David Canellis

Katherine Ross

Today is day three of <a href="https://blockworks.co/event/permissionless-iii">Permissionless III</a> — have fun staying richly informed and entertained to all the attendees headed to the event this morning.



Keep reading for the inside scoop on where the crypto vibes are headed from Katherine, reporting from Salt Lake City. Catch you next week!



<h2 class="wp-block-heading">App revolution</h2>



It’s looking like crypto is ready to transcend to its next major phase.&nbsp;



Apps, not infrastructure.



There have been calls to renew focus on funding and building apps for a while now. Not “crypto apps,” like perps DEXs and lending protocols, but more genpop apps that regular people really want to use at scale — that would just so happen to run on blockchain rails.



With good reason. Infrastructure plays dominate the market. I spent the morning cataloging the top-200 cryptocurrencies by capitalization — which represents 96% of the entire market — per CoinGecko into three top-level categories: infrastructure, currency and apps.



Within each of those headline items were subcategories. Under infrastructure there’s layer-1 tokens like ether, SOL and TON, layer-2s arbitrum, mantle and optimism and pure-play infra assets including chainlink, PYTH and EIGEN.&nbsp;



Under currency there are stablecoins, memecoins and tokens derived from wrapping, staking or bridging other assets, like wrapped bitcoin and lido staked ETH.&nbsp;



App categories include exchange tokens — both DEX and CEX — as well as ones for metaverses, wallets and compute marketplaces like Akash, and DeFi platforms such as sky (formerly maker), pendle and aave.



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1513" height="1600" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png" alt="" class="wp-image-93002" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=1513 1513w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=284 284w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=968 968w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=1452 1452w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=243 243w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=247 247w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=207 207w, https://blockworks-co.imgix.net/wp-content/uploads/2024/10/image.png?w=76 76w" sizes="(max-width: 1513px) 100vw, 1513px" /><figcaption class="wp-element-caption">Appcoins are in purple, with exchanges and DeFi tokens the most common</figcaption></figure>



It obviously took some value judgments: Are liquid staking platforms Jupiter and Lido “apps” or “DeFi”? Probably the former. You use your crypto through the platform and immediately receive something else in return — in those cases a liquid staking token. DeFi apps would otherwise generate potential rewards over time.



Bitcoin was labeled a “currency,” and not a layer-1 under infrastructure. Those are mostly smart contract-native platforms on which apps can be deployed: coins that aim to offer ownership, exposure and utility to the underlying architecture of Web3.



All told, infrastructure coins, when sorted this way, represent $660.5 billion out of the $973.2 billion that remains of crypto after excluding bitcoin — 68% of the whole.



Appcoins are worth just $45.3 billion, or less than 5% of the total. Currencies other than bitcoin meanwhile make up over 27%.



Of course, the next wave of consumer apps, like the ones crypto-forward TradFi titan VanEck is looking to back with its <a href="https://blockworks.co/news/forward-guidance-newsletter-vaneck-vc-fund">new fund</a>, might not even have their own token. The blockchain and crypto elements could be buried underneath slick UX, so that users are none-the-wiser that they’ve landed in Web3.&nbsp;



Polymarket, for instance, doesn’t have its own coin but is one of this cycle’s most successful apps within the broader zeitgeist.



Still, there’s obviously room for growth within the app space. It’s difficult to say how big the explosion in adoption could be.&nbsp;



Despite the example of Polymarket, I suspect that token launches — specifically ones that prioritize access to the general public — will need to be central to those projects. Perhaps the shift to the applayer will bring about the return of initial coin offerings.&nbsp;



After all, it could be that infrastructure tokens are only so dominant because they offer exposure to potential growth within those ecosystems, through their native coins.



App projects may do well in following that formula — as long as they can stomach a potential visit from a trigger-happy SEC.&nbsp;



With that in mind, whatever success is destined for the applayer rests on how well <a href="https://blockworks.co/news/forward-guidance-newsletter-sec-ripple-inflation">Coinbase</a>, <a href="https://blockworks.co/news/uniswap-at-center-of-us-war-on-crypto">Uniswap Labs</a> and now <a href="https://blockworks.co/news/sec-charges-cumberland-unregistered-dealer">Cumberland DRW</a> fairs against the regulator in court. Joy.



— David Canellis



<h2 class="wp-block-heading">IYKYK</h2>



We’re bringing you something a little different this week.



Instead of just sitting down and absorbing what Blockworks co-founder — and Empire host — Jason Yanowitz said on the podcast this week, I tracked him down at Permissionless.



“The biggest takeaway from me is that the energy online is very different online from the energy in person,” Yanowitz told me.&nbsp;



“There [are] like three stages of companies from 2017-2020, which was the CeFi infrastructure people (like Fireblocks, BitGo, Anchorage), 2020 to 2024 was infrastructure and now I think we’re entering this application era,” Yanowitz said. “Every panel ends up talking about applications in some way, which we’ve never seen at a conference before.”



“I think all signs are actually pointing to 2025 being [the year that all applications] are funded,” he explained.&nbsp;



So the bullish vibes really are real.For Yanowitz, the energy felt “rejuvenating.” He thinks bitcoin could carve out fresh all-time highs in November or December, setting the stage for a (potentially) bullish start to 2025.



And now you know.



<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">Day 2 at <a href="https://twitter.com/Permissionless?ref_src=twsrc%5Etfw">@Permissionless</a> was awesome. -Favorite talk was on macro by <a href="https://twitter.com/JanvanEck3?ref_src=twsrc%5Etfw">@JanvanEck3</a> and others, TLDR bullish setup for crypto. -Way too many bullish on memecoins and bearish alts. Short term basis in my opinion. Alts are just memecoins with fundamentals. Memecoins will trend… <a href="https://t.co/mCrrj3wxYQ">pic.twitter.com/mCrrj3wxYQ</a>&mdash; Jesse Eckel (@Jesseeckel) <a href="https://twitter.com/Jesseeckel/status/1844590367829786665?ref_src=twsrc%5Etfw">October 11, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



&#8220;Despite (SEC) Chairman (Gary) Gensler’s call to just &#8216;come in and register,&#8217; Cumberland has for years been expressly prohibited from using its now-dormant registered broker-dealer for crypto asset activity. We cannot comply with rules that do not exist or a framework that regulators are interpreting to prohibit trading in natively issued crypto assets,” Cumberland said.



While it may look like next year is potentially bullish, the Securities and Exchange Commission continues to target companies in the crypto space.&nbsp;



Yesterday, it was Cumberland.&nbsp;



“We are not making any changes to our business operations or the assets in which we provide liquidity as a result of this action by the SEC,” Cumberland said in a statement.



“Despite frequent protestations by the industry that sales of crypto assets are all akin to sales of commodities, our complaint alleges that Cumberland, the respective issuers, and objective investors treated the offer and sale of the crypto assets at issue in this case as investments in securities, and Cumberland profited from its dealer activity in these assets without providing investors and the market with the important protections afforded by registration,” Jorge G. Tenreiro, acting chief of the agency’s crypto assets and cyber unit, alleged.



It’s one of those cases that could have lasting effects on the crypto space, but first, we need to see how it plays out.



— Katherine Ross



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



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>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



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Crypto set for a new era of apps over infrastructure

Jack Kubinec

<div id="highlights-block_633b45b1a1a3c" class="highlights">
 <ul>
 <li>Cumberland and GoldenTree cast a combined 8.1 million of 13 million votes</li>
 <li>11 million of 13 million total votes were cast by just five wallets</li>
 </ul>
 
</div>



<a href="https://cms.blockworks.co/sushi-dao-holds-election-for-chief-executive/" target="_blank" rel="noreferrer noopener">The SushiSwap DAO hoped to set a new precedent</a> for transparency and crypto governance by holding a first-of-its-kind election for its chief executive, known as the decentralized protocol’s “head chef.”  



But <a href="https://snapshot.org/#/sushigov.eth/proposal/bafkreifkvrkobnbzy6j7th244kcvbryg2qiq4digepljyaqgnnnlwdvyza" target="_blank" rel="noreferrer noopener">voter turnout</a> was collectively low, giving quite the runway to five whales — including the kingmakers GoldenTree and Cumberland — leading to what some SushiSwap community members have dubbed a lopsided result, carried out in the very early days of governance and activism in the Web3 world. 



While activism has had an established, and SEC-regulated, framework in equities for decades, corresponding Web3 governance proposals have been plagued by low voter turnout and dominated by deep-pocketed token owners.&nbsp;&nbsp;



Ultimately, the two venture firms cast the deciding votes. In fact, if every other voter opposed their pick, the financiers still would have come out on top, considering just 391 of some 18,000 eligible Sushi wallets cast a virtual ballot. Of 13 million votes — one per token — 11 million came from the five big-money wallets.



Jared Grey, former CEO of DeFi platform Eons Finance, carried the election with 83%, though Andy Forman and Kenneth Hurley, who finished second and third, respectively, each garnered more votes from unique wallets.&nbsp;



Grey received support from key whales. Ten million of his 11 million votes came from four anonymous whale wallets.&nbsp;



The largest whale wallets in the election, which cast four million votes apiece, belonged to venture capital firms <a href="https://www.goldentree.com/" target="_blank" rel="noreferrer noopener">GoldenTree</a> and <a href="https://cumberland.io/" target="_blank" rel="noreferrer noopener">Cumberland</a>, Grey and Hurley told Blockworks.&nbsp;



Representatives from the prominent traditional finance asset managers approached Grey and other candidates after one of <a href="https://www.youtube.com/playlist?list=PL03oyFX32uZfNpcT8_EYubJcoijIut-S-" target="_blank" rel="noreferrer noopener">Sushi’s AMA calls</a>, Grey told Blockworks. Hurley said the two firms pressured Sushi insiders to back Grey during a private meeting ahead of the election.



Sushi DAO members were disheartened by the election’s dominance by whales.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I guess DeFi is no different than [TradFi], except that this has the veneer of choice,” a DAO member <a href="https://discord.com/channels/748031363935895552/1009910713017438228/1026027197250687036" target="_blank" rel="noreferrer noopener">wrote on Discord</a> after the election. </blockquote>



Venture capital backing aside, the Sushi community has <a href="https://discord.com/channels/748031363935895552/1009910713017438228/1026510556057829416" target="_blank" rel="noreferrer noopener">generally positive feelings</a> about Grey. For his part, Grey is unconcerned about venture capital participation in the election.



“I got the impression from those funds that I spoke with that ended up voting for me, that they’re very much in alignment with what people want,” Grey said.



SushiSwap, once <a href="https://web.archive.org/web/20201125082236/https://defillama.com/home" target="_blank" rel="noreferrer noopener">among the largest</a> DeFi protocols on the market, has been roiled in <a href="https://cms.blockworks.co/update-cto-resigns-as-sushiswap-struggles-arca-submits-restructuring-proposal/" target="_blank" rel="noreferrer noopener">leadership controversy</a> for much of the past two years, sliding to 19th in total value locked (TVL) among DeFi protocols, <a href="https://defillama.com/" target="_blank" rel="noreferrer noopener">per DeFiLlama</a>. Head chef candidates were under pressure to roll out detailed plans for how to restore Sushi to the upper echelons of DeFi.



In an interview with Blockworks ahead of the election, Grey said he hoped to “do a forensic style audit on [Sushi’s] treasury” and make the protocol “operationally lean.”



Hurley was less optimistic on venture capital’s alignment.



“When I talked with the one VC firm, he said, ‘Oh, well we all have the same goals in mind, and that’s to get the Sushi price up,’” Hurley said. “That’s not necessarily my goal. I want to move the crypto space forward.”



Grey stressed that DAO governance is a work in progress, considering DeFi is in its infancy and <a href="https://cms.blockworks.co/bipartisan-stablecoin-regulation-has-a-slim-chance-of-passing-this-year/" target="_blank" rel="noreferrer noopener">regulation</a> remains opaque. Sushi is currently weighing the <a href="https://forum.sushi.com/t/sushi-meiji-restoration/10969" target="_blank" rel="noreferrer noopener">Meiji proposal</a>, aimed, in part, to reduce the voting power of whales. In the meantime, Grey still sees the election as a step up from executives being nominated behind closed doors.



“At the end of the day, [the election is] one of the more fair ways to get executive leadership in these roles,” Grey said. “I’d like to see some version of this process get adopted by more DAOs, so we can improve on it.”



Cumberland and GoldenTree did not respond to requests for comment.



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



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>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

SushiSwap ‘Head Chef’ Election Settled by GoldenTree, Cumberland

Ben Strack

<div id="highlights-block_621e941905ff3" class="highlights">
 <ul>
 <li>Offerings will allow traders to hedge market-moving events with greater precision, according to CME Group’s global head of equity and foreign exchange products</li>
 <li>CME Group began offering micro bitcoin and micro ether futures contracts last year</li>
 </ul>
 
</div>



Derivatives exchange CME Group is set to roll out options on micro bitcoin and ether futures this month in a move to give more traders exposure to such instruments with nominal capital.



The options contracts, set to launch March 28, will be one-tenth the size of their underlying tokens. CME introduced bitcoin futures contracts, sized at five bitcoin, in 2020.



Futures require the buyer to purchase an asset at a certain date, while options give an investor the right, but not the obligation, to buy or sell an asset before the contract expires.



CME Group began offering bitcoin futures contracts in 2017 and <a href="https://cms.blockworks.co/cme-group-to-launch-cash-settled-micro-bitcoin-futures/" target="_blank" rel="noreferrer noopener">launched</a> cash-settled micro bitcoin futures contracts worth one-tenth of one bitcoin last year. The derivatives marketplace <a href="https://cms.blockworks.co/cme-group-plots-launch-of-micro-ether-futures/" target="_blank" rel="noreferrer noopener">moved in November</a> to add micro ether futures as liquidity in ether futures grew steadily with investors.&nbsp;



About 5.2 million micro bitcoin and micro ether futures contracts have changed hands in less than a year, according to Tim McCourt, CME Group’s global head of equity and foreign exchange products.



“Building on the strength and liquidity of the underlying contracts, our micro-sized options will enable traders of all sizes to efficiently hedge market-moving events with greater precision and flexibility or fine-tune their cryptocurrency market exposure,” McCourt told Blockworks in an email.



As traders favor short-dated options to manage risk, according to McCourt, the launch will feature Monday, Wednesday and Friday weekly expiries for micro crypto options.



Executives at Genesis Global Trading, Cumberland and Akuna Digital Assets said their firms will provide liquidity.



&#8220;We believe that options on these contracts will allow existing market participants greater flexibility when seeking cost-efficient exposure as well as opening the market to new participants who prefer the more granular sizing,&#8221; Akuna CEO John Harris said in a statement.



The launch comes after CME Group launched two new reference rates for bitcoin and ether Monday that provide a daily reference rate of the US dollar price of the two digital assets, published at 4 pm ET.



“We’re continually talking with and listening to clients and market participants about new ways to help them manage cryptocurrency risk,” McCourt said, declining to share specific future crypto products the company has in the works.



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



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>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.