Zephyr Protocol

Jack Kubinec

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



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When President Trump launched the <a href="https://blockworks.co/news/trump-memecoins-rock-solana">TRUMP memecoin</a> on the eve of his inauguration, he did so on the Solana blockchain.&nbsp;



Memecoins, which are jokey crypto tokens that trade based on vibes, are currently the most popular use for Solana. The network’s long-term vision — for capital markets to all be housed within a shared global system — is much broader than that. Solana’s chance of achieving this largely comes from its <a href="https://blockworks.co/news/lightspeed-newsletter-blockchain-tps-testing">speed</a> and the <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">cheap transaction fees</a>, which also happens to be why memecoin traders like it so much.



Solana is a blockchain, and a blockchain is a decentralized digital asset ledger. Every bank operates an asset ledger, but the ledgers don’t work together very well. They’re often slow and expensive to move money around on because banks and other existing asset ledgers use <a href="https://blockworks.co/news/solana-anatoly-yakovenko-1000x-visa">inefficient infrastructure</a>.&nbsp;



Blockchains are made up of global computers running software that ensures the asset ledger is accurate, which can be expensive. It costs over a dollar on average to transact on the Bitcoin network, and it costs $0.05 on average to buy something on Ethereum. What’s more, Bitcoin and Ethereum — which are the largest and second-largest blockchains — only process a few handfuls of transactions per second. Credit cards handled an <a href="https://capitaloneshopping.com/research/number-of-credit-card-transactions/#:~:text=In%202023%2C%20nationwide%20credit%20card,%2D10%20in%2Dstore%20purchases.">average</a> of 1,700 transactions per second in 2023, according to data from Capital One.



Solana’s chief architect, <a href="https://blockworks.co/news/qa-solana-founders-raj-anatoly">Anatoly Yakovenko</a>, was a software engineer at the wireless technology firm Qualcomm. Yakovenko endeavored to make blockchains faster and cheaper by realizing some principles of wireless technology that could be applied to blockchain, which led him down the road to creating Solana. Yakovenko raised venture capital funding and began building the blockchain alongside a couple co-founders.&nbsp;



Solana launched in 2020. The blockchain’s key innovation was creating “proof-of-history,” a term used to describe a kind of clock that every validator — the people running the computers with Solana’s software — used to process Solana transactions more quickly than they could otherwise.



SOL, which is also referred to as Solana, is the crypto token issued by and used to secure the Solana network. People can also buy and sell SOL, kind of like they do a stock.



When people transact on Solana, they pay a SOL-denominated fee. This is usually a fraction of a cent used partly to compensate validators for running Solana’s software. For comparison’s sake, <a href="https://blockworks.co/news/helio-upgrades-solana-pay-plugin-for-shopify">credit cards</a> usually charge 1.5-3.5% of a transaction to the merchant, a cost which gets passed along to consumers.&nbsp;



Solana is also much faster than Bitcoin or Ethereum, handling over 1,000 transactions per second. It could theoretically handle even more given more demand for Solana’s asset ledger.



Solana has had a few outages — events wherein validators stopped producing blocks due to a bug in the software. The last time <a href="https://blockworks.co/news/solana-downtime-post-mortem">Solana halted</a> was on Feb. 6, 2024. These outages were partly caused by Solana’s lack of client diversity, which is a way of saying there’s basically one version of the Solana software. So if there’s a bug in the code, every validator is affected. There is a second Solana client being written from scratch called Firedancer, but it’s <a href="https://blockworks.co/news/solana-validators-mev-concerns">not quite ready </a>yet.&nbsp;&nbsp;



FTX, a crypto exchange that <a href="https://blockworks.co/news/ftx-impacts-on-cryptos-future">went bankrupt</a> and brought the whole crypto market tumbling down, was an <a href="https://blockworks.co/news/sam-bankman-fried-crypto-portfolio">early Solana adopter</a>. Solana’s reputation was badly hit following its collapse, with the price of SOL dipping under $10 in late 2022. Remarkably, the network survived and had a roaring comeback in 2024. SOL hit an <a href="https://blockworks.co/news/solana-sets-all-time-high-of-263">all-time high</a> of $293 after Donald Trump released a memecoin in January 2025.



President Trump isn’t the only person using Solana for memecoins. For all intents and purposes, memecoin trading is currently the main use for Solana’s asset ledger. Trading these volatile tokens is pretty much just gambling, and some knock Solana for its memecoin entanglement. Others <a href="https://x.com/weremeow/status/1845273658069221558">argue</a> that less refined use cases can help the technology scale for more serious ones, citing how demand for online pornography forced broadband capacity to scale up and create the modern internet.



The more serious use case Solana hopes for is what the blockchain’s supporters <a href="https://multicoin.capital/2025/01/22/the-solana-thesis-internet-capital-markets/">call</a> internet capital markets. The idea is that Solana could let all kinds of assets — memecoins but also stocks, bonds, tokenized raw materials, whatever — be traded within the same system. This is partly attributed to all Solana data being available to all network participants, which is something Solana developers call global shared state. This Solana-centric financial system could be more inclusive and efficient than the current system, where every financial venue has its own database.



That future is still a ways away, of course, but with its speed and low fees, Solana has as good a chance as any blockchain of pulling it off.



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Solana: A beginner-level explainer

Casey Wagner

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



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The US Treasury Department issued its quarterly refunding statement this week. As Felix <a href="https://blockworks.co/news/bessent-quarterly-refunding-announcement">alluded to yesterday</a>, this is where officials announce their debt issuance plans for the coming quarter.&nbsp;



The Treasury will be holding auction sizes steady “for at least the next several quarters,” the latest <a href="https://home.treasury.gov/news/press-releases/sb0010?utm_source=substack&amp;utm_medium=email">statement</a> read. Treasury yields, in response, slid. 10-year yields were hovering around 4.5% Friday while the 2-year rose to 4.28%.&nbsp;



Normally, higher yields mean lower stocks, like we saw in 2022 when the 10-year rose to over 4% and the S&amp;P 500 ended the year almost 20% lower.&nbsp;



In 2023, for most of the year, yields kept creeping up and so did US equities. It’s worth noting though that the S&amp;P 500 doubled its annual gains during the final quarter of 2023 when the 10-year yield fell 0.5%. 2024 followed roughly the same pattern.&nbsp;



Okay, history lesson over. That brings us to now. There’s really no reason to think stocks can’t maintain momentum with yields in the 4%-range, but if yields move too much higher, recessionary fears come back and stocks go down.&nbsp;



The outlook for Treasury yields is uncertain for a few reasons.&nbsp;



First, there’s the <a href="https://blockworks.co/news/the-fed-committed-to-pausing-rate-cuts-why">Fed hitting pause</a> on its interest rate-cutting cycle, for who knows how long. Plus, inflation is still sticky. Rising tensions surrounding <a href="https://blockworks.co/news/trump-tariffs-trade-war">global trade</a> and <a href="https://blockworks.co/news/trump-gradual-tariff-policy">higher tariffs</a> on US imports (if and when enacted more broadly) could also weigh on growth, or expectations for growth at least.&nbsp;



Then there’s the Treasury’s new leadership. Secretary Scott Bessent hasn’t been shy about his distaste for how former Secretary Yellen handled things, namely her choice to primarily use short-term bills for funding.&nbsp;



Long story short, it’s all pretty up in the air. But when the dust settles we’ll have all the info you need. Keep an eye on your inbox.



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Why the outlook for Treasury yields remains uncertain 

Ben Strack

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



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It wasn’t exactly surprising to hear speakers at yesterday’s Ondo Summit in Manhattan opine on crypto regulation/legislation.&nbsp;



But beyond the <a href="https://blockworks.co/news/trump-lenient-crypto-regulation">post-election optimism</a> we’ve heard plenty of, there was clear recognition of the ample work to do.



Former Congress member Patrick McHenry called <a href="https://blockworks.co/news/sec-chair-nominee-crypto-past">Paul Atkins</a> a “great choice for SEC chair.” But finalizing confirmations like his can be a months-long process, McHenry noted. Hence the potential “<a href="https://blockworks.co/news/sec-in-purgatorial-state?utm_source=mail.blockworks.com&amp;utm_medium=newsletter&amp;utm_campaign=crypto-value-is-no-longer-an-oxymoron">purgatorial state</a>” of the SEC, if you recall from last week’s Forward Guidance.



Another months-long process: the “arduous” journey to draft and pass legislation, McHenry added. There’re hearings before lawmakers start to craft a bill. Then, getting it out of committee and bringing it to the floor. If passed in the House, it’s off to the Senate, which McHenry called “a completely different beast.”



At “breakneck speed,” a crypto bill could be signed on July 4.



“Or it could take 18 months,” he noted.&nbsp;



Beyond timelines, McHenry encouraged the industry to engage with the folks in Washington. It’s now safe to do so, he argued — with the <a href="https://blockworks.co/news/hester-peirce-reveals-sab-121-rescission">end of SAB 121</a> and <a href="https://blockworks.co/news/hester-peirce-on-sec-priorities">Hester Peirce’s plans</a> as key indicators.



Franklin Templeton’s Sandy Kaul knows all about engagement. Her firm has a whole team that does nothing but create FAQ materials and presentations for regulators.



“On one hand you’ve got to go very quick and be very open-minded and be very willing to disrupt yourself,” Kaul said during one panel. “On the other side, you really need to take the regulators on a journey with you and use your reputation as someone they trust to get them comfortable that it’s OK to move forward.”



CFTC Acting Chair Caroline Pham had her own fireside chat at the event. She noted the <a href="https://x.com/strack_ben/status/1882537022646305042">near-term deadlines</a> laid out in Donald Trump’s <a href="https://blockworks.co/news/trump-vs-biden-crypto-orders">executive order</a> that the agency is working to meet. Pham mentioned, too, that the CFTC plans to bring aboard “crypto market structure experts” as senior advisers.&nbsp;



The derivatives regulator today <a href="https://www.cftc.gov/PressRoom/PressReleases/9049-25">revealed</a> an upcoming CEO forum (with Circle, Coinbase, Crypto.com and Ripple) to discuss the agency’s pilot program for tokenized non-cash collateral.



When asked how the industry can avoid squandering this opportunity for clarity, Pham urged sector players to come in with a “reasonable approach.” This will help close an unfortunate “credibility gap” spurred by some of the space’s fraudsters, she argued.&nbsp;



Pantera Capital founder Dan Morehead said in a separate panel the industry is still getting used to the friendlier invitations to engage.&nbsp; “The rebels just threw the gates open, the sun’s beaming in and we’re all just still sitting there too afraid to be excited that it’s a new era,” Morehead mused.



But people shouldn’t be scared, McHenry stressed. And it’s key for the industry to take advantage of the momentum now.



“If we’re going to get something positive out of legislative or regulatory action, it will happen in the next 18 to 20 months,” he said. “That is open-field running; and if we miss this window, we’re going to be much worse off and we’re going to see people go back overseas.”



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Engage now, or forever hold your peace

Macauley Peterson

Story is a sovereign layer-1 blockchain built using the Cosmos SDK and CometBFT consensus, with an added EVM execution — a custom Geth fork. This choice allows for full governance control, optimized execution for intellectual property workflows and a staking economy based on the $IP token.



Standard blockchain environments — even high-performance chains like Solana — struggle with modeling the recursive licensing structures that intellectual property ecosystems require, the team said. Story’s <a href="https://blockworks.co/news/crypto-funding-story-protocol-dex-brinefi-investor">unique</a> graph-based architecture is specifically designed to handle the complex relationships between intellectual property assets, the team said.



While Story Protocol’s vision of a graph-based <a href="https://blockworks.co/news/story-protocol-ritual-ai-provenance">intellectual property economy</a> is ambitious, its decision to launch an entirely new layer-1 with its own token instead of, say, a validium rollup, is worth scrutinizing.



Many projects claim to need a custom execution environment, only to ascribe an L1 premium to their tokens. Could Story not have built this as a rollup with a purpose-built intellectual property layer on top?



The Cosmos SDK grants Story more sovereignty, but at the cost of fragmenting liquidity, security and developer mindshare. Do we really need to bootstrap yet another staking economy? Many similar application-specific chains have struggled to justify their independence beyond token incentives. Rollups benefit from <a href="https://blockworks.co/news/ethereum-native-rollups-scalability">inheriting</a> Ethereum’s deep liquidity and mature validator set, and even Cosmos chains are trending toward greater use of Interchain security.



<h2 class="wp-block-heading">The role and tokenomics of $IP</h2>



$IP serves multiple key functions in the Story ecosystem, according to a <a href="https://www.story.foundation/blog/introducing-ip">blog</a> released today. Such functions include:



<ul class="wp-block-list">
<li>Securing the network: Validators stake $IP to participate in consensus.</li>



<li>Gas token: $IP is required for all on-chain interactions.</li>



<li>Governance: Token holders shape the future of Story Protocol through governance decisions.</li>
</ul>



Story has structured $IP&#8217;s supply and distribution to prioritize long-term community participation. The total supply is set at 1 billion $IP, with an initial unlocked supply of 25%.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="900" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=1024&amp;h=1024" alt="" class="wp-image-97195" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/02/unnamed.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">Source: <a href="https://www.story.foundation/blog/introducing-ip">Story Protocol</a></figcaption></figure>



A portion of $IP is burned with each transaction, potentially reducing supply over time.



<h2 class="wp-block-heading">‘Fair Launch’ staking</h2>



Unlike <a href="https://blockworks.co/news/0xresearch-newsletter-eigen-tokens-transparency">many token launches</a> that benefit early insiders, Story’s staking mechanism ensures no one earns staking rewards before the community does. February is part of what the protocol is calling the “Singularity Period,” during which users can stake or delegate tokens without earning rewards yet. Only after the “Big Bang” event on March 2 will rewards begin accruing to all participants at the same time.



Public mainnet access is set to launch alongside an initial claim for the community. Importantly, locked tokens will also have their staking rewards locked for a minimum of six months, though that may be extended, a spokesperson told Blockworks.



“We will not allow locked tokens to sell staking rewards anytime soon, and we believe the community should have the ability to set up staking and receive rewards,” the team said.



<h2 class="wp-block-heading">AI and IPFi</h2>



A fascinating prospect is the potential for intellectual property-based DeFi primitives — or IPFi. Teams like Unleash, Verio and Color are already developing marketplaces, restaking mechanisms and lending/borrowing infrastructure for intellectual property-backed assets. The example of Aria securing real TVL on intellectual property, <a href="https://x.com/StoryProtocol/status/1881713146274156951">including assets</a> like <a href="https://blockworks-research.beehiiv.com/p/wednesday-february-5">Justin Bieber’s Peaches</a>, is interesting. However, the real test will come once public mainnet launches.



For now, whether intellectual property assets can be meaningfully used as collateral outside of Story Protocol remains theoretical. That said, LayerZero (LZ) integration means that some form of cross-chain composability will be possible from day one — an indicator that Story’s intellectual property-backed assets could plug into Ethereum-based DeFi protocols if liquidity and demand exists.



The mention of a new DeFi-oriented API leveraging LZRead functionality is intriguing. If Story can abstract complexity and make intellectual property-backed lending as seamless as USDC or wBTC lending, it could position itself as a unique RWA-like collateral class for DeFi lenders. But that’s going to be a mammoth task.



<h2 class="wp-block-heading">AI meets intellectual property</h2>



Story Protocol isn’t just about digitizing intellectual property — it’s building a blockchain-native economy for AI and creativity. By removing intermediaries, enabling automated licensing and supporting agent-based transactions, Story is positioning itself as a fundamental layer for digital ownership.



&#8220;The easier you make it to register [intellectual property], the easier you make it to license [intellectual property], the easier you make it to transact on it — the more this turns from an oligarchy into a true marketplace,” Story Foundation president and Roman emperor-styled “Marcus Devrelius” <a href="https://x.com/storyprotocol/status/1887591351988158558?s=46&amp;t=yjAdM2ddX0KgGQimu7jcDQ">said</a> in a Twitter Space.



Updated Feb. 7, 2025 at 4:55 pm ET: Clarified company role of Marcus Devrelius.



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Story Protocol turns the page with intellectual property token launch

Katherine Ross

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



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What’s a good way to gauge how crypto’s faring without depending too much on price action?



If you ask Kaiko, it’s L2s.&nbsp;



So far, since the election, the research firm’s L2 index has traded higher, which is — admittedly — perhaps not a huge surprise, given that all of crypto took on an optimistic outlook starting in November.&nbsp;



The index tracks five L2s across Bitcoin and Ethereum. It also tracks Polygon.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeEEd5MYVjhKvoLuqOfJvOK7unmosgZfVsX8TUaOhLrGpFWVoVAr9QQB6a78PRjnwBJkYe5ZjQOt9encik3HtJ1jq-ooi_svQ1FKnDeF34Fj8AsLMItr8kJTVkkn80NiHj08anJlw?key=r7UJwDSxvmuP7JeyAN-Z78QO" alt=""/></figure>



As you can see above, we have Stacks, Optimism, Arbitrum, Polygon and Starknet in the same bucket.&nbsp;



Keep in mind that L2s are making a comeback so far after falling behind the market last year. And there’s been <a href="https://blockworks.co/news/crypto-infrastructure-bloat">plenty of discussion</a> around whether we have too many L2s.&nbsp;



That’s not to say that there isn’t still demand though.&nbsp;



Take, for example, a Galaxy <a href="https://www.galaxy.com/insights/research/bitcoin-layer-2-modular-future/">report</a> from November that projects that $47 billion of bitcoin could be “bridged into bitcoins L2s by 2030” — or roughly 2% of bitcoin’s circulating supply.



Anyway, back to the data: There might be some more positive catalysts in store for L2s, especially if bitcoin doesn’t dominate the narrative as much moving forward.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcBB2fNhZG-kGUcnLkAPuwCCl3Tldn-kOcFRRfQgsGfZG_Txl-1YmxC9cspb7gOIFDie99oQ4wLXd7G-W-H4oXHrpfChfMWk8-yr8nTfXvtS9XSyxdbJjx9ZWCkdWbt1CcNPM_18w?key=r7UJwDSxvmuP7JeyAN-Z78QO" alt=""/></figure>



“Sector rotation is another potential tailwind for L2 assets. BTC dominated the crypto market in 2024, setting record highs before and after the U.S. election as institutional investors poured billions into spot BTC exchange-traded funds. However, the rally hasn’t yet extended beyond BTC, as has historically been the case. While the crypto market structure has evolved, a rotation to smaller assets remains likely as investors seek higher upside potential via high-beta tokens,” Kaiko analyst Adam McCarthy wrote.&nbsp;



Taking into account that the changing regulatory headwinds play a huge factor here — especially in Polygon’s case given that the SEC previously labeled <a href="https://blockworks.co/news/sec-10-tokens-securities">MATIC a security</a> — and perhaps the future’s looking a bit brighter.&nbsp;



While investing in bitcoin is accessible to the masses, it’s hard to find opportunities beyond it, McCarthy wrote.&nbsp;



“While the broader crypto bull market has yet to fully extend to altcoins, evolving regulatory dynamics could serve as a catalyst for renewed interest. As policy shifts in Washington and investors explore opportunities beyond Bitcoin,” L2s are “positioned for significant growth in 2025,” he continued.&nbsp;



Man, it’s hard to be pessimistic in crypto right now.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



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Sector rotation ‘tailwind’ for L2s: Kaiko

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



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Solana has seen frenzied trading activity over the past year, and arguably the biggest beneficiary has been the network’s validators.



Since November, validator revenue consistently netted at least $40 million every roughly two days, according to data from 21 co. That’s up from roughly $4 million every two days this time last year. A number of new validators have been springing up to enter the fray.



The small crypto research startup Kairos Research launched a Solana validator in partnership with node operator Firstset this week, which currently has around $3 million in delegated SOL. Solana validator hardware requirements are “an order of magnitude higher” than on other blockchains, Firstset told me, so the server providers it looked at were a bit more expensive than they would have been on Ethereum, for instance.&nbsp;



Kairos also had to reckon with the higher hardware provider costs based on Solana’s higher throughput and the bit more than one SOL per day validators have to spend voting on blocks, which is how the network reaches consensus.&nbsp;



The Solana Foundation initially covers voting costs for new validators, and it stakes its large stash of SOL with smaller validators. With the Solana Foundation’s help on voting costs, Kairos and Firstset’s validator currently costs around $1,400 per month to run and is already breaking even.



Validators earn revenue from SOL-denominated block rewards the network pays out as well as MEV and priority fees paid by users trying to land transactions. Validators set a commission on block rewards and MEV income, and they currently receive half of priority fees. Those who have more SOL staked have a better chance of receiving block rewards, so validator revenue increases with size.



Helius, the largest validator on the Solana network with more than 3% of the total stake, didn’t initially intend to get into the staking business at all. When stake-weighted quality of service — a newer feature that prioritizes network traffic based on stake and makes it easier for RPC nodes with validators to land transactions — went live on Solana, Helius changed course.&nbsp;



“I was like, ‘Shit, we need a Solana validator now,’” Mumtaz recalled on a <a href="https://www.youtube.com/watch?v=FES9-WXxfHc">Lightspeed podcast episode</a>. The hardware costs were negligible for Helius, since the company already ran a number of nodes, and it quickly began attracting stake after launching in May 2024 due to Mumtaz’ brand and the high APY it passed onto stakers.&nbsp;



Larger enterprises have the option to go the acquisition route. Sol Strategies, a holding company focused on Solana, <a href="https://blockworks.co/news/sol-strategies-is-solanas-microstrategy">has acquired</a> two validator operations. Its validator operations now <a href="https://dune.com/sol_strategies/sol-strategies">net</a> between 100 to 200 SOL during most epochs, a Solana time measurement which takes around two days. That’s tens of thousands every other day in revenue.&nbsp;



Max Kaplan, who was once head of engineering at Kraken, started one of the staking companies Sol Strategies acquired, and he’s now the company’s head of staking.



“It&#8217;s very competitive now,” Kaplan said of the staking space. “You need to be good at system level optimizations [and/or business development] to really make it profitable.”



Kaplan still thinks new validators turning a profit is doable. Validators’ fortunes will partly depend on if Solana can maintain what has been an unprecedented level of usage over the past several months.



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New validators spring up as Solana usage surges

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



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If there’s one question I’m starting to hear it’s this: Have we topped?



I jokingly responded to Bitwise’s Ryan Rasmussen that I didn’t want TRUMP to be the top, and I stand by that. I’m admittedly, perhaps wishfully, hoping that we don’t top till later this year.&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">Was TRUMP the top?&mdash; Ryan Rasmussen (@RasterlyRock) <a href="https://twitter.com/RasterlyRock/status/1887216884241891566?ref_src=twsrc%5Etfw">February 5, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It sounds like Empire’s Jason Yanowitz was on the same page but the “funky” price actions led to a theory for him. Strategy, the firm formerly known as MicroStrategy, has propped up the price of bitcoin.&nbsp;



Without the <a href="https://blockworks.co/news/microstrategy-btc-purchase-recap">$20 billion-plus spending spree</a> that Michael Saylor’s company went on throughout the end of last year into this year, we’d have bitcoin at a far lower price.&nbsp;



Here’s the catch: Yanowitz thinks that puts us earlier in the cycle. And his theory’s backed up by Dan Matuszewski of CMS Holdings.



<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">12. Either way this time has been different <a href="https://t.co/g5VEIQWpnl">pic.twitter.com/g5VEIQWpnl</a>&mdash; Holdings (@cmsholdings) <a href="https://twitter.com/cmsholdings/status/1887220342655230327?ref_src=twsrc%5Etfw">February 5, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



As Yanowitz <a href="https://blockworks.co/podcast/empire/410d84f2-e4dc-11ef-9cb6-977e0c795192">explained in the Round Up this morning</a>, we haven’t seen enough venture capital yet, it’s “very PvP.”



“I don’t know why this is different this time around or if I’m just off on where we are in the cycle but my guess is the overhang of 2021 is still with us. Liquid basically doesn’t exist and therefore can’t materially drive flows or collect inflows and venture remains the big yardstick for alts,” Matuszewski wrote.



Santiago Santos noted that we need to see “more flows coming in,” and that we haven’t see that yet outside of a “selective” few.&nbsp;



Are we there yet might be the next question we start asking as we debate the top. No matter where we are in the cycle, though, we should acknowledge that we’re in the early days of this new administration and one can only imagine that some of their actions will act as a catalyst moving forward.



<iframe loading="lazy" width="560" height="315" src="https://www.youtube.com/embed/mvUpUuA8tJQ?si=6qz3GMwa802TGpwp" 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>



And now you know.



Speaking of the regulatory environment, I listened to the Operation Chokepoint 2.0 hearing held on Capitol Hill yesterday.&nbsp;



None of it, admittedly, was as interesting as the <a href="https://x.com/iampaulgrewal/status/1887500132523860283">court transcript generously shared by Coinbase’s Paul Grewal</a>, but if there was one takeaway by all parties involved, I’d say that everyone seemed ready to move on.&nbsp;



I, too, hope we can move forward and get some answers on what happened and why. In case you need a refresher: Operation Chokepoint 2.0 was carried out by regulators, including the FDIC, to debank or prevent crypto companies from being able to bank with traditional institutions.&nbsp;



Admittedly, I was skeptical initially on how much of this was intentional versus just the fault of vague or nonexistent regulations but there’s enough hard proof now, including in the aforementioned court transcripts, to show that there was intention.&nbsp;



If you want the TLDR but still want to get some of the spiciest bits from the transcript, I’d recommend checking out Scott Johnsson’s thread below.



<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">I&#39;m two pages into this transcript, and it&#39;s already hilarious. Since Paul is respectfully deferring on characterizing, let me do so. The judge is absolutely livid. <a href="https://t.co/dhBKXMYAoR">https://t.co/dhBKXMYAoR</a> <a href="https://t.co/1mCIZNPEeZ">pic.twitter.com/1mCIZNPEeZ</a>&mdash; Scott Johnsson (@SGJohnsson) <a href="https://twitter.com/SGJohnsson/status/1887512912089972772?ref_src=twsrc%5Etfw">February 6, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Grewal was a witness in the hearing alongside WSPN USA CEO Austin Campbell and Better Markets Banking Policy Director Shayna Olesiuk.



Campbell, at one point, told lawmakers that regulators decided to debank crypto firms just because of some bad actors (cough cough FTX amongst others). And Grewal argued that the targeting of digital asset firms “discourages” banks from even trying to bank companies in the space.&nbsp;



“What we saw in the documents that were produced yesterday, case after case, when the bank stepped forward and raised their hands and asked for permission to offer basic services, they were either ignored or they were given detailed examination and re-examination and re-examination until they simply gave up,” Grewal said. While we’re in friendlier waters, I think it’s fair to say that we need to see some changes — beyond the <a href="https://www.reuters.com/world/us/trump-appoints-travis-hill-fdic-acting-chair-white-house-says-2025-01-20/">changing of the guard at the FDIC</a> — before we can fully say we’re past Operation Chokepoint 2.0.



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Is crypto still early in the cycle?

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



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Digital assets are not quite like any others. That’s part of what makes them appealing to many — but it can also spur confusion.



Trying to quantify the relationship between BTC, for example, and other asset classes is becoming more prevalent as more investors seek diversification and hedging opportunities.&nbsp;



A clear finding in a recent FTSE Russell report: The rolling correlations of bitcoin and ether returns sharply increased with risk-on assets since 2020.



If we look at BTC in particular, the Russell 1000 index — comprising US large-cap stocks — has a 0.58 correlation to the asset. That relationship is nearly as strong for BTC and US financial stocks and US tech stocks — at 0.53 and 0.52, respectively.&nbsp;



The correlation, since Covid, between BTC and US high-yield credit (the most “risk-on” fixed income asset class) stands at 0.49.



Prior to the Covid-19 outbreak (spurring inflation and <a href="https://blockworks.co/news/fed-chair-powell-economy-depends-on-covid-path">monetary tightening</a>), all these correlations were much closer to zero.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXffBeeFASUb7uuFqgOXUWMOhxoAU8XPo8mLPDlq4o0Eg82Ho_FRCDJ7_hsGqedA3_VBxUQZBBkzma36znxCYk6XD9RpRUh6qSkvq-xycZp2br9U4c5iwYaJ-cQwpYa0M-WQfWY4?key=JKn2IKvppGoCAezKSe7GPSkT" alt=""/></figure>



7–10 year US Treasurys were rather unique in not seeing a meaningfully higher correlation to BTC after Covid. And the US dollar is the only asset showing negative correlation to BTC and ETH over those years.



Despite bitcoin often being compared to gold, the BTC-gold correlation in the post-Covid era is only 0.15.



BTC’s high volatility (and the varying importance of <a href="https://blockworks.co/news/alliancebernstein-gold-bitcoin-returns">safe haven</a> and <a href="https://blockworks.co/news/goldman-sachs-ceo-btc-store-of-value">store-of-value </a>characteristics in financial markets) may obscure the “true correlation” between these assets’ returns, the report notes.



It adds: “But the true correlation may simply be low, reflecting the fact that bitcoin and ETH are predominantly risk-on assets, whereas gold has a long-established trading history as a ‘safe haven’ asset, even if they do share some store of value characteristics.”



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BTC’s evolving correlation to more traditional asset classes  

Kate Irwin

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There’s been a lot of buzz around Berachain, which <a href="https://x.com/berachain/status/1887485522492203155">launched</a> on Thursday and has already seen over <a href="https://berascan.com/">2 million</a> transactions.&nbsp;



It’s the latest launch by the makers of the Bong Bears NFTs, a collection of 100 smoking bears on the Ethereum blockchain launched back in the 2021 crypto boom.&nbsp;



Berachain, by contrast, is an ambitious Web3 blockchain using “Proof of Liquidity,” with the idea that pooled-up funds will lead to a sustainable ecosystem long-term.&nbsp;



Some, however, are not so sure. An exec with ties to a gaming-focused chain tells me: “[Berachain] bothers me deeply.” They don’t like how the project accumulated a pile of NFT money first and then built a whole chain somewhat randomly years later.



Yet as the pseudonymous Berachain founder Smokey <a href="https://youtu.be/u_eDYZYN9B4?feature=shared&amp;t=80">puts it</a>, Berachain was a series of “happy accidents.”&nbsp;



But there’s another new chain in town. Abstract — which launched last month from the Pudgy Penguins team — continues to hold attention on Crypto Twitter right now, leading some to compare it with Berachain.&nbsp;



One <a href="https://x.com/cnig69/status/1886957776171364813">post</a> that got over 600 likes in less than 24 hours praised Berachain for incentivizing whales and attacked Abstract Chain for catering to “normies and streamers” because Abstract’s platform centers games and livestreaming.&nbsp;



Right now, only about 750 approved accounts can livestream on Abstract (in the past few days, I’ve seen anyone from 57 to 75 streamers live at any given time). Maybe it’ll get more traction than Theta and DLive crypto streaming — or maybe not.



There are already over 35 gaming-related projects on Berachain’s website, suggesting it’s a gaming-friendly chain, too. It got<a href="https://blockworks.co/news/berachain-pre-launch-liquidity"> over $1.6 billion</a> in pre-launch liquidity, while Abstract has just <a href="https://defillama.com/chain/Abstract">$8.49 million</a> in total value locked (TVL) as of Thursday morning.&nbsp;



The bear-themed blockchain has <a href="https://x.com/berachain/status/1887178672995537236">unveiled</a> its token airdrop, too. Berachain is <a href="https://x.com/berachain/status/1887178677810553117">allocating</a> half its token supply to investors (34.3%) and “initial core contributors” (16.8%).&nbsp;



Some early testnet users are <a href="https://x.com/mark_krov/status/1887193558815285305">pissed</a>, as they’re only being allocated a tiny fraction (<a href="https://blog.berachain.com/blog/berachain-airdrop-overview">1.65%</a>) of the airdropped tokens in total.&nbsp;



Another big catch, of course, is that they’re blocking US residents from a number of online sites, including those for the project’s BeraHub, its HONEY stablecoin, and its token and NFT bridges. Will you be able to get around this? I’m currently working from South Africa, so the hub’s site loads for me until I turn on my VPN and choose a US-based IP address. Then, access denied.



Blockchains will inevitably get compared — but it doesn’t make much sense to compare Berachain and Abstract, Abstract Marketing Lead Phineas Totten tells me. “Our product is so distinctly different.”



“We just want to have fun on-chain again,” he adds.



Sony’s Soneium blockchain has also arrived. It launched three weeks ago as a rollup on Optimism. It’s being managed by Sony Block Solutions Labs, separate from Sony Interactive Entertainment and PlayStation.&nbsp;



But that doesn’t mean games on Soneium are 100% out of the picture.&nbsp;



Sam Barberie — head of strategy and partnerships at blockchain gaming infra firm Horizon — tells me he’s been working with Sony on some of their blockchain solutions. Sony’s move into crypto is exciting because they’re, as he puts it, “willing to experiment.” If this experiment works out, he posits, even more big fish could jump into the crypto pond.



“When companies get to see that [success], and the sky doesn’t fall, then it starts to open up more conversations,” Barberie says.



Soneium is a big deal for Web3 — if it can make a splash with US companies or consumers.



<h2 class="wp-block-heading">PENGU fire fizzles&nbsp;</h2>



PENGU, the Pudgy Penguins’ NFT token, burned big this week.&nbsp;



The team set over <a href="https://x.com/pudgypenguins/status/1887164609133429246">12.1 billion</a> Pengu tokens on figurative fire in a token burn amounting to roughly $150 million, or about 14% of the total supply. That’s keeping their <a href="https://x.com/pudgypenguins/status/1885027033794621514">promise</a> that after the Pengu claim ended, remaining tokens would be burnt. That’s good news.



That burn hasn’t sent the token climbing, though. Pengu is down 5.5% in the past day, and down roughly 73% in the past month. 



<h2 class="wp-block-heading">Raised by wolves</h2>



Yet another gaming-adjacent token may be on the horizon.&nbsp;



WolvesDAO, an invite-only group of Web3 gaming enthusiasts, may be releasing a token. The WolvesDAO hosts Twitter Spaces, but they also have a robust, exclusive Discord server that frequently purges inactive members.&nbsp;



WolvesDAO cofounder Sam Steffanina tells me via DM: “Something along those lines” of a token is in the works following a <a href="https://x.com/WolvesDAO/status/1887181047718203505">few</a> mysterious <a href="https://x.com/WolvesDAO/status/1886842509948580040">posts</a> to the group’s X page.&nbsp;



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Berachain and Abstract are buzzing, but face criticism

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



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First, MicroStrategy rebranded to, well, just Strategy. Then it detailed its plans for 2025.



If you weren’t yet convinced the company formerly known as MicroStrategy was all in on bitcoin, perhaps yesterday changed that.



<a href="https://x.com/strack_ben/status/1887201721728049298">Strategy’s orange logo</a> features a bitcoin “B.” Company leaders, after Wednesday’s market close, pledged to stick with its plan to raise, purchase, and repeat.



The self-proclaimed bitcoin treasury company (and now <a href="https://blockworks.co/news/mstr-and-bitcoin-standard-etf-filing">a Nasdaq 100 stock</a>) held 471,107 BTC, as of Feb. 2 — worth roughly $46 billion at that time. It acquired 258,320 for $22.1 billion in 2024 (avg. price of $85,447 per BTC).&nbsp;



On yesterday’s earnings call, Strategy CEO Phong Le reiterated the company’s <a href="https://blockworks.co/news/microstrategy-shares-audacious-plan-to-buy-more-bitcoin">21-21 plan</a> detailed in Q3 — raising $21 billion of equity and $21 billion from fixed income securities between 2025 and 2027. Strategy has made progress there faster than anticipated due to “favorable market dynamics,” he noted.&nbsp;



The capital-raising/BTC-buying ramp-up in Q4 was clear. Strategy raised $15 billion through equity issuances and $3 billion via convertible debt. It had raised $10 billion over the previous 17 quarters (dating back to first adopting BTC as its treasury reserve asset).



The company is shifting its focus in 2025 to fixed income issuances (i.e. convertible notes, preferred stock), Le said. Its long-term leverage target is 20-30% of its BTC holding value.



In a Thursday research note, Benchmark’s Mark Palmer pointed to Strategy upping its 2025 BTC yield target to at least 15% — up from the 6-10% figure it offered on the last earnings call.&nbsp;



Though Strategy <a href="https://blockworks.co/news/microstrategy-pauses-btc-buying-spree">paused its BTC-buying spree</a> last week, Palmer said the company’s $10 billion BTC dollar gain target (quantifying shareholder value created by its treasury operations) implies it will continue to “aggressively” raise capital to fuel BTC buys.



Palmer kept his price target for MSTR (the ticker remains) at $650. The stock was trading around $326 at 1:30 pm ET.



Oh, and Strategy wants you to know it’s launched a merchandise store for all your apparel needs. To each their own.



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After rebrand, ‘Strategy’ shares 2025 targets

Felix Jauvin

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



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With the recent confirmation of Scott Bessent as US Treasury Secretary, we’ve received the first quarterly refunding announcement under his leadership.



Much has been written in the past year about the potential politicization of the composition of debt being issued by Treasury and how that could impact markets.&nbsp;



As seen below, the proportion of bills that have been issued compared to coupons has skyrocketed. Historically, this type of maneuver has been kept for times of crisis when Treasury needs to raise a lot of money very quickly, with little impact to duration.&nbsp;



However, this has occurred in a regime of exceptional economic strength.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXd_pDkSjjrGXfckckzl37lEWZY3-oyKgEl7bXt7HZvxYt-fhURalcEHAXhRenzJZiej6zcZ4ytiC7sIp1G5aQwVg_rAlcvd0NDlaHm_gOV24ccKb7JxhFo7qqC7d1odLiCchK9e?key=JKn2IKvppGoCAezKSe7GPSkT" alt=""/></figure>



Before being nominated as secretary, Bessent was publicly critical of this strategy. He discussed his belief that it was essential for the composition of issued debt to get normalized —&nbsp;meaning an increase in proportion of longer-duration debt being issued.&nbsp;



Though admirable, this strategy would be very precarious due to the lack of structural demand for long-duration bonds without the Fed buying for QE, foreign central banks becoming net sellers of long-term debt, and concerns about fiscal deficits increasing.&nbsp;



With that context, all eyes were on this week’s QRA to see whether Bessent would change the composition of issuance back toward normalization.&nbsp;



As seen in the chart below of the estimate for borrowing for the next two quarters, Bessent has toed the line and kept the policy approach he criticized Yellen for:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcPUSL7ykKXxH0LW6Mmzc1jsmo8Qbhc1uraLsGQQbwEnHyQTtRM67T2jTGU0rX5SX9CGuNax2sWO7sxszjlLTem2xBZXbldlzVKpB_Nr5Cu5upRz00j4Qc-VPvM_33UdBN58aQjGg?key=JKn2IKvppGoCAezKSe7GPSkT" alt=""/></figure>



What’s even more interesting is the commitment to the forward guidance of this issuance that was introduced last year, guidance the Treasury decided to keep despite recommendations from TBAC to remove it: “In discussing issuance recommendations, the committee uniformly encouraged Treasury to consider removing or modifying the forward guidance on nominal coupon and FRN auction sizes that has been in the refunding statement for the past four quarters. Some members preferred dropping the language altogether to reflect the uncertain outlook, though the majority preferred moderating the language at this meeting.”



Despite this recommendation, Treasury kept the following commitment:



“Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters.”



So what’s the takeaway? I’ll leave it with a meme:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfqN2k7oKttgAnQBNilI6aqxxlQGmX04XnjUynR-5u2tyedZOKBjc8YADkP09CxYFKFdGEFC3_SWxXXrvxbE2fdeWHmaV1mAOVJV2HHqCx0SJ1KfsgjAveLECwBf-9UmBubUGFEig?key=JKn2IKvppGoCAezKSe7GPSkT" alt=""/></figure>



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Big takeaways from Bessent’s first quarterly refunding announcement

Donovan Choy

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



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The world’s longest testnet is at an end. The Berachain L1 blockchain is officially launching its mainnet and BERA token today.



<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">Henlo, and furthermore, your tokens are coming. <a href="https://t.co/b9isn5XhiU">pic.twitter.com/b9isn5XhiU</a>&mdash; Berachain Foundation 🐻⛓ (@berachain) <a href="https://twitter.com/berachain/status/1887178672995537236?ref_src=twsrc%5Etfw">February 5, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



People are very excited! But that was already obvious. Berachain has attracted a ridiculous <a href="https://boyco.berachain.com/">$3.1 billion</a> in liquidity on its pre-launch liquidity platform <a href="https://blog.berachain.com/blog/rfb-boyco">Boyco</a>, making Bera the 8th largest chain by TVL.



Bera’s <a href="https://blockworks.co/news/berachain-pre-launch-liquidity">early liquidity rush</a> is thanks to its somewhat complex “proof-of-liquidity” (PoL) consensus mechanism.&nbsp;



Here’s the gist of it:



Your average proof-of-stake (PoS) network has a general-purpose native token (e.g. ETH or SOL).&nbsp;



Berachain splits that token into a dual token model:



<ul class="wp-block-list">
<li>BERA serves as gas and a bond for validator staking. </li>



<li>BGT is an inflationary but non-transferrable governance token.</li>
</ul>



The Berachain protocol emits BGT, and validators decide which dapps receive BGT emissions. Users who interact with these dapps (e.g. providing liquidity) can earn BGT.



But why do users want to farm a non-transferrable token? Because BGT is a veTokenomics-style bribe token.&nbsp;



You delegate BGT to validators, and this gives validators the governance power to direct future BGT emissions to whichever liquidity providers they like (hopefully, to the dapp you’re staking your liquidity on).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeUlQjhH9YhRngVVrZ4vEGxymLr09zIVFiSeqAqB6NA2Tf63igRt-3Lvt1TpyQEfRqar4R0AFArl2ZAFvDgwQHaErXjtM2ko8I9OM_QA1mua6X5oU-eCrzXFS_IMny_A_rCKtALmg?key=lJ36fFIu1TYHKByklWs92zyi" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://docs.berachain.com/learn/pol/">Berachain</a></figcaption></figure>



This, at its core, is what makes Berachain unique: the creation of a direct relationship between liquidity providers and block validators.



On traditional PoS chains, validators merely stake a bond (e.g. ETH/SOL) and secure the chain. On Berachain, validators are actively deciding which dapps/LPs should be rewarded with BGT for their capital provision.



Now here’s the kicker. Calling BGT “non-transferable” is a bit misleading because BGT can be <a href="https://docs.berachain.com/learn/pol/tokens/bgt">irreversibly burned</a> at a 1:1 ratio to BERA. This means market values inevitably show up in the BERA token.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfuZZvbHvuVtzOsDxSTIVTqY8HGaRJzg71lp4U8VGv3OAB2uVhi7gcNjAEwkflm-Fw_HGMMOL3K7oQiI30OfhlRcH9JqVsspgsvqVE83vlbp7zg-C5kb6UiakvpXlDKCGnpH1TD4g?key=lJ36fFIu1TYHKByklWs92zyi" alt=""/></figure>



In contrast to the multiyear lockups on other veTokenomics models, such as Curve’s or Aerodrome’s, Berachain lets you exit when you like. But the exit is permanent.



You can’t buy your way back in like with CRV (BGT is a soulbound token). You’d have to farm BGT all over again.



This may explain Berachain’s early liquidity rush. Bera’s tokenomics are excellent at solving the cold-start TVL problem, because validators — who are already committed participants in the ecosystem — are internalizing the risks of liquidity provision, as opposed to the traditional playbook of dapps using their own native tokens.&nbsp;



But it also produces a flywheel effect that heavily privileges early participants in the Berachain ecosystem over later ones.



It may also explain why Bera has made the unusual choice to enshrine native applications — like its AMM DEX (BEX), money market (Bend) and perps DEX (Berps) at launch — as opposed to most L1s which <a href="https://x.com/QwQiao/status/1886765042864996843">outsource</a> these efforts to third-party builders.



The earlier to this game you are, the bigger warchest of BGT you’ve already built, which in turns means the largest power you have to control future BGT emissions.



It’s the <a href="https://blockworks.co/news/podcast-understanding-the-curve-wars">Curve wars</a> all over again. Except now it’s taking place at the Berachain protocol level



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Berachain mainnet debuts as BERA token hits $1B market cap

David Canellis

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



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



They say crypto rapidly <a href="https://x.com/naiivememe/status/1789562418550669617/photo/1">ages</a> you. Look no further for proof than the ETH chart.



More specifically, the ETH chart in comparison to Intel stock. Their trajectories share an uncanny resemblance.



The chart below plots the price of ETH in pink against Intel stock in blue but with caveats:



<ul class="wp-block-list">
<li>INTC is set over the past 50 years (it went public in 1971) on weekly intervals.</li>



<li>ETH is set over the past seven years on daily intervals.</li>



<li>ETH is advanced by around two and a half years — so it starts in Jan 2018 rather than August 2015.</li>
</ul>



As you can see, ETH has done almost exactly what Intel stock has achieved, just seven times as quickly.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdbonS5VYspwoOqhFkZfcI91u2B9zuilZxDmk4wuK4YVLxsqDxj5gTeiOXBj38I_0S7vHl_5ovLcSgBtq6WgwowAtcI4Md02CIk0Cvpb_j31lnO_CfQbMv6TLmsubvgCPujqn7eew?key=JOAUs5lZRL4PgoRC0B8h7JAu" alt=""/><figcaption class="wp-element-caption">It’s not all bad news: Intel stock has recently tanked harder than ETH</figcaption></figure>



Comparing cryptocurrencies and stocks doesn’t make a lot of sense. Ethereum is not a <a href="https://www.vaneck.com/pl/en/blog/digital-assets/a-potential-valuation-methodology-for-ethereum/">business</a> in the same way that Intel is.&nbsp;



Ethereum is a decentralized network that sells blockspace to apps and other protocols that service users in some way — far from a chipmaker with factories, employees, board members and CEOs.



Still, I can’t help but draw similarities between Ethereum and Intel, at least in terms of narrative arcs.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfB8rjmhX7HGrejCI8tRofdPPaAXVsgpcDkiflLmtfjIJYCqdz6gk2yGmFop-jjldNxhXotcUT8ssSLaHgmWtc6YAGm87EV1cJPmo8JO3TTrC_mnD72-yMuBIwBIQZ6Qdv8OV2Wtg?key=JOAUs5lZRL4PgoRC0B8h7JAu" alt=""/><figcaption class="wp-element-caption">ETH’s market cap is now about four times that of Intel stock</figcaption></figure>



Top brain Vitalik Buterin and the non-profit Ethereum Foundation (EF) he leads are still <a href="https://blockworks.co/news/steep-disconnect-ef-crypto-community">under fire</a> for supposedly misaligning themselves with the modern crypto community — prioritizing infrastructure over exciting new apps that properly accrue value to ETH.



That disconnect has contributed to massively increased market and mindshare for rival Solana and a ETH/BTC ratio at four-year lows.



Intel’s board meanwhile <a href="https://www.cnbc.com/2024/12/02/intel-ceo-pat-gelsinger-is-out.html">ousted</a> its CEO Pat Gelsinger in December over concerns that he&#8217;d failed to capitalize on the AI boom and could no longer stage a comeback against Nvidia.&nbsp;



Intel had long been the most valuable US chipmaker until Nvidia flipped its stock in mid-2020. Many tip SOL to potentially flip ETH somewhere down the line.



If the eerie correlation with Intel stock persists (and that’s a big if), perhaps it could happen sooner rather than later.



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ETH is speedrunning the 50-year Intel chart

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



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



Solana’s validators are about to see a major income bump, but the protocol lacks a way for them to share the wealth with their stakers.&nbsp;



In May, Solana validators <a href="https://blockworks.co/news/solana-validators-tackle-side-deals">passed a proposal</a> to send 100% of priority fees — which are extra funds users can pay for a better chance of landing their transactions — to validators. The proposal’s implementation now seems imminent, but some are calling for Solana to pump the brakes until validators are able to share the extra fees with stakers.&nbsp;



Validators, who run Solana’s software and create blocks in the Solana blockchain, currently receive half of SOL-denominated priority fees, and the other half is burned, or effectively removed from circulation. This leads some validators to strike side deals with users, since a user paying 75% of the priority fee directly to the validator outside of the Solana protocol would benefit both parties, for instance.



Named SIMD-0096, the May proposal aims to end these side deals. But Solana lacks an in-protocol way for validators to share priority fees with stakers — who delegate their SOL to validators for a share of the validator rewards — so the increased SOL inflation would essentially benefit validators at the expense of everyone else.&nbsp;



Some Solana developers have <a href="https://x.com/trentdotsol/status/1887175400159428850">argued</a> that SIMD-0096 could incentivize priority fee spoofing, or validators artificially raising priority fees to take home more rewards. Still, the change is being implemented.



Solana priority fees totaled some $240 million in January, according to Blockworks Research. Implementing SIMD-0096 would have increased Solana’s real economic value, a Blockworks Research metric for blockchain value accrual, by roughly 22% last month.



A newer proposal, <a href="https://x.com/blockworksres/status/1865094406937944571">SIMD-0123</a>, would give validators the ability to directly share priority fees with stakers. As things stand, this proposal has little chance of being implemented by the time SIMD-0096 goes into effect, Solana Foundation validator relations lead Tim Garcia said on X.&nbsp;



Some are <a href="https://x.com/smyyguy/status/1880341498824388732">calling</a> for the network to only approve both proposals together so that stakers can share in the windfall. If these calls aren’t heeded, then stakers will have to rely on the goodwill of validators passing along extra rewards until SIMD-0123 is enabled.



“[V]alidators are only overcompensated if they do not share back the rewards ([H]elius will share back for example),” Mert Mumtaz, CEO of the largest Solana validator in Helius, said in a text. Solana infrastructure shop Jito also offers a way to distribute priority fees via <a href="https://substack.com/home/post/p-156136928?utm_campaign=post&amp;utm_medium=web">TipRouter</a>, a piece of software built for Jito’s restaking protocol that distributes validator rewards.



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Solana validator revenue is about to jump, but stakers might miss out

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



Today’s the day!



Berachain’s mainnet is finally launching.&nbsp;



Back in August, we looked at how both Berachain and Monad were able to<a href="https://blockworks.co/news/empire-newsletter-layer-1s-professor-coins"> carve their own paths</a> in a very crowded space, and David even <a href="https://empire-31ed59.beehiiv.com/p/eth-s-big-problem?_bhlid=c401c659d0bc1c1ccc2bea7bbefd1fe056fa5b09&amp;last_resource_guid=Post%3A40ad4880-04f7-4d97-912c-95b79fb8975f&amp;utm_campaign=eth-s-big-problem&amp;utm_medium=newsletter&amp;utm_source=empire-31ed59.beehiiv.com">referred</a> to them as potential Solana killers just the other day.



So it’s fair to say the hype train left the station a long time ago.&nbsp;



“Simply put, in a landscape where most blockchain apps and chains today survive or thrive irrespective of one another, Berachain is a philosophical challenge to the current chain-app model. We believe that the network’s novel Proof of Liquidity (PoL) consensus mechanism, which lets network validators direct block rewards to certain apps built on Berachain, could fundamentally reshape how the entire industry views the relationship between builders and blockchains,” Framework’s Michael Anderson explained.&nbsp;



Prior to mainnet launch, Berachain raised a fair amount of capital. In its Series B alone — which was co-led by Framework — it raised $100 million, and that’s not counting the $42 million Series A round.&nbsp;



“The Berachain community is also by far the most fanatical we’ve seen since our involvement in the early days of Chainlink, and we think that the combination of that raw enthusiasm with a real means to influence the direction of the network will be incredibly powerful,” Anderson continued.&nbsp;



Projects that raise as much capital as Berachain are few and far between. But raising more than $140 million before even launching your mainnet is no small sum, so it’s understandable that some might question why crypto projects are looking to raise a ton of money. And why VCs are willing to back such a project.&nbsp;



MV Global’s Tom Dunleavy doesn’t think that projects like Berachain should be raising as much capital. He’d prefer to see raises around $10 million, he wrote in a post on X.&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">No project in crypto needs to raise over $10m. Full stop. I frankly think alot of these big projects (<a href="https://twitter.com/berachain?ref_src=twsrc%5Etfw">@berachain</a> , <a href="https://twitter.com/monad_xyz?ref_src=twsrc%5Etfw">@monad_xyz</a> , <a href="https://twitter.com/AbstractChain?ref_src=twsrc%5Etfw">@AbstractChain</a>, <a href="https://twitter.com/infinex_app?ref_src=twsrc%5Etfw">@infinex_app</a>, <a href="https://twitter.com/movementlabsxyz?ref_src=twsrc%5Etfw">@movementlabsxyz</a> etc) get their valuations strictly because of the need for BIG capital allocations from large VCs.…&mdash; Tom Dunleavy (@dunleavy89) <a href="https://twitter.com/dunleavy89/status/1887135982073376894?ref_src=twsrc%5Etfw">February 5, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“The valuations associated with big capital intakes set the bar so high that they are priced for perfection for what their user and revenue metrics will be 10 years in the future,” he argued.&nbsp;



But putting a cap on the amount raised isn’t a solution. Mason Nystrom, a junior partner at Pantera, said that there are a variety of reasons for projects to receive funding above $10 million. That includes competition, talent, volatility and opportunity.



Talent is expensive, and Pantera’s own comp survey from last year pegged the average salary at $176,000 for US employees.&nbsp;



Competition and volatility go hand-in-hand. Obviously there’s a lot of competition in the space, especially as an L1. Then you add in the cyclical nature of crypto and, well, the money starts to add up.&nbsp;



Finally, it’s all about opportunity: “The nature of success is power-lawed. The blockchain networks that succeed will be centi-billion to trillion dollar networks. The sheer size of the opportunity presented by blockchain networks (e.g. L1s) enables them to take on more capital to compete to be the power law winners,” Nystrom said.&nbsp;



At this point, crypto funding isn’t out of control and big capital raises aren’t happening every day. If a project manages to close a multi-hundred million dollar round, I say let them cook.



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Why venture capital money is necessary in crypto

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About two weeks after the SEC formed a <a href="https://blockworks.co/news/new-sec-crypto-task-force">crypto task force</a>, unit leader Hester Peirce checked in.&nbsp;&nbsp;



The rough message: We’re working on a bunch of things, but please be patient.&nbsp;



Peirce (no surprise) criticized the previous path taken by the SEC. It “incessantly slammed on the enforcement brakes as it lurched along a meandering route with a destination not discernible to anyone.”



Further, its handling of crypto “has been marked by legal imprecision and commercial impracticality” (in case you didn’t already know how Peirce felt).&nbsp;



It’ll take time to “disentangle all these strands,” she noted several times — ongoing litigation included. Seemingly related, the SEC plans to scale back staff focused on crypto enforcement actions, the New York Times <a href="https://www.nytimes.com/2025/02/04/business/sec-crypto-task-force.html">reported</a>.&nbsp;



Among 10 listed priorities, Pierce notes the status of crypto assets under the securities laws as “fundamental to resolving many other questions.” This jibes with what Bitwise general counsel Katherine Dowling <a href="https://blockworks.co/news/sec-in-purgatorial-state">told me</a> about the “dolphins in the fish nets” — alluding to assets the SEC has previously <a href="https://blockworks.co/news/the-sec-says-these-crypto-assets-are-securities-their-reasoning-is-wrong#">labeled as securities</a>.



Another priority is to identify areas that fall outside the SEC’s jurisdiction — a signal the agency intends to stay in its lane.



Other focuses include creating a framework for custodying client assets; offering clarity on if and how crypto lending and staking programs are covered by securities laws; and creating some sort of cross-border sandbox for crypto projects.



On crypto ETFs, the task force will be clear about its approach when approving/disapproving planned products, Peirce promises. As issuers look to add staking and in-kind creations/redemptions to existing products, she added, the SEC may first need to make progress on custody (and other) issues.



The SEC is working toward these goals “in an orderly, practical and legally defensible way,” Peirce made clear.



And so, she reminds those eager for change: “It took us a long time to get into this mess, and it is going to take us some time to get out of it.”



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