Welcome to our June issue,
Mayhem continues... We're running out of bad puns for this issue, so we'll skip that part and jump right in. Almost the second after we hit that little 'publish' button for the last issue, news broke that the SEC is continuing its 'operation chokepoint' by suing Coinbase.
While it's true that there is never a 'dull moment' in crypto, the past few weeks have felt especially dynamic—making it kind of tricky to write a newsletter, let me tell you. The recent weeks have been like riding a news headline roller coaster! From stomach-churning drops (hello, lawsuits for Binance & Coinbase) to thrilling, hand-in-the-air climbs (with BlackRock and Deutsche Bank diving headfirst into crypto).
A few years ago, such a news mix could have signaled either 'Curtains Up' on the apocalypse or 'Fasten Your Seatbelts' for an insane crypto joyride. Acknowledging that the truth probably—as so often—lies somewhere in between, does make you realize that our industry as a whole is maturing, slowly growing out of its infancy. Plus (big plus), it helps with keeping sane.
Okay, let's briefly tackle some of the past weeks' developments one by one:
Binance & Coinbase getting sued
Just a day after the SEC sued Binance, it turned to Coinbase claiming it is “operating as an unregistered securities exchange, broker, and clearing agency.”
In the wake of this, the SEC also mentioned seventeen tokens across both lawsuits that they deem a security—among these are, e.g., SOL, MATIC, and ATOM. News that led FinTech poster child Robinhood to delist any of those tokens that they were offering.
Both exchanges emphasized that they are welcoming proper regulation and discourse with policymakers, but that they are willing to fight back against the SEC's seemingly arbitrary rule by enforcement. Let's see how this plays out.
TradFi entering the stage - big time
Despite prevailing regulatory uncertainties in the U.S., Wall Street giants are making major moves into crypto. Fidelity, Charles Schwab, and Citadel launched EDX, a new crypto trading platform geared towards institutional investors. Concurrently, BlackRock, the world's largest asset manager, has applied for an ETF license from the SEC, which would mark the first spot Bitcoin ETF ever. Other firms, including ARK Invest and WisdomTree, have lodged similar applications. Credit graphic Meltem Demirors. 'Fun fact', Coinbase would be the custodian behind BlackRock's ETF - do they know something that we don’t?
While the approval (or rejection) of said ETFs will take a few weeks, if not months, news broke that the commission's first response was to state that most of the applications were 'inadequate', which does not mean that they are rejected (contrary to what you read on Twitter), but rather that they would have to be resubmitted. Again, let's see how this plays out.
Things look brighter outside the US
Despite all of this, crypto markets are demonstrating renewed vigor as key global entities—governments, central banks, and commercial banks—also enter the scene in a big way.
Brazil is pioneering in this space, introducing its own digital currency, the digital Real. This move is aimed at replacing the antiquated and complex financial system with streamlined code and extending financial services to its 30 million unbanked citizens.
Simultaneously, Singapore is collaborating with industry titans like HSBC and JP Morgan to explore the tokenization of assets, a process that has the potential to revolutionize how financial assets are handled.
Moreover, in a proactive move to support crypto start-ups, Japan has rescinded its 30% tax on unrealized crypto earnings, thus fostering a more conducive environment for business ventures. This development signifies a significant progression in the crypto domain, offering opportunities for everyone from Bitcoin novices to DeFi experts.
Last but definitely not least, things look quite bright here in Europe, but don't take my word for it. Instead, take this little thread:
‘Dahoam is Dahoam’ - ETH Munich
We're excited to announce that we're one of the sponsors for the first-ever ETH Munich Hackathon, taking place from August 11th through 13th at the TUM Campus in Garching.
Applications are now open at ethmunich.de.
A big shout out and thank you to all the organizers, sponsors, and partners - especially PretzelDAO, which is establishing itself as the driving force behind a thriving and ever-growing blockchain community here in Munich.
ReFi Hackathon Berlin
For those of you ready to hack right away, as well as those who are not sure if a hackathon is really your cup of tea, we're co-hosting the Mini Hackathon: Green Edition at the Lisk Center in Berlin on July 8th. This is in collaboration with the Solana Foundation, Superteam Germany, Sunrise Stake, Crypto Girls Club, Femme Capital, Ultimate, Soonami, Triggr, Marinade, and Lisk - quite the list, isn't it?
https://twitter.com/StakingFac/status/1673319208770326528
You can apply here.
Ethereum
All good things come in threes. This saying also applies to Ethereum - at least according to one of Vitalik Buterin's latest posts. In it, he describes three 'major technical transitions that the stack needs to undergo, roughly simultaneously':
L2 scaling
Transaction fees need to decrease significantly for mass adoption. The design choice for the Ethereum network are Layer 2 (or even 3) solutions such as Arbitrum or Optimism. Side note: here’s a great thread explaining some scaling solutions in simpler terms.
Smart contract wallets
Self-custody wallets need to become a lot easier to use for them to beat custody solutions. Otherwise, they're never going to be adopted by average Joe and Jane. Smart contract wallets can be manifold, but their main objective is to abstract away certain aspects that are native to our industry (e.g. addresses, key management/recovery etc).
Privacy
Having all of your transactions and cat pictures (= your collectibles, credentials etc.) available publicly for literally anyone to see would either kill many use cases or deter too many users, pushing users to more centralized, non-self-custody solutions.
Hash it out. Ethereum core developers are discussing a potential proposal to increase the maximum amount of staked ETH to become a validator - from the current 32 ETH to 2048 ETH (that’s 64x). The objective is to make the validator set more efficient by reducing bloat. The community seems to be split so far, with some voices saying that this might indeed lead to more centralization, whereas others see this as a chance for validators to become more profitable - as of now, any 'excess' of 32 ETH just sits idle on your validator and does not earn any rewards. Note that the minimum amount of ETH needed to become a validator (=32ETH) would be unaffected by this change.
Dencun is coming. After the Shapella upgrade, all eyes are now on the next major hardfork, Dencun. Ethereum core devs agreed on the scope of the upgrade during a dev call at the beginning of June. Dencun encompasses five Ethereum Improvement Proposals:
EIP-4844 (the show pony of the hard fork)
Introduces proto-danksharding, which is basically a technique that allows nodes to verify large chunks of data by just sampling a subset. This would make the work of L2s a lot easier.
EIP-1153
A proposal aimed at slashing on-chain data storage fees to optimize block space usage.
EIP-4788
An initiative focused on enhancing designs for bridge structures and staking pool models.
EIP-5656
A proposal that introduces slight code modifications pertaining to the Ethereum Virtual Machine.
EIP-6780
An initiative to eliminate code that potentially could bring smart contracts to an abrupt end.
No specific date has been communicated for Dencun, but it is going to be a major push for the whole network - stay tuned!
Solana
SECurity. The bear market is hard on everyone, but few have been hit as hard as the Solana community. SOL was amongst the tokens mentioned by the SEC to potentially be considered a security - note that this was revealed in the lawsuits against Binance and Coinbase, respectively, and not in a lawsuit against Solana Labs or the Solana Foundation. The Solana Foundation has publicly rejected the SEC’s claim, but at the same time affirmed that it is proactively seeking an exchange with policymakers.
Thread it out. Messari published a massive thread covering the main insights of their Solana report - we know you’re busy, which is why we distilled the thread for you:
Solana strives for crypto mass adoption by facilitating seamless financial and consumer interactions on a shared state (=monolithic approach).
Achieving this goal hinges on a few crucial components: Validator Scaling, State Management, and Hotspot Isolation. Furthermore, the successful implementation of several key initiatives, namely Firedancer, state compression, and local fee markets, is instrumental.
Firedancer aims to enhance network functionality, with the potential to achieve an impressive 1M+ transactions per second. With successful implementation, it could manage transactions on par with major platforms like NASDAQ, NYSE, Twitter, and VISA - this was already successfully tested!
State Compression targets the optimal placement of Web2-scale user activity data on-chain, while Local Fee Markets offer promising solutions to scalability issues by facilitating parallel transaction processing and local state pricing.
However, the adoption of this technology is reliant on the applications leveraging it. Solana boasts a diverse portfolio of promising apps across various sectors, particularly in #DeFi and consumer applications.
Tendermint & Substrate … wait what?!
Tenderstrate. Ok, admittedly a horrible title, but this is major: Composable is a project set out to defragmentize liquidity across blockchains by leveraging components both from the Tendermint (IBC) as well as the Substrate ecosystem (XCVM) - their flagship products are Centauri and Picasso. Through Centauri and Picasso, IBC-enabled chains can conduct IBC transfers between both ecosystems - connecting over 45 IBC chains with ~80 DotSama chains. While things still need to play out in the wild, these are major steps towards a multichain future. You can learn more here.
Welcome aboard. After proposal #797 was approved, the validator set grew from 175 validators to 180. Welcome aboard fellow validators.
Not ready yet. While a similar approach to increasing the validator set on Polkadot was taken, its proposal to grow the validator set got shut down due to security and performance concerns.
Network quick takes
A year in review. Chainlink looks back on their first year after the Chainlink Economics 2.0 were introduced for the first time.
Heck of a month… for Elusiv as they launched their SDK, were featured on the Validated podcast, and launched support for Ledger hardware wallet. This thread will bring you up to speed on all of this in no time.
One. Trillion. That’s how many queries have been served by The Graph network.
Aptos & Google are sitting in a tree…Jokes aside, if you’re building on Aptos, you can leverage the web2 giant's Google for Startups Program - more here.
The Fellowship. Wormhole recently announced their Fellowship Program as a launchpad for their community - interested? Check out this thread.
"Tokenized US Treasury Bills Are Entering Emerging Markets" (read)
"EU Publishes Digital Euro Bill Featuring Privacy Controls, Offline Guarantee" (read)
Who Let the Dogs Out? - "German Intelligence Service Launches Dog-Themed NFTs to Fetch Cyber Talent" (read)
Ledger has acted upon their promise to gradually release/open-source parts of their stack. They started by publishing the Ledger Recover Cryptographic Protocol Whitepaper, which covers the system design, architecture, and operational flows of Ledger Recover. (read)