The Three Kingdoms

Byron Gilliam

This is a segment from The Breakdown newsletter. To read full 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">
“Money and banking, in the end, is a confidence game, and our job at the Federal Reserve is to preserve confidence.”



— Richard Fisher, President, Federal Reserve Bank of Dallas (2005-2015)
</blockquote>



In Michael Lewis’ Wall Street classic Liar’s Poker, the phrase “equities in Dallas” is wielded as an epithet — a catch-all term for the least competent people at Salomon Brothers doing the firm’s least desirable jobs.



The young investment bankers in Lewis’ class of Salomon trainees lived in fear of being assigned to the equities division in Dallas — a fate considered only marginally better than being fired.



In their eyes, Dallas, TX — an incomprehensible 1,547 miles removed from Salomon’s New York City headquarters — was a financial backwater of provincial irrelevance.



But Dallas was a financial center in its own right — and its distance from New York is what made it an important one.&nbsp;



Dallas is home to one of the 12 regional banks of the Federal Reserve, many of which were strategically placed in financial backwaters as a means to decentralize the US banking system.&nbsp;



The idea was to distribute the Fed’s power across regions — not just to reflect economic diversity, but also to insulate monetary policy from concentrated political or financial influence.



That may seem like an anachronism in today’s world of megabanks and seemingly all-powerful Fed chairs.&nbsp;



But the threat of centralized power is neither theoretical nor historical, as has been illustrated by the president’s recent threats to fire Chair Powell for failing to cut interest rates.



Last week, however, the Supreme Court <a href="https://www.supremecourt.gov/opinions/24pdf/24a966_1b8e.pdf">ruled</a> that the president does not have the power to remove the Fed chair or any other board members of the Federal Reserve.&nbsp;&nbsp;



Instructively, the same ruling found that the president likely does have the authority to fire appointees at federal agencies like the NLRB and MSPB.



But the Federal Reserve is exempt, the majority reasoned, because the central bank is “a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”



This was always the plan.



What makes the structure of the Federal Reserve “unique” is that it&#8217;s not one bank, but many — and with several in places like Dallas.



The Federal Reserve was designed as a group of semi-independent regional banks to better resist the centralization of financial power, be it in New York or DC.



Putting some of those banks in economic backwaters like Dallas wasn’t an accident; it was a way to hardwire decentralization into the system.



In 1914, when Dallas was chosen as a site for a regional Federal Reserve bank, its population of 131,278 made it the 58th-largest city in the US.



The <a href="https://www.dallasfed.org/news/speeches/fisher/2012/fs120626?utm_source=chatgpt.com">lobbying pitch</a> for why Dallas should be chosen ahead of larger cities included the proud statement that it “leads the world in the manufacture of cotton gin machinery and in the manufacture of harness and saddlery.”&nbsp;



If that helped its cause, I can only imagine it was because the pitch illustrated just how different Dallas is from New York.



Once established, the Dallas Fed hired a staff of 27 (at an average pay of $30 a month) whose primary task was to provide centralized check-clearing for the region — bundles of checks would arrive at the bank during the day and Dallas Fed employees would spend the night sorting them by hand.



The bank also supplied currency and coins to the region — to this day, banknotes ordered and circulated by the Dallas Fed prominently feature the letter “K” on the front (K being the 11th letter of the alphabet and Dallas being the 11th of 12 regional Fed banks).



More consequentially, the Dallas Fed also set local interest rates.



In the beginning, regional Federal Reserve banks were so independent that they each set their own lending rates for banks in their region.



Imagine 12 Fed banks…all setting their own monetary policy!&nbsp;



Fun, I imagine, but it didn’t last long.



Regional interest rates proved unwieldy and the practice ended in 1935 when the Banking Act of 1935 granted the Board of Governors in Washington DC the authority to set a single interest rate for the entire country.



But regional banks retained a say in rate decisions.



All 12 Federal Reserve bank presidents attend FOMC meetings to represent their region’s interests, and a rotating group of four regional presidents (New York excluded) have a vote on the FOMC.



In short, even though it often seems like Chair Powell is setting interest rates himself because he’s the face of the Fed, his is only one of 12 votes in FOMC decisions.



Importantly, this semi-decentralized structure limits the ability of a president to bully the Fed.&nbsp;



It’s true that seven of the 12 FOMC members are presidential appointees, but their staggered, 14-year terms are explicitly designed to limit the influence of any single president over monetary policy.



This has never been more relevant.



Last week, the president bullied the House into passing a “big, beautiful bill” that the Congressional Budget Office <a href="https://www.cbo.gov/publication/61187">estimates</a> would put the US on the path to adding $56 trillion of federal debt over the next 30 years.



Perhaps the Senate will impose some fiscal responsibility before the bill becomes law, but the political will to rein in deficits appears to have evaporated in recent years.&nbsp;



If so, that leaves the Federal Reserve as the last bastion of economic sanity and the last line of defense for the US dollar.&nbsp;



It might not hold.



Last week’s Supreme Court ruling demonstrates the power of the Federal Reserve’s decentralized structure.



But the Fed ultimately reports to Congress, which could rewrite the law that grants it independent control over monetary policy — and even the most responsible monetary policy may be overwhelmed by today’s increasingly irresponsible fiscal policy.



Hence the recent strength in gold and bitcoin — if the semi-decentralized Fed isn’t able to hold the line on dollar devaluation, a fully decentralized currency might take its place.



In the meantime, though, the House budget and Supreme Court ruling are reminders that we should all be thankful that there is, in fact, “banking in Dallas.”



New York’s young investment bankers most of all.



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The Breakdown Newsletter

The monetary power of the periphery: How Dallas defends the dollar

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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Not many of crypto’s top 15 tokens by market capitalization were first issued after FTX’s collapse. Two exceptions are SUI, which began trading in mid-2023, and HYPE — which has risen to over $11 billion in market capitalization since being airdropped in November 2024.&nbsp;



HYPE, which is the native token of the Hyperliquid layer-1, has more than tripled in price since a local bottom on April 6, outpacing SOL’s roughly 70% gain over that time span. For crypto investors seeking the next layer-1 token that could capture Solana-like returns, HYPE is generating a lot of hype. Even Galaxy’s Mike Novogratz is <a href="https://x.com/stevenyuntcap/status/1923368561671606595">on board</a>.



Hyperliquid’s core layer-1 appchain, called HyperCore, is purpose-built for Hyperliquid’s order book exchange, which generates fees and leads to token buybacks. This product is very popular: Hyperliquid accounted for 77% of onchain perpetuals trading volume in April, <a href="https://app.artemisanalytics.com/sectors">according</a> to data from Artemis. Hyperliquid also has an Ethereum Virtual Machine network called the HyperEVM, but its adoption is so far more <a href="https://app.blockworksresearch.com/research/hyperliquid-not-done#valuation">muted</a> than HyperCore.



So, there is some confusion on HYPE: Should it be valued like a perps DEX that is maxing out demand in the perps DEX market, or like a layer-1 that could compete with the likes of Ethereum and Solana?



HYPE is priced somewhere in the middle. Ryan Watkins of Syncracy Capital — which has positions in both HYPE and SOL — posted a chart showing in early March how Hyperliquid was trading at a lower fee multiple than other L1s, including Solana.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXftPe5-9rbUN50TMy8G-KUgjTgJB6AKVge5iklezPSJoAXt8p9d5RyxtESy329JFuPrjQE45aE_mJN3AfUfWIOX4qrVpGtOadRoApRcQ3cO3djv1bhWxRjHtpnuk-T5RsDVlbk_?key=ec3LIWV_Fs75WjSNR7Pdyw" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://x.com/RyanWatkins_/status/1897302205327401167">Ryan Watkins on X</a>.</figcaption></figure>



But as Blockworks Research analyst Boccaccio <a href="https://app.blockworksresearch.com/research/hyperliquid-not-done#valuation">has pointed out</a>, Hyperliquid trades at a higher fully diluted valuation (FDV) to fees ratio relative to competitor perps DEXs in Drift and dYdX, indicating it is more valuable to investors compared to simple perps DEXs.&nbsp;



Bitwise Research analyst Danny Nelson said Hyperliquid aims to create a vibrant blockchain economy like Solana’s, but it’s “not quite there yet.”



“That said, the ecosystem’s flagship perpetual contracts exchange has become an industry juggernaut. The market is pricing HYPE accordingly, and, I would argue, attempting to account for a future where Hyperliquid hosts yet more winners,” Nelson added.



There are other idiosyncratic factors at play as well. Hyperliquid’s validator set is <a href="https://blockworks.co/news/hyperliquid-decentralization-validator-put">not as decentralized</a> as some other L1s. Hyperliquid does not require know-your-customer (KYC) checks, and most centralized exchanges such as Binance do, and maybe that’s a valuable feature to some traders that is being priced in as well.



For dopamine-deprived token investors, HYPE may look like the kind of opportunity that has been fewer and further between in recent years, but it’s likely too soon to call it the next SOL.



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Hyperliquid

Hyperliquid valued between layer-1 and perps DEX

Casey Wagner

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



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Nvidia will report its first quarter earnings after the bell today, closing out the Q1 season for the <a href="https://blockworks.co/news/meta-microsoft-earnings-q1-stocks-higher">Magnificent 7</a>. 



With things relatively quiet (hopefully I didn’t just jinx it) on the trade war front, <a href="https://blockworks.co/tag/nvidia">Nvidia</a>’s report is poised to move markets. 



Analysts polled by FactSet are calling for Q1 revenue to come in at $43.3 billion, which would be a 66% year-over-year increase. Not too shabby — though the chipmaker’s year-over-year revenue growth was 262% in Q1 2024.&nbsp;



This time around, investors will be just as interested in what Nvidia isn’t selling.&nbsp;



In April, the chipmaker said it would be taking on a charge of up to $5.5 billion in the first quarter after regulatory changes rendered a portion of its inventory unsellable. Nvidia’s H20 chips — designed specifically for Chinese buyers — now require a license to sell, so the company will be eating costs associated with purchase commitments.&nbsp;



NVDA futures slid 6% on April 15, when Nvidia revealed the news in a regulatory filing. Shares have since pared losses, and as of 2 p.m. ET Wednesday were trading 31% higher than their mid-April low. Still, NVDA is down 1% year to date.&nbsp;



Just days ago, Nvidia CEO Jensen Huang called the restrictions on H20 chip sales to China “deeply painful” and “enormously costly.” Two phrases shareholders never want to hear.&nbsp;



We’ll see what execs have to say about the Q2 forecast this evening. As always, keep an eye on your inbox for the breakdown tomorrow.



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earnings

Nvidia earnings in the spotlight

Kate Irwin

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



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Apparently, it’s a controversial take in crypto to ask for more single-player games (and fewer multiplayer games).&nbsp;



When juicing up an in-game economy with crypto elements, a multiplayer game seems like the obvious choice. Players can flex their purchasing power to others in the game. They can crush others with their NFT that cost $1,000, showing other players that they are, indeed, willing to spend that much on a single game item.



But is that use case worth the cost? And can most crypto game studios — most of which are technically “indie” game developers — even make successful 3D multiplayers with complex but balanced crypto economies that live up to their (and our) expectations?



Ronin cofounder Aleksander Larsen <a href="https://blockworks.co/news/crypto-gaming-biggest-hurdles">previously told me</a> that every crypto game studio can only pick two of these three options: graphics, gameplay, and game economy. (For Axie Infinity, they chose gameplay and economy.) The reason not every game can have all three shining bright is partly because of budget, but also because of the time it would take to perfect all three (therefore costing more money).



I wrote a <a href="https://x.com/pixiekate13/status/1927412004039389302">thread</a> about this single-player versus multiplayer issue yesterday that went, surprisingly, viral. If you want to crack the X engagement algorithm, by the way, just write an essay of 1,000 words or more in a single tweet (xeet?) about something on which you have a strong opinion and years of experience. People will read it and some will probably get mad at you. But that’s okay, because now people are thinking about it.



When it comes to single-player, 53% of gamers actually prefer single-player games, <a href="https://www.midiaresearch.com/blog/most-gamers-prefer-single-player-games">according</a> to a 2023 Midia Research study.&nbsp;



The whole CS:GO-and-DOTA gray markets argument came up a few times, with critics saying, I love trading skins in these games, of course we need more games that have this natively with crypto!



<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">Stop making multiplayer crypto games. Stop making crypto battle royales and multiplayer FPS titles. Stop making crypto MMORPGs. Unless you&#39;re making them all AI-controlled bots OR have over $100M and a plan to market to mainstream gamers and somehow overcome the longstanding… <a href="https://t.co/ixoZAkoWbR">https://t.co/ixoZAkoWbR</a>&mdash; Kate Irwin (@pixiekate13) <a href="https://twitter.com/pixiekate13/status/1927412004039389302?ref_src=twsrc%5Etfw">May 27, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Those brands were built with more money than most crypto game studios have — and building those brand-name games to what they are today took many, many years (CS has been around since the actual year 2000).



So if you’re willing to wait 10-plus years — and help fund such games — then be my guest.



The first major challenge ambitious multiplayer games in crypto face is the ping-and-player-count problem for immersive, 3D games. <a href="https://docs.aws.amazon.com/wellarchitected/latest/games-industry-lens/live-ops.html#:~:text=Live%20Operations%20(Live%20Ops)%20is,experience%20for%20the%20player%20community.">Live ops</a> video games offering multiplayer experiences like first-person shooters require the use of many different servers around the world. The server needs are substantial for any game that requires low latency (ping) like FPS games, MOBAs, or even some MMORPGs. Apex Legends, for example, previously had over 15 different servers for US-based players alone for years (before it switched to AWS recently).&nbsp;



But because players need low enough ping in these types of games in order to actually play and compete against others without being at a disadvantage, that means there needs to be enough of a playerbase in their precise region connecting to each server and pressing “Play” at the same time to sustain decent matchmaking times (less than 10 minutes, preferably less than three minutes).



That’s one of the reasons why, I think, we’re only seeing one <a href="https://blockworks.co/podcast/empire/6558f55c-a09f-11ef-aae9-2b3740fcea67">Off The Grid</a> right now. That, and the fact that building a game like that takes tens of millions of dollars, many years, and some star power to get more funding and bring it to market.



<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">Tough to see &#8211; the brutal truth is many games won&#39;t cut it. With 60% of playtime going to titles 6yrs or older only, and more content (TikTok/social, Steam&#39;s 19k games/yr) vying for attention than ever &#8211; games need a reason for players to stay. Just adding web3 is not enough. <a href="https://t.co/dbYD6JWRqM">https://t.co/dbYD6JWRqM</a>&mdash; soro.eth (@soro) <a href="https://twitter.com/soro/status/1927494051491619023?ref_src=twsrc%5Etfw">May 27, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Crypto games, for many years and likely for a number of years into the future, also have a smaller number of interested players by default. Blockchain games are not going to surpass Fortnite, Roblox, or Call of Duty anytime soon for many reasons that should be obvious, and I touched on above. Many gamers also still take issue with NFTs, and have decried every single mainstream game studio’s attempt at launching a crypto integration or game.&nbsp;



The reality is, we just don’t have enough interested players in this <a href="https://www.howtogeek.com/why-live-service-games-are-dropping-like-flies/">already-oversatured</a> gaming market to make piles of pricey, live-ops multiplayer games. The broader gaming industry is having a difficult time, too, as <a href="https://blockworks.co/news/animoca-brands-yat-siu-crypto-gaming-comeback">Animoca’s Yat Siu</a> and <a href="https://blockworks.co/news/crypto-games-shouldnt-monetize-early-nfts">VCs</a> have recently pointed out.



Thankfully, crypto game development has been trending toward mobile, which typically involves lower development costs and games that don’t require low ping. Naavik and Game7 research <a href="https://naavik.co/digest/web3-gaming-2024-year-in-review/">found</a> that mobile titles made up 30% of all crypto games last year, with Telegram games making up another 20%. Most crypto game developers are also technically “indie” based on their funding amount and budgets, meaning they simply don’t have the cash to make the next Call of Duty for crypto.



Maintaining games that use mobile or have a single-player focus will be less of a lift for developers, many of whom are also finding it difficult to raise more money right now.&nbsp;



Single-player crypto games can have asynchronous marketplaces, meaning one player can list something for sale, keep playing the game, and then eight hours later someone else on the other side of the world buys that item. There are many reasons why players would want to buy items for a single-player game, and they do already (the third-party site Nookazon is a good example of Animal Crossing trading, and people buy items for The Sims all the time). What if CyberPunk 2077 let you buy glitzy NFT items? What if NFT game cosmetics or items from single-player titles had other use cases or perks, too?



Crypto gaming has potential. There will be successful games that break through the noise. But many are on hopium, and need to come back down to earth with regard to what’s actually possible with the money that’s going around.&nbsp;



We’ve seen three multiplayer-focused crypto game studios close in the past month. If that isn’t a wake-up call that the existing strategies aren’t working, I don’t know what is.



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Gaming

Opinion: We need more single-player crypto games

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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Polygon Labs and GSR are teaming up on Katana. The new DeFi-optimized blockchain, set to launch next month, has a clear mission: Stop fragmenting liquidity and start redirecting value back to users. 



It’s built on Polygon’s new OP Stack-based cdk-opgeth framework, powered by <a href="https://blockworks.co/news/conduit-gigagas-throughput-sequencer">Conduit’s G2 sequencer</a>, and uses zk finality via Succinct’s SP1 prover. Good tech — but Katana’s true innovation isn’t technical, it’s economic.



This isn’t another “chain for everything” play. Katana is focused on DeFi — a purpose-built appchain designed to concentrate liquidity and maximize real yield. Think of it less as another rollup and more like a high-performance DeFi venue with protocol-aligned incentives, productive TVL and a built-in emissions flywheel, said <a href="https://blockworks.co/tag/polygon">Polygon</a> Labs CEO Marc Boiron.



“When you ask users what they actually want from DeFi, the answer is always the same: deep liquidity and high yields,” Boiron told Blockworks. “General-purpose chains just don’t deliver that.”



Where most <a href="https://blockworks.co/tag/layer-2-2">layer-2s</a> treat DeFi as one vertical among many, Katana makes it the main event. Core protocols like <a href="https://blockworks.co/analytics/morpho">Morpho</a> (lending), <a href="https://blockworks.co/tag/sushi">Sushi</a> (spot DEX), and <a href="https://blockworks.co/podcast/0xresearch/bd00fff0-3b58-11ee-9796-5fbaffa9ad85">Vertex</a> (perp DEX) serve as foundational infrastructure, not one of many apps doing the same thing. In a radical break from the usual DeFi sandbox model, Katana ensures these key partners face no competition within their category on the chain.&nbsp;



That’s by design and is expected to benefit the user experience. “You&#8217;re actually substantially worse off having $100 million split across three protocols than $175 million in one,” Boiron said.



Katana plans to channel activity through these few “core apps,” and supercharge them with yield sourced from five different streams: protocol emissions, KAT incentives, bridged asset yield (via <a href="https://polygon.technology/blog/introducing-vaultbridge-a-new-revenue-lego-for-evm-chains">VaultBridge</a>), sequencer fee redistribution and native stablecoin income (via Agora’s AUSD).



The VaultBridge directs bridged ETH, USDC and WBTC into Morpho vaults on Ethereum. It generates real returns before those assets even reach the chain, then compounds them further once they do. Even the sequencer revenue — which most chains keep for themselves or future validators — is redirected into user incentives and protocol-owned liquidity.



That’s an advantage of the rollup design space, according to Conduit founder Andrew Huang. “We worked with the Katana team to create a custom fee redistribution mechanism for the chain’s sequencer revenues,” Huang told Blockworks.



Thus, with yield transparently flowing from multiple sources and emissions guided by vote-escrowed KAT governance (à la Curve Wars), Katana is aiming for long-term sustainability, not short-term yield farming.



Boiron describes this approach as a response to DeFi’s persistent inefficiencies: fractured liquidity, unsustainable yields and duplicated assets. “If you’re not going to differentiate your blockspace,” he says, “don’t build [it].”



It’s also Polygon’s most serious bet yet on its <a href="https://blockworks.co/podcast/lightspeed/e14b89fa-e5f0-11ee-94eb-d754c5abecb8">AggLayer vision</a> — the idea of a network of tightly integrated chains stitched together via zk bridges and shared liquidity. <a href="https://blockworks.co/news/polygon-and-matter-labs-compete-on-zkevm-rollups">Polygon zkEVM</a>, once slated to fill that role, struggled to gain any user adoption, with activity and REV <a href="https://app.blockworksresearch.com/analytics/polygon-zkevm">on the decline</a> since the spring of 2024. (Blockworks Research is a data partner for Katana.)



Katana aims to showcase what the AggLayer can do as “a chain with very deep liquidity that every other chain can tap into,” Boiron said.



While most OP Stack rollups still rely on fraud proofs and treat tokenomics as an afterthought, Katana integrates zero-knowledge finality from the start. This evolution of the Polygon CDK — now known by the more brand-neutral Agglayer CDK, uses the OP Stack for developer familiarity, but replaces its core infrastructure with Polygon’s AggLayer bridge and execution proofs generated by Succinct’s SP1 prover.



That means no long fraud proof withdrawal windows on canonical bridges, Boiron noted, “and because we’re using OP Stack, users also get all the innovation from Base and Optimism, just ported onto Katana.”



Katana is also aiming for L2Beat’s Stage 1 compliance, meaning users will be able to safely exit without relying on any centralized operators. While Katana’s forced inclusion mechanisms won’t be live on day one, the project is committed to reaching full Stage 1 status shortly after launch. Conduit is working on a product expected later this year that will enable rollups to launch at Stage 1 from the get go, Huang said.



Pre-deposits are now opening in the run-up to launch with a lootbox-style reward mechanic, rather than a more nebulous points system. Public mainnet is scheduled for June 23.



Whether it becomes DeFi’s new liquidity hub or just a clever experiment remains to be seen, but at least it’s not “just another L2.”



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0xResearch Newsletter

Polygon preps a DeFi-focused chain to showcase AggLayer

David Canellis

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Why did nobody build Bitcoin before Satoshi?



Cryptographers had toyed with the idea of decentralized digital currencies since the late ‘90s. It took two whole decades more for someone to figure out how to actually do it at scale.



Perhaps some technical limitation at the node level held it back, like low memory or disk bandwidth. Or maybe it was that the slow pace of dial-up wasn’t exactly conducive to internet-based distributed computing before the dot-com boom.



Gwern, the pseudonymous internet brainiac, wondered as much in a 2011 blog — a post which immediately summoned legendary bit wizard Nick Szabo to respond.



<h2 class="wp-block-heading">On This Day – Szabo defends Bitcoin</h2>



In their May 27, 2011 essay, “<a href="https://gwern.net/bitcoin-is-worse-is-better">Bitcoin is Worse is Better</a>,” Gwern suggests that Bitcoin “involves no major intellectual breakthroughs.”



Bitcoin was mostly a collection of prerequisite technologies, ranging from the hash tree from 1979 to Adam Back’s Hashcash and Wei Dai’s B-money, until finally Szabo’s bit gold in the early 2000s.



The next day — 14 years ago today — Szabo <a href="https://unenumerated.blogspot.com/2011/05/bitcoin-what-took-ye-so-long.html">replied</a>. “Bitcoin, what took ye so long? So asks gwern in a spectacular display of hindsight.”



Szabo had only really publicly commented on Bitcoin twice before, at least by my count.&nbsp;



<a href="https://unenumerated.blogspot.com/2009/05/liar-resistant-government.html">Both</a> <a href="https://unenumerated.blogspot.com/2011/01/tech-roundup-012211.html">instances</a> involved comparisons to bit gold, and he went so far in January 2011 as to say that Bitcoin was “an implementation of the bit gold idea.” Which in many ways is, of course, true.



In 1998, Szabo proposed a concept for a decentralized digital currency, bit gold, which is widely regarded as Bitcoin’s closest ancestor. Bit gold has many of Bitcoin’s hallmark features, including proof-of-work mining and time-stamped blocks.



Bit gold was never formally implemented into a working public prototype, leading many in the early years to wonder whether Szabo was actually Satoshi Nakamoto himself. (Nick has denied creating Bitcoin on multiple occasions.)



“The short answer about why it took so long is that the bit gold/Bitcoin ideas were nowhere remotely close to being as obvious gwern suggests,” Szabo wrote. “They required a very substantial amount of unconventional thought, not just about the security technologies gwern lists (and I&#8217;m afraid the list misses one of the biggest ones, Byzantine-resilient peer-to-peer replication), but about how to choose and put together these protocols and why.



“Bitcoin is not a list of cryptographic features, it&#8217;s a very complex system of interacting mathematics and protocols in pursuit of what was a very unpopular goal.”



The whole post is worth the read, especially after going over Gwern’s entire original post beforehand (Gwern even shows up in the comments, replying to Szabo’s criticism. Szabo’s <a href="https://unenumerated.blogspot.com/">blog</a> is also worth revisiting, although he hasn’t posted since March 2018.



Most interestingly, Szabo mentions a private mailing list he’d founded in the late ‘90s, “libtech,” where he and Wei Dai both detailed their ideas for bit gold and b-money. Szabo later <a href="https://thedailyeconomy.org/article/the-mating-of-economic-ideas-and-bitcoin/">stated</a> that Hal Finney, free banking authority Larry White, and economist George Selgin were also on the list.



Anyone who knows if an archive of those emails still exists, hit me up.



<h2 class="wp-block-heading">Did You Know?</h2>



Wei Dai’s b-money proposal is the first citation in the Bitcoin white paper. And while he may not be Satoshi, Wei did mine bitcoin in early 2011, when it traded for less than a dollar.&nbsp;



“&#8230; My understanding is that the creator of Bitcoin, who goes by the name Satoshi Nakamoto, didn&#8217;t even read my article [<a href="http://www.weidai.com/bmoney.txt">proposing b-money</a>] before reinventing the idea himself,” Wei <a href="https://www.lesswrong.com/posts/ijr8rsyvJci2edxot/making-money-with-bitcoin?commentId=hbEu9ue9eymNzaF2J">wrote</a> on LessWrong, a forum for discussions about rationality, philosophy and so on.&nbsp;



“He learned about it afterward and credited me in his paper. So my connection with the project is quite limited.”



Wei continued: “BTW, thanks to the discussion you started, I bought a Radeon 5870 and started mining myself, since it looks likely that I can at least break even on the cost of the card. (Of course I heard about Bitcoin earlier, but in my version of the idea, nobody can make large profits by mining/minting, so I didn&#8217;t look into the possibility.)”



The 50 BTC earned by mining just one block in 2011 would now be worth more than $54 million.



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Cypherpunks

Why Bitcoin may not have been possible in the ’90s

Katherine Ross

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Have you heard about Cove?&nbsp;



Given that the protocol didn’t have a testnet, you might not have, or you might have seen its $3 million pre-seed raise led by Electric Capital, with participation from Accomplice, Daedalus, and Robot Ventures.&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">We’re thrilled to announce <a href="https://twitter.com/stormlabs_xyz?ref_src=twsrc%5Etfw">@stormlabs_xyz</a> has completed a $3MM pre-seed fundraise led by <a href="https://twitter.com/ElectricCapital?ref_src=twsrc%5Etfw">@ElectricCapital</a> with <a href="https://twitter.com/Accomplices?ref_src=twsrc%5Etfw">@Accomplices</a> <a href="https://twitter.com/robotventures?ref_src=twsrc%5Etfw">@robotventures</a> <a href="https://twitter.com/daedalus_angels?ref_src=twsrc%5Etfw">@daedalus_angels</a> and more to build <a href="https://twitter.com/cove_fi?ref_src=twsrc%5Etfw">@cove_fi</a> and the future of onchain portfolio management! Say goodbye to loss-versus-rebalancing (LVR). <a href="https://t.co/TF3Stm72cX">pic.twitter.com/TF3Stm72cX</a>&mdash; Cove (@cove_fi) <a href="https://twitter.com/cove_fi/status/1777723825288831384?ref_src=twsrc%5Etfw">April 9, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Cove is launching its mainnet today, the team exclusively told Blockworks. They’re also launching coveUSD, which lets folks earn yield on Ethereum.&nbsp;



But let’s back up: The Cove protocol aims to deliver “risk-adjusted yield” through curated DeFi vaults. It came about as a solution for Cove founder Sunil Srivatsa.&nbsp;



“I&#8217;m just spending a lot of time onchain, monitoring different returns and trying to earn the most money. And I got sick of it, and I was like, ‘There&#8217;s got to be a better way to do this,’” he said. “This is how I would yield farm if I wasn’t lazy.”



So Srivatsa built the protocol and partnered with Gauntlet so that the two can bring their strengths together.



“[Gauntlet’s] actually done a very comprehensive methodology that&#8217;s kind of underpinning all the strategies that we&#8217;re launching, where they&#8217;re doing all the data and model, the data modeling, offline, off-chain, using their existing systems,” Srivatsa said. Cove has written “Python Silverback bots that are able to basically take [the] off-chain intelligence and use that to run the protocol in the most optimized fashion.”



Right now, Cove is only on Ethereum, but Srivatsa teased that it plans to expand later on. However, the focus is on executing “safely and in a controlled fashion.”



“We&#8217;re working very closely with Gauntlet to make sure that we&#8217;re optimizing and monitoring everything as we roll this out,” he said. Cove is set up to rebalance once a day, which should take roughly 15 minutes. But if it has to retry, then it could take up to 45 minutes.&nbsp;



Srivatsa designed Cove to be noncustodial. Basically, he wants to automate the features for ease of access. That also went into the thought process behind the UX, he said.&nbsp;



To protect both the users and the protocol, Cove’s already undergone three audits with Zellic and Pashov Audit Group. Quantstamp and Trail of Bits are also auditors, <a href="https://www.cove.finance/">per the website</a>.



You could have probably already guessed this, but Cove won’t initially be available in the US. Srivatsa is hoping for a day with more regulatory clarity where they can remove the geoblock, especially since the team is US-based, but we’re just not there yet.&nbsp;



Clearly, this isn’t Srivatsa’s first rodeo. He previously was the CEO of Saddle Finance, which <a href="https://www.coindesk.com/tech/2023/08/08/venture-backed-saddle-finance-proposes-wind-down-dissolution">wound down</a> in 2023. He then founded Storm Labs, which raised the pre-seed round for Cove.



His experience in the space has led him to realize that “DeFi doesn’t really need automated market making. It needs automated investing.”&nbsp;&nbsp;



Notably, this has been a concept tried by other projects in the past, such as <a href="https://blockworks.co/tag/sommelier">Sommelier</a>.&nbsp;



I asked Srivatsa how he plans to build out the user base since the protocol’s going straight to mainnet. For him, it’s simple: Make DeFi as easy to use as running water. It’s something that comes from his past experience at Uber.&nbsp;



“Anybody should be able — with one click — to access a safe rate and noncustodial[ly],” Srivatsa said. “You shouldn&#8217;t have to deal with banks or wire transfers or any of this stuff; you should have full control over [your] finances.”&nbsp;



As for another venture round, Srivatsa told me to “keep your eyes posted.” He also teased that the <a href="https://blockworks.co/news/epic-games-apple-store-app-ruling-games">Apple v. Epic Games ruling</a> from earlier this year may have sparked some interest.



“I think a native mobile application that makes it as simple as you can to go from Apple Pay to earning with coveUSD, and then taking your money out again is something that would be cool. So, [we] might be working on something in that avenue as well,” he said.



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Empire Newsletter

Exclusive: Cove launches mainnet, CoveUSD

This is a segment from The Breakdown newsletter. To read full 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 chief business of the American people is business.”



— Calvin Coolidge
</blockquote>



When Ross Perot’s “computer facilities management” startup Electronic Data Systems was listed on the stock exchange in 1968, the shares were offered at 118x earnings.



It was an eye-popping valuation at the time — especially given the risks.&nbsp;



EDS “is in a precarious position,” Fortune noted shortly after its IPO. “It has only a few customers, and three of them accounted for a total of 64% of revenues during fiscal 1968.”



But those were the kinds of risks that investors were keen to take.



“As every ladies’ investing club knows,” Fortune explained, “the public these days is wildly receptive to new stock issues, particularly from companies involved in the computer industry.”&nbsp;



It’s unlikely that many of those ladies had ever even seen a computer, let alone used one.



But they were nonetheless eager to bet on them, however aggressive the valuation.



Ken Langone, the investment banker who promised Perot he’d IPO EDS at “the highest possible price,” acknowledged that the price was indeed high.



At 118x earnings, the stock “would be way overvalued,” Langone later <a href="https://www.amazon.com/I-Love-Capitalism-American-Story/dp/073521624X">wrote</a>.



“But it would only be overvalued until it grew, and then it wouldn’t be.”



The investment club ladies — intrepid pioneers of growth investing — agreed with him.



EDS closed its first day of trading 40% above the “overvalued” IPO price.



With that, Perot has achieved “perhaps the most spectacular personal coup in the history of American business,” Fortune assessed.



The article dubbed Ross Perot “the fastest richest Texan ever,” which was no small feat in the state renowned for overnight oil fortunes.&nbsp;



Soon, Perot was also historically rich.



With EDS shares soaring into the end of the year, the 39-year-old Perot became history’s first tech billionaire.



It was a uniquely American story.



No other country could have produced an entrepreneur quite like Ross Perot, who spoke in Texas colloquialisms, got his hair cut Marine short every week at the same Dallas barber for 30 years straight, was a devout family man but also ruthlessly hypercompetitive in business — and won 18.9% of the popular vote in the 1992 presidential election.



But what made Perot’s fortune even more uniquely American is that investors in no other country would have enabled it.



EDS was just one of 368 companies to list its shares on American stock exchanges that year in an era when companies in other developed countries got most of their funding from bank loans.



While the US was averaging more than one IPO per calendar day, Germany, for example, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=231231">averaged</a> fewer than one IPO per year.



​After the EDS IPO, Fortune speculated that “probably no other man made so much money so fast.”



But the author also cautioned that “most of Perot’s wealth can be attributed to the enthusiasm of investors.”



That enthusiasm for risk-taking did more than just make founders like Perot wealthy, however — it made America wealthy, too.



The United States “had a public stock market that was willing to absorb risk at much earlier stages than European and Asian markets,” Bhu Srinivasan <a href="https://www.amazon.com/americana-400-year-history-american-capitalism-Books/s?k=americana+a+400-year+history+of+american+capitalism&amp;rh=n%3A283155&amp;hvbmt=%7BBidMatchType%7D&amp;hvdev=c&amp;tag=googhydr-20&amp;ref=pd_sl_5drh44zcl3_e">wrote</a> in his history of American capitalism.



This gave the US “the unique capability to finance ideas at the earliest stages,” — and later “an ecosystem in Silicon Valley that allowed embryonic companies in nascent markets to develop quickly.”



Some of those embryos have developed into giants: The United States is now home to 21 of the 25 largest companies in the world. Americans don’t always celebrate this incredible success.



Occupy Wall Street types actively bemoan it, of course — but even the treasury secretary of the United States seems ambivalent.



“It’s Main Street’s turn,” Secretary Bessent has said repeatedly, as if the economy is a zero-sum contest between Main Street and Wall Street.



It’s not.



“Increases in stock market capitalization and the number of listed companies are closely correlated with real GDP growth,” one <a href="https://www.researchgate.net/publication/361086455_The_Influence_of_the_Capital_Market_on_Economic_Growth_in_the_USA">study</a> found, “supporting the argument that capital markets have played a key role in driving US prosperity.”



Another <a href="https://www.sciencedirect.com/science/article/pii/S0304405X00000702">study</a> detailed why: “Across 65 countries, those with developed financial sectors increase investment more in their growing industries, and decrease investment more in their declining industries.”



It doesn’t always feel that way, of course.



The popularity of things like meme stocks, zero-days-to-expiration options, and crypto “treasury companies” can make the stock market look like a giant misallocation of resources — not much more than a casino.



But a third <a href="https://www.sciencedirect.com/science/article/abs/pii/S0378426602004089">study</a> found “strong evidence that greater stock market liquidity, as measured by trading volume relative to market size, causally contributes to long-run GDP growth.”



In other words, even day trading might be economically productive.



Could crypto trading be too?



Solana co-founder Anatoly Yakovenko <a href="https://x.com/aeyakovenko/status/1925705058785644978">thinks so</a>: “What makes American capital markets great is their depth and liquidity and broad array of participants,” he says, adding that “the whole pitch of Solana [is] lowering the barrier to entry to participate in capital markets.”



It&#8217;s a good pitch, I think, because opening markets to more traders makes markets better — and crypto opens markets to everyone.



America’s capital markets are the world’s best because they’ve always connected the best founders (like Ross Perot) to the most enthusiastic investors (like the ladies’ investing clubs).



Now, crypto capital markets — newly <a href="https://multicoin.capital/2025/01/22/the-solana-thesis-internet-capital-markets/">rebranded</a> “internet capital markets” — might be the next place where risk-taking founders meet risk-taking investors.



The hope is that this happy, permissionless meeting will result in the creation of “<a href="https://x.com/_ryanrconnor/status/1924876335777734950">net new assets</a>” that could only ever be funded by crypto enthusiasts.&nbsp;



Such optimism is easy to dismiss, because for all the extraordinary enthusiasm that crypto investors have shown, the results so far have been underwhelming: Non-sovereign money was an immaculate conception, stablecoins aren’t really crypto and the rest of crypto seems highly self-refential — not much more than new ways to trade crypto.



But trading is important — and if crypto turns out to be where a new generation of enthusiastic traders fund new kinds of assets, it’s worth taking a chance on.



History shows that America’s enthusiastic investors didn&#8217;t just make fortunes for founders — they made fortunes for America, too.



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<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
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The spirit of ’68: How capital markets made America wealthy

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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I spent much of last week running between conference venues and side events during Solana Accelerate in New York City.&nbsp;



Conferences tend to be announcement-heavy affairs, and Accelerate didn’t disappoint, bringing major updates on Solana’s core infrastructure, Solana’s phone startup and tokenized equities.&nbsp;



And as I <a href="https://blockworks.co/news/solana-accelerate-day-one-etfs-firedancer">pointed out last week</a>, change is in the air. Competition is heating up, and formerly-hyped areas of Solana’s ecosystem are starting to lose their luster.&nbsp;



To elucidate some of that potential change, here are four big questions I have after Accelerate.



<h2 class="wp-block-heading">1. What’s the deal with Firedancer?</h2>



Jump <a href="https://blockworks.co/news/lightspeed-newsletter-solana-firedancer-testnet">released Frankendancer</a>, a halfway version of Firedancer that makes some performance improvements to the existing Solana client, last September. It began <a href="https://x.com/whosknave/status/1894134153446031532">rolling</a> out Jito bundle support — allowing validators to more efficiently MEV — earlier this year.



Today, Frankendancer <a href="https://app.blockworksresearch.com/analytics/solana?dashboard=131">commands</a> just 6% of Solana’s total stake (that proportion is up slightly from around 5% last week). This from-scratch Solana client project has been talked about in hallowed terms for years, but for one reason or another, most validators aren’t currently using Frankendancer.&nbsp;



One Accelerate attendee mused to me that Jump and Solana may have hyped up Firedancer too much, too soon, and perhaps building and rolling the software out more quietly would have been the better move.



Frankendancer’s key catalyst could be financial incentives: The client’s developer announced a stake delegation program similar to what the Solana Foundation offers during Accelerate.&nbsp;



<h2 class="wp-block-heading">2. Has Kraken become the Solana-favored exchange?</h2>



One major news item from Accelerate was Kraken’s <a href="https://www.wsj.com/finance/currencies/kraken-crypto-exchange-stock-tokens-e4fc1bb9?gaa_at=eafs&amp;gaa_n=ASWzDAgyoeZEozJQPCzOiVx9Ta6nVeJba4g_rjkkAHNtpnkllIWhV6juu0nX1eeMX2U%3D&amp;gaa_ts=68360099&amp;gaa_sig=wHrVyKYN3BI0rBGsrl6J2vapDwzPavSgAl9B751UK0uhotgqYLUM7wWH0UJr1C-ZBKd6vUEYctiviq1qRDn3XA%3D%3D">launch</a> of xStocks, tokenized equities —&nbsp;including Apple, Tesla and Nvidia — that will trade on Solana.



It’s an interesting development in international investors’ ability to invest in US stocks, but more interesting was the decision to launch on Solana. Kraken has an in-house <a href="https://blockworks.co/news/kraken-ethereum-layer-2-superchain">layer-2 blockchain</a> named Ink, which would have been a natural fit for the new product, but I think the exchange sees business upside in Solanaland.



As a US-based exchange operating in Coinbase’s shadow, Kraken may spy opportunities in the former exchange’s sometimes-contentious relationship with the Solana community, which has <a href="https://www.reddit.com/r/solana/comments/1h1m4ut/coinbase_is_intentionally_making_solana_look_bad/">expressed</a> consternation over Coinbase’s penchant for nudging users to use its layer-2, Base.



Solana is the hottest blockchain ecosystem of the moment, so becoming the favored exchange for Solana investors could prove lucrative for Kraken. In the past few months, the exchange has brought back staking for US users, <a href="https://blockworks.co/news/janover-to-receive-kraken-staked-sol">parked some</a> of its own money in a Solana treasury vehicle and now will launch tokenized equities on Solana. Kraken appears to be well on its way.



<h2 class="wp-block-heading">3. What’s the thinking behind the SKR token?</h2>



The Solana Labs-supported mobile phone startup Solana Mobile made three big announcements at Accelerate, which were:



<ul class="wp-block-list">
<li>A) the Seeker phone will ship in August</li>



<li>B) with a new decentralized architecture to rival Android and iOS, and&nbsp;</li>



<li>C) it will have a token with the ticker SKR.</li>
</ul>



I found this last announcement somewhat surprising. As an entity with some presence in a New York City office, I’m sure Solana Labs has to be reasonably careful with compliance — and launching tokens can create legal headaches. Just look at <a href="https://blockworks.co/news/bakkt-delist-cardano-polygon-solana">some of the fallout</a> from when the SEC deemed SOL a security.&nbsp;



My guess is that Solana Labs — which currently develops companies including Solana Mobile — thinks a friendlier legal environment can shield SKR from too much scrutiny, and it knows token incentives <a href="https://blockworks.co/news/solana-phones-sold-out">drove a chunk</a> of the demand around the last Solana phone.&nbsp;



Disrupting the App Store duopoly, as Solana co-founder Anatoly Yakovenko likes to say, will be no easy task. Maybe SKR will make things a bit easier.&nbsp;



<h2 class="wp-block-heading">4. Is the Trump-crypto marriage growing strained?</h2>



Leadership at the newly-formed <a href="https://blockworks.co/news/solana-policy-institute-ceos-political">Solana Policy Institute</a> was visible in and around Accelerate, as Solana looks to grow its political footprint. To that end, there’s one political post from the conference that caught my eye.



“Congressman @RitchieTorres just got cheers from the crowd at Solana Accelerate for saying ‘We should not be selling access to Congress or the White House,’” the journalist Veronica Irwin, formerly of Unchained, wrote on X last week.



She went on to add: “I was surprised by the cheers — disapproval of President Trump is not something you see often at crypto conferences these days.”



President Trump held a dinner for holders of his Solana memecoin last week, a move that <a href="https://www.washingtonpost.com/politics/2025/05/22/trump-meme-coin-dinner/">raised</a> ethics concerns. As <a href="https://blockworks.co/news/senate-advances-genius-act">legislation</a> on stablecoins and crypto market structure works its way through Congress, I’m wondering whether Trump’s crypto profiteering may cost the industry legislative wins if Democrats <a href="https://blockworks.co/news/legislative-speed-bumps-genius-act-sec">turn against</a> crypto.



Still, Trump’s SEC dismissed a number of burdensome lawsuits against crypto companies. If I were a betting man, I’d say that in combination with the president’s other overtures to the industry would be enough to keep the union intact.



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conference

4 big questions following the Solana Accelerate conference

Ben Strack

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



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As corporate bitcoin treasury strategies proliferate, one firm is set to focus on buying ether at scale.&nbsp;



We all know about Strategy’s relentless bitcoin purchases (it bought another 4,020 BTC last week) and how more <a href="https://blockworks.co/news/strategy-metaplanet-bitcoin-treasuries-all-time-high">companies are following</a> its lead.&nbsp;



Well, SharpLink Gaming revealed Tuesday that it intends to use the proceeds of a $425 million private placement to buy ETH. Ethereum co-founder Joseph Lubin is set to become SharpLink’s board chair.&nbsp;



Shares of the Nasdaq-listed company were up roughly 400% on the day at 2 p.m. ET.&nbsp;



“ETH is a scarce asset that has bouts of deflation when chain activity is high, while simultaneously providing a nice yield through staking,” said Matt Lason, CIO at crypto hedge fund Globe 3 Capital. “This combination of scarcity, deflation and yield is an ideal scenario for a treasury strategy.”



While others have recently bought ETH on a smaller scale (<a href="https://www.newsfilecorp.com/release/250997/Beyond-Medical-Technologies-Announces-2.5-Million-Convertible-Note-Financing-to-Support-Blockchain-Attestation-Platform">Beyond Medical</a>, <a href="https://www.nasdaq.com/press-release/srx-health-solutions-further-diversifies-treasury-strategy-purchase-ethereum-2025-05">SRx Health Solutions</a>), Lason told me SharpLink is set to have a first-mover advantage similar to Michael Saylor-led Strategy. Having Lubin and a “AAA-list” of Web3 investments companies (Consensys, Pantera, GSR, Galaxy Digital, etc.) certainly helps, he noted.&nbsp;



LMAX Group crypto strategist Joel Kruger said capital is expected to flow beyond bitcoin as crypto matures, pointing out the falling BTC dominance and growing adoption of ether ETFs.



“While Ethereum carries more risk given its evolving technology and broader use case, its role as the backbone of internet capital markets makes ETH exposure a logical, if bolder, move for companies looking to diversify their crypto treasury strategy,” he told me.



Kruger said ETH appears to have formed a solid bottom and could retest its 2021 high (~$4,880) in the coming months. ETH was trading around $2,700 at 2 p.m. ET — up 48% over the past month.



“While Solana has captured some short-term liquidity, Ethereum remains the more battle-tested, decentralized and developer-diverse ecosystem,” he added.



Some will continue to prefer Ethereum’s rival layer-1 blockchain. Sol Strategies in April announced a convertible note facility of up to $500 million dedicated to <a href="https://blockworks.co/news/sol-strategies-is-solanas-microstrategy">acquiring and staking</a> solana tokens.



As for Lason’s outlook for ETH, he expects a new all-time high by the year’s end and a possible push to $8,000 by the end of 2026.&nbsp;



Price predictions are, well, just predictions. But it’s good to have them on the record.



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As bitcoin treasury strategies proliferate, one company eyes big ETH buys

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



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Investors were once again reminded over the weekend that when it comes to the trade war, threats often do not become reality.&nbsp;



US stocks were on the rise Tuesday, thanks to signs the US could be approaching a deal with the EU, as well as May’s better-than-expected consumer confidence survey.&nbsp;



Let’s start with a trade war update. Today’s rally follows a long weekend of heightened tensions, after President Trump on Friday said he would impose a 50% tariff on the EU, sparking a selloff late in the session. By Sunday, though, he had announced a pause on the levies until July 9.&nbsp;



“Talks will begin rapidly,” Trump wrote in a Truth Social post Sunday night.&nbsp;



The S&amp;P 500 and Nasdaq Composite indexes had erased Friday’s losses — trading 2% and 2.5% higher on the day, respectively, as of 2 p.m. ET.&nbsp;



Apple shares were also on the rise after facing headwinds on Friday following Trump’s threat to impose a 25% on iPhones made outside the US. I’ve <a href="https://blockworks.co/news/us-equities-trade-tariffs-magnificent-company-earnings">written before</a> about why I think Trump will be forced to spare Apple when it comes to his trade policy agenda, and we saw a hint of that over the weekend.&nbsp;



Trump’s Friday morning Truth Social post triggered a selloff in APPL futures; the stock opened 3.5% lower that day. By Tuesday, the administration was doing damage control. National Economic Council Director Kevin Hassett said this morning on <a href="https://www.cnbc.com/2025/05/27/trump-apple-iphone-tariffs.html">CNBC</a> that they “don’t want to harm Apple.”&nbsp;



By 2 p.m. ET, Apple shares were back in the green, trading 2.7% higher on the day and just below last Thursday’s close.&nbsp;



Trump’s threat and Hassett’s comments come about six weeks after the administration issued a tariff “exemption” on certain consumer electronics, including iPhones. We’re getting whiplash.&nbsp;



It’s true that Trump has said he’s willing to tolerate a level of pain in markets (remember, don’t be a “panican”), but we’ve seen time and time again that there’s a threshold. That’s one explanation for these back-and-forth policies that change on a sometimes hourly basis. If you ask Karoline Leavitt, though, the president is practicing the “Art of the Deal.”&nbsp;



Either way, stocks are trading on Truth Social posts. If anyone tells you they know where these tariff policies will land, take whatever they say with a grain of salt.&nbsp;



The other thing moving markets today was May’s consumer confidence survey.&nbsp;



The report came in much higher than expected, gaining 12.3 points on the month to hit 98. Analysts had projected a reading of 87. The numbers suggest that households may be feeling more positive about where tariffs will end up.&nbsp;



We know there’s still a lot up in the air, and like we said, one Truth Social post could send shares tumbling to new lows. But it seems that until consumers actually see higher prices, their outlook isn’t too bad.&nbsp;



Next up, the FOMC’s May meeting minutes are set to be released tomorrow afternoon. Investors will be looking for signs about how central bankers are thinking about <a href="https://blockworks.co/news/fed-holds-rates-fomc-may-powell">future rate cuts</a>. March’s minutes revealed that committee members are very comfortable with waiting for more economic data before adjusting interest rates in response to tariffs.&nbsp;



Keep an eye on your inbox tomorrow for our analysis.



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Donald Trump

Tariff reversal sends stocks higher

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



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We now know more about the bug that was exploited last week, resulting in over $220 million in frozen and stolen funds from the Sui-based DEX Cetus.



On Monday, Sui <a href="https://x.com/SuiNetwork/status/1927077606488252775">described</a> the flaw as “a bug in a Cetus math library” and promised to commit $10 million to improving Sui’s security more broadly. That includes a <a href="https://x.com/SuiNetwork/status/1927077631477891141">bug bounty program</a>, plus Sui-funded security audits for projects using the chain.



Blockchain security firm Dedaub <a href="https://dedaub.com/blog/the-cetus-amm-200m-hack-how-a-flawed-overflow-check-led-to-catastrophic-loss/">explained</a> that the attack involved intentionally misconfiguring a liquidity pool with an “extremely high value.”



“This allowed them to add massive liquidity positions with just 1 unit of token input, subsequently draining pools collectively containing hundreds of millions of dollars worth of token,” the firm wrote.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXePT5t92frYhGnlQd14zNo3j78OWArKwh4M9KlCvfx4zTC6mDGSfxk93EQXxeOxz46IFhkwyMQa0vBN9EX_zSzl7bfPuz3ttDr3GsA3L2iF9Kja_rA-z4YkjBr5Hbbejm4nch71IQ?key=1yjnQt7AfIzXFB7ywHt_gA" alt=""/><figcaption class="wp-element-caption">Image from Cetus detailing how the incident occurred.</figcaption></figure>



As of May 26, Cetus <a href="https://cetusprotocol.notion.site/Cetus-Incident-Report-May-22-2025-Attack-Disclosure-1ff1dbf3ac8680d7a98de6158597d416">said</a> that the majority of the swiped crypto (roughly <a href="https://x.com/CetusProtocol/status/1925567348586815622">$162 million</a>) remained frozen across two Sui wallets, while the rest of the stolen funds had already been converted to ETH by the attacker.&nbsp;



“Cetus has been among the DeFi teams on Sui that invested the most in smart contract audits and system safeguards. Unfortunately, reality does not always unfold as we wish,” Cetus said in its disclosure. “Multiple rounds of audits on the underlying contracts and the dependent open-source libraries — combined with their widespread and successful use by ecosystem developers — gave us a sense that we had done enough. In hindsight, we realize we allowed ourselves to relax our vigilance. This painful lesson has shown us: we must do more.”



The DEX further <a href="https://x.com/CetusProtocol/status/1925914205745459433">said</a> last week it hasn’t heard from the hacker thus far.



Sui isn’t the only one that’s recently seen crypto swiped on its chain due to an exploit. On a much smaller scale, Cardex, a game on Abstract, had a flaw that resulted in at least $500,000 being siphoned from that app’s users earlier this year.



Being permissionless means more people can build in a chain’s ecosystem with less oversight, getting closer to financial <a href="https://blockworks.co/news/suis-decentralization-dex-put-to-the-test">decentralization</a>, one of the original aims of crypto.&nbsp;



But it also means a chain’s reputation can take a hit when some apps that use it are lacking on the security front — leading to headline-generating exploits and losses often in the millions.



“Security audits are inherently imperfect,” <a href="https://x.com/Jack24klove/status/1927226183592050789">wrote</a> BlockSec’s CCO, who goes by Orlando on X, in response to the incident. “In 2023, the entire crypto market spent $1 billion on security audits, yet $2 billion in assets were still stolen.”



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hacks

Sui shares details on $220M Cetus exploit, vows to step up security

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>.



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More than a year after its initial <a href="https://blockworks.co/news/starkware-starknet-zero-knowledge-prover">announcement</a>, StarkWare is today launching S-two (STARK Two) in public alpha.



S-two is a next-generation zero-knowledge STARK prover fast enough to run natively on consumer hardware. Developers will be able to start building with S-two today.



According to a press statement, S-two will be able to generate STARK proofs “directly on phones, laptops and browsers…enabling smooth mobile experiences, fast browser-based apps and new classes of client-side privacy and AI applications.”



A full Starknet integration is slated for later this year.



Various teams such as Kakarot, Nexus, ZAN, Giza, Herodotus and more have begun building with S-two.



Based on the team’s own benchmark tests, S-two claims to generate proofs up to 39x faster than Succinct’s SP1 and 28x faster than Risc Zero’s R0VM on specific workloads.



<h2 class="wp-block-heading">The history of zk proving</h2>



In the context of blockchains, a prover is the entity in a zero-knowledge system that produces the mathematical proof that transactions are executed correctly and in compliance with protocol rules.



Historically, proof generation was an expensive bottleneck. Rollups had to batch thousands of transactions into a single proof, accepting a delay of several minutes or hours before publishing the result to Ethereum.



To users, this meant limitations of cross-chain composability (a.k.a. synchronous composability) and a withdrawal time delay capped by proof-generation times.&nbsp;



Recent breakthroughs in zk tech enable what Ethereum devs typically refer to as “<a href="https://x.com/drakefjustin/status/1924929057676001466">real-time proving</a>,” or the ability to compress proof-generation latency to mere seconds. Specifically, below 12 seconds — Ethereum’s block interval.



With real-time proving, rollups can finalize blocks at near-L1 speeds while still enjoying the quick throughput and cheaper fees of an L2.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfSTrR05oiu-y4uKW5IR7tktDerqYdJiN3C5iwY-fZlZjXPohIMGGuG5kpKMzRo9R0A9JBPpCpto0xUamPvzt752jyeNjnqP6nuJReQyNM6UDmJtsRa7nL41FIkR8vYeU87_vV-xg?key=AImQF8zvh6OFN8fSc0AqXw" alt="notion image"/><figcaption class="wp-element-caption">Source: <a href="https://risczero.com/blog/introducing-R0VM-2.0">RISC Zero</a></figcaption></figure>



S-two’s client-side proving will also mean users/rollups no longer have to rely on trusted and centralized prover clusters typically hosted on AWS or Google Cloud.&nbsp;



With S-two, proofs will be generated locally on the client side and submitted directly to Ethereum, potentially making every browser a self-sovereign proving node and reducing liveness risks from single-hosted clusters.



<h2 class="wp-block-heading">A step towards the zk endgame</h2>



StarkWare is not alone in chasing single-digit-second proofs.&nbsp;



Last week, Succinct <a href="https://x.com/pumatheuma/status/1924862764528370145">unveiled</a> SP1 Hypercube, a multilinear-polynomial zkVM that claims to be able to prove 93% of Ethereum mainnet blocks in just 10.3 seconds.



The announcement drew praise (and caution) from Vitalik Buterin, who <a href="https://x.com/VitalikButerin/status/1925050155922862526">tweeted</a> that the milestone represented real-time average cases, but that “real-time worst case for safe L1 use” was still a challenge.



Where Succinct’s new zkVM demonstrated that real-time block proofs are feasible, StarkWare’s new S-two prover shows the consumer-grade hardware feasibility of real-time proving.



Just a few years ago, it was <a href="https://x.com/zengjiajun_eth/status/1924995966832157107">thought</a> that real-time proving wouldn’t be ready anytime soon.&nbsp;



“Run a zero-knowledge proof on your phone” was a mere punchline.



Yet, zero-knowledge technology continues to accelerate with continued breakthroughs.



Users will never notice the cryptography under the hood. What they will notice, however, is when bridging takes mere seconds instead of minutes and privacy comes baked into the wallet — all without compromising on trustlessness.



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StarkWare launches new consumer-grade hardware ZK prover

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



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“Sigh&#8230;why delete a wallet instead of moving it aside and keeping the old copy just in case?”



That’s Satoshi in October 2010 — only two months before they would post their last public message to Bitcointalk.&nbsp;



Satoshi had been <a href="https://bitcointalk.org/index.php?topic=1327.msg15136#msg15136">troubleshooting</a> a report of an unconfirmable transaction somehow making it to the chain, which would’ve been much easier had the person who’d sent it still had their wallet instance active on their machine.



“You should never delete a wallet,” Satoshi said, seeming frustrated.&nbsp;



And as it so happens, addresses once believed to have been controlled by Satoshi are now sitting on up to 1,125,150 BTC, equivalent to $123.3 billion right now.



If that’s true, Satoshi would be the 10th richest person in the world, at least for today — about $7 billion behind former Microsoft CEO and hypeman Steve Ballmer.



<h2 class="wp-block-heading">Unsolved Mysteries</h2>



Did Satoshi really mine more than 1.1 million bitcoin?



It would mean that Bitcoin’s creator had hoarded about 26% of the circulating supply by the time they urged users never to delete their wallets.&nbsp;



Another 15.5 million coins have been mined since then, bringing down Satoshi’s estimated holdings to 5.6% of the current supply.



Bigger brains than mine have scoured the chain data for clues, and I’d encourage anyone to read over the detailed work of Bitcoin developers Sergio Lerner and Jameson Lopp, if you haven’t already.



Essentially, Lopp <a href="https://blog.lopp.net/was-satoshi-a-greedy-miner/">independently</a> verified <a href="https://bitslog.com/2019/04/16/the-return-of-the-deniers-and-the-revenge-of-patoshi/">Lerner’s discovery</a> of a particular method of mining that was incredibly powerful in the early years.



Miners usually randomize nonce values on their way to finding valid hashes to generate new coins. But until May 2010, there was a miner — or miners — selecting nonces more systematically.



Whoever they were, they would only search for correct nonces within certain small ranges, rather than the 4.3 billion that exist within the entire valid pool.



They would also maximize their efficiency by incrementing through a then-little-known feature, ExtraNonce, which allows miners to more easily check additional hashes after the whole pool has been exhausted. ExtraNonce was not documented or utilized within the official Bitcoin software itself, so whoever had done this had built their own miner.



These specific processes imprinted a pattern into the chain data through the block header hashes themselves, and Lerner, Lopp and eventually BitMEX researchers all concluded the same things: This method was extremely effective and it had been used to mine up to 1.1 million bitcoin in the first year and a half or so. It tapered off over time, until suddenly it stopped.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc7hlGKUoHcmGqYEWIWla2GPVFfL2bWs_m9u8Q1x6hyI_aNBqd1hM3llpFQ58VXtNosFJMln6zXsR4zdoS4ZjrzkaaEz_UOIZhJYPF8baiuzDsDa_VMQrD7rFGoylkb0olSKbGvNw?key=6pcwshwfFmFwoKny87L03Q" alt=""/><figcaption class="wp-element-caption">Satoshi’s estimated hash rate is in red, the total network is in blue. Notice red and blue are positively correlated until late 2009, implying Satoshi dominated mining for almost a year (<a href="https://organofcorti.blogspot.com/2014/08/167-satoshis-hashrate.html">source</a>).</figcaption></figure>



Lerner had named the pattern “Patoshi,” but it’s never been explicitly proven that Satoshi was the one mining bitcoin in this way. (By the way, check out Sergio Lerner’s <a href="https://www.youtube.com/watch?v=WY9hbafQ2Pc">recent appearance on Supply Shock</a>.)



Of course, the theory tracks: There were very few miners on the network in 2009, and most simply ran the official Bitcoin software, which didn’t contain a customizable ExtraNonce field. Who else but Satoshi would know how to exploit it?



Devil’s advocate: Bitcoin is open source, and its code was just not that long in 2009 — only about 9,000 lines. It’s not outside the realm of possibility that some savant reviewed the mining logic and immediately understood what to do.



Still, even the number of coins mined using the Patoshi method is technically still up for debate. In 2018, BitMEX boffins <a href="https://blog.bitmex.com/satoshis-1-million-bitcoin">found</a> only reasonable evidence pointing to a single dominant miner generating between 600,000 and 700,000 BTC — almost 40% fewer than Lerner’s initial calculation.



In that case, Satoshi’s bitcoin would be worth only $76.7 billion — $10 billion ahead of Binance founder Changpeng Zhao, still making them the 21st richest <a href="https://www.forbes.com/real-time-billionaires/#3764e9de3d78">billionaire</a> in the world.



After all, you should never delete a wallet.



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Bitcoin

Why Satoshi might still hold the keys to $123B BTC

Cantor’s Bitcoin financing business is fully operational, the company announced on Tuesday.&nbsp;



One of the transactions was with Maple, which said that it closed its first tranche of Bitcoin-backed financing.&nbsp;



“This financing facility through Cantor enables Maple to accelerate its growth and expand its reach as a provider of digital asset credit,” said Sidney Powell, CEO of Maple Finance.



Maple said that the transaction was a “major milestone” for the institutional adoption of crypto.&nbsp;



Cantor says it plans to make $2 billion of financing available in its initial phase.&nbsp;



“Institutions holding bitcoin are looking to broaden their access to diverse funding sources, and we are excited to support their liquidity needs to help them drive long-term growth and success,” Cantor’s Christian Wall said.&nbsp;



Cantor tapped Anchorage Digital and Copper as custodians.



The firm, helmed by Commerce Secretary Howard Lutnick’s son, Brandon Lutnick, announced that it would launch its Bitcoin financing business <a href="https://www.cantor.com/cantor-fitzgerald-partners-with-digital-asset-custodians-anchorage-digital-and-copper-co-to-support-bitcoin-financing-business-">earlier this year.</a> Lutnick, who stepped down from the company when <a href="https://blockworks.co/news/trump-appointments-cantor-fitzgerald-sec">tapped as commerce secretary</a>, has been a <a href="https://www.bloomberg.com/news/articles/2025-05-13/tether-s-150-billion-managed-by-unknown-brit-in-the-bahamas-usdt">supporter</a> of Tether for years.&nbsp;



Cantor <a href="https://www.cantor.com/tether-softbank-group-and-jack-mallers-launch-twenty-one-a-bitcoin-native-company-through-a-business-combination-with-cantor-equity-partners/">announced</a> in April that it was teaming up with Tether and SoftBank. The three formed Twenty One Capital through a merger with Cantor Equity Partners, a blank-check vehicle.&nbsp;



“With a visionary leader at the helm and backing from two renowned industry leaders, Twenty One is designed to help investors capture value from bitcoin’s growing global demand and increasing institutional adoption,” Cantor Fitzgerald Chair Brandon Lutnick said at the time.&nbsp;



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Cantor’s Bitcoin financing business announces first transactions

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The crypto boom isn’t just boosting interest in the US — it’s boosting interest across the world.&nbsp;



Gemini’s <a href="https://www.gemini.com/blog/introducing-the-2025-global-state-of-crypto-report">State of Crypto Report </a>found in a survey that Singapore has the highest ownership rate at 28%, a 2% increase from last year. Meanwhile, the UK jumped to 24% from 18%.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfxv2VQ625o8XlVfySP4OKHmk-iyrHcZNRgwDgcsUeamR9jtVvpDKPsNekgefKAf7xtKU51HHU6H4cz-6rPIrfoiYfcIu6VwzEiEmSWCLKbOrS-8qf48ZuY5o2QISTfxpcjjk2z2g?key=TYYZLjQ4yNoAz4KPY-S4Qw" alt=""/><figcaption class="wp-element-caption">Source: Gemini</figcaption></figure>



It’s obviously hard to deny the impact of the US opening up, and that was cited as a big reason for folks across the world who are crypto-curious but not ready to commit to owning any (yet).&nbsp;



“Nearly a quarter (23%) of non-crypto owners in the US said the launch of Strategic Bitcoin Reserve makes them more confident in the value of cryptocurrency. This sentiment was echoed by respondents in the UK and Singapore, where about one in five (21% and 19%, respectively) non-owners said they were more confident due to President Trump’s Strategic Bitcoin Reserve,” the report said.&nbsp;



But what I found to be the most interesting nugget was actually about memecoins. Before you roll your eyes, hear me out.&nbsp;



France is the leader for memecoin adoption so far this year. A whopping 67% of French crypto investors own memecoins, which is pretty firmly above the 59% of Singapore investors and 58% of Italians that own memecoins.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXchlyh7HK3xPnkFgV7tCb6jejr__VuqA0hAGjkwdyyhcyBf6Cvnj_hz64SIM6ZHqRDz8XzLy1DjZolYVcm95fChsq6tutNrgN_qV7YvuB1Q-UymiM1Sq6OH0v4f2QEqht23-zFn?key=TYYZLjQ4yNoAz4KPY-S4Qw" alt=""/></figure>



The survey also found that memecoins seem to be working as an onramp for investors, with 94% of folks surveyed reporting that they own both memecoins and other crypto.&nbsp;



“In the US, 31% of investors who own both memecoins and traditional cryptocurrencies report that they purchased their memecoins first, followed by 28% in Australia and the UK, 23% in Singapore, 22% in Italy, and 19% in France,” the report said.



But for the more buttoned-up investors, ETFs have helped act as an onramp. In the US specifically, Gemini found that two in five US investors surveyed own crypto ETFs. The products have also seen a jump over in Italy, United Kingdom, Australia and Singapore.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf4zYGergdhuuojVnbmuI7hK0GiUAH_zDP4xrBGHmEUa0bXSXOzgr_J90KP3PIaV4tF_u9h7dDaDZMobr_SSLVyR8IDM4TtB5JDsMPNYTZ6zxM6ecxCtTzhy-fNzebA08mGqEiKWA?key=TYYZLjQ4yNoAz4KPY-S4Qw" alt=""/></figure>



I always caveat these types of reports by cautioning that they’re giving a glimpse into survey results, which means we may not be seeing the full picture for a lot of the momentum we’ve seen.&nbsp;



However, there’s no denying that the results give us an interesting snapshot of the appetite for crypto at this point.&nbsp;



It’s also nice to see how global adoption continues, something we’ve been touching on but haven’t had a chance to delve into. Admittedly, right now it’s pretty easy to get lost in the US narratives as they continue to dominate.&nbsp;



One thing’s for sure, though: Love ‘em or hate ‘em, memecoins have managed to stick, not only as a way to onboard folks but as a way to allow investors to diversify their crypto holdings if they’re feeling, well, adventurous.&nbsp;&nbsp;



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