David Canellis

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First, the really bullish stuff.



Pantera Capital managing partner Paul Veradittakit just put out a State of Crypto Venture Capital report with plenty to prick up your ears.



First, the industry is on pace to break 2021’s fundraising record of $29.17 billion. Crypto companies this year have raised over $16 billion — which is already more than the total deal value of 2024.



(BTW: Very cool that <a href="https://www.veradiverdict.com/p/e4aa8be1-52e2-477f-b687-7239522cde79?free_preview=false">Veradittakit’s report</a> is grounded in <a href="https://app.blockworksresearch.com/analytics/deal-flow">Blockworks Research data</a>, which covers all things deal flow, including fundraising, M&amp;A and debt financing.)



Veradittakit characterizes this year’s fundraising as a game-changer fueled by record M&amp;A and IPO activity.&nbsp;



He wrote: “2024 was a record year for acquisitions with over 100 mergers and acquisitions (M&amp;A) totaling $1.73 billion and 2025 is set to surpass 2024 in deal count. From January to July of this year it is already at 76 deals and $6.23 billion, which is 3.6× 2024’s full-year dollar volume and is on pace for 130 deals if the current run rate holds.”



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeqPJRPFKp5dO52iaq-GCg7cW-EdajU8JDyCB3oqCbxT-b8Y8pJJlyP1mEHF4aLDtVTDKa0NBEzjd2XSWaP7g5Kcq7NF34XP9vkKSAFv99l46kgsvGZgtY2eCaJo27Fy5N6qfEs?key=VUdjECCR-IQTKGtKSIld6A" alt=""/><figcaption class="wp-element-caption">Nice big green candles. Source: VeradiVerdict</figcaption></figure>



“The momentum in 2025 is less about unleashing pent‑up demand and more a sign of the industry’s natural maturation,” Veradittakit added.



Crypto IPO successes like Circle and Bullish, as well as others coming up (including Figure and BitGo) are making new entrants more comfortable with investing in the blockchain industry.&nbsp;



“This is a pattern seen in other major technological shifts, where a multi-decade build-out precedes explosive growth,” per Veradittakit.



Over on the Empire podcast, Rob Hadick, general partner at Dragonfly Capital, floated the notion that raises like M0’s $40 million and Rain’s $58 million Series Bs were probably the “tail end of the fervor” that came just before the Genius Act rolled out in June.



“I can tell you right now, there&#8217;s definitely some fatigue,” Hadick said.&nbsp;



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Stablecoins &amp; Prediction Markets, Nothing Else | Weekly Roundup" width="1024" height="576" src="https://www.youtube.com/embed/XuiL_EyEiEc?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>
</div></figure>



Interestingly, Hadick pointed out that the level of entrepreneurs that are now building in stablecoins is increasing.&nbsp;



One deal that Dragonfly is looking at right now involves founders that were executives at “some of the largest payment companies in the world and they just know how money flows — we haven’t seen that level of entrepreneur before.”



“And so I think we&#8217;ll see this kind of dip in the market, and then we&#8217;re going to see new novel, awesome entrepreneurs, an acceleration into maybe the end of the year [and] next year,” Hadick said.



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Dragonfly Capital

Crypto industry on pace to break 2021 fundraising record

Katherine Ross

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



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Business-to-business (B2B if you will) stablecoin transactions are gaining momentum, per a new report from Artemis, Dragonfly, and Castle Island Ventures.



The <a href="https://www.stablecoin.fyi/">report</a> found that such payments are annualizing $36 billion, which is a step above the person-to-person (P2P) rate of $18 billion.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdKhYZb6iw8_RoGbAs0S5b5mzJPuqcdbxnaJ6xFV9uhv3-Xbk5yNtryCNXmnzPJQENErKCfvBs7M3kg71kYk2OBVxro14yaCW9jIfwJYA5GgVLo4I5cTG5AU5roAzPrsYMwDfiIDg?key=cS080LHB1w_pUxzNZg64uA" alt=""/><figcaption class="wp-element-caption">Source: Stablecoin Payments From the Ground Up</figcaption></figure>



As you can see in the chart above, the volumes have really picked up on the B2B side of things, showing that the adoption that we’ve been talking about is being heavily reflected in data. Love to see it.



The study noted that USDT wins the popularity contest in these payments, but USDC has roughly 30% of the monthly volume.&nbsp;



“I kind of expected…that Circle would have done a little better than it has,” Dragonfly’s Rob Hadick told me. “The reality is, today, it&#8217;s still…between 80% and 90% Tether. There&#8217;s some indication that maybe Circle is gaining on the B2B side, but we haven&#8217;t seen that one in the data yet.”



On the downside, though, it looks like P2P might be struggling a bit.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc19hc_-dxV7G9FW39GKdQGhIfJUnKa6AmNybBwQqX1MDktL3bXhFtOoQlT4oHmqaZSfvB-StQQ4t2cFeWZ7x5hHr3cSDWK7kzjOtBiVdXQ5ziKdKwgQtKSI73VT1TVvVbIG0gm?key=cS080LHB1w_pUxzNZg64uA" alt=""/></figure>



You can see that volumes seemed to peak earlier this year, but haven’t quite bounced back, despite what is arguably a very bullish environment for stablecoins specifically.&nbsp;



Hadick told me he was surprised to see the P2P market hit such a wall. He noted that WorldPay’s most recent <a href="https://www.worldpay.com/en/global-payments-report?utm_source=google&amp;utm_medium=paid_search&amp;utm_campaign=2025_ENT_PM_GPR-ENGLISH_29508&amp;utm_content=en-us_gpr_google&amp;gad_source=1&amp;gad_campaignid=22443344533&amp;gbraid=0AAAAAqItqDOMZCYb15mlFdFpDoK5Vo2JV&amp;gclid=CjwKCAjwruXBBhArEiwACBRtHY2j_TWl6vAVBBeU3oTbzUB0jUZKe2ZxDFXMuWjqRdegFfdVOnbPfhoC870QAvD_BwE">report</a> showed that account-to-account payments are trending higher and becoming the fastest-growing segment of payments worldwide.



So his read was that P2P stablecoin volumes could get a boost from that, but clearly — as the data shows above — that’s not the case. On the other hand, he was thrilled to see that B2B payments are quickly growing.



What stood out to me is that the smaller segment of business-to-consumer payments is also stagnating.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfbwCjng5T6sANcD8NPBWT6fe4b8dtzU77v8V5rngH0TePt9lW8lCDAbavS5UYGzOm7r3TZYHGOErtut67L9PtxO6CbtppP1AAWUqEDYBBFyyyuOMnW2yoa7QTofjV9GoVUguV6?key=cS080LHB1w_pUxzNZg64uA" alt=""/></figure>



As you can see above, it looks like B2C volume hit a high roughly around the same time as P2P before dropping.&nbsp;



That’s not to discount the rise this year in volumes, which is focused on Binance Pay and Orbital.&nbsp;



“Volume has increased substantially, rising from approximately $50 million per month at the start of 2023 to surpassing $300 million by early 2025. This growth highlights the expanding role of stablecoins in everyday digital commerce and service platforms,” the study said.&nbsp;



Empire co-host Santiago Santos, <a href="https://www.youtube.com/watch?v=8FzTibc5jAc">in this week’s Round Up</a>, noted that B2B versus B2C caught his eye.



“ I think the first time, like B2B stablecoin transfers are now at or above B2C, which is institutions are using stablecoins,” he said. “ Now the volume of, or the share that institutions are using stablecoins, is now greater than [retail].”



Even with some of the more surprising datasets, Hadick told me that it’s still very early on for stablecoin use cases.



“The book is just starting to be written,” Hadick said. He still firmly believes that more companies will enter the space, and that’ll help boost massive winners.&nbsp;



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The stablecoin ‘book is just starting to be written,’ Dragonfly’s Hadick says

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A new perps DEX is entering the chat.&nbsp;



The team exclusively told me that Perpl, a decentralized perpetual futures exchange, raised $9.25 million from Dragonfly to build on Monad.&nbsp;



Other participants in the round include Ergonia, Brevan Howard, Breed, L1D and CMS.&nbsp;



I had a chance to speak with co-founder PB, who told me that he and his cofounder — both Americans — left the US to build Perpl in London. They’ve since hired a London-based team. Surprise, surprise, the decision came due to the lack of regulatory clarity in the US.&nbsp;



PB isn’t writing off the US entirely, though, noting that if the laws change, Perpl would consider opening up to the market — it’s just not currently in the cards.&nbsp;



Perpetual futures, or perps, are becoming more of a popular product, especially in crypto. Just last week, Coinbase <a href="https://www.coinbase.com/blog/24-7-futures-trading-has-arrived">teased</a> that 24/7 perps were “coming soon” after announcing 24/7 futures trading.&nbsp;



“I think the thing with perps, specifically, is how simple it is. With options, there&#8217;s just a lot of complexity. There are expirations, there&#8217;s just a lot more math for users to be aware of. But perps, it&#8217;s very simple, never expires,” PB explained.&nbsp;



“You just have to keep track of liquidations. And then that also helps with getting all the liquidity in one place. With options, since you have expirations, you have liquidity each month, but with perps, all liquidity for the assets is in the same place. More liquidity, better trading experience.”



What PB noticed is that crypto traders like the ease of access that perps offer. There’s also the added benefit that a project like Perpl can move faster on a token listing than, say, a Coinbase.&nbsp;



“With perps, you just need an oracle price and USDC, and you can start immediately taking a position. If you were to rewind back to maybe a couple of years ago, you needed a Binance or one of these central exchanges to actually list perps, but with DEXs, they&#8217;re able to list these tokens faster,” he explained.&nbsp;



Perps DEXs are “broken in a very interesting way,” PB told me. Basically, there are infrastructure and engineering issues and then the DEXs make some trade-offs to account for them, but Perpl claims to be different.&nbsp;



“What Hyperliquid has done with a cloud-based perp DEX has shown that the market appetite is there for something that has a deep liquidity. What we&#8217;re really excited for is to see how the composability angle plays out with that,” he added.&nbsp;



Perpl plans to utilize the EVM architecture from Monad to build its onchain central limit order book. But the downside is that, since it’s on Monad, it won’t be able to launch mainnet until Monad itself goes live. It does, however, plan to launch testnet by the end of the year.&nbsp;



“We&#8217;ve raised enough money to help us sustain ourselves if testnet or mainnet takes longer, but we want to get it onto testnet by the end of this year, just because we want people to try it,” he said. “There are going to be bugs that they&#8217;re going to be able to find. No matter how much we test internally, [nothing beats] user testing, so we want them to be able to get their hands on it.”



But PB and the team aren’t too worried if Monad’s mainnet takes longer than anticipated; they’ll just be building up the features on Perpl in the meantime.



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Exclusive: Perpl raises $9.25M from Dragonfly to build on Monad

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We’ve talked a lot about where venture capital stands in crypto right now. I had the chance to catch up with Dragonfly’s Rob Hadick and pick his brain about the industry, VCs and, of course, stablecoins.&nbsp;



Hadick believes that the backdrop for crypto right now “is as good as it’s been” now that the US is mulling regulation and has been overall friendlier to the industry. Add in Hadick’s optimistic stance on things like stablecoins, and bam! He says he’s “never been more bullish for crypto in the US.”



However, he noted that valuations across crypto are still “very high.”



Dragonfly is slowing down a bit in order to properly pick and choose its spots, he told me. But that makes sense, given that it focuses on Series A and B rounds rather than pre-seed or seed stages (which is a rare find in the industry, though not abnormal given the relative youth of crypto).



“We frankly haven’t done a lot. In fact, Q1 was maybe our slowest quarter ever in terms of new term sheets out, new term sheets signed,” he said. But that’s not necessarily because of the overall macro situation, he was careful to add. It’s partially due to Dragonfly balancing itself out because it was “very aggressive last year.”



It’s also because Dragonfly’s “really sensitive” to the fact that valuations have taken off. “And to us, [that means] just changing the way we’ve invested over the last few years. We do less deals, but we do larger check sizes and take more ownership,” he noted, so that they can partner more with their portfolio companies.&nbsp;



So far, the firm’s been very busy as the second quarter gets underway.&nbsp;



“We did one term sheet out of all of Q1, and the first two weeks of Q2, we’ve actually had [a few] term sheets out already at the seed stage,” he said.



One thing I was curious about, admittedly, was Hadick’s thoughts about stablecoins. He told me there’s a lesson buried in the success of stablecoins for the crypto native folks.&nbsp;



Despite the volatility we’ve seen across DeFi and crypto, stablecoins have managed an upward trajectory — and yes, there’s still a slight correlation between stablecoins and crypto. But the difference is that they’ve managed to hit the nail on the head when it comes to solving real-world issues.&nbsp;



For DeFi projects looking to succeed in crypto right now, Hadick advises founders to “solve the problems” that folks in the real world are experiencing.&nbsp;



“Let’s continue to make DeFi rails better than traditional rails,” he said, but it’s about usability at the end of the day and “bringing a better experience for the mass market.”



Now go out there and build.



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What DeFi founders could learn from stablecoin success

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$1.9 to $2.64 billion.&nbsp;



That’s the amount of potential revenue that Dragonfly thinks US users have missed out on thanks to geoblocking.&nbsp;



Okay, really, it’s more because of the regulatory environment — or should I say former environment.&nbsp;



“As of 2024, we estimate that 22-24% of all active crypto addresses worldwide belonged to US residents. Our sample of 11 projects generated a total value of approximately $7.16 billion to date, during which approximately 1.9 million claimers participated worldwide with an average median claim value of around $4.6 thousand per eligible address,” Dragonfly wrote.



As we’re all aware, projects have had to protect themselves by excluding US users from the party. Sad.&nbsp;



If we want to look outside the box, it’s not just crypto folks who have lost out on potential bags.&nbsp;



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1220" height="1026" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png" alt="" class="wp-image-98676" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png?w=1220 1220w, https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png?w=306 306w, https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png?w=310 310w, https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png?w=260 260w, https://blockworks-co.imgix.net/wp-content/uploads/2025/03/AD_4nXdzhT6Qrr7Of8h5Quh1xOcRTiSlRIR5FXCvMSRRJSg7p5NJZKXGX0lflsA0_j8apVbRI5HkGlMzbZpRvvXjF2soaN4u9L6bTP5dTlylpBWXr_x85UvvUBYyHoSS32Kh2t50QFTvyg.png?w=80 80w" sizes="auto, (max-width: 1220px) 100vw, 1220px" /><figcaption class="wp-element-caption">Source: Dragonfly</figcaption></figure>



“The federal tax revenue loss from these geoblocked airdrops ranges between $418 million and $1.1 billion, with an additional $107 million to $284 million in state tax revenue foregone,” Dragonfly wrote. “These figures do not account for further tax revenue that could have been generated from the capital gains taxes upon the eventual sale of these tokens.”



Oof.&nbsp;



Unless you’re a total contrarian — or anti-crypto — the consensus is that the last couple of years have not given us the regulatory clarity that crypto needs to survive and thrive.&nbsp;



Clearly, the data points to that. It also begs the question: Wen regulatory clarity on airdrops?&nbsp;



Right now, that’s not clear, though <a href="https://airdropreport2025.dragonfly.xyz/Dragonfly-s-State-of-Airdrops-Report-2025-1b1af13b644180c8aff9c2bd0d222e14">Dragonfly used its study</a> to present a case that argues airdropped tokens aren’t securities under the Howey test.



As for recommendations, the report suggests that non-fundraising airdrops include a safe harbor that would protect them. This harbor would include issuer disclosures, insider lock-up, consideration, functional platform and token post-launch and, finally, strict rules to target manipulation.&nbsp;



A safe harbor could be grandfathered into previous airdrops, too. Bonus points if the projects have to hand over data that demonstrates they’ve complied with the standards set forth.&nbsp;



I know we have a lot going on when it comes to trying to figure things out from a regulatory perspective at the moment. But clarifying and protecting both the firms behind airdrops and their users could give crypto a much-needed boost. Just saying.



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airdrop

US users missed out on $2.6B in potential airdrop revenue: Dragonfly

Jack Kubinec

For venture capitalists looking for significant returns on their crypto investments, layer-1 blockchains that are compatible with Ethereum’s software are a pretty popular bet.&nbsp;



This week, two layer-1 blockchains compatible with the Ethereum Virtual Machine (EVM) secured significant funding. Monad, which is developing a parallel EVM, raised $225 million in a round led by Paradigm.



Meanwhile, Berachain, an EVM-compatible layer-1 built with Cosmos’ software development kit (SDK), <a href="https://x.com/berachain/status/1778776309927191012">closed</a> a $100 million Series B funding round co-led by Brevan Howard Digital’s Abu Dhabi branch and Framework Ventures.



Read more: <a href="https://blockworks.co/news/paradigm-leads-monad-parallel-evm-fundraise">Paradigm leads $225M round for high-throughput blockchain Monad</a>



Monad’s raise was the largest crypto venture round since cross-chain messaging protocol <a href="https://blockworks.co/tag/wormhole">Wormhole</a> secured $225 million in November. Monad’s valuation wasn’t disclosed, though <a href="https://blockworks.co/news/cross-chain-protocol-investor-funding">Wormhole was valued at $2.5 billion</a> when it raised the same amount in the fall.&nbsp;



Monad justifies its lofty fundraising with the promise to deliver a much more performant <a href="https://blockworks.co/tag/evm">EVM</a>. For context, Monad hit 10,000 transactions per second in testing, while Ethereum often <a href="https://etherscan.io/">sits</a> around 15 TPS.



The parallel EVM is yet to go to mainnet however, and as <a href="https://blockworks.co/news/solana-network-congestion-transaction-volume">Solana experienced this week</a>, the obstacles blockchains encounter in the real world can be unpredictable.&nbsp;



Berachain, which also has not yet launched its mainnet, is set to introduce a “proof-of-liquidity” (PoL) consensus mechanism. This model <a href="https://docs.berachain.com/learn/what-is-proof-of-liquidity">aims</a> to improve upon Ethereum’s proof-of-stake (PoS) by addressing limitations around liquidity and centralization.



Unlike PoS, where users delegate tokens to validators who lock them up as stakes, PoL incentivizes users to contribute liquidity to decentralized exchange pools. Users’ contributions are then rewarded with governance tokens, improving both the security and efficiency of the network.



Berachain’s PoL model separates its governance tokens (BGT) from its transactional gas tokens (BERA), to prevent the centralization of stake. This promotes a fairer distribution of rewards and influence among participants.



Notably, this proof-of-stake downside — the fact that too much of the liquidity supply can end up being staked — has been on the Ethereum Foundation’s mind as of late. With around a quarter of the ETH supply now staked, some EF researchers are proposing ways to discourage staking and keep ether liquid.&nbsp;



Read more: <a href="https://blockworks.co/news/empire-newsletter-eth-monetary-policy">Smell Ethereum’s cooking: What ETH has in common with pro wrestling</a>



And of course, Berachain’s active online community looks good to <a href="https://x.com/hiFramework/status/1778776939903242378">investors</a> as crypto’s memecoin phase carries on.&nbsp;



<h2 class="wp-block-heading">Mini Q&amp;A: Dragonfly’s Tom Schmidt</h2>



Blockworks caught up with Tom Schmidt, partner at the crypto venture fund Dragonfly, to talk about the recent upswing in crypto VC activity.&nbsp;



Keep reading for excerpts from Blockworks’ conversation with Schmidt.



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



Blockworks: What are you seeing in the crypto venture world currently?



Schmidt: I think crypto VC is just starting to get a little bit warmer. The past two years have been really just ice cold. You know, these rounds are not super competitive, they happen pretty slowly. It’s great on my end because it gives you a lot of time to do deeper due diligence, build up time with the team, etc.



Overall though, it&#8217;s maybe reminiscent of fall 2020, in that we&#8217;re seeing institutions start to get more into crypto, we&#8217;re starting to see them come a little bit more into the rounds. We&#8217;re starting to see some interesting novel use cases and a little bit more excitement in the asset class.&nbsp;



But it isn&#8217;t like peak frenzy, you know, CNBC’s every other story is about crypto, which is great for <a href="https://blockworks.co/tag/venture-capital">VC</a> because I think there’s still great opportunity and deals to be had, but it&#8217;s not as sort of easy pickings as it was maybe a year ago.&nbsp;



Blockworks: Going off of that fall 2020 analogy, last cycle there were some bets that worked out and some bets that very noticeably didn&#8217;t. What are the lessons learned from the prior cycle and what sorts of investments do you think are going to pay off in four years’ time?&nbsp;



Schmidt: The beauty of being a proper venture fund is we have a very long fund life and so we can make bets that we think are going to pay off in five years or something like that. Obviously in venture too, there is this weird dynamic where you know most of your investments aren&#8217;t going to pan out. They&#8217;re going to be a zero or a 1x or something like that. And then you have one or two that are going to pay for the entire fund.



So there&#8217;s always going to be things where you invest, where you lose money. Like, that&#8217;s the nature of the business. I think the lesson from the past year has been don’t invest in anything that is going to blow up or embarrass you or embroil you in lawsuits.



There&#8217;s this component to crypto where everything is inherently a little bit procyclical, right? Like even Coinbase earnings, they go up when the price of bitcoin goes up and they go down when the price of bitcoin goes down. There&#8217;s some businesses that you look at that are maybe procyclical on the downside but conversely, they do not get paid and there&#8217;s no convexity when markets really rally, and those are the businesses that I&#8217;d try to avoid where you&#8217;re basically not getting paid for the risk that you&#8217;re taking.



This interview has been edited for brevity and clarity



<h2 class="wp-block-heading">Other notable funding news</h2>



<ul class="wp-block-list">
<li>Bitcoin mining hardware producer Auradine <a href="https://x.com/Auradine_Inc/status/1778093722657243256">closed</a> an $80 million Series B.</li>



<li>A new report <a href="https://blockworks.co/news/vcs-funding-early-stage-bitcoin-projects">showed a spike</a> in pre-seed rounds for Bitcoin ecosystem startups.</li>



<li>Alpen Labs <a href="https://x.com/AlpenLabs/status/1778080721128599949">announced</a> a $10.6 million seed round led by Ribbit Capital to apply zero-knowledge proofs to Bitcoin rollups.</li>



<li>Blockchain beauty platform KIKI World <a href="https://x.com/kikiworld_/status/1777614313366131092">rolled</a> out a “community commerce platform” with a16z crypto and the venture arm of cosmetics giant Estée Lauder as financial backers.</li>
</ul>



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Funding Wrap: Monad raises $225M, Berachain bags $100M in big week for L1s

Michael Bodley

Objections to the SEC’s proposed shifts to the US regulator’s long standing custodial rules are mounting.&nbsp;



In a joint letter this week, representatives from Bain Capital Crypto, Dragonfly Digital, Electric Capital, Haun Ventures and Ribbit Capital on Monday joined a growing number of dissenting industry voices to the SEC’s efforts to shift custodial regulations for registered investment advisers (RIAs).&nbsp;



The five firms in the <a href="https://www.sec.gov/comments/s7-04-23/s70423-186379-340322.pdf">letter</a> said they collectively “manage over $15 billion in assets, including crypto assets” on behalf of institutional investors. None of the five immediately returned a request for comment.



Top industry figures, including the crypto lobbyist <a href="https://blockworks.co/tag/blockchain-association">Blockchain Association</a>, have weighed in recently, too.



“The safeguarding of crypto assets is a vital concern for our industry, but it must be properly balanced against the real concern of stifling emergent technology and innovation,” the letter said.&nbsp;



Read more: <a href="https://blockworks.co/news/blockchain-association-sec-custody-rule">Blockchain Association Calls for Revisions to SEC Custody Rule</a>



A great deal of crypto-native dispatches to the <a href="https://blockworks.co/tag/sec">SEC</a> of late have decried a lack of self-custodial options for digital assets under the new rules.&nbsp;



Signed by top compliance and legal executives from their respective firms, the letter called into question the impact of the proposed rule changes on crypto traders — and, especially, their investors.&nbsp;



The executives went as far as to say that, lacking appropriate crypto self-custody provisions, “investors lose out on an investment opportunity and the adviser is required to neglect its fiduciary duty to its investors.”&nbsp;



The objections pertain to the SEC’s Rule 223-1, which remains <a href="https://www.sec.gov/comments/s7-04-23/s70423.htm">open</a> for public comment. It was first <a href="https://www.sec.gov/news/press-release/2023-30">introduced</a> by the regulator in February.&nbsp;



<h2 class="wp-block-heading">Qualified custodians poised to control crypto for RIAs</h2>



One major and contentious piece of the SEC’s proposal would require qualified custodians, as defined by the federal regulator, to oversee the custody of a basket of assets beyond the scope of what’s currently required.&nbsp;



If they take effect, the SEC’s new custodial rules would expand the requirements for asset safekeeping of client funds overseen by an RIA — even assets not currently regulated by the SEC as a security.&nbsp;



The updated guidelines appear poised to require crypto asset managers, including venture firms with token investments, to tap a US-regulated, qualified custodian for their digital assets.&nbsp;



In making the case for crypto self-custody to be permissible, at least in certain circumstances, the letter repeatedly drew on the idea that forcing crypto custody exclusively into the hands of third-party custodians would ratchet up custody fees and stifle related innovation.&nbsp;



“For a qualified custodian to support a particular crypto asset requires a large upfront investment of operational resources,” the letter said. “This is ultimately a business decision for the custodian as to whether to support a particular asset. Therefore, during the period when a custodian is unable to take custody of crypto assets, advisers have to rely on self-custody.”&nbsp;



The proposal also objected to the SEC’s proposal to make state-chartered crypto custodians gain FDIC approval in order to operate.&nbsp;&nbsp;



There have been “many safeguards that have been developed to self-custody crypto assets,” the letter said.&nbsp;



And the representatives in the letter said that they agree with the SEC that “an overhaul of the entire framework is advisable.”&nbsp;



Ideally, if certain crypto-friendly provisions are added in.&nbsp;



“Investment advisers need a unified and consistent framework for the custody of client assets of all types in order to provide investors with professional investment management services,” the letter said.&nbsp;



It gave a few industry examples, including multi-signature wallets and cold storage kept on-location by a crypto investment firm.&nbsp;



And crypto asset managers should be subject to an outside audit of their investment activities and operations, at least on an annual basis, it said.



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Bain Capital

Bain Capital Crypto Among 5 Firms Bashing SEC’s Proposed Custody Rule

Casey Wagner

<div id="highlights-block_62fa73dadf2ca" class="highlights">
 <ul>
 <li>Dragonfly purchases early Ethereum investor in undisclosed deal</li>
 <li>Dragonfly managing partner Haseeb Qureshi formerly worked as a partner at the hedge fund firm</li>
 </ul>
 
</div>



Cryptocurrency-focused venture capitalist Dragonfly has purchased its first digital assets hedge fund firm backed by Sequoia and a16z.&nbsp;



The acquisition, MetaStable, founded in 2014, is one of the oldest and highest-performing crypto hedge funds. MetaStable was an early investor in Ethereum, Filecoin and Algorand — at one point raking in a return in excess of <a href="https://fortune.com/2017/07/26/bitcoin-cryptocurrency-hedge-fund-sequoia-andreessen-horowitz-metastable/" target="_blank" rel="noreferrer noopener">500%</a>. 



More recently, the fund has invested in trading platform Floating Point Group and layer-1 protocol Iron Fish.&nbsp;



<a href="https://cms.blockworks.co/tag/dragonfly-capital/" target="_blank" rel="noreferrer noopener">Dragonfly</a> managing partner Haseeb Qureshi, who formerly worked as a partner at MetaStable, in a <a href="https://medium.com/dragonfly-research/re-introducing-dragonfly-f6a2deb7078a" target="_blank" rel="noreferrer noopener">blog</a> post Monday said the firm is now “more expansive than it’s ever been.” 



The news comes months after Dragonfly, based in San Francisco, CA, <a href="https://www.prnewswire.com/news-releases/dragonfly-capital-closes-oversubscribed-650-million-crypto-venture-fund-iii-301543290.html" target="_blank" rel="noreferrer noopener">closed</a> its third crypto venture fund at an oversubscribed $650 million. Its second fund, closed in 2021, cleared $250 million. The company remains interested in native protocols, Web3 initiatives and tokens that aim to create new digital economies, General Partner Tom Schmidt said in <a href="https://www.prnewswire.com/news-releases/dragonfly-capital-closes-oversubscribed-650-million-crypto-venture-fund-iii-301543290.html" target="_blank" rel="noreferrer noopener">May</a>. 



Dragonfly will also soon be the new owner of 10 million LDO tokens — equal to 1% of the total supply — after the Lido DAO <a href="https://thedefiant.io/lido-dragonfly-deal-approved" target="_blank" rel="noreferrer noopener">approved the sale</a> earlier this month. Lido is a liquidity platform where traders can earn yields on staked assets. LDO token holders came to an agreement after floating <a href="https://cms.blockworks.co/after-failed-first-attempt-lido-relaunches-proposal-for-diversified-treasury/" target="_blank" rel="noreferrer noopener">different versions</a> of the proposal. 



Dragonfly committed to buying the LDO tokens at $1.45 apiece, or at the two-week average price as of the vote plus a 5% premium, whichever is higher. There is a one-year lockup period.



As part of a brand overhaul, also announced Monday, the firm has dropped “Capital” from its name.&nbsp;



The acquisitions and rebranding effort fit into Dragonfly’s broader goal to reintegrate itself as a crypto-native brand. Its new look is affectionately inspired by the “hacker” and “weirdo” culture often displayed throughout the space, according to Qureshi.&nbsp;



“It’s time for a refresh,” Qureshi said.



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Crypto Venture Firm Dragonfly Acquires Hedge Fund Backed By A16z, Sequoia

<div id="highlights-block_62e160807d821" class="highlights">
 <ul>
 <li>Lido is now offering to sell 1% of its LDO token supply to Dragonfly Ventures</li>
 <li>Dragonfly also has the freedom to withdraw from the commitment if the price per LDO token exceeds $2.25 during the voting period</li>
 </ul>
 
</div>



Two days after its <a href="https://cms.blockworks.co/in-buffer-against-bear-market-lido-opens-new-door-for-dao-money-management/" target="_blank" rel="noreferrer noopener">first plan</a> failed to pass, the Lido Finance DAO has rolled out a new governance proposal to diversify the asset makeup of its treasury in an effort to secure operating costs for the next two years.&nbsp;



The newest proposal comes after the decentralized governance body voted against selling 10 million LDO tokens, or 2% of its total supply, to venture capital firm <a href="https://cms.blockworks.co/tag/dragonfly-capital/" target="_blank" rel="noreferrer noopener">Dragonfly Capital</a> on Monday.&nbsp;



Lido’s <a href="https://research.lido.fi/t/treasury-diversification-2-part-2/2657" target="_blank" rel="noreferrer noopener">new plan</a>, introduced Wednesday, proposes that Dragonfly Ventures will instead purchase 1% of the total LDO token supply from its treasury, half of the initial offer. The remaining 1% “will be handled at a future date,” Lido said in the new proposal.&nbsp;



Dragonfly will commit to a final LDO price of either around $1.45 per token, which is the previously defined 7-day time weighted average price (TWAP) under a 50% premium, or a 7-day backward-looking TWAP taken at the time of vote completion under a 5% premium. Dragonfly will pay whichever price is the higher of the two.&nbsp;



Dragonfly also has the freedom to withdraw from the commitment if the price per LDO token exceeds $2.25 during the voting period. Voting is set to open on Wednesday, July 27, at 6 pm ET.&nbsp;



“I think LDO holders should accept this offer,” said Mika Honkasalo, a digital asset researcher and investor.&nbsp;



Honkasalo was surprised that the original offer did not pass but is more confident in this new proposal.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“[It] cleans up some of the minor issuers from previous sale terms,” he said.</blockquote>



The majority of LDO’s treasury is at present made up of the organization’s native token — equating to some $237 million — according to <a href="https://tokenterminal.com/terminal/projects/lido-finance" target="_blank" rel="noreferrer noopener">data</a> from Token Terminal. $366 is now held in stablecoin USD Coin (USDC).&nbsp;



The investment would be a smart move for Dragonfly as current volatile market conditions continue, <a href="https://www.linkedin.com/in/adamscochran/" target="_blank" rel="noreferrer noopener">Adam Cochran</a>, general partner at venture capital firm Cinneamhain Ventures, told Blockworks when the <a href="https://cms.blockworks.co/in-buffer-against-bear-market-lido-opens-new-door-for-dao-money-management/" target="_blank" rel="noreferrer noopener">original proposal</a> was announced. 



“Right now, after a collapse of a lot of speculation in the space, there is a huge incentive for investors to back projects that have a path to revenue and ownership of key infrastructure,” Cochran said.



“Lido is one of a handful of projects that has both that opportunity and a product market fit, and I think the interest in these types of projects is going to continue to grow as we face uncertainty in macroeconomic conditions and as we see some of the froth come off the crypto space,” he said.



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DAO governance

After Failed First Attempt, Lido Relaunches Proposal for Diversified Treasury

<div id="highlights-block_62d9bcb189908" class="highlights">
 <ul>
 <li>Lido Finance has issued a new proposal to help fund the DAO for the next two years</li>
 <li>Voting has not yet opened, but Dragonfly Capital could be the buyer of 2% of LDO’s total supply if the proposal passes</li>
 </ul>
 
</div>



The Lido Finance DAO has rolled out a governance proposal to diversify the asset makeup of its treasury in an effort to serve as a buffer against current market conditions.



The plan ought to ensure the Lido <a href="https://cms.blockworks.co/tag/DAOs/" target="_blank" rel="noreferrer noopener">DAO</a> (decentralized autonomous organization) will have enough capital to fund operating expenses for roughly two years.



<a href="https://cms.blockworks.co/tag/lido/" target="_blank" rel="noreferrer noopener">Lido</a> suggested selling 2% of its native token, LDO, from the DAO treasury. The token will be priced at a 7-day time weighted average price (TWAP) under a 50% premium, roughly $1.45 per token. On Thursday, LDO traded around $1.50.



Digital asset-focused venture capital firm <a href="https://cms.blockworks.co/tag/dragonfly-capital/" target="_blank" rel="noreferrer noopener">Dragonfly Capital</a> is in the running to purchase a sizable number of tokens, according to Lido — although there are “a number of interested parties” the collective did not identify. 



<a href="https://www.linkedin.com/in/adamscochran/">Adam Cochran</a>, general partner at venture capital firm Cinneamhain Ventures, told Blockworks he doesn’t “think the deal is adequately priced.”



“Whenever you&#8217;re buying a block of tokens from the team over the counter, you are both impacting the circulating supply and avoiding price slippage, so there is a baked-in price discount,” Cochran said.



If the proposal is approved and Dragonfly leads the buy, it could mark a new era for DAO treasury management.&nbsp;



“This type of structure should have already been more common because it doesn&#8217;t make sense for your treasury to be fully in your own token,” said Mika Honkasalo, a digital asset researcher and investor. “You need to have proper runway and you can&#8217;t rely on the market always being on your side.”&nbsp;



The majority of LDO’s treasury is at present made up of the organization’s native token — equating to some $237 million — according to <a href="https://tokenterminal.com/terminal/projects/lido-finance" target="_blank" rel="noreferrer noopener">data</a> from Token Terminal. $366 is now held in stablecoin USD Coin. 



Despite being at odds when it comes to pricing, Cochran said the investment would be a smart move for Dragonfly as current volatile market conditions continue.



“Right now, after a collapse of a lot of speculation in the space, there is a huge incentive for investors to back projects that have a path to revenue and ownership of key infrastructure,” Cochran said. “Lido is one of a handful of projects that has both that opportunity and a product market fit, and I think the interest in these types of projects is going to continue to grow as we face uncertainty in macroeconomic conditions and as we see some of the froth come off the crypto space.”&nbsp;



Voting for the <a href="https://research.lido.fi/t/treasury-diversification-2/2570" target="_blank" rel="noreferrer noopener">proposal</a>, which was released Monday, has not opened yet. 



“I think people are on board with a variation of [the proposal], for sure,” Honkasalo said. “If you have to raise, you have to raise. Some version of it will get passed.”



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In Buffer Against Bear Market, Lido Opens New Door for DAO Money Management

Garrett Harper

In this episode of Empire, Jason is joined by Haseeb Qureshi and Tom Schmidt of Dragonfly Capital. Haseeb and Tom are top venture capitalists with unique insights into crypto&#8217;s current trends, new innovations and market sentiment. If you want expert advice on the market, these are two people you ask.



Haseeb Qureshi and Tom Schmidt discuss:



<ul class="wp-block-list"><li>the venture capital landscape</li><li>power is shifting to investors</li><li>being long crypto while fighting the Fed</li><li>supercharged crowdfunding</li><li>convertible bonds &amp; debt financing</li><li>the changing meta</li><li>how projects choose where to build</li><li>the end of airdrops</li><li>market outlook</li></ul>



Check out what they had to say in the video below.👇



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Can Crypto Find a New Narrative? | Haseeb Qureshi &amp; Tom Schmidt" width="1024" height="576" src="https://www.youtube.com/embed/ZAOhG9KdPu0?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<h3 class="wp-block-heading">About the show</h3>



&#8220;Empire&#8221; is a twice-a-week show where we share the real crypto stories that aren’t heard elsewhere. On Mondays, Jason and Santiago Santos interview crypto industry movers and shakers to talk about their struggles, bold moves and tough decisions. Finish off the week with Friday&#8217;s weekly roundup episode that covers the top news and narratives of the week.



For any NPR or Guy Raz fans out there, you can think of &#8220;Empire&#8221; as a &#8220;How I Built This&#8221; for Web3.



Subscribe to &#8220;Empire&#8221; today on&nbsp;<a href="https://podcasts.apple.com/us/podcast/empire/id1554930038" target="_blank" rel="noreferrer noopener">Apple</a>&nbsp;or&nbsp;<a href="https://open.spotify.com/show/4UTePv1CR3APdKOiosR3Iq" target="_blank" rel="noreferrer noopener">Spotify</a>. Watch episodes on&nbsp;<a href="https://www.youtube.com/channel/UCEOv-8wHvYC6mzsY2Gm5WcQ" target="_blank" rel="noreferrer noopener">YouTube</a>.



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</ul>

DeFi

Podcast: Can Crypto Find a New Narrative? | Haseeb Qureshi & Tom Schmidt

Ben Strack

<div id="highlights-block_62697aca73bac" class="highlights">
 <ul>
 <li>Founded in 2018, Dragonfly has invested more than $700 million overall</li>
 <li>Most US venture capital firms don’t focus enough on crypto projects in Asia, according to a Dragonfly Capital executive</li>
 </ul>
 
</div>



Dragonfly Capital has launched its third crypto venture fund with $650 million in commitments, earmarking the capital infusion to back later-stage startups as the crypto industry matures.



Those backing the new fund include Tiger Global, KKR, Sequoia China, Invesco, Top Tier Capital Partners and Ivy League endowments. The fund was originally aiming for $500 million in commitments, <a href="https://www.sec.gov/Archives/edgar/data/1900344/000190034422000001/xslFormDX01/primary_doc.xml" target="_blank" rel="noreferrer noopener">a regulatory filing</a> shows.



Dragonfly intends to “double down” on its backing of the next breakthroughs in crypto infrastructure, DeFi and smart contract scaling, as well as consumer products, such as NFTs, crypto games and DAOs.



“Our strategy is still early-stage investing, but we&#8217;ll now be able to lead more Series A and Series B rounds as well,” Dragonfly Managing Partner Haseeb Qureshi told Blockworks. “Our goal is to support entrepreneurs in every round from seed to exit.”



The new fund has not yet made any investments.



<a href="https://cms.blockworks.co/dragonfly-launches-second-vc-fund-with-225-million/" target="_blank" rel="noreferrer noopener">The firm last year launched</a> its second venture capital fund, focused on international decentralized technologies, with $225 million.



Founded in 2018, Dragonfly has invested more than $700 million, including stakes in Avalanche, NEAR Protocol, Compound, MakerDAO, 1inch, Matter Labs, Anchorage and Dune Analytics.



Despite venture dollars flowing into crypto in recent years, Qureshi said the biggest gap in the market right now is investing in Asia.



“Dragonfly has been global from day one, so we have deep roots in Asia,” he said, adding that the firm was an early backer of Amber Group, Babel Finance, Matrixport and Bybit. “We believe that it&#8217;s a hugely important part of the market that&#8217;s neglected by most of the US [venture capital firms].”



Amber Group reached a $3 billion valuation with <a href="https://cms.blockworks.co/crypto-trading-platform-amber-group-eclipses-3b-valuation-with-latest-raise/" target="_blank" rel="noreferrer noopener">its fundraise in February</a>, while Matrixport <a href="https://cms.blockworks.co/matrixport-raises-100m-and-hits-unicorn-status-with-1b-valuation/" target="_blank" rel="noreferrer noopener">hit a $1 billion valuation</a> last year.



Bybit, which recently moved its headquarters from Singapore to Dubai, unveiled crypto options trading this week. CEO Ben Zhou said the firm is confident that the new offering will help normalize crypto options trading, “just like what Robinhood did for stock options.”



Qureshi declined to comment about potential future fund plans.



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Dragonfly Capital’s Latest Crypto Fund Aims to Invest From ‘Seed to Exit’

Morgan Chittum

<div id="highlights-block_621eabc4c01c6" class="highlights">
 <ul>
 <li>Led by Archetype, raise investors include Coinbase Ventures, Dragonfly Capital, Solana Ventures and ParaFi</li>
 <li>Parcl has 15 full-time employees but hopes to expand its staff to 25 by the end of the year</li>
 </ul>
 
</div>



Parcl, a startup that digitizes real estate investments via the Solana blockchain, raised a $4.1 million seed round Tuesday, earmarked for marketing and staffing.



The New York-based company has 15 full-time employees but aims to expand its staff to 25 by year-end, co-founder and CEO Trevor Bacon told Blockworks.



“It&#8217;s a tough hiring environment, but we&#8217;ve managed with our team and vision to have been able to attract some of the best talent,” Bacon said.



Parcl’s mission is to give everyone a chance to invest in real estate, a market which has historically high barriers to entry, but consistent returns.



Parcl’s protocol allows users to invest in a digital square foot of real-live property via its price index, which replicates the price per square foot in various neighborhoods. The platform has transaction fees, but no minimum investment requirement.



“[For example], Tribeca will have a price per square foot of like $2,000, and we&#8217;ll call that a ‘parcl,’” he added. “‘A parcl’ is one square foot of any given neighborhood, and the blockchain is what allows you to create those assets and trade them. It’s basically a way to gain exposure to real estate.”



Led by Archetype, raise investors include Coinbase Ventures, Dragonfly Capital, Solana Ventures, ParaFi, Shima Capital, Slow Ventures, Tribe Capital, Not Boring Capital and FJ Labs.



Parcl will launch a testnet, along with the release and sale of a non-fungible token (NFT) collection in the coming weeks. All of the proceeds, Bacon said, will go toward buying someone a house.



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Dragonfly Capital

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