🔮 Farcaster and DeSoc, SOL Outage, Coinbase ETF Impact, Digital (De)Dollarization, Celsius Revival

Top Stories

A Social Network Mullet: Web2 in the Front, Crypto in the Back¹

Farcaster, the social network recently taking the crypto sphere by storm, represents a significant departure from previous attempts at decentralized social like Friend Tech. Unlike its predecessors, Farcaster prioritizes social and decentralization aspects over financial elements. The protocol, defined as "sufficiently decentralized" by co-founder Varun Srinivasan, ensures users can communicate regardless of network interference. By enabling developers to build various clients on the network, Farcaster empowers users with unprecedented control over their social media experience. Warpcast, an application built atop Farcaster, exemplifies this decentralized approach, despite facing initial challenges with user onboarding. The recent introduction of Frames, which allow users to turn posts into interactive apps, has catalyzed user and developer activity. While the protocol isn't without challenges such as spam, it signifies a crucial step towards democratizing social media and reducing the influence of centralized platforms. As Farcaster gains momentum, it heralds a new era of decentralized social media, offering users unparalleled freedom and security, without the pitfalls of ponzinomics.

If you're not on Farcaster yet, we highly recommend signing up and following MJL (@mjlcapital) and our team members (@spm and @marcusl).

Source: Dune

¹ Credit to Farcaster co-founder and marketing wizard Dan Romero.

Revolutionizing Emission Distribution: Bittensor's Dynamic TAO Proposal

Bittensor, an AI model marketplace at the nexus of crypto and machine learning, is undergoing a transformation with the introduction of the Dynamic TAO proposal. This initiative seeks to overhaul Bittensor's emission distribution system, transitioning from a manual, centralized process to a market-driven mechanism. The proposal aims to address concerns of centralization and scalability while fostering a more efficient allocation of resources. Alongside this development, the collaboration between the Nous and Cortex.t subnets introduces innovative approaches to fine-tuning AI models and democratizing access to expensive API services. With these advancements, Bittensor is poised to revolutionize the open-source AI landscape and drive unprecedented innovation in the field.

Down Goes Solana

The Layer 1 network Solana recently experienced a significant disruption, halting block production for five hours, before resuming operations following a successful upgrade and restart. The incident, which began at approximately 09:53 UTC, prompted engineers to investigate the outage, with suspicions pointing towards the "Berkley Packet Filter" mechanism as a potential cause. Matthew Sigel, Head of Digital Assets Research at VanEck, highlighted a Solana Improvement Proposal (SMID) as a factor in the failure, suggesting alterations to the BPF may have contributed to the issue. While Solana has encountered outages in the past, this marks its first major disruption since February 2023, prompting continued monitoring and a root cause analysis by core contributors.

Keeping Time: Metronome's Q4 2023 Tempo

In Q4 2023, Metronome saw a significant 33% increase in Total Value Locked (TVL), exceeding $13 million by year-end, marking the fourth consecutive quarter of growth. However, the expansion in outstanding synthetic assets was modest, with less than 1% growth, mainly driven by a $900,000 surge in USDC-denominated synthetics. Despite these positive developments, user activity declined, with only 137 new unique users engaging with the protocol, and transaction volume dropped to 3,087, reaching its lowest point since the deployment of Optimism in Q2’23. Notably, Metronome improved cross-chain liquidity by implementing LayerZero during the same quarter.

Source: Messari

Decun Live On Sepolia

The Ethereum Dencun upgrade successfully launched on the Sepolia testnet, marking the second of three planned dress rehearsals. Dencun aims to substantially reduce transaction fees on Layer 2 by replacing gas-intensive calldata with blobs, enabling Ethereum's Layer 2 ecosystem to compete with alternative Layer 1 solutions in terms of gas fees while maintaining the robust security guarantees of Ethereum's consensus layer.

Source: Twitter (X)

Wormhole Unveils Airdrop Plan for "W"

Cross-chain protocol Wormhole has revealed its plans for an airdrop of its "W" governance token, native to both the Ethereum and Solana blockchains. While the snapshot has been taken, the launch date is yet to be announced. The token will boast a maximum supply of 10 billion, with an initial circulating supply of 1.8 billion, and the remaining 82% gradually unlocked over four years. The distribution of W tokens spans six categories, including community and launch, guardian nodes, ecosystem and incubation, core contributors, strategic network participants, and the foundation treasury. Wormhole intends to progressively decentralize governance to W holders, fostering community-driven decision-making and protocol development.

Sol y Luna Jupiter

Last week marked a significant milestone for Solana with the launch of the long-awaited DEX aggregator Jupiter's token on January 31st. With 1.35 billion JUP tokens issued and distributed via airdrop to nearly 955,000 wallets, trading activity surged, propelling Jupiter to the top DEX platform by volume. Despite some initial sell-offs causing volatility, the platform's popularity has driven transaction fees on Solana to their highest levels in over a year, with users prioritizing transactions by tipping validators. While JUP faced a temporary downturn post-launch, the platform's plans for future airdrops and continued user engagement suggest sustained momentum.

Source: The Block

Eigenlayer's TVL Surges as Protocol Lifts Caps

Eigenlayer, an Ethereum layer 2 protocol facilitating the restaking of ETH for other blockchains' security, experienced a remarkable surge in total value locked (TVL), nearly doubling from $2.16 billion to $5 billion. This surge was triggered by the temporary removal of caps on certain tokens, notably stETH from Lido, contributing $560 million to the influx. Eigenlayer initially imposed caps to prevent token dominance and maintain protocol decentralization. However, with plans to lift caps permanently and introduce governance limits to prevent control by any single entity, Eigenlayer aims to stimulate organic demand while upholding neutrality and decentralization. Amid Ethereum's transition to proof-of-stake, Eigenlayer's innovative approach to utilizing staked ETH for shared security across blockchains garners attention and investments, despite concerns voiced by Ethereum founder Vitalik Buterin regarding potential chain overload.

Regulation

Coinbase's Diverse Revenue Streams Offset Concerns Over BTC ETF Impact

Despite concerns over potential revenue loss to Bitcoin ETFs, Coinbase's resilience and adaptability shine through various revenue streams. In January 2024, trading volume surged by 50% compared to the average monthly volume in the last quarter of 2023. The platform also witnessed an eightfold increase in monthly transacting users compared to the previous cycle, indicating significant growth potential. Notably, subscription and services revenue accounted for nearly half of total revenue in Q3 2023, marking a substantial increase from the previous year. Additionally, the BTC ETF custody revenue, projected at an annualized $50 million, is set to grow alongside issuer assets under management (AUM). Furthermore, the introduction of L2 Base revenue, currently at an annualized $25 million and growing, highlights Coinbase's ability to diversify its revenue streams effectively. With international expansion efforts just beginning to ramp up, Coinbase demonstrates its versatility and strategic positioning in the evolving cryptocurrency landscape.

SEC Expands Definition of 'Dealer' to Include Securities Traders

The Securities and Exchange Commission (SEC) voted to broaden the definition of 'dealer' to encompass companies routinely trading US Treasurys and other securities, a move affecting both cryptocurrency firms and traditional finance operations. The new rule, passed in a 3-2 vote, requires hedge funds, proprietary trading firms, and others engaging in trades exceeding $50 million to register with the SEC, become members of a self-regulatory organization (SRO), and comply with federal securities laws. Crypto companies trading government securities or digital assets classified as securities are also now considered dealers. While SEC Chair Gary Gensler defends the regulation as necessary for investor protection, critics, including the National Association of Private Fund Managers and the DeFi Education Fund, argue it is overreaching and impractical, particularly for decentralized finance (DeFi) market participants.

Digital (De)Dollarization

In response to concerns over the dominance of the U.S. dollar, nation-states are exploring alternatives and enhancing their own currencies' roles in global trade. Efforts include bolstering the euro's standing in key transactions, China's advancement of the yuan through initiatives like CIPS, and various inter-governmental organizations expressing interest in local currencies. Alongside this, the rise of digital assets like Bitcoin, stablecoins, and CBDCs presents transformative opportunities, with Bitcoin's adoption expanding beyond speculation and stablecoins revolutionizing cross-border transactions. CBDCs, particularly China's digital yuan, mark significant steps in central bank digitalization, aiming to modernize financial systems and potentially challenge traditional intermediaries and dominant currencies. As these digital currencies evolve, they promise to reshape the global financial landscape, influencing not just monetary transactions but broader economic and geopolitical dynamics.

Source: Nic Carter - Castle Island Ventures, Coinmetrics, World Bank, Federal Reserve, Bloomberg, NACHA

Celsius, Not Cold Yet

Celsius Network has exited Chapter 11 bankruptcy, initiating the distribution of over $3 billion in cryptocurrency and fiat assets to creditors after a resolution spanning 18 months. A portion of the funds will establish Ionic Digital, a new Bitcoin mining company owned by creditors, with plans for public trading. Hut 8 will oversee mining operations, while Celsius prepares to wind down its mobile and web applications. The resolution follows legal challenges and regulatory scrutiny, including lawsuits against Celsius and its former CEO, Alex Mashinsky.

Prometheum's Bold Move... promETHeum's

U.S.-registered digital asset firm Prometheum has made a bold choice by selecting Ethereum's ether for its initial crypto custodial services offering. Targeting institutional clients initially, the firm plans to launch its ether custodial services in Q1, with later expansion to retail clients in 2024. This decision comes amidst regulatory ambiguity, with SEC Chair Gary Gensler hinting at ether's classification as a security, while CFTC Chair Rostin Behnam views it as a commodity. Prometheum's move is seen by some as a strategic maneuver to challenge the SEC's stance and assert ether's status as a security, against prevailing industry sentiment, according to reports by Fortune citing legal experts.

Other Domestic Regulation Updates

• SEC denies petition to change ‘gag order’ rule after 5 years
• Tether made nearly $1B in monthly profit during Q4
• DOJ charges trio for $400 million SIM-swapping hack targeting FTX
• Qredo enters administration following partial acquisition by Dan Tapiero's 10T and 1RT
• ARK/21Shares has just filed an amended S-1 for their spot Ether ETF

Other International Regulation Updates

• DeFiance Capital Scores Win in Singapore Dispute Against 3AC
• South Korean authorities arrested three Haru Invest executives
• BlackRock's spot bitcoin ETF overtakes GBTC in daily volume
• South Korea to enforce tougher crypto law with potential life sentence
• Fidelity has a 1-3% bitcoin allocation in their "All-in-One" asset allocation funds in Canada, using spot bitcoin ETFs
  

Pain & Gain

Pain

• Polygon Labs lays off 19% of team after 'rapid growth' during crypto's bull run
• Solana's SOL token dipped by over 4% after the network suffered a "major outage," forcing the rollout of a software update for validators
• The Dymension airdrop yesterday distributed $390 million worth of DYM tokens to wallets across several chains, including Solana and Ethereum. But now people are concerned that 44% of the network's voting power sits with just one validator

Gain

• Hybrid crypto exchange Cube reaches $100 million valuation in new funding round
• Solana 'Chapter 2' crypto phone reaches 60,000 preorders
• ENS collaborates with GoDaddy to link web domains with blockchain