzVS6yhgTpkiSa9f9jt4EzDuY9BHxPv861xadQlLaPs4c1J2igSnqkxQG76oggIrhFyywZhqg?key=QW7c4J6OZHHxNOfUyB3E4A" alt="" style="width:700px;height:auto"/><figcaption class="wp-element-caption">Hacker News users had the right idea in July 2011 — only keep bitcoin in exchanges for as long as you need to.</figcaption></figure>



Szabat then offered to sell Bitomat the euro equivalent of 17,000 BTC ($220,000 then, $1.95 billion today), in an overt effort to make users whole.&nbsp;



“I wish to inform you that I had several conversations with potential investors from home and abroad,” he said, and directed anyone interested to reach out via email.



It was actually Mark Karpeles and Mt. Gox that answered the call. The deal meant Bitomat would shut down altogether and its domain would instead forward existing users to a Polish-language localized version of Mt. Gox, where they could log in as normal and trade bitcoin via a new Polish złoty pair.



“The acquisition of Bitomat.pl is a windfall for its users, especially in the wake of such a sudden and unsettling event. Also, for the first time ever on a bitcoin exchange, users are now able to access a substantially larger market with their local currency, so we think it’s a happy ending all around,” Karpeles <a href="https://siliconangle.com/2011/08/11/mtgox-acquires-bitomat-pl-in-bid-to-restore-confidence-in-bitcoin-market/#:~:text=Thursday%2C%20August%2011%20trading%20on,on%20the%20new%20site%20seamlessly">said</a> at the time.&nbsp;



Mt. Gox had only months earlier suffered through two of its many hacking incidents, one for 80,000 BTC ($~65,000) when a thief was able to copy the platform’s own wallet.dat file, and another for 300,000 BTC ($~1.5 million) two months later, with the hacker eventually returning all but 3,000 of the stolen coins.&nbsp;



Of course, Mt. Gox would go completely belly-up nearly three years later, potentially affecting any Bitomat users who had migrated over for a second time.&nbsp;



There’s no question that modern day crypto exchanges, at least the top-tier ones, are different beasts compared to the earliest platforms like Bitomat and Mt. Gox. But for all their assurances, we can never really know for sure how well exchanges are storing user bitcoin.&nbsp;



This is both the coolest and hardest part of using Bitcoin: It takes trust to trade bitcoin and significant operational security to store it yourself (although multi-sigs do help). Anything else is just managing exposure.&nbsp;



If it were easy, everyone would do it. Until then, in exchanges we trust.



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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>

Bitcoin

The exchange that accidentally deleted its 17K Bitcoin wallet file

Katherine Ross

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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Comparing the slew of new digital asset treasury (DAT) companies to the ICO era is “apt,” Electric Capital’s Avichal Garg told Empire co-hosts Jason Yanowitz, Santiago Santos and Rob Hadick on <a href="https://blockworks.co/podcast/empire/7ffa3c40-6e62-11f0-a847-7f882b11347f">today’s weekly roundup</a>.&nbsp;



“ I think the most interesting question here is how long does it last? And is any of it actually durable?” he asked.&nbsp;



“Most of [the capital] doesn&#8217;t get anywhere, but actually, we got Ethereum outta the ICO cycle, right? You got a $500 billion asset that has had a transformative impact, right?” he continued.&nbsp;



But Garg isn’t fully on the “this is all bad” train. He believes that certain implementations are going to be very interesting. 



<iframe loading="lazy" width="560" height="315" src="https://www.youtube.com/embed/PaVPrpVcVbE?si=zouWPSgZE9_6ueOU" 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>







Obviously, ETH, SOL and bitcoin will continue to dominate. But some of the smaller assets that are being bought up by various treasury companies may not have the same staying power.&nbsp;



“ Some of the longer-tail assets, I think, [are] gonna be very hit or miss. Some of them are clearly gonna not be around, and some of them actually have a shot of being around, because the exposure into a new capital market is sort of like front-running an ETF,” Garg explained.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXccMmREvUkmZ_WTG58wY364w_0vOSTOFUvM4IMxQYWo0FOi3R1ZE4V3_LzkU36rfiwe8qmhKs2qiSzMZr7Y1dW5rea47oYZWwatIAMLdgkOKF83vd5XZ_DOUBK6Zm0TGGcYBsOA-g?key=Yx0Tl2Txu21qGhcaj7BIFw" alt=""/><figcaption class="wp-element-caption">Source: Blockworks Research</figcaption></figure>



Hadick added that he thinks there’ll be a lot of M&amp;A and capital activism, which means that the door for drama is wide open, depending on who and how folks approach activist stakes.&nbsp;



He also noted that we’re already seeing exhaustion in the market around these things, which is not super surprising given the sheer amount of announcements we’re getting weekly.&nbsp;



“ You clearly don&#8217;t need 30 of these, right? At the end of the day, the amount of copycats that are popping up right now is just astronomical, honestly,” he told the Empire crew.&nbsp;



The other thing to add — a very good point from Santos&nbsp;— is that hedge funds generally are not able to buy ETFs, which means that they’re closely watching these treasury companies and looking for opportunities they otherwise wouldn’t have.



“Other than retail, hedge funds that want to express a view on anything will buy these DATs. And I think that&#8217;s where you could see this [continue] for an extended period of time where you have a lot of demand coming in that way,” Santos added.&nbsp;



Though, as Blockworks’ Dan Smith noted, the ETH treasuries saw low trading volume on Thursday.



<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">Yesterday was the lowest trading volume day for ETH treasury companies since the initial announcements The group combined for $1.4b, down 76% from the recent highs <a href="https://t.co/WDhUSHsqRs">pic.twitter.com/WDhUSHsqRs</a>&mdash; Dan Smith (@smyyguy) <a href="https://twitter.com/smyyguy/status/1951209977856823739?ref_src=twsrc%5Etfw">August 1, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



I’m still wary of one too many DATs causing the whole thing to crumble, but I can’t argue with Hadick, Garg, or Santos, who have some very valid points.&nbsp;



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<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>

Empire Newsletter

Why the appetite for DATs isn’t waning yet

Byron Gilliam

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



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;What unites people? Armies? Gold? Flags? Stories. There&#8217;s nothing more powerful in the world than a good story.&#8221;



— Tyrion Lannister
</blockquote>



<a href="https://blockworks.co/analytics/launchpads">Blockworks Research launchpad dashboard</a>



Here’s an incredible chart from Blockworks Research:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeXiGhOCL9YR33PP0PCMop0-hVjhw_i4zo868Zzt6FlzOiYxkG-_AyfgZgK-T1scrBx38uaefUW7PWxQFNO2L-BkaFi6bi2tc7grQ4gAGDr7O8aT_AsNL4EfxHvlBbM-MUNuQMbPQ?key=yoZ4ihdHd6uoHnz_rRLS0g" alt=""/></figure>



Incredible because it illustrates just how fast fortunes can change in the low-moat business of crypto.



As measured by trading volumes, Pump.fun (in green) went from a nearly 100% share of the market for launchpad tokens on June 9 to under 10% now.



But the even more incredible part might be what happened in between: the Pump.fun ICO.



Has there ever been a similar case where the underlying business of a company was collapsing in the same moment that investors were eagerly sending the company their money?



The closest I can find is when Blue Apron IPO’d in 2017, just a week after Amazon bought Whole Foods.&nbsp;



The prospect of Amazon delivering groceries the way it delivers everything else suddenly made Blue Apron’s business of delivering meal kits seem doomed.



It was — and most investors seemed to know it. The IPO was re-priced sharply lower, the stock immediately fell even further than that and the company was eventually acquired for less than one-tenth its valuation at IPO.



Crypto investors, by contrast, seemed weirdly eager to buy into a similar setup, with Pump.fun in the role of Blue Apron and Bonk.fun in the role of Amazon.



Bookmark the dashboard to see if they can rewrite the ending.



<a href="https://blockworks.co/analytics/treasury-companies">Blockworks Research DAT dashboard</a>



Another new Blockworks Research dashboard is the best way to follow the story of crypto treasury companies without having to pay attention to crypto treasury companies.



On multiple metrics, the story seems to be losing steam.



The collective mNAV (multiple of net asset value) for treasury companies investing in ETH and SOL, for example, has fallen below the mNAV for bitcoin treasury companies — which might be a sign that the MicroStrategy phenomenon is not as easy to replicate as its emulators seem to think.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcC-by3m_pod8uIc4XUEfcSICDHwgq0e-kSsPHcbhqVAJjae_OXwFGYpUr86hlr1OCCFeQuauhgHwu1ZHKWVlhegOjIqjdumHvrX8j6NKtq0y6XYNLg846A-T0-r_oBbWOtNGDzCQ?key=yoZ4ihdHd6uoHnz_rRLS0g" alt=""/></figure>



Personally, I blame this week’s announcement of a <a href="https://www.businesswire.com/news/home/20250728220301/en/Mill-City-Ventures-III-Ltd.-Announces-%24450000000-Private-Placement-to-Initiate-Sui-Treasury-Strategy">SUI treasury company</a>, which has surely taken things too far.&nbsp;



What would Michael Saylor say???



<a href="https://www.moneyness.ca/2023/08/who-are-money-launderers-in-tornado.html?m=0">Someone laundered the money</a>



Tornado Cash has long been a cause célèbre in crypto circles, mostly on the basis that code is speech.



The case that the prosecution just finished making against co-founder Roman Storm, however, is not that he wrote the code, but that he owned and controlled Tornado Cash.



Whatever the merits of that argument, it’s interesting to think through the implications should the jury return a non-guilty verdict for Storm — because someone laundered the money.



“Somewhere in the Tornado Cash stack,” JP Konig <a href="https://www.moneyness.ca/2023/08/who-are-money-launderers-in-tornado.html?m=0">wrote</a> when Storm was indicted, “someone is committing the crime of money laundering.”



The US government says that someone was Storm and his co-founder, Roman Semenov.



If a jury disagrees, it presumably means someone else was responsible, because no one disputes that money was indeed laundered.



“Crooks depositing dirty ether are still ending up with laundered ether, so there is by definition a ‘someone’ in the stack who is providing laundering services to them,” Konig wrote.



Could that someone be the users of Tornado Cash?



“A person who is aware that criminals are depositing dirty money into Tornado Cash smart contracts, yet decides to deposit their own funds into those same smart contracts…ticks all the boxes for a money laundering charge.”



No user of Tornado Cash could plausibly claim ignorance of its use for money laundering. So, if the co-founders don’t take the rap, users might have some explaining to do.



“Counterintuitively, the indictment [of Roman Storm] seems like a win…for fans of decentralized finance, or DeFi,” JP Konig concluded.



If so, a win for Roman Storm could, counterintuitively, turn into a loss for DeFi.



<a href="https://www.nasdaq.com/events/consensys-rings-closing-bell-celebrate-ethereums-10th-anniversary">Ethereum closing bell</a>



The 10th anniversary of Ethereum’s founding was celebrated yesterday with a ceremonial ringing of the closing bell for Nasdaq.



It’s surprising just how unsurprising that seems.&nbsp;



Crypto, conceived as an alternative financial system, is suddenly most celebrated by the traditional system it was meant to replace.



Crypto is worth more on the stock market than it is in crypto markets; stock market investors value Circle at 10x what crypto investors probably would have; crypto IPOs are hotter than crypto ICOs.



And no one seems particularly surprised about it.



TradFi is having a crypto moment. I get it.



But what’s unclear to me is whether crypto is changing finance or finance is changing crypto.



In the case of Ethereum, the community has been executing on its technical roadmap, but the token was languishing, which made people question the roadmap.



Now, the token is hot again, but only because the stock market has somewhat arbitrarily decided to like it for reasons unrelated to its technical development.



Is that good?



In investing, everything is a story and the stories determine what kind of businesses get built.



Now, Wall Street seems to be writing a new story for ETH and that might affect what kind of Ethereum gets built.



Jim Cramer, for example, says he’s buying ETH as a hedge against inflation and if that’s a story that catches on, it might just become that.



Ethereum isn’t a company, of course, so maybe it’s exempt from the perception-is-reality dynamics of TradFi.



Still, my guess is that celebrating Ethereum’s 10th birthday on a stock exchange will have an effect on what it becomes by its 15th or 20th.&nbsp;



<a href="https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-the-presidents-working-group-on-digital-asset-markets-releases-recommendations-to-strengthen-american-leadership-in-digital-financial-technology/">A golden age of digital assets is coming</a>



In a statement this week, the White House declared its ambition to usher in “a golden age of crypto,” along with a report on the regulatory and legal changes that will make this possible.



The 160-page document makes clear just how committed the administration is to digital assets, detailing a broad suite of industry-friendly policies that I have no doubt will go a long way toward realizing that vision.



But the golden age of crypto will begin when none of that matters.



Crypto will only be ascendant when it’s routinely exchanged peer-to-peer, not when “regulators provide clarity regarding BSA obligations and reporting.”&nbsp;



When people routinely pay for everything in crypto, without any need for on- and off-ramps&nbsp; “with built-in AML and KYC protocols.”



And when DeFi is sufficiently self-sovereign that it can safely operate without studying the “AML/CFT obligations of actors within the decentralized finance ecosystem.”



In fairness, the full report refers to &#8220;digital assets” throughout and the statement frames the White House’s goal as “positioning America as the leader in digital asset markets.”



Which is good. 



I hope it really does usher in a golden age of digital assets.  But whether that, in turn, leads to a golden age of crypto…is an entirely different question.



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Get the news in your inbox. Explore Blockworks newsletters:



<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>

The Breakdown Newsletter

Thursday links: Dashboards, money laundering and a golden age of ‘crypto’

Jack Kubinec

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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SEC Chair Paul Atkins dropped a crypto market bombshell this morning.



“Today I am announcing the launch of ‘Project Crypto’ — a Commission-wide initiative to modernize the securities rules and regulations to enable America’s financial markets to move onchain,” Atkins said in a <a href="https://www.sec.gov/newsroom/speeches-statements/atkins-digital-finance-revolution-073125">speech</a> to the America First Policy Institute.&nbsp;



Atkins’ talk came a day after President Trump’s crypto working group released its report, which contained a <a href="https://www.bloomberg.com/news/articles/2025-07-30/trump-crypto-group-unveils-proposals-to-boost-digital-finance">slew</a> of fairly boring crypto-linked policy suggestions.&nbsp;



Atkins has injected some excitement with his pledge to move financial markets onchain, though his speech was somewhat light on the particulars. Will onchain markets run alongside traditional financial rails, or replace them altogether? Will those outside the US be allowed to invest? Curious observers will have to wait on more concrete answers.



“No one knows what it means but [it’s] provocative,” a host of crypto podcast The Rollup <a href="https://x.com/ayyyeandy/status/1950960636239765729">said</a> of Atkins’ pledge on X, channeling Blades of Glory.&nbsp;



Nonetheless, Atkins’ onchain-markets line feels like a new high-water mark in the crypto industry’s repaired marriage with US regulators. It’s one thing to drop a bunch of onerous lawsuits, as the SEC has. It’s another thing altogether to begin the process of moving the world’s largest financial markets onchain.



In other words, crypto replacing TradFi rails is quickly going from a crypto investor’s pipe dream to a crypto investor’s PIPE dream.



Blockworks co-founder Mike Ippolito asserted onchain financial markets are “[m]assively bullish Ethereum,” which makes sense given retail giant Robinhood’s planned move to begin <a href="https://blockworks.co/news/robinhood-l2-staking-us">tokenizing US equities</a> on Arbitrum.



But Ethereum’s chief competitor in Solana will be looking to capitalize on the major shift in regulatory winds as well.



The Solana Policy Institute lobbying group has already begun <a href="https://www.theblock.co/post/358641/solana-phantom-orca-superstate-compliant-tokenized-securities-sec">pitching</a> the SEC on a framework to compliantly bring tokenized securities onchain. The SPI asked the SEC for exemptive relief for blockchain infrastructure, which would essentially allow crypto infrastructure to operate outside of existing regulations. Based on Atkins’ speech this morning, it seems like the SEC may be happy to oblige.



“I&#8217;m absolutely blown away by the breadth of the ambition of the agenda laid out in Chair Atkins&#8217; speech. Project Crypto, led by the SEC, is going to revolutionize financial markets generally, and ensure that the US remains at the forefront of Internet Capital Markets,” Solana Policy Institute CEO <a href="mailto:miller@solanapolicyinstitute.org">Miller Whitehouse-Levine</a>, who attended Atkins’ speech today, said.



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institutional adoption

SEC Chair Paul Atkins pledges to move financial markets onchain

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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Fed Chair Jerome Powell did quick work in yesterday’s FOMC meeting to quell any speculation about a September rate cut.&nbsp;



With no meeting until September, optionality to guide toward a cut during next month’s Jackson Hole symposium, and two more jobs reports and inflation reports to look at before the next meeting, there was very little incentive for Powell to signal any <a href="https://blockworks.co/news/dovish-fed-fomc-july-2025">sort of dovishness</a>.&nbsp;



As the dust settled, odds of a rate cut in September lowered from 58% to 39%.&nbsp;



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeEmCzJqEJLR8Xveli0iBX3Ir-HjqZvRqZpulVQzONVkYdX42y5U40IVzn3LQJd9WImZgdBaUI8sMiYcFoFUytYJMQ-Ly16mHI1b2wiNidhDGBKXmh_22a5gS8ebzhb1mMYVtMaDw?key=ydIfj8BMlBf4wg6CCFVUAQ" alt="" style="width:669px;height:auto"/></figure>



Despite the hardline stance against any sort of easing from Powell, the committee was much less aligned beneath the surface about the path of policy.&nbsp;



For the first time in 30 years, we saw two FOMC governors dissent on the decision. Governor Waller and Governor Bowman both dissented to cutting rates at this meeting.&nbsp;



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcNdK1eKksKWVlbFWkNPH-OxFkBogla9ZnugPAABnlR8kGbhT5oln2MAxQDBbrKuDr0vdQG4wKtqicpWI3uHu1Huc2tkh2YHXzXtPHRjHR3shPzRWQ_1iF0OvTtkGR5V_M-_5R2?key=ydIfj8BMlBf4wg6CCFVUAQ" alt="" style="width:660px;height:auto"/></figure>



A dissent of this magnitude highlights the fork in the road in the context of <a href="https://blockworks.co/news/fiscal-dominance-isnt-about-interest-rates">US monetary policy</a>.



Governor Waller has advocated for preemptive insurance cuts due to what he sees as emerging risks in the labor market and a high conviction that tariff inflation will be transitory.&nbsp;



Contrasting the unemployment rate with the “jobs hard to get less jobs plentiful” data point, you can see where he’s coming from regarding emerging risks to the labor market.&nbsp;



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeq68aczE-V2W9xmZpF8kzUX_-1BHwNcpyJoSfiJw3yQYSo8A8eLAe8cy0cJy-DCRLS8gtqjUQ93oqywDEDdAynK7InaJZR0uwwcSUtX41P3BdFglgJFvNpJaYuYBJh0pAFs5O6?key=ydIfj8BMlBf4wg6CCFVUAQ" alt="" style="width:694px;height:auto"/></figure>



That said, it’s clear that inflation is starting to tick up due to tariffs. Today we received core PCE data (the Fed’s preferred inflation metric), and no matter which way you try to annualize the data, it’s clear that inflation is skewed higher, not lower. <img loading="lazy" decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf0Hdc-YYMKirK4ZspiM03yLv2PEU0LIHoUoV8YbWZjyKfV9tfkDuDNrTaOZ0x6HwwsbKtdJcOyVv31xMFpBDObkm1nKrkXj6CZVqw7ou6dGHZh0hW0MkHccKxmTCA5nNV0n-ukSQ?key=ydIfj8BMlBf4wg6CCFVUAQ" width="624" height="387">



Picking apart services inflation from goods, it becomes crystal clear that the stickiness of inflation is being manifested by higher goods inflation brought on by tariffs. This is quite different from the past two years, where goods were outright deflationary and it was services propping things up:



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe6H76xOKkY0ckrl2tFEf7NN6F-YjNzVfr4xQPOX9my5pu3sSty73CxLbBybK4dhXpnMmSCXk5AT8TUmr9-6B2qioJSw9xc8EqXcRuiIIfGBvz1OoMipSgE4t5MAKjrAnV0nnVmHQ?key=ydIfj8BMlBf4wg6CCFVUAQ" alt="" style="width:635px;height:auto"/></figure>



This combination — paired with continued political pressure for it to cut rates —&nbsp;puts the Fed in <a href="https://blockworks.co/news/inflation-breakevens-eroding-fed-independence">a tough place</a>.&nbsp;



When Powell was asked about whether he was willing to “look through” tariff-related inflation as a one-time price adjustment, he sternly responded that “by not hiking rates right now, we already are.”&nbsp;



That sounds like a shot across the bow directly at the Trump administration. As we finish off the data-heavy week, tomorrow’s jobs report — if it comes in hot — could well be the nail in the coffin for any potential rate cut in September.



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Federal Reserve

Powell remains resolute amid dissents

Molly Jane Zuckerman

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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NFTs, meet the Labubu —&nbsp;your worst enemy.



The possibility of crypto has long led artists to dream of creating characters that become universally beloved while also making a ton of money.



It&#8217;s not an impossible fantasy. It&#8217;s at the heart of pretty much all NFT collections, and no matter what the creators say about their mission to build community, money is the bottom line.



The blueprint for obsession already exists —&nbsp;look at Pokémon, My Little Pony, Yu-Gi-Oh!, Beanie Babies. People have proven they are willing to spend probably too much money and too much time collecting many versions of cute little things. That’s a given.&nbsp;



And yet, essentially all NFT collections have failed at creating lasting public interest in their version of “cute little things,” perhaps with the exception of Pudgy Penguins and their Walmart plushies.&nbsp;



But they’re clearly no Labubus.



It’s so humbling to see a completely non-blockchain, non-NFT, non-crypto collectible do what NFT collections have been trying to do for years, essentially overnight.



Labubus, sinister yet cute tiny monsters, were created by Hong Kong-Belgian artist Kasing Lung back in 2015. They only became the phenomenon they are today after partnering with toymaker Pop Mart for mass distribution in 2019. BlackPink’s Lisa (arguably one of the world’s largest popstars) wearing a Labubu on her purse in April 2024 did not hurt.



<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">Our biggest FAN. <a href="https://twitter.com/hashtag/LISA?src=hash&amp;ref_src=twsrc%5Etfw">#LISA</a> <a href="https://twitter.com/hashtag/LABUBU?src=hash&amp;ref_src=twsrc%5Etfw">#LABUBU</a><a href="https://twitter.com/hashtag/BLACKPINK?src=hash&amp;ref_src=twsrc%5Etfw">#BLACKPINK</a> <a href="https://twitter.com/search?q=%24labubu&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$labubu</a><a href="https://twitter.com/hashtag/labubuOnSol?src=hash&amp;ref_src=twsrc%5Etfw">#labubuOnSol</a> <a href="https://t.co/kzAUTATJaG">pic.twitter.com/kzAUTATJaG</a>&mdash; Labubu Fans (@labubufans) <a href="https://twitter.com/labubufans/status/1928724825733845398?ref_src=twsrc%5Etfw">May 31, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



What makes it such a laugh riot to me, an NFT skeptic, is that beloved worldwide phenomenon Labubus, physical plushies, can attribute their success to accidentally following the NFT “guide to success” that has failed so miserably with “digital” plushies.&nbsp;



What’s that guide? Rarity, exclusivity, community.



Labubus often come in “blind boxes,” meaning that it’s a crapshoot what your Labubu will look like. As Psychology Today <a href="https://www.psychologytoday.com/nz/blog/the-mind-of-a-collector/202507/what-labubu-dolls-say-about-us">writes</a>,&nbsp;



“This uncertainty is not unlike a slot machine, which taps into our brain’s reward circuits. A limited edition of ‘secret’ Labubus can spark joy, and even an obsession. Then, collecting is more than acquisition; it becomes a ritual, a source of community, and possibly a point of pride.”



This sounds like the “About” section on every failed NFT collection’s website, right after they explain their rare attributes, surprise mint schedules, and link to their community Discord.&nbsp;



More celebrities besides Lisa have more recently been spotted with a Labubu accessory —&nbsp;Rihanna, Kim Kardashian and Dua Lipa, to name a few.&nbsp;



And while some of the more well-known NFT collections did have their celebrity followers too (most notably Justin Bieber’s Bored Ape and Jay-Z’s CryptoPunk), we now cringe when we look back on the celebrity-studded NFT craze. Nobody is cringing that hard at Labubus — yet.



Yes, Labubus are probably also over-hyped, and yes, it is funny to see Labubus at both the playground and the bar. But they might’ve unlocked the long-lasting charm that no NFT collectible has come close to achieving.&nbsp;



Why am I so certain that you’ll never see a Pudgy Penguin bag charm on a Kardashian arm anytime soon?



There’s a whimsy to the Labubu that has always eluded NFT art. Maybe it’s the whiff of the cash grab that surrounds all NFT art, even when it comes to the coolest and cutest of the digital creatures. Maybe it’s that NFTs are inaccessible to anyone who isn’t hip to the technology.&nbsp;



There’s no denying the fact that Labubus have made it where NFTs have so far failed.



Let’s just hope that Labubus don’t come to the blockchain and prove me wrong.



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Labubus have succeeded in every way that NFTs have failed

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/0xresearch" target="_blank" rel="noreferrer noopener">subscribe</a>.



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I’m a Firefox user. I say that with pride and shame.



Pride because I’ve stayed loyal to a browser that once upon a time was the “cool” alternative to Internet Explorer.



Shame because I know the world has moved on to Chrome.&nbsp;



The irony is that despite my “loyalty” to Firefox, it only exists thanks to Chrome.



85% of the Mozilla Foundation’s revenue ($570 million) comes from a revenue-sharing agreement with Google, where Mozilla takes a share of ad revenue generated by Google searches from Firefox users.



Google also pays out billions to OEMs like Samsung, Motorola and AT&amp;T to ensure Chrome (and Google Search) is preinstalled on their hardware devices.



It’s the price Google pays for maintaining the browser’s dominant (~70%) market share.



It was also always the plan. During Chrome’s 2008 launch, Sundar Pichai <a href="https://www.promarket.org/2024/08/08/chrome-is-the-forgotten-fulcrum-of-googles-dominance/">stated</a> upfront that Google’s core business depends on dominating the browser market.



If Google doesn’t control the browser market, less people are Googling, which means less ad revenue.&nbsp;



In other words, it all comes down to owning the end user.



Now Chrome’s decades-long dominance may be facing its first-ever serious competitive threat.



A slew of AI-first browsers, notably Perplexity’s recently-announced <a href="https://www.perplexity.ai/comet">Comet</a>, are looking to reinvent the browser experience.



Based on all the information our browsers know about us — our history, bookmarks, credentials, web behavior — AI-first browsers like Comet can become an “active participant” and “embedded” part of our workflows, Delphi’s Can Gurel <a href="https://www.delphiintelligence.io/research/browser-wars-got-personal?utm_source=twitter&amp;utm_medium=social&amp;utm_campaign=Browserwarsintel#browser-war-iii">pointed out</a> in “Browser Wars Got Personal.”



If a browser-integrated AI agent can find and make restaurant reservations for me, I no longer need Google.&nbsp;



Again, it comes down to owning the end user.



Crypto isn’t an exception to this rule. A similar phenomenon is playing out in Solana’s memecoin land.



Of late, Pump has been losing market share to LetsBonk — putting out $229 million in trading volumes compared to LetsBonk’s $1.1 billion in the last week.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfCuPzytdbx_b4N5rZEUZK5ox4wWg8sFLY3GJfZl0a3Nml73wQcbiO_PwGG-B6gwBuV6QGUwFy75KY5hBeKB_DWTLC6x6SIOdOanXkmHrFLbgDKEdOGUjloOqVB9leBBQ8FxL5t?key=Wntvl5Sn4L_8fKC76FtKdw" alt=""/></figure>



Pump’s revenues have seen a steep decline.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc8x2owpsoec1PgL32U8aCeRhupEAT4B8s0a-tuFFwYk9PY0-6Mkx60Bh-W7INz9kX_0J7QjF8WkS_u0YLl2wm6b5peIOGsfbR2dL-R1-v8IfL5OHNBuTUNnuAA-v78Ykx8CxTRpg?key=Wntvl5Sn4L_8fKC76FtKdw" alt=""/></figure>



Yet while order-flow volumes are bouncing between Pump and LetsBONK, it doesn’t affect the revenues of the dominant trading bot Axiom.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdvO9PyG9i4gpLBhIoB838V_VvcIOxkA0V1aZgQ1j5ivftgIG56NNBJ7JnsoUob9GjMzngD5I27n2fPx6C4lka-OVGcIjmhXAZw88X1s51Q6jZH70ZVi4r3fdaR8sx3udndKIEngw?key=Wntvl5Sn4L_8fKC76FtKdw" alt=""/></figure>



That’s because while memecoins are launched on Pump or LetsBonk, degen traders are in Axiom’s frontend UI.



Launchpad bonding curves are permissionless, so Axiom simply looks at every new token, detects which launchpad contract it came from and builds a buy/sell button around it.



And traders stick around on Axiom for its comprehensive suite of pro tools like advanced charts, wallet trackers and the integration of other popular trading products (Hyperliquid perps), rebates, etc.



In other words, Axiom — like Google — owns the user. It monetizes whatever launchpad is hot by pointing to any launchpad contract.



Whether it’s web search or onchain degen trading, the game is the same: The interface that commands daily habit and captures the last click captures the money.



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Why owning the end user is profitable – lessons from Axiom and Google

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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It’s the final day of July, so I figured, why not look back at this month and recap what happened from a market point of view?



I wouldn’t blame you for forgetting some of the big events that happened just this month, such as bitcoin topping a fresh all-time high (though it’s backed down slightly since), the passage of the GENIUS act, and ETH being up 56% in the past month.&nbsp;



Speaking of ETH, Kraken’s OTC desk noted: “ETH has broken decisively above the long-standing pivot at $2,813, a level that had capped price for over a year. This breakout marks a significant structural shift and clears the path towards the next major resistance zone near $4,000, which now comes into view as the next upside target.”



In the short term, however, we may be in for a somewhat volatile start to August, given Trump’s tariff deadline and other macroeconomic factors. Though even bearing that in mind, Kraken’s OTC report suggests that the momentum has already softened for bitcoin.



The good news: bitcoin managed to bounce back from an initial dip after Galaxy unloaded 80,000 BTC for a client.&nbsp;



“One core explanation behind the resilience lies in the continuous strong accumulation from BTC treasury vehicles and ETPs throughout July,” K33 noted. That helped to offset the “sale order effect in the broad market. This resilience has reignited risk appetite, with perpetual futures open interest climbing toward Q4 2024 highs, though funding rates have remained neutral.”



I don’t think anyone will be surprised by the next stat that K33 pointed out: While July tends to be a more chill month, this July bucked the trend.&nbsp;



“Average daily trading volumes over the past week come in at $4bn. This reflects a 12% decline from last week’s level but remains well above May to June levels,” K33 said.&nbsp;



Like I noted above, the first week of August may not be very smooth, but the volatility may not be here to stay.&nbsp;



Looking at CME data, K33 analysts said that the “August premium over July futures initially reflected confidence, but compressed post-expiry to levels not seen since May, signaling cautious medium-term positioning during a seasonally quieter period.”



At least we’re at the tail end of the dog days of summer.&nbsp;



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Bitcoin loses momentum to close out July, as ETH eyes new upside target

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



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“The continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.&#8221;&nbsp;



— Financial Report of the United States Government
</blockquote>



There once was a happy time when Fed chairs felt free to lecture politicians on their irresponsible spending habits.



In <a href="https://www.washingtonpost.com/archive/politics/1990/07/19/fed-would-lower-rates-if-congress-cuts-deficit/d1a24805-d603-436b-92c0-5779ffdc5c99/">1990</a>, for example, Alan Greenspan told Congress he would lower interest rates, but only if it cut the deficit.



In <a href="https://www.upi.com/Archives/1985/02/20/Volcker-says-Congress-must-cut-deficit/9515477723600/">1985</a>, Paul Volcker even specified a number, telling Congress that the Fed&#8217;s “stable” monetary policy was contingent on Congress cutting about $50 billion from the federal budget deficit.



(Oh, for the days when $50 billion of federal debt wasn’t just a rounding error.)



In both cases, the Fed chairs were not-so-subtly threatening Congress and the White House with recession: That’s a nice economy you&#8217;ve got there. Would be a shame if something happened to it.



Now, however, it’s the other way around, with President Trump lecturing the Fed on interest rates.



In just the last few weeks, the president has opined that the fed funds rate is “AT LEAST 3 points too high,” insisted there is “no inflation” and mocked the Fed Chair as Jerome “Too Late” Powell.



This, too, is a shakedown: That’s some nice central-bank independence you’ve got there…



President Trump lobbied for lower interest rates during his first term as well. Like nearly every modern US president, he wanted the Fed to stimulate the economy.



This time, however, it’s about much more than that: Trump wants the Fed to finance the deficit.



The Trump vs. Powell showdown is ostensibly about the current level of interest rates (which the FOMC left unchanged today, presumably to the president’s displeasure).



But what the president has been threatening is “fiscal dominance” — the state of affairs when monetary policy is subordinated to the needs of government spending.



“Our Rate should be three points lower than they are saving us $1 trillion a year (as a Country),” the president recently <a href="https://truthsocial.com/@realDonaldTrump/114902704048179740">wrote</a> on Truth Social (in his signature style of random capitalization).



With repeated such statements, Mr. Trump has made history by being the first US president to explicitly call for fiscal dominance.



But he’s far from the first to acknowledge the possibility.&nbsp;



When Volcker and Greenspan threatened Congress with rate hikes, it brought the usually hidden link between monetary and fiscal policy out into the open.&nbsp;



It worked for them: Both Fed chairs had some success in using the threat of recession to get Congress to address its deficit spending, which is a hopeful precedent.



But that tactic seems unlikely to work this time.



Chair Powell has often warned about the risks of growing deficits, and even explained that higher deficits could mean higher long-term interest rates.&nbsp;



But it’s hard to imagine him making an explicit threat in the way Volcker and Greenspan did — perhaps because he knows he’s bargaining from a much weaker position.



In the 1980s, the most-feared effect of higher interest rates was recession, which the Fed was willing to risk in order to get Congress to change its free-spending ways.&nbsp;



Back then, lawmakers faced a ballooning defense budget and a stagnant economy, both of which seemed manageable.&nbsp;



At just 35% of GDP, the national debt seemed manageable too.



Now, with federal debt at 120% of GDP, the US <a href="https://www.wsj.com/politics/policy/debt-has-always-been-the-ruinof-great-powers-is-the-u-s-next-02f16402">spends more on interest payments</a> than it does on defense:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXflkgNB1zlYtVD1qwbyfEhsXMynn4rcesXGWNtdFWBmiuFkjXtq077kd8t-pS_jjRqUSVVscyZT69E2YRXT5hiYlJtWWHkMGTHI9nrgi7UExqtw-mbAzffDpztweWIWx3hx6uVMvw?key=iWJ7_ctUrfu-bNc4jMJZgw" alt=""/></figure>



The fast-rising blue line above may now be the biggest budgetary problem.



This puts the Fed in a bind because raising interest rates to encourage fiscal sanity would only exacerbate the problem it wants lawmakers to address.



The Fed could risk it, of course.&nbsp;



But if rate hikes drive the deficit even higher, who blinks first: the Fed or the White House?



Before answering, consider that 73% of federal spending is now non-discretionary, vs. just 45% in the 1980s.



To believe the Fed can win a showdown over deficits is to believe Congress will make significant cuts to non-discretionary spending like Social Security and Medicare.



This seems, well, unbelievable.&nbsp;



Now, especially, with a president who appears wholly unperturbed by the country&#8217;s growing indebtedness.



This may come from his experience as an over-indebted real estate developer in the 1990s.



&#8220;I figured it was the bank&#8217;s problem, not mine,” Trump later <a href="https://www.amazon.com/Think-Big-Make-Happen-Business/dp/0061547840">wrote</a> of not being able to service his debts. “What the hell did I care? I actually told one bank, &#8216;I told you you shouldn&#8217;t have loaned me that money. I told you that goddamn deal was no good.'&#8221;



Now, as president, when Trump tells Powell that interest rates should be lower, what he’s really saying is that the national debt is the Fed’s problem, not his.



He’s not wrong.&nbsp;



“When interest payments on the debt rise and primary surpluses are politically off the table,” David Beckworth <a href="https://macroeconomicpolicynexus.substack.com/p/the-consolidated-government-budget">writes</a>, “something else has to give. That something is more debt, more money creation, or both.”



Yes, the Fed could run the Volcker/Greenspan playbook and threaten Congress with higher interest rates.



But Powell presumably knows that following through would only exacerbate a problem that might ultimately be the Fed’s to fix — and pull forward the time by which it’s forced to fix it.



“If debt levels are too high and growing,” Beckworth explains, “it becomes the Fed’s job to accommodate — by suppressing interest rates or monetizing debt.”&nbsp;



That, and not President Trump, he warns, is the real existential threat to the Fed: “When the central bank is forced to accommodate fiscal needs, it loses its economic independence.”&nbsp;



Beckworth remains hopeful that it might not come to that.&nbsp;



And maybe it won’t. We’ve just seen how unpopular inflation is, so maybe if we get another bout of it, voters will force lawmakers to address the deficit.



But he despairs that the focus on Trump’s demands for lower interest rates is a distraction: “What we are witnessing is less about Trump himself and more about the growing and unavoidable fiscal demands being placed on the Fed.”



President Trump is the first to start explicitly making those demands, presumably because he knows the US government’s current fiscal policy is unsustainable.&nbsp;



But everyone knows that, even the government itself.



The only question now is: Who’s going to deal with it?



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Fiscal dominance: Behind the Fed’s growing and unavoidable burden

Jeff Albus

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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When building on Solana up until now, you&#8217;ve really only had two bad choices for storing and delivering your app&#8217;s data.



You could lean on Web2 giants like Cloudflare or AWS, which are fast and easy, but very much centralized and outside the crypto ethos. Or you could try to piece together more decentralized fixes using IPFS, Arweave, and other assorted gateways — bearing in mind that, while these latter methods do work, they require lots of duct-tape and set-top thwacking to dial in.



Decentralized CDN Pipe Network aims to change all that with Firestarter Storage, an infrastructure play designed to transform Pipe into a full-stack Cloudflare alternative for the Solana ecosystem.



Until now, Pipe has operated behind the scenes, powering Solana&#8217;s full <a href="https://blockworks.co/news/solana-proof-of-history">proof-of-history</a> archive and snapshots via its Firestarter infrastructure.



Now, with Firestarter Storage, Pipe graduates from decentralized transport to a full-stack cloud competitor, combining origin storage, CDN delivery and edge compute into a Cloudflare-class system — but decentralized from the ground up.



Developers can tap into the same backbone to serve anything from pay-as-you-scroll video to edge-optimized AI workloads.



&#8220;Storage from day one has been a critical element of Pipe Network&#8217;s service as a decentralized CDN running a global network of over 280,000 points-of-presence (PoP) node operators,&#8221; said David Rhodus, founder of Permissionless Labs.



&#8220;This would be impossible without origin support, which is already holding Solana&#8217;s full data set — 1 PB containing 350 million files — and cutting sync time by up to 30% through Solana Snapshots.&#8221;



Unlike legacy CDNs, Firestarter serves content directly from Pipe&#8217;s native storage layer, meaning it never leaves the Pipe Network.



Content lives entirely within the decentralized system, with pricing bundled at the protocol level — 1 $PIPE token per gigabyte for the base tier.&nbsp;



For developers, this manifests entirely new architecture capabilities: streaming micropayments per byte, geo-pinned smart contracts with hard data sovereignty guarantees, and pop-level compute for edge inference and ultra-low-latency gaming.



&#8220;Pipe&#8217;s unified fabric lets frontend code stream satoshi-sized, onchain payments per byte, so devs can launch pay-as-you-scroll video and per-query dataset APIs instead of pre-purchasing bandwidth buckets,&#8221; Rhodus told Lightspeed.



A critical differentiator is Pipe&#8217;s ability to meet jurisdictional and defense-grade requirements.



As Rhodus explained, &#8220;Firestarter nodes can be whitelisted to run only inside a customer&#8217;s jurisdiction, with remote-attested proofs that no replica ever leaves the boundary.&#8221;



With Firestarter now public, Pipe Network is positioning itself as a new foundation for real-time, decentralized content distribution, with sovereignty, speed and cost-efficiency converging at the protocol layer.



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Lightspeed Newsletter

Pipe Network debuts Firestarter Storage for Solana developers

Casey Wagner

The presentation portion of Roman Storm’s criminal trial came to a close Wednesday afternoon with the prosecution and defense each making their final pleas to the jury.&nbsp;



Both sides spent over 90 minutes on their closing arguments. The government opted to close with an additional 45-minute rebuttal. Attorneys on both sides focused on the same essential facts of the case, but urged the jury to come to different conclusions.&nbsp;



“This is a story about greed,” government attorney Benjamin Gianforti said at the beginning of his closing arguments. “It’s a story about helping criminals hide bags and bags of money.”&nbsp;



“Tornado Cash made dirty money clean money, and made it impossible to tell the difference,” he added.&nbsp;



The defense does not argue the truth of this second statement: they admit that criminals did use Tornado Cash for illicit activities, but this was never Storm’s intent in creating the software.&nbsp;



Storm created Tornado Cash to give users the ability to keep their financial transactions private, defense attorney David Patton told the jury.&nbsp;



“Did that also make it extremely useful to criminals? You bet it did,” Patton said.&nbsp;



The “privacy argument,” prosecutor Nathan Rehn said during the government’s rebuttal, is simply a “cover story.”&nbsp;



Storm not only knew criminals were using Tornado Cash to launder money, he supported them, Rehn argued.&nbsp;



The government presented messages to the jury in which Storm calls reports of hackers using Tornado Cash “advertising.” They also submitted photos of Storm and his co-developers wearing Tornado Cash T-shirts with images of a laundry machine.&nbsp;



These messages and photos are a mischaracterization, Patton later insisted. The shirts were a joke, and there are many communications that show Storm was not “celebrating hackers’ use of Tornado Cash.”&nbsp;



As for the prosecution’s claims that Storm “made millions” from Tornado Cash, the defense again maintained that this was a misleading portrayal of reality. The money Storm made came from selling the TORN token, which, Patton added, lost value when reports of criminals using Tornado Cash surfaced.&nbsp;



“They weren’t getting a cut” of money hackers laundered through Tornado Cash, nor did developers charge fees for using the software, Patton added.&nbsp;



After two weeks of witness testimony, jurors received charge instructions late Wednesday afternoon, the final step before the group heads to the deliberation room.



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Roman Storm

Tornado Cash trial is now in the jury’s hands

Ben Strack

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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Despite Coinbase’s second quarter milestones, not all is rosy for the crypto exchange as it gets set to discuss its Q2 results tomorrow.



Coinbase’s stock price roughly doubled during the quarter — performance Oppenheimer analysts attributed to its S&amp;P 500 inclusion and progress around the GENIUS Act (progress that led to <a href="https://blockworks.co/news/trump-signs-genius-law">its ultimate passage</a> earlier this month).



COIN shares were trading around $382 on Wednesday at 1:30 p.m. ET — up 9% from a month ago.&nbsp;



And yet, in other ways, COIN’s setup ahead of the quarterly print is “unfavorable,” Oppenheimer’s Owen Lau and Guru Sidaarth wrote in a note. They estimate Coinbase’s Q2 trading volume to be ~$220 billion, marking a 44% decline <a href="https://blockworks.co/news/coinbase-outlooks-q1-results-deribit-analysts">from the prior quarter</a>.



Morningstar analyst Michael Miller noted that transaction volume will always be a key data point, given transactions account for Coinbase’s largest revenue stream.&nbsp;&nbsp;



Beyond that, though, Miller will be listening for commentary on pricing pressure (or lack thereof) as competitors like Robinhood ramp up their crypto offerings in a friendlier regulatory environment.&nbsp;



“I’ll also be looking for any data or commentary on the firm’s <a href="https://blockworks.co/analytics/base/base-overview/base-stablecoin-supply-and-transfer-volume">Base transaction volume</a> and revenue and how much USDC is on the firm’s platform and products,” Miller told me. “While Coinbase is still heavily exposed to cryptocurrency trading, USDC and Base have enjoyed a lot of momentum this year.”



Miller, in a Monday note, revealed he had increased his COIN “fair value estimate” from $170 to $205. A part of that was indeed due to USDC’s market cap eclipsing $60 billion and overall bullish sentiment after the stablecoin-focused GENIUS Act became law. If you forgot, Coinbase earns interest income on the USDC it holds on its platform.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcxoVOjxECsiraxBs-F32R7RMas5TsgXnD6OsYK_TVqFJZb0x4VXaZA72hqhn3zzG932EqmSISMNtPCLgQW3eGbWpqh73UmBVPDeYlCsYj54nKSu6NzV_wOgXDNuAwHLnlcnROB9A?key=wc4qbIEt1FJXnWzzwbFkzg" alt=""/><figcaption class="wp-element-caption">Source: rwa.xyz</figcaption></figure>



Despite Miller’s COIN upgrade, he still considers shares “significantly overvalued” as the market reacts to recent crypto price surges.&nbsp;



The Oppenheimer analysts see things a bit differently. They have a COIN price target (in the next 12-18 months) of $417.



Lau and Sidaarth note Coinbase’s US derivatives and International Exchange notional values were more resilient than spot trading volume — up 22% and 28%, respectively, quarter over quarter. That’s an area they’re more focused on after <a href="https://blockworks.co/news/coinbase-deribit-deal-focus-derivatives">Coinbase’s Deribit acquisition</a>.&nbsp;



Maybe Coinbase CEO Brian Armstrong will give us a sense of other <a href="https://blockworks.co/news/coinbase-circle-amazon-of-crypto">possible acquisition targets</a>. As far as link-ups go, Coinbase on Wednesday revealed a partnership with JPMorgan Chase that lets Chase customers link their bank accounts to Coinbase wallets.&nbsp;&nbsp;



Lau told me he’ll be seeking expense guidance from Coinbase executives tomorrow, as well as any update on July trading revenue.&nbsp;



Coinbase is pretty connected in DC, and could also offer thoughts around when they expect the CLARITY Act to become law. That bill, which would create a definition for “digital commodities,” got the <a href="https://blockworks.co/news/us-house-passes-clarity-act">House’s blessing</a> on July 17.“Passage of the CLARITY Act will support <a href="https://blockworks.co/news/crypto-treasury-companies-alt-season">Altcoin Summer</a>, following the Stablecoin Summer after the passage of the GENIUS Act,” Lau explained.



Add it to the list of things we’re monitoring. Never a dull moment.



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Coinbase

Coinbase outlooks are mixed ahead of Q2 earnings

Macauley Peterson

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/0xresearch" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Ethereum’s first decade has taken it from a fringe experiment to the potential backbone of digital finance. In the roundup below, 10 builders, researchers, and market watchers explain what that journey has meant, and where the next 10 years may lead.



We open with Michael Egorov, founder of <a href="https://blockworks.co/tag/curve">Curve</a>, who reminds us of just how far things have come: “Ethereum is turning 10 years old: The time flies! Over that time, it has grown from an idea to the foundation of the new financial system.”



For Kirill Fedoseev of Blockscout, that foundation is now an ecosystem: “<a href="https://blockworks.co/tag/ethereum">Ethereum</a> turning 10 marks more than just the anniversary of a single chain. It’s a celebration of an open ecosystem that’s driving some of the most important infrastructure innovation in Web3.”



Anurag  Arjun, co‑founder of <a href="https://blockworks.co/tag/avail">Avail</a> and Polygon alumnus, quantifies the scale‑up: “The ecosystem growth is unprecedented: from 15 transactions per second to 24 million daily transactions across multiple layers, 127 million active wallets, $75 billion in DeFi protocols.” Those numbers, he argues, vindicate the modular, <a href="https://blockworks.co/tag/rollups">rollup‑centric</a> thesis.



Networking expert Muriel Médard of <a href="https://blockworks.co/news/optimum-ram-web3-protocol-memory-decentralized">Optimum</a> points to adaptability: “What attracted me most to Ethereum was seeing a decentralized network that could actually evolve and improve over time, and 10 years in, that adaptability has been validated repeatedly.” Her next priority is a faster networking layer to “strengthen how information flows between all stakeholders.”



Markets are noticing. Shawn Young of MEXC notes that “this is due to the shift in the institutional perception of Ethereum…spot Ether ETFs [have logged] 16 consecutive days of net inflows totaling over $5 billion.”



Yet usability still lags. Vikram Arun of Superform observes: “10 years in, Ethereum feels less like an experiment and more like critical infrastructure…The next 10 years will be defined by cohesion at the product layer: fintech‑like mobile apps with seamless UX.”



Rob Viglione of Horizen Labs underscores the slow grind behind that cohesion: “Over the past 10 years, Ethereum’s growth has often felt slower than we anticipated…but in reality, we’ve made meaningful progress in solving many of these issues.” He expects <a href="https://blockworks.co/tag/privacy">privacy</a> — via technologies such as <a href="https://blockworks.co/news/what-is-fully-homomorphic-encryption">fully homomorphic encryption</a> — to dominate the next cycle.



Steven Goldfeder, co‑founder of <a href="https://blockworks.co/tag/offchain-labs">Offchain Labs</a>, is motivated by the runway ahead: “What keeps me most excited…is its untapped potential paired with the community’s dedication to transparently and openly building a better system.”



Aryan Sheikhalian of CMT Digital sounds a cautionary note: “Even if ETH accrues value through <a href="https://blockworks.co/news/ethereum-blobs-balancing-act">blobspace</a>, Ethereum risks becoming the TCP/IP of crypto: essential, invisible, commoditized.” Remaining the cultural and economic center, he says, requires owning standards, liquidity and UX — not just settlement.



Finally, Hart Lambur of UMA and Across sketches the end‑state: “The real endgame is straightforward: a giant payments-and-exchange network that connects every blockchain.” Achieving that will hinge on seamless interoperability and the liquidity battles it will ignite.



From visionary beginnings to trillion‑dollar ambitions, these 10 voices agree on one thing: Ethereum’s first decade was merely the preface. Scaling trust, usability, privacy and culture for the world is an ongoing project.



What I return to as truly novel is Ethereum’s global scale and resilience. Spend a few minutes on the “<a href="https://www.youtube.com/live/igPIMF1p5Bo?si=mvTIndVlXDDT8HZS">10 Years of Ethereum Livestream</a>” and you find celebrations jumping from Toronto to Buenos Aires, Barcelona, Lagos and Mumbai. As a truly decentralized network, it has succeeded in maintaining <a href="https://dune.com/queries/3367820">virtually 100% uptime</a> across 10 years and 16 hard forks. That’s a level of resilience that no other network has been able to match.



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10 reflections on Ethereum’s 10th anniversary

“Nothing further from the defense,” attorney Brian Klein told Judge Katherine Polk Failla yesterday afternoon at Manhattan’s Thurgood Marshall courthouse.



The team representing Tornado Cash co-founder Roman Storm had cycled through what remained of its witness list, and Storm chose not to take the stand.&nbsp;



A reminder that Storm is being charged with conspiracy to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money transmitting business.



His defense (and advocates of the privacy protocol) argue Storm isn’t criminally responsible for<a href="https://blockworks.co/news/treasurys-tornado-cash-sanctions-have-companies-stepping-back-from-users"> bad actors using</a> something he helped create.&nbsp;



Closing arguments were scheduled to begin at 9 a.m. “sharp” Wednesday — meaning in a matter of minutes (if you’re reading this when it publishes).&nbsp;



In the meantime, let’s go through Tuesday’s witnesses and some of the more memorable moments:



<h2 class="wp-block-heading">Guy Wuollet, partner at a16z crypto</h2>



Tuesday’s first witness, Wuollet had evaluated whether Andreessen Horowitz’s crypto/Web3 unit would invest in Tornado Cash in 2021.&nbsp;



In an email to Storm at the time, Wuollet wrote he was “impressed by the strength of the privacy” of Tornado Cash and “excited about the next iteration of the protocol.”



The reason a16z didn’t invest? Wuollet said the firm didn’t know if Tornado Cash would be profitable. “We will continue to be fans of Tornado Cash and to track its adoption onchain,” Wuollet added in the email.&nbsp;&nbsp;



When asked to acknowledge that crimes are committed on the blockchain, Wuollet paused before saying he thinks of it differently. “If someone robbed a store, I wouldn’t say the store was used in the crime.”



An attendee sitting to my left started laughing. The prosecution ended the cross-examination there.&nbsp;&nbsp;



<h2 class="wp-block-heading">Omid Malekan, Columbia Business School professor&nbsp;</h2>



Not on the stand long, Malekan said he used Tornado Cash in 2021 to purchase an Ethereum Name Service (ENS) name.&nbsp;



He used the protocol because he “didn’t want to put a bullseye on my back.”&nbsp;



The prosecution’s Ben Arad shouted out an objection. Failla asked Klein to control his witness.&nbsp;



<h2 class="wp-block-heading">Dr. Stephanie Hurder, founding economist of Prysm Group&nbsp;</h2>



We found out the defense has so far paid Hurder $120,000 for her time analyzing this case and being an expert witness. She reviewed Tornado Cash DAO proposals, TORN token price data, transactions on Etherscan, etc.&nbsp;



She countered several points previously brought up by the government about Tornado Cash’s supposed lack of decentralization. Hurder noted the protocol’s DAO was “well-designed and active” (55% of TORN tokens initially went to the DAO treasury) and that Tornado Cash founders did not have (or always use) their voting power on proposals.



She added that the founders did not have a direct hand in selecting entities on Tornado Cash’s relayer registry.



The government’s exchanges with Hurder were heated, with prosecutors getting her to acknowledge that bad actors have apparently used Tornado Cash to hide criminal proceeds. As we know, the case against Storm is more nuanced than that.&nbsp;



And in a reference to the vesting schedule for founders’ TORN tokens, a prosecutor asked: “Tornado Cash became less decentralized over time, right?”



Despite the government wanting only yes or no answers, Hurder got out: “The distribution of tokens became less decentralized. Yes.”



<h2 class="wp-block-heading">Dr. Matthew Green, computer science professor at Johns Hopkins University</h2>



Green, who helped create the <a href="https://www.researchgate.net/publication/286668243_Zerocash_Decentralized_Anonymous_Payments_from_Bitcoin">Zerocash</a> protocol, was brought in to emphasize the value of privacy.&nbsp;



Though he was intrigued with crypto and blockchain technology essentially from its outset, Green called the lack of privacy (i.e. public transactions) “a huge bug.”



He talked about the value of VPNs and credit-card tokenization in protecting individuals and institutions. At one point, I caught a juror dozing.



The Tornado Cash pools were immutable, Green confirmed — preventing hackers or founders from making changes there.&nbsp;&nbsp;



During the cross-examination, Arad asked Green whether the Tornado Cash website, user interface and relay registry could be changed. “Yes” to all three.



Also of note was Klein wanting Green to address the feasibility of a hypothetical user registry that one of the government’s witnesses, AnChain.AI’s Philip Werlau,<a href="https://blockworks.co/news/roman-storm-government-may-rest-case"> brought up last week</a>.&nbsp;



Green’s initial hesitation to respond and a subsequent sidebar with the judge meant that the question went unanswered.



But as this case winds down and the jury is charged, we’ll have other, more critical answers soon.&nbsp;



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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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Roman Storm trial: Witnesses play up Tornado Cash privacy, decentralization

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">
“An economist says to a physicist: ‘Sure, this equation works in practice. But does it work in theory?’”



— Overheard in the faculty lounge
</blockquote>



For those fortunate enough never to have learned the mechanics of special purpose acquisition vehicles, here’s all you really need to know: If you don’t like the company a SPAC finds to buy, you can get your money back.&nbsp;



There are lots of important details, of course — PIPEs, warrants, fees, the price you paid — but the differentiating factor is the redemption mechanism.



SPACs raise capital by issuing shares at $10 and then looking for a company to buy.



If you like the one they find, you stay invested. If not, they’ll give you your $10 back.



In theory, this democratizes the IPO process.



As a retail investor, you won’t be getting into the next Goldman IPO at the offer price — banks reserve IPO allocations for their top institutional customers.



With SPACs, however, retail investors can typically buy in at or near the standard $10 offering price.



You won’t know what company the SPAC will become, which isn’t ideal, but when you do find out, you’ll have the option to redeem at $10.



In theory, that lets you participate in the IPO process at something close to the same terms of institutional investors.



In practice, however, it rarely works out.



Citing data from ListingTrack, the Financial Times <a href="https://www.ft.com/content/6da2f475-dd6a-4de4-abac-9e62f808bd41">reported</a> that “the median return from [SPACs] that have completed mergers with target companies is minus 83% since 2020.”



Minus 83%! Yikes.



In hindsight, though, it’s not hard to see why.



Here are some of the dubious businesses that were brought to the stock market in the last SPAC boom: electric-scooter sharing, hydroponic farms in Kentucky, cell towers in outer space, a music-streaming service with no paying users, an EV truck company that couldn’t make trucks, bitcoin ATMs, Playboy Inc. and BuzzFeed, to name just a few of the notorious ones.



(Partial disclosure: I may or may not have invested in the cell-towers-in-outer-space one.)&nbsp;&nbsp;&nbsp;



Even so, there was still a lot of money to be made — just not by retail.&nbsp;



One <a href="https://site.warrington.ufl.edu/ritter/files/SPACs.pdf">academic study</a> found that SPAC sponsors —&nbsp; the bankers who list the SPAC and go hunting for a deal — do extremely well: “The average annualized sponsor return, over approximately 2.5 years, was 113%.”



The institutions that invest in those SPACs via private funding rounds also did fine, earning an average one-year return of 9.3%.



But the public shareholders who invested in the exact same deals made an average loss of 19.8%.



And yet, SPACs have been wildly popular at times.



In 2021, a series of SPACs sponsored by Chamath Palihapitiya traded 50% to 80% above their $10 issue price before investors even knew what company they were investing in.



Most egregiously, a SPAC sponsored by star banker Michael Klein traded up 550% in anticipation of a merger with Lucid Motors (thought, at the time, to be the next Tesla).



It’s hard to overstate how irrational those prices were.



With his $10 SPAC trading at $65, the market was implying that Michael Klein could negotiate a deal that would instantly make a 6.5x return for his investors.



There are only two ways he could have made that happen: 1) by finding a company willing to sell itself for far less than its worth, or 2) finding a business that’s worth far more on the stock exchange than it is as a private company.



Either way, it turned out to be a poor assumption to make: Lucid Group now trades at $2.60.



That is an extreme example, but it illustrates the point that paying well above $10 for a SPAC doesn’t make much sense.



A skilled banker like Klein might buy a company for 10% or 20% below what it’s worth on the stock market, which would justify paying $11 or $12 for a SPAC, but not much more.&nbsp;



But what if the SPAC buys crypto?



As we’ve learned from MicroStrategy, the stock market routinely values crypto at double what it’s worth on a crypto exchange. Or more.



So it makes sense that a SPAC that uses $10 of investor money to buy $10 of crypto could be worth $20 or more.



In theory.



In practice, it’s not working.



SPACs that have recently announced deals to become digital asset treasury companies (let’s call them DAT SPACs) are mostly trading around $11 per share.



This seems pointless.



An $11 SPAC price implies that the new company will be valued at 1.1x NAV — and what’s the point of a digital asset company that trades at 1.1x NAV? The core value proposition of DATs is that they can grow their stack of crypto by selling shares above NAV: MicroStrategy, for example, has been growing its “bitcoin per share” by exchanging $10 of equity for $20 of crypto.



But exchanging $11 of equity for $10 of crypto? That hardly seems worth the trouble.



Weirdly, DATs that have gone public by merging with a shell company have been doing much better.



The shares of VAPE, SBET and TRON, for example, are all up 5-10x since announcing their conversion into digital asset companies (buying BNB, ETH and TRON, respectively).



Even the Litecoin one, MEIP, has doubled in price.



There’s no obvious reason why a digital asset company that started as a shell company should be any more valuable than one that started as a SPAC.



But most DAT SPACs — including high-profile ones like CEPO, led by Adam Back, and CCCM, led by Anthony Pompliano — are only up about 10%.&nbsp;



This doesn’t make much sense, in theory.



But it might make sense in practice: SPAC investors have learned that paying a big premium to NAV rarely works out.



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



Get the news in your inbox. Explore Blockworks newsletters:



<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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