Options in Financial Markets

Most people don’t realise they’ve been trading options their whole lives.

If you’ve bought insurance, you’ve paid a premium for a conditional payout in the future. This is a put because you are protected against a drop in the value of whatever you insured. If you’ve taken out a mortgage, you hold the right to refinance early. This is a call because you hold the exclusive right (but not the obligation) to “call in” or cancel your current debt contract.

Options now dwarf futures in global exchange-traded derivatives volume, with options accounting for over 4x the contracts of futures in 2024, and in 2025, U.S.-listed options posted a sixth consecutive record year, with roughly 15.2B contracts traded, equating to ~$36B in premium traded daily.

Figure 1 (CL) State of Options Industry

Zero-day-to-expiry (0DTE) options on SPX alone topped $1 trillion in daily notional at their peak, averaging 2.3 million contracts daily and comprising 59% of the product’s total volume in 2025. 0DTE options expire on the same day they are traded; they are used to chase large, rapid returns on intraday stock movements, but they carry the risk of losing 100% of your investment very quickly.

In 2024, the NSE (National Stock Exchange of India) accounted for ~84% of global equity options contracts; however, in value terms, the total premiums paid by options buyers in the US were still around 4 times those in India. This suggests that the Indian retail public is trading a massive number of tiny contracts, whereas US participants trade fewer, but vastly larger and more expensive contracts.

The appeal of options is making its way into crypto products, too, albeit from institutions.

CME, the largest US-regulated derivatives exchange, is now offering 24/7 crypto options. This is an unprecedented shift from a legacy exchange seeking to retain its user base, one that recognises the appeal of crypto markets that trade around the clock. Furthermore, in April, open interest in BlackRock’s IBIT options, which launched just over 2 years ago, surpassed BTC on Deribit, rising from $26.9 B to $27.6 B, despite Deribit launching over 10 years ago.

Options are extremely flexible instruments which can be leveraged in a wide range of applications:

• Hedging: using options as an insurance policy against price exposure (buying puts to lock in a firm floor against downside losses, or calls to protect against missing out on a sudden upside rally)

• Income: selling options to steady cash premiums from the market. These are great for non-directional users, who can generate passive yield on their existing assets (covered calls), or get paid upfront while waiting to buy the dip (cash-secured puts)

• Speculation: expressing a view on price or volatility without buying the asset outright, whether on direction, timing, or specific price movements (this could be via a range of options strategies)

• Custom strategies: combining multiple options into structured products, commonly used by banks and asset managers to create yield products or downside-protection notes

User profiles are spread widely across financial markets. They range from institutional market makers hedging risk and banks packaging yield, to volatility funds trading market swings and retail investors speculating on cheap, same-day 0DTE movements.

Early Onchain Attempts

Given their prominent role in traditional markets, options were expected to be an instrument with natural product market fit in volatile, onchain crypto markets. Instead, they have been one of its most repeated failures.

This was in no way due to a lack of experimentation, as can be seen from the products launched in previous cycles:

• Opyn tokenised vanilla options on Ethereum in 2019, but thin liquidity, heavy collateral requirements, and high fees on mainnet held it back.

• Hegic attempted the peer-to-pool model in 2020, simplifying the experience for buyers, but pooled LPs took on risk that was hard to hedge.

• Ribbon, Friktion, and Dopex opened vaults in 2021, creating simple deposit-and-earn structured products for users seeking yield without having to manage positions, but volatility was sold into thin, cyclical demand, compressing yields until the premiums could no longer outweigh the risk.

• Lyra, Premia, Pods, and Siren experimented with options AMMs, trying to provide continuous liquidity across strikes and expiries, but struggled with pricing and hedging, so LPs inherited complex volatility and inventory risk, while organic flow remained thin.

• In 2022, Opyn launched Squeeth, a perpetual that tracked ETH squared exposure, giving users convexity without having to manage dated options. Launched on Ethereum at a time of high fees, the product was hard to explain and expensive to hold when funding was high.

Figure 2 (CL) Options Vaults TVL - DefiLlama

The sector has been repeatedly held back, primarily by structural constraints. Weak market-maker participation left venues with thin two-sided liquidity and pushed hard-to-hedge risk onto passive LPs. Poor capital efficiency was paired with unreliable volatility surfaces, while the user experience was left in no man’s land: too complex for retail but lacking the professional architecture required by institutions.

New Infrastructure & Refinement

Since these early attempts, conditions have been continually improving:

• Rollups and Ethereum scaling cut gas fees, making complex onchain actions affordable while improving execution and settlement.

• CLOBs and RFQs began to replace AMM models, fostering a more natural environment for professional traders and market makers, enabling them to quote specific strikes and expiries, update their prices in real time, and control their risk more effectively.

• Simplified products targeted narrower audiences as venues focused on shipping specific products for specific users.

• Prediction markets made option-like payoffs accessible for mainstream retail, normalising conditional payoff trading through binary outcomes

• Institutional demand for crypto options has been growing steadily, primarily through Deribit and, more recently, through IBIT and CME.

Figure 3 (CL) Deribit vs IBIT vs CME BTC Options

Conditions have also improved onchain, where stronger options markets are beginning to form, with 30d notional volume at ~$1.44B, and premium volumes posting all-time highs this year.

Figure 4 (CL) Options Premium Volume

The resultant category looks vastly different from the first DeFi options cycle. Protocols are no longer simply attempting to become Deribit onchain, and the ecosystem touches many parties from institutional venues and ETF wrappers to onchain vanilla options, new exotics, and binary options operational through prediction markets.

In the following sections, we will dive into the current options landscape, focusing on what’s happening onchain.

The Crypto Options Ecosystem

The crypto options landscape is a set of adjacent markets with different settlement and payoff types. The map below splits the ecosystem across these two dimensions:

1. Settlement: onchain to offchain

2. Payoff: vanilla to exotic

Figure 5 (CL) Options Ecosystem Comparison

Offchain vanilla options remain the clear leader, led by Deribit, IBIT, and CME, along with CEXs like Binance and OKX. Onchain vanilla venues are instead beginning to rebuild liquidity around CLOBs, RFQs, and more simplified user-focused products, whilst settling transactions onchain.

More experimental products sit within onchain exotics, using options or option-like payoffs as building blocks rather than simple listed calls, puts, and spreads. Examples include:

• Perpetual options: replace fixed expiries with a streaming premium mechanism. These allow traders to hold volatility positions indefinitely without the friction and gas costs of manually rolling over contracts.

• AMM-native options: create option-like exposure from AMM liquidity positions rather than listed calls and puts. These enable advanced yield farmers to hedge against impermanent loss and allow long-tail asset speculators to buy calls and puts on newer, unlisted tokens.

• Short-dated touch options: provide an immediate, fixed payout the exact moment an asset touches or breaches a specific price target. This structure is heavily utilised by retail day-traders, scalpers, and event-driven news traders chasing rapid feedback loops during short bursts of extreme intraday momentum.

The fourth quadrant, offchain exotics, is more opaque, dominated by OTC desks, market makers, and structured-product providers rather than transparent public venues.

This report focuses on the onchain side of the map, covering vanilla options venues and exotic options primitives before turning to binary option-like markets, most commonly expressed through prediction markets.

Onchain Vanilla Options Venues

There has been clear progress in onchain vanilla options recently, not through changing the payoff itself, but through the surrounding infrastructure, product design, and user experience. These venues have generally moved away from passive LP pools toward CLOBs and RFQs, making room for portfolio-margin and yield-bearing collateral, as well as more targeted income products that simplify outcomes for users.

This section will walk through the most prominent venues as they stand today.

Derive

Derive is a clear example of this architectural shift. It evolved from Lyra, an options AMM, into the CLOB-based venue we see today. Today, Derive runs on its own OP Stack L2, offering cross-margined options and perps through a professional orderbook interface. Derive does not attempt to hide the complexity of options from users and therefore targets pro traders, market makers, institutional users, and other sophisticated volatility traders. It looks much like a traditional options exchange, with an array of assets, strikes, and expiries that can be combined to create custom payoff structures.

Using an off-chain matching engine for instant execution and an onchain L2 for settlement allows institutional allocators to trade at the speed of a centralised exchange (CEX) like Deribit while maintaining non-custodial ownership of their assets. Derive also offers a range of vault products that, unlike previous attempts, harness the underlying exchange to execute a predetermined options strategy, aiming to earn yield on deposits.

Derive accounts for the majority of onchain options activity currently, with $1.142B in 30-day notional and $44.3M in premium, representing 79.2% of notional and 87.2% of premium across the category. These numbers should be accompanied by the caveat that Derive uses market-maker rewards, OP incentives, DRV rewards, and rebate programmes to support liquidity.

Figure 6 (CL) Derive Options Premium Volume

Despite the incentivisation of liquidity and participation, Derive highlights how the industry has developed over the years, with fully fledged options exchanges now running on performant appchains, accessible to institutions and market makers.

Rysk

Rysk takes a completely different approach than Derive. Built around covered calls and cash-secured puts, it uses options as upfront income products, whilst keeping strikes and expiries selectable, unlike option vaults of the past. It routes user demand through an RFQ system, where market makers quote on specific requests, purchase the options flow, and manage their own risk elsewhere. Rysk focuses on abstracting the complexity of option products, making them appealing to retail and institutional investors alike with strong asset selection, clearly defined outcomes, and a seamless user experience.

For users, the offering is simple. Earn yield on your assets while agreeing on a price level you are willing to sell at or buy at. This is reflected in a broad range of actual users. They all want to earn yield, but do so in different ways and with different strategies. Treasuries, DAOs and funds are long-term holders that already have a view on where they would be willing to buy or sell an asset, and if they didn’t want to, could still earn yield on much more distant strikes. Institutions, on the other hand, for example, Hyperion, a Nasdaq-listed HYPE treasury company, runs curated vault strategies on top of Rysk infrastructure. Its mandate is to accumulate HYPE, so a cash-secured put strategy is a natural fit, earning them yield while placing orders at lower levels.

Rysk generated $136.3M in notional and $1.94M in premium over the last 30 days, accounting for 9.5% of the category’s notional. Rysk’s monthly notional volume grew from $50M in January to $182M in May, remaining above $175M in March and April as well.

Figure 7 (CL) Rysk Finance Options Premium Volume

Unlike Derive, TVL for Rysk is much more relevant, as the product is based on collateralised option-selling strategies. To capture your premium, you need to deposit all your collateral, whereas in Derive, users can buy cheap options with a low premium to pursue large payouts.

Figure 8 (CL) Rysk V12 TVL by Asset Family, Weekly Average

Rysk has managed to find a different kind of PMF in options, reframing them from trading instruments into income products based on selling volatility. With yields compressed across the industry, this has become highly competitive relative to lending, staking, and basis products, as evidenced by the strong, sustained growth since launch.

Aevo

Like Derive, Aevo evolved from an earlier options product into an orderbook exchange. It emerged from Ribbon Finance, one of the first major DeFi Options Vault (DOV) products, before shifting to a broader derivatives venue. Today, Aevo offers options alongside perps, pre-launch markets, OTC and automated strategies on a custom L2, with offchain order matching and onchain settlement. Orders are matched in microseconds via an off-chain Central Limit Order Book (CLOB) to replicate a CEX user experience, but user funds remain secure in onchain smart contracts hosted on a custom OP Stack Ethereum Layer-2 rollup.

Launched in 2023, Aevo saw its strongest options activity during 2024. Since then, reported TVL and visible options activity have fallen from earlier highs, although options premium volume has recently started to pick up again.

Aevo’s primary unique selling proposition is its variety of products inside a unified margin account. This includes pre-launch tokens, allowing users to trade highly leveraged options and perps on hyped, unreleased tokens before they hit spot markets.

Aevo generated $45.1M in notional and $2.52M in premium over the last 30 days, representing 3.1% of onchain options notional. Monthly notional rose from $20M in January to $50M in May, but live options OI is only around $3.6M, far below Derive and below Rysk’s calculated open-notional proxy.

Figure 9 (CL) Aevo Options Premium Volume - DefiLlama

Incentives likely support some of this activity. Aevo distributes 1M AEVO per week through trading rewards, with 30% reserved for options, which may partly explain the recent uptick in options volume. Despite Ribbon being one of DeFi’s earliest options teams, focused on options vaults, Aevo’s migration to a broader derivatives exchange drew attention to perps, pre-launch markets, and trading campaigns. Options now look more like a secondary product with less focus, rather than the core business, and while the team are clearly trying to boost activity there, it remains to be seen whether these incentives can fully revive the options markets for Aevo.

Others

Beneath Derive, Rysk and Aevo, the rest of the market is smaller and fragmented.

Paradex is another broad derivatives venue, built by the Paradigm.co team, a provider of institutional crypto derivatives liquidity. Currently offering perps, options, and various Vault Traded Funds (VTFs), Paradex used to support perpetual options, but has recently paused this feature to focus on dated options, which opened in April of this year. To further encourage traders and gain market share, they have reintroduced zero-fee trading for makers and takers across perps, spot, and options.

Hypersurface looks more similar to Rysk, using covered calls and cash-secured puts to provide a yield product on HyperEVM. CallPut expands beyond crypto, differentiating from other platforms by offering a range of stocks, including SPCX, TSLA, NVDA, and COIN, in its vanilla call and put options exchange, which operates via request-based execution and protocol-managed liquidity.

Kyan has evolved from Premia into a wider derivatives exchange, using an orderbook-based model with support for RFQs. It offers portfolio margin and multi-leg combo trades to build more customised positions.

Ithaca offers a wide range of options, strategies, and structured products, and has recently integrated AI agents into its protocol for managing options strategies.

SOFA.org offers structured products, packaging option-like outcomes into products like Earn and Surge, rather than the user trading options directly.

Figure 10 (CL) Options premium volume in 2026 excluding Derive, Rysk, and Aevo

The market is becoming more diverse at the lower end, with new entrants like Kyan, Paradex, and CallPut capturing share of premium volume in recent months.

Many protocols are now building better infrastructure, but infrastructure is not enough. Orderbooks, RFQs, cross-margin and portfolio margin do not create demand by themselves. Users still need a reason to choose options over perps for direction or prediction markets for events. The clearest demand appears when options are tied to a specific asset-holder problem, as with Rysk and HYPE: they offered newly wealthy HYPE holders yield, the ability to manage their entries and exits, and a way to monetise exposure without simply selling the asset. To achieve stronger growth, teams need to craft user-targeted products that perps and prediction markets cannot easily replicate.

Onchain Exotic & Short-dated Options Primitives

By exotic and short-dated options primitives, we mean option-like products that go beyond simple listed calls, puts, and spreads. These may remove fixed expiries, derive exposure from AMM liquidity, or settle based on whether the price reaches a specific zone within a short time window.

Vanilla onchain options are no doubt becoming more sophisticated and professional, but they still largely replicate familiar offchain products. Exotic and short-dated primitives, on the other hand, expand the design space and case studies, experimenting with payoffs that are harder to deliver through standard listed options: perpetual convexity, AMM-native exposure, and ultra-short-dated touch markets. Most of these ideas remain commercially unproven, often solving an interesting payoff-design problem before they solve a user-demand problem.

Perpetual options

Perpetual options remove the expiry variable from the equation. Instead of choosing a fixed expiry, traders hold a continuous convex exposure funded over time, much like a perpetual futures contract, but with greater upside potential. Squeeth is the historical example that gave users exposure to ETH², while Paradex has also tested perpetual options, though its current live options markets are dated only.

The problem, especially when compared to traditional perps, is that removing expiry does not remove complexity. Users still need to understand convexity, but now also need to manage the ongoing funding or premium cost and decide when holding the exposure no longer justifies the payoff. That weakens one of the core benefits of a standard option: knowing in advance the premium you will have to pay and the payoff. Perpetual options remain an interesting primitive, but have not yet made the product simpler or more widely adopted.

AMM-native options

Traditional options platforms fragment liquidity across strikes and expiries, where market makers need to update quotes after every price move. Despite improvements in faster, cheaper chains, this still remains a difficult task, especially on Ethereum mainnet, and often relies on offchain matching. Panoptic and GammaSwap instead create option-like exposure using AMM liquidity.

Panoptic uses Uniswap V3-style liquidity ranges to create perpetual options. Instead of paying a fixed upfront premium for a fixed expiry, buyers pay streaming premia over time, while liquidity ranges act as the basis for strikes and option exposure. This way, options can be created for long-tail assets already trading on AMMs without requiring a separate orderbook. Panoptic V2 just launched, offering perpetual options trading on ETH and SPCX. On the other side, depositors can enter either the Unicorn vault, which remains delta-neutral and scalps gamma, or the PLP Vault, which uses deposited ETH liquidity to earn Uniswap fees, Panoptic premia, and lending fees.

Figure 11 (CL) Panoptic V2 TVL

GammaSwap took a different angle with its V1, allowing users to borrow AMM liquidity and create perpetual option exposure. This made it possible to hedge impermanent loss or speculate on token volatility without an oracle.

These products are among the most complex DeFi-native designs in the category. Panoptic, for example, whilst it removes expiry fragmentation, also introduces streaming premia, liquidity widths and AMM range mechanics, meaning users of the product need to be comfortable with Uniswap V3 and the complexities of providing liquidity. GammaSwap, on the other hand, has now moved on entirely, looking to overcome its capital-efficiency and complexity issues by creating crypto-focused binary markets using an order book. This gives users a simple, convex trade without the risk of liquidation. In these markets, users are either right and they win, or wrong and they lose.

Short-dated ‘touch’ options

This bucket is probably the furthest from standard calls and puts. Instead of buying upside or downside exposure at a fixed strike and expiry, the user chooses a simple condition over a short window: will the price enter this zone, finish above this level, or resolve in-the-money within the next few minutes?

Euphoria’s Tap Trading is the newest onchain example of this design. Users select a grid square representing a price range over a five-second window. The payout is quoted up front by professional market makers and varies with the distance from spot, the time to maturity, and volatility. If price enters the selected zone before expiry, the trade wins. If it does not, the trade expires worthless.

Figure 12 (CL) Euphoria Finance Perp Volume and TVL

This product moves in a similar direction to GammaSwap V2’s binary markets. The target user wants to bet on crypto prices over increasingly short timeframes, so the product competes less with traditional options exchanges and more with perps, prediction markets, and mobile betting. The appeal is simplicity: users can understand the trade quickly and access convex exposure without managing funding rates, liquidations, greeks or theta decay.

Why Options and Prediction Markets are the Same Instrument

The emerging popularity of prediction markets among retail participants is the first real example of non-linear payoff products gaining significant onchain traction.

But little known to the users trading them, prediction markets on financial assets, such as BTC Up/Down markets, are structurally identical to binary options, a well-known and well-studied instrument in Traditional Finance. Each contract pays out a fixed amount if a condition is met at expiry, and $0 otherwise.

This article is an excerpt from our research on The Renaissance of Onchain Options, mapping the expansion of options (and prediction markets) as a trading instrument and the volatility that prices them, published in collaboration with Block Scholes.

A follow-up piece will examine the prediction market ecosystem, analysing the top providers for binary outcomes (Kalshi, Polymarket, and Hyperliquid) based on the volume and spread of the BTC 1-day expiry markets they list.

Download the complete report here.

From trading niche categories like “What will be said in a particular podcast” to predicting “Fed rate cuts decision”, a user can choose to trade anything and everything.

This growth came almost entirely from the curated model, in which a small set of platform-appointed entities determines which markets exist. Polymarket and Kalshi, the incumbents, built themselves within this model by tightly controlling what gets listed, and the market rewarded them for it.

The curated model works, but it isn’t the same vision as that adopted by earlier product iterations in this category. PMs initially targeted the permissionless creation of markets, where anyone could launch one on any topic. But most products (Augur, Omen, Zeitgeist, and others) built around this vision failed due to recurring problems with liquidity, resolution, creator incentives, and regulation.

The lesson the industry drew was that open curation doesn’t scale, but this conclusion is being tested again. A new wave of products is entering the market, aiming to solve issues earlier iterations faced through better oracle infrastructure, scalable liquidity models, and more deliberate designs.

This report traces this evolution, examines why permissionless curation failed in the first place, why permissioned curation won, and how current products are trying to restore the permissionless nature of PMs. Additionally, we use Limitless as a case study, which has recently expanded into permissionless user-generated markets (UGMs), and examine how it has adapted to fit UGMs.

Early Prediction Markets: The Permissionless Approach

The power of PMs was first brought to the spotlight when Polymarket and Kalshi showed more accurate odds for the 2024 U.S. elections. Since then, PMs have evolved into much more than that.

Since the start of the year, prediction markets have consistently produced a notional volume exceeding $20 billion, and last month crossed $40 billion, with the largest contributions coming from the sector’s current duopoly: Polymarket and Kalshi.

PMs were among the first experimental primitives in crypto, and they started with a permissionless approach given the crypto ethos of decentralisation and permissionless participation.

Augur was one of the first products to launch in this category in July 2018.

Founded in 2014, its ICO was the first in the space and raised $5.5 million.

On Augur, market creation was fully permissionless.

This permissionless architecture came with its own problems as, within weeks of launch, Augur’s UI surfaced markets on political assassinations, plane crashes, and other legally toxic event types. Additionally, the problem set expanded to include technical limitations, such as high gas fees on Ethereum and settlement delays (resolutions can take up to 90 days due to disputes).

An interesting aspect of the product was its native REP token, which enabled holders to report outcomes by staking.

Augur is now rebooting in 2026 under the Lituus Foundation, as a resolution infrastructure which other PMs can utilise. They are competing on infrastructure now. In their new resolution engine, participants commit their own capital in support of an outcome. Every time a dispute occurs, the commitments increase, making it progressively more expensive to sustain a dishonest position.

Gnosis, another early participant in this category, developed the Conditional Token Framework in 2017, which allowed anyone to curate markets and turn event outcomes into tradable tokens. Polymarket later adopted this framework. Gnosis closed its product due to issues similar to those Augur faced, including high Ethereum gas fees, scalability issues, and a lack of user-friendly tools.

Using the same framework developed by Gnosis, Omen launched in 2020, offering permissionless market creation with an Automated Market Maker (AMM). However, one of the challenges it faced was liquidity fragmentation: anyone could curate a market on any niche, producing hundreds of near-identical markets for the same event, most of them totally illiquid.

Apart from this, they also faced Oracle-related problems. Omen used Kleros for resolution, an external, decentralised oracle infrastructure. Kleros crowdsourced jurors were incentivised to vote with the majority, and the majority consensus did not necessarily reflect the truth or market outcomes. Apart from this, the resolution process was also very slow and high gas fees were common.

The problems so far have been a combination of technical and liquidity problems, but the platform’s economics and design also play a huge role.

In early 2018, Stox launched a permissioned prediction market for sports, finance, and news and raised $33 million in its ICO. The core failure of Stox was the lack of a revenue model and tokenomics alignment. While the platform collected fees, they were insufficient to sustain market-maker incentives. Moreover, holders of STX, the platform’s native token, were supposed to benefit from platform revenue through a fee split, but it was never mechanically enforced in a way that could attract more users and liquidity to the platform. In terms of technicalities, the Stox resolution oracle was centralised and company-dependent, raising concerns about centralisation.

Another permissionless platform, Hedgehog Markets, was built on Solana, allowing users to curate their own markets. They introduced “no-loss prediction markets” using principal-protected deposits. Users would stake either $100 or $1000 in USDC and get game tokens against their stake, which were used for actual predictions, and the yield from the pooled USDC was distributed to winners. While this model sounds unique, it reduced users’ earning potential from the market because only the yield was at stake. This created an asymmetry for users who were genuinely interested in participating in the market and were willing to risk their capital, as the yield was the maximum amount they could earn.

All these products highlighted problems in different areas, surfacing issues around liquidity, event curation, resolution, regulatory compliance, and more.

Discoverability Problem

Permissionless market creation allows users to produce any number of markets, which can lead to multiple identical markets, resulting in hundreds of low-liquidity, oddly worded, partially redundant markets for every major event.

This redundancy creates a bad UX and confuses most users. Sophisticated users may allocate funds to the market with the most liquidity, but this gap can only be fully addressed either by not creating similar markets or by building a frontend that effectively excludes low-liquidity markets and makes them available only via search.

Resolution Dispute

“A prediction market is only as good as its ability to determine truth.”

Augur REP staking-based oracle and Kleros (Omen) incentivised stakers to vote in line with the majority. Similarly, in UMA, the optimistic oracle (used by Polymarket) faces the same resolution issues as in any market dispute: UMA token holders vote to make a final decision, and these same voters can trade on Polymarket, creating a bias towards a decision in favour of their position.

In Polymarket, for example, the dispute resolution is currently dominated by 9 whale addresses whose decisions have consistently aligned with the winning outcomes. These addresses can easily manipulate a market in the direction of their own trade.

One recent example of such a case is the MicroStrategy BTC sale market. The market should have been resolved to “Yes”, given that Strategy sold 32 BTC during May 26th to May 31st in the market, but it resolved to “No” even after being disputed 2 times.

Liquidity Fragmentation

A permissionless curation model creates liquidity fragmentation as users curate across multiple competing markets on the same topic, dividing liquidity among them. For Omen, the biggest challenge was liquidity fragmentation, as users curated near-identical markets.

This can only be solved by having a stricter curation process, for example, allowing only 1 market for each event, or it can also be handled through the frontend, where the UI shows a topic and all the different markets in the same place, and the user can choose which one to trade in while it recommends the one with the most liquidity.

Manipulation Surface

PMs are inherently manipulable either with economics or information.

A user could dramatically move a market’s price by buying a large position, gaining significant voting power on the Oracle, and steering the decision in their favour.

This problem is replicable in both permissioned and permissionless models, but the attack surface expands far more quickly in the latter as users continue to create markets.

Recently, a Google employee was caught by the SEC for trading in Google search-related markets on Polymarket. He utilised information arbitrage since he already knew the correct resolution, making millions in the process.

Regulatory Issues

CFTC treats event contracts as futures contracts that require registration with a designated contract market (DCM) under the Commodity Exchange Act.

Many older PMs weren’t compliant, which was a major problem for scaling.

For non-compliance, Polymarket was fined $1.4 million in 2022. The U.S. is a huge market due to active sports betting and trading happening. This is why Kalshi always took a regulatory-first approach, and Polymarket followed by acquiring QCEX in 2025 to become U.S.-regulated.

No Curator Economics

Earlier iterations of permissionless market curation didn’t focus much on the economics of market curation or on how curators could benefit from building the market. This created an asymmetry between the platform and the market curators, as they had less motivation and no financial benefit if the market grew in popularity and liquidity.

But some of these were problems that newer platforms, now incumbents, understood and pivoted to by adopting a permissioned curation approach.

Permissioned Curation: Polymarket and Kalshi Approach

Polymarket launched in 2020, while Kalshi launched in 2021. Both platforms have taken different approaches, but recently they have begun to converge on regulatory compliance and on winning the U.S. market.

Kalshi and Polymarket have become strong competitors over time.

Until mid 2025, Polymarket maintained an 80% market share. Then, Kalshi established its own dominance through partnerships with platforms like Robinhood and now accounts for the majority of the volume PMs handle.

In terms of fees, Kalshi is currently generating annualised fees of ~$2 billion, compared to Polymarket’s ~$300 million. Additionally, in recent rounds, Kalshi and Polymarket were valued at $22 billion (Kalshi is currently targeting a $40 billion valuation) and $15 billion, respectively, making Polymarket overvalued relative to its competitor, as measured by their P/S ratios**.**

To scale to this level, both Kalshi and Polymarket solved most of the issues we highlighted above for early prediction markets.

Starting with regulatory compliance, Kalshi’s regulatory-first approach has been fruitful and has helped it grow in the U.S. Polymarket is also following up with Polymarket U.S., which is undergoing a phased rollout.

In terms of market curation, both platforms have active market curation teams and are permissioned, helping prevent problems such as liquidity fragmentation and duplicate markets.

While the permissioned nature of these platforms has been a successful approach so far, it doesn’t mean a permissionless model cannot co-exist in this category, as it is still required by many users to have control of the market, creating niche markets about the topic they are interested in, share curator revenues, and participate in building liquidity.

The permissionless model and early iterations of PMs surfaced multiple problems that incumbents addressed.

Even as incumbents have existed for some time and scaled sufficiently, users still cannot create and trade in the market of their choice, which is the ultimate goal for a Prediction market to become a source of truth for any and every topic backed by a financial stake.

Given that, as the solution space grows, permissionless curation is witnessing a great revival.

In the following section, we discuss how permissionless market creation is emerging as a category and how user-generated markets (UGMs) could scale.

The Permissionless Turn: New-Gen PMs

The permissionless curation sector has grown over the last year, with new players entering the market (Melee, HIP-4, XO Market, and more), and older products like Limitless also entering the category as they expand to provide UGMs.

Limitless recently went live with permissionless markets. They haven’t fully opened permissionless curation yet, but are initially allowing only crypto-related markets and will gradually expand into other categories to better understand demand and scale accordingly.

Additionally, Curators on the platform receive 50% of the revenue from the markets they curate, creating direct alignment between the platform and the market curators.

HIP-4, Hyperliquid Bounded Markets are capital-gated and require market deployers to stake 1 million HYPE to access a deployment slot. Builders can set an optional fee share of up to 50% on top of Hyperliquid’s base fees (fees are currently zero to incentivise trading in this initial phase, as they launched in early May). This approach helps Hyperliquid completely remove spam markets, as the threshold for deploying outcome markets is very high.

An additional structural advantage HIP-4 markets have is that they run natively on Hypercore, sharing the same orderbook, account structure, and margin engine as Hyperliquid’s spot and perpetual markets, meaning traders can access prediction markets and hedge their portfolios without fragmenting capital across separate accounts.

Both of these platforms support orderbooks, and liquidity is seeded by market makers (MM).

Other platforms target liquidity differently.

XO Market uses a Liquidity-Sensitive Logarithmic Market Scoring Rule (LS-LMSR) AMM model, an evolution of the standard LMSR used in most prediction markets.

The key difference lies in how liquidity is managed: in standard LMSR, the market curator must set a fixed liquidity parameter upfront, effectively estimating how much trading activity the market will attract. Setting this parameter too low makes prices overly sensitive to trades, while setting it too high requires excessive capital commitment. LS-LMSR removes this burden by making the liquidity parameter dynamic, allowing market depth to adjust automatically as trading activity accumulates.

It also requires users to bootstrap initial liquidity when creating the market, which helps deter spam and reduce illiquidity, thereby earning it the label “conviction market,” as users must provide liquidity.

On resolution, XO takes a unique approach by utilising a three-layer system. The first is the AI-first path through MODRA (Market Outcome and Dispute Resolution Agent), which uses AI to autonomously resolve clear-cut cases quickly. After that comes the Senate court and a Supreme Court appeal, which require human review. It has traded over $250 million so far, enabling 2800+ markets and 30,000+ trades.

Melee, another PM on the list, is expanding the parimutuel market model, which they call “PMM.” In a traditional parimutuel market, all wagers are pooled, and payouts are determined by the total amount wagered and the number of winning participants. While no traders can enter or exit after a certain period, for example, it is used in horse racing; bettors cannot exit when the live match starts.

Parimutuel markets create a set of problems, such as the need for constant liquidity, because users can exit only after the market is resolved. Being unable to exit mid-market pushes traders away due to a lack of flexibility. Additionally, to exit, traders might need to buy tokens in the opposite direction while the market is open, and the market’s value can change at any time, given the PM’s nature. Moreover, in this design, markets need to close before the event begins, as during the match, market participants might buy only the winning side, thereby gaming the market’s mechanics.

Melee is actively working to adopt the parimutuel model by eliminating the caveats by enabling continuous trading, but hasn’t launched publicly yet.

Products like Xmarket handle the initial market liquidity differently from others.

Markets can be curated with a minimum seed of $1, but they go live only after reaching a $100 soft cap in the initial liquidity. If any market fails to do so, every participant gets a refund. This essentially removes basic spam, filters for attention and determines whether users are interested in the market. However, this threshold is easy to game as it is pretty low: market curators can push for a softcap to make the market live, but it still helps initiate initial liquidity and activity.

In the graphic below, we make the distinction between these products more concrete by comparing them based on the problems the first generation of PMs encountered. There are multiple approaches to solving the key problems of curation, resolution, liquidity, economics, and regulatory path, showing a willingness to experiment in the category.

UGMs have faced a ton of challenges in the past, and there is no concrete evidence of which approach works best, as no UGM has achieved significant scale so far.

In the next section, we focus in detail on one of the recent products, Limitless, highlighting its approach to UGMs and to the problems highlighted in the initial section.

Financial Prediction Markets: How Limitless UGM Works?

Limitless has been in the PM space since 2024 and has been growing gradually. This growth can also be attributed to the use of their token as a distribution tool for user incentives.

Limitless platform follows a permissioned curation process, and markets are designed internally by the team. The resolution process is also structured, with Pyth and Chainlink serving as oracles for financial markets like crypto, stocks, commodities/FX, and manual resolution for Sports, Politics, and other categories handled by the Limitless team. If the market is unable to resolve, users are refunded.

Given their already built infrastructure, they are expanding their offerings towards permissionless curation.

On June 2, 2026, Limitless launched its first permissionless market type. To scale this, they are deliberately taking a templated, finance-scoped approach rather than opening curation for any topic. In this initial phase, creators can choose from a fixed set of crypto assets (BTC, ETH, SOL, XRP, and DOGE), set a bounded price target (between -5% and +5%), and pick a duration from 15 minutes to 1 day. The goal behind the templated approach is to leave no room for ambiguous or oddly worded markets.

In the initial first month of rollout, these markets have generated $2.2 million in volume.

UGMs run alongside the platforms’ internally curated markets, making Limitless a hybrid platform. Additionally, this initial phase is crypto-only, with other categories added in the future as the team validates demand and maintains platform standards.

As these markets scale, UGMs can evolve into custom hedge instruments, allowing users to curate their own markets based on their perp/spot positions. The use case expands further as additional asset classes and PM categories, such as sports and esports, are added to the platform.

Limitless adopts a unique approach to address the distinct problems early PM implementations faced.

Creation Surface: Limitless approach starts with a limited scale and focuses on fewer financial markets, starting with crypto (BTC, ETH, SOL, XRP, and DOGE). Users choose the price and market duration in a templated configuration, leaving less room for oddly worded markets that might cause problems during resolution.

Resolution: Since they are starting with crypto-related markets, the oracles used are the same as their permissioned offering. They utilise providers such as Chainlink and Pyth to maintain consistent price feeds on their platform. Having an automated oracle removes the need for constant monitoring, allowing markets to be created and closed more fluidly.

Liquidity: Limitless bootstraps the initial liquidity. UGMs are created in CLOB to facilitate an open infrastructure, allowing any market maker to enter and provide liquidity, thereby enabling efficient price discovery.

Curator Incentives: One of the major things that matters for a UGM to succeed is curator economics and how curators make money in the whole process, because without a substantial revenue exposure, they won’t treat the curation process within parameters and create a lot of ambiguity, which isn’t good for market discoverability and attracting volume. This symmetry between the platform and curators is essential to keep the interests aligned. On Limitless, curators pay fees between 100 and 1,000 LMTS (depending on market duration; the longer the duration, the higher the fees) to create the market and receive a 50% fee share from the market they curate. Additionally the team is exploring different pricing models based on user feedback.

Discoverability: Since markets are price-only for a few assets, the possible market surface is bounded in terms of asset, duration, and price target, limiting market fragmentation and the creation of near-duplicate markets.

Regulatory Compliance: At the beginning of May, Limitless applied for CFTC approval to operate as a federally regulated derivatives exchange in the U.S. (an application the CFTC has since deemed materially complete, moving it into formal review). Once approved, this will provide a clear regulatory path for Limitless to scale in the U.S. as a prediction market and to actively compete with Kalshi and Polymarket U.S., and crypto.com derivatives.

The Limitless approach provides a good set of solutions to the different problems that surfaced in earlier PM iterations. Their templated configuration maintains platform integrity and mitigates issues related to ambiguous markets. While they charge fees to create markets, this effectively removes the problem of spam, as requiring a threshold to create the market would make it expensive for someone trying to push for spam. The 50% fee share gives creators a real incentive to participate and attract activity. Additionally, Limitless, pending CFTC approval, offers a clear regulatory path that sets it apart from its peers.

But the fees the platform charges also create the “chicken-and-egg problem”: it expects users to pay fees to create these markets, so users have to balance their investment against the potential return from the 50% market-fee share. The latter can only be increased with enough activity, while the former stays stagnant.

In the current limitless model, the fees users initially pay are static and accounted for in their native token, LMTS. While this is good for avoiding spam, the platform could consider adding dynamic fees based on curation demand, so that when demand for certain markets or assets is lower, fees are lower, and vice versa when demand is higher.

What Comes Next?

PMs started early, with initial iterations such as Augur and Gnosis launching during the crypto ICO era. These products faced very similar issues, mostly surrounding fragmented liquidity, slow or disputed resolution, weak curator economics, and regulatory exposure.

The new wave of products in the permissionless curation space recognises these gaps and adopts distinct designs to address the problems PMs face today.

XO market enables creators to bootstrap initial liquidity and adds a tiered resolution model to achieve the most accurate conclusion. Melee reworks the parimutuel model for continuous trading. Xmarket tries to filter spam with a soft-cap funding threshold. HIP-4 gates creation behind a large stake to only allow quality markets. Limitless introduces a 50% fee share and a curation fee to enhance curator economics and prevent spam.

But what separates them isn’t the solutions they provide, but the completeness of them in different directions. A product that solves liquidity but not resolution, or solves resolution but not creator economics, won’t be good enough to scale.

Given that, permissionless markets are being revisited and are worth keeping an eye on.

Over time, it will be discovered which design choices scale best and become the most optimised venues for opening a market in any given niche, and finding the truth, PMs are made to source architecturally.

Download the complete report here: https://docsend.com/v/sjv2g/rwareport

While the RWA market size is huge, at ~$28 billion, the actual value deployed in DeFi is only 10% of that, at ~$3 billion.

The 90% of unutilised RWAs are tokenised assets for exposure; they still have a use case, but not an enhanced one, such as serving as collateral in lending protocols. The main reason for using these assets in lending protocols is that they can be used in looping apart from just earning additional yield as a deposit.

In Looping, an asset that has an underlying yield is used as collateral to borrow against. These borrowed assets, usually stablecoins (USDC/USDT), are used to buy the same asset again, which are then put up as collateral and borrowed against. This process can be repeated multiple times, depending on the collateral allowed loan-to-value (LTV) ratio. The leverage a user can achieve can be calculated using the same ratio: leverage = 1 / (1 - LTV). So for an LTV of 70%, a user could take ~3x leverage. This strategy becomes profitable only if the borrowing rate is lower than the RWA yield.

While dynamic borrowing rates in lending protocols play an important role in the profitability of looping, scaling the strategy actually needs a better liquidity profile and instant redemption. If these positions need to be liquidated because higher borrowing rates erode collateral or because their value changes, the liquidators must sell the collateral to pay off any debt. But due to settlement delays and redemption availability ranging from T+1 to T+3, it becomes a major problem. To address this, multiple protocols are building products, which we will explore in this section. Before that, we will take a brief look at which assets are currently being utilised and why.

The current RWA DeFi TVL is lower than expected. The majority of this number comes from private credit, followed by public debt and reinsurance. However, if we compare utilisation relative to an asset class’s market size, reinsurance ranks at the top, with over 83.2% of its market capitalisation actively deployed in DeFi. The same numbers for private credit and public debt are 46.7% and 5.5%, respectively. These three categories alone represent 84% of all RWA deployed in DeFi.

But behind this usage in DeFi lie multiple protocols, including Morpho, Maple, Aave, Kamino, Fluid, and more.

Current Stage of RWAs in DeFi

The current active DeFi TVL is about $3 billion, with categories such as private credit and reinsurance leading the way. In this section, we explore the reasons behind this concentration and recent developments that have helped increase DeFi utilisation of RWAs, with a focus on protocols, liquidity, and redemption.

Pendle and Fixed Rate Products

Pendle is a yield tokenisation layer with $956 million in TVL across 11 chains, making it the leading fixed-rate primitive in DeFi by a wide margin.

Pendle takes yield-bearing tokens, whether RWA or not, and splits them into two separate claims: a Principal Token (PT) and a Yield Token (YT). The PT represents the principal portion and can be redeemed at maturity for the accounting asset. The YT receives the variable yield and rewards until maturity.

This aligns well with institutional actors, who are accustomed to creating long-term, stable strategies using fixed-income products, in which rates and maturity dates are known. Variable onchain yield, on the other hand, is harder to underwrite.

As TN, Co-Founder and CEO of Pendle, put it: “Fixed income and interest rate swaps are the backbone of TradFi, and bringing the same structure to RWAs opens these assets to a wider set of strategies and, in turn, a different class of user.”

This institutional story is still developing, however. Pendle’s largest markets still include crypto-native assets such as sUSDe, liquid staking assets and points-driven yield products. Current Pendle RWA markets remain short-dated, with TVL and 7D volume concentrated in maturities under 6 months.

Public dashboards show many of the largest Pendle markets are actually PT-heavy, including major stablecoin, Ethena and RWA-labelled markets. That suggests there is real demand for locking in a consistent yield rather than only speculating on YT. The caveat is that the largest markets still skew toward crypto-native yield, stablecoin yield, points and structured products rather than mature institutional RWAs.

The current RWA-labelled metrics from Pendle V2 show exactly this. The TVL leaderboard is led not by institutional tokenised assets but by structured yield assets like USDat (saturn.credit), reUSD (re.xyz), USDai (USD.AI), and apxUSD (apyx.fi).

Stablecoins remain the clearest near-term category, while “tokenised preferred shares have also demonstrated real appetite.” Assets such as USDat and apxUSD sit near the top of the leaderboard and are linked to DAT / STRC-style yield. Others are different again: reUSD introduces reinsurance-linked exposure, while USDai brings AI-compute credit onchain.

Pendle has built one of the best onchain venues for turning variable yield into fixed-rate instruments, but demand for institutional RWA assets and markets is still forming.

Lending Protocols

Lending protocols are the most important part of RWA utilisation, as they enable RWA to participate in the active onchain credit economy.

Having an RWA being utilised as collateral and borrowed against is a huge utility add-on for any asset because it can help boost the yield of the asset or leverage the exposure by borrowing against and buying the same asset again, a process which is done multiple times, also called “looping”, as highlighted above.

While looping helps drive growth, it is a leveraged strategy and should be viewed as such.

Morpho

Morpho is the leader in RWA utilisation, with over $1 billion in RWA deposits and $400 million in active loans against them, and ~40% RWA-specific borrowing utilisation. For reference, this is already 10% of the cumulative deposits on Morpho, which is ~$10.5 billion.

The majority of this growth came in the last two months from assets such as syrupUSDC, PRIME, and AA_FalconXUSDC, driven by overall growth, leading to increased allocation and looping demand from specific vaults (supporting automated looping) and users.

Why is Morpho a leader in RWA deposits?

• Isolated Markets: Morpho’s design isolates markets and the risks associated with them, making them a suitable venue for RWAs, as they carry their own risks and, in the case of any bad debt, won’t lead to larger contagion effects, unlike in pooled models.

• Permissionless Curation: Another aspect of morpho’s is that it is built on the curator model, allowing curators to customise vaults to accommodate custom collateral ratios, interest rates, and compliance checks, which is a much-needed addition, as different RWAs have different legal structures and liquidity profiles.

To really understand what permissionless curation enables, Steakhouse Vaults are a great example. They provide exposure to multiple RWAs, and their allocation process includes assessing risks related to “Credit, Counterparty, Liquidity, Oracle, Smart Contract, and Liquidity Traps”.

Morpho’s architecture is self-sustaining and scalable, requiring minimal governance inputs to add new assets, markets, and vaults.

Aave

Aave, the largest lending protocol, also launched its RWA instance, Aave Horizon, in August 2025. Today, it has a market size of ~$500 million and accepts multiple RWA collateral, such as USCC, USTB, VBILL, and JAAA, as well as deposits from lenders in RLUSD, GHO, and USDC, which are then lent to institutional borrowers who deposit the whitelisted assets.

Most of its supplied assets and borrowing demand are associated with RLUSD, which has active rewards pushing the supply yield. Aave also allows RWA assets to be utilised in v3, with Maple assets (syrupUSDC and syrupUSDT) having cumulative deposits of over $330 million.

Kamino

Kamino on Solana has strong RWA demand with PRIME (Hastra), syrupUSDC, ONyc (OnRe), and USCC being deposited on the platform, totalling $400 million in market size.

An interesting bit about Kamino is its integration of assets from xStocks, which currently sits at net deposits of over $20 million, beating every platform in tokenised public equities deposits. Since the majority of xStocks products’ liquidity is on Solana, Kamino becomes an obvious choice for deploying these assets.

But tokenised stocks still have particularly low utilisation given their size, though the category is developing to address this.

Fluid

Fluid’s architecture is unique due to its liquidity hub design and primitives like Smart Debt and Smart Collateral, which can help deploy collateral into AMM pools, reducing borrowing costs and making it a more profitable venue for running loops. Due to this design, Fluid is able to provide a venue which is “cheaper to bootstrap deep secondary market liquidity, enable deep borrow/lend markets, and provide the best borrowing conditions with high LTVs and low LTs”.

Currently, the market size of RWAs on Fluid is $270 million, primarily led by sUSDai from USD.AI. This number also includes the RWA deployed in JupLend (Fluid’s whitelisted deployment in collaboration with Jupiter Exchange on Solana). Juplend mainly has deposits of PST (tokenised by Huma Finance, earning yield from real-world payment flows), syrupUSDC, and tokenised public equities like SPYx from xStocks.

Additionally, with its design and collaborations, Fluid provide “large cross-ecosystem distribution (across EVM and Solana via Jupiter - the largest retail user base in all of DeFi) and services like Liquidity-as-a-Service (LAAS), which can save asset issuers millions by totally cutting out market-making and liquidity management costs.”

Onboarding these assets into any system requires multiple processes to ensure they are fit for the platform.

While the adoption of RWAs in DeFi looks promising, it still only accounts for 10% of net tokenised RWAs. While transfer restrictions and KYC requirements for these assets contribute to this number, another problem is the slow redemption infrastructure for RWAs.

For example, for an asset with T+1 settlement that is bearing high borrowing rates and decides to close its 3x-leveraged position, the exit would take 2-4 days. If they had sufficient liquidity to exit, the exit could have been executed instantly. While they are trying to exit, their position still accrues the spiked borrowing interest.

A solution to avoid an invariant borrowing rate is fixed-rate lending, which has also begun to emerge within the lending category through products such as Jupiter Offerbook (already launched) and Morpho Midnight (in the audit phase).

Even with fixed-rate lending and borrowing costs known, exiting the loop takes time, and for someone looking for an instant exit, it remains an issue.

The next section explores the products working in this direction.

The Developing Redemption Infrastructure

While RWAs have achieved good scale, they still face the problem of active onchain redemption required to access liquidity immediately, which is also essential for making them composable within DeFi. For example, in a lending protocol, when a position needs to be liquidated, the liquidator would need to sell the RWAs to pay back the loan.

Solving this issue requires a third party willing to assume that duration risk in exchange for the instant liquidity they provide to the liquidator.

Products like Redstone Settle, Upshift Clear, and others provide this exact form of redemption.

RedStone Settle

Redstone Settle launched in April 2026 and operates as a KYC-verified solver auction for atomic cross-chain RWA redemption.

1. A user initiates a redemption request.

2. Redstone runs a competitive auction among KYC-verified solvers capable of providing immediate liquidity.

3. Winning solver fronts USDC at T+0 (instantly).

4. The solver is reimbursed at T+1 or T+2 when the issuer processes the underlying redemption.

The solver (currently on a whitelist basis) bears the duration risk during the asset’s settlement window and maintains the spread post-settlement, while DeFi protocols receive immediate settlement. This essentially creates a market amongst solvers to provide competitive bids while accounting for duration risk.

Upshift Clear

Upshift Clear, launched in May 2026, provides T+0 USDC liquidity for RWA assets at a 50 bps fee via their dedicated USDC Vault. They have initially provided support for Superstate Crypto Carry Fund (USCC) redemption.

The 50 bps fees create a structured repo market for RWA assets: Clear vault lenders earn from the spread plus USCC yield accrual during the redemption window.

Grove Basin

In May 2026, Grove launched its institutional instant RWA redemption product, Basin, providing up to $1 billion in daily liquidity. This product is launched in partnership with BlackRock (BUIDL) and Janus Henderson (JTRSY). For this redemption product, Securitize and Centrifuge provide the underlying tokenisation workflows, while platforms such as Anchorage Digital, Galaxy and FalconX facilitate access to the product.

Basin targets the settlement gap for funds that cannot use permissionless solver auctions like Redstone Settle due to regulatory constraints or counterparty KYC, making it an institutional-grade complement to products like Settle and Clear.

Agra

Agra is a central limit order book for tokenised credit instruments. It currently supports markets such as wmtUSDC/USDC (the receipt token for deposits in the market that provides loans to Wintermute on Wildcat), ACRDX/USDC (Anemoy Tokenised Apollo Diversified Credit Fund), and a few others.

Makers post bids at a discount to the NAV of these assets, and get access to the yield visible on the platform itself. It essentially boosts the total yield for makers since they got the asset at a discount. After that, they can either sell using the same mechanism or hold it until maturity. While on the taker’s side, they are simply swapping one asset for another through a CLOB.

Again, even in the Agra model, markers are essentially getting paid for the duration risk.

3F

Another protocol serving in the redemption and efficient RWA looping category is 3F (a platform for leveraging RWAs onchain). It currently has $7.7 million in net leveraged exposure and approaches the problem of RWA assets in DeFi differently than other solutions.

3F externalises different parts of the RWA instant redemption problem through Bridge Facilitators and Liquidity Integrators.

Bridge facilitators provide upfront liquidity to complete the exposure the user intends to take on their base capital. For example, a user targeting $3 million in exposure and with $1 million to deposit can obtain the remaining $2 million in liquidity from a bridge facilitator, enabling the entire position at 3x leverage. Similarly, when the user intends to unwind, the facilitator provides the required liquidity, solving the redemption delay problem.

Liquidity integrators provide instant liquidity when a user wants to exit immediately. Because even with a Bridge facilitator, the user has a $1 million deposit that must go through the entire redemption process, these integrators provide the much-needed liquidity.

Both of these approaches borrow efficiency from the market, just as liquidation works in lending, with motivated onchain actors filling the required gap in RWA looping for profit. Over time, systems like this become easier to scale because every participant has something to gain from the process: loopers get a smooth exit, and facilitators earn a profit by providing liquidity and faster redemption for users.

Fission

Fission is another instant RWA redemption protocol and currently supports instant redemption of assets such as ACRED, ACRDX, and JAA. While the product aims to address an active issue with RWAs, it charges a 564 bps fee, which is significantly higher than that of any other platform. Additionally, it lacks sufficient liquidity, making it an inefficient venue for asset swaps, as users would incur high slippage and fees.

The redemption of RWAs is a relatively new area, with most products launched in the last few months. While the efforts are in the right direction, these platforms face a “chicken-and-egg” problem.

As they try to provide instant redemption for RWAs, they themselves lack liquidity, which sometimes makes them inefficient venues for trades. As this niche grows, liquidity is expected to deepen because duration risk offers a good risk/reward profile for liquidity providers.

To enable DeFi composability, the backend consists of vault standards. In the next section, we discuss multiple available standards and what they offer.

Vault Standards

The vault standards determine the composability ceiling for any RWA product. There are currently four active standards:

1. ERC-4626: ERC-4626 is the de facto DeFi yield-vault standard. The standardised deposit(), withdraw(), and convertToAssets() functions create a universal interface. Multiple protocols, such as Morpho, Euler, Fluid, Aave, and other major lending protocols. But the vault must honour redeem() call synchronously, which demands T+0 settlement, making the standard feasible only for onchain native assets like syrupUSDC, wmtUSDC, and others.

2. ERC-7575: This ERC is a multi-asset extension of ERC-4626 and supports vaults in which a single share token can be deposited/withdrawn in multiple assets (e.g., deposit USDC or USDT and receive the same share token). It is particularly relevant for the RWA product that accepts multiple settlement assets. Additionally, it is fully backwards-compatible with ERC-4626 integrators, adding flexibility without any additional engineering costs. This improves on the ERC-4626 rigid standard, which would require depositors to convert to a specific asset before depositing or to introduce multiple assets per deposit, creating fragmentation.

3. ERC-7540: Introduced in October 2023, ERC-7540 extends ERC-4626 and introduces asynchronous redemption, a product specific to RWA offerings. It has functions such as requestRedeem() and claimRedeem() for cases that require a waiting period (T+1, T+2, or an arbitrary delay). This ERC is perfect for Treasury products, tokenised private credit, or any RWA with a defined settlement window. Additionally, users still bear duration risk because the NAV could change between the request and the claim, affecting their position’s value. This ERC is widely adopted and promoted by infrastructure providers such as Centrifuge, which is also its developer, with many assets utilising it on platforms like Aave, Euler, and Morpho.

There is a great development regarding vault standards as well, aimed at addressing various issues with the most widely adopted standard, ERC-4626.

Another interesting standard is ERC-3643, developed by T-REX and is the compliance-first standard, which introduces onchainID. Every transfer of assets that adopts this standard requires whitelist verification against KYC’d addresses. It is adopted by asset issuers like KKR, Hamilton Lane, and Apollo, which use Securitize infrastructure. Additionally, it is functionally incompatible with standard DeFi: Morpho vault addresses, Aave pool addresses, and Uniswap pool addresses are all non-KYC’d and cannot receive ERC-3643 tokens. Only specialised compliance-aware wrappers (Ember’s sACRED, Securitize’s own bridge) can interface ERC-3643 with DeFi, adding a wrapper counterparty risk layer.

Find the complete report here:

https://docsend.com/v/sjv2g/rwareport

The privacy ecosystem on Solana is nascent.

We had the opportunity to chat with Mert and ask him a couple of questions regarding privacy on Solana. In his own words, he said Solana is lagging a bit on privacy.

But what does a mature ecosystem look like?

​​Non-negotiables include:

• Formal verification

• Lack of committee

• Immutability

• Open source code

Solana also benefits from a unique architecture, which can lead to different privacy priorities than its EVM counterparts. Mert points out how, for instance, at ZK compression: “We can actually get mass scale and composability for a privacy protocol on Solana without the need for a rollup. At least not a persistent one when you can use based rollups.”

In the specific case of Solana, the two most relevant verticals for developing privacy are Neobanks and Private DeFi. Nonetheless, in terms of tools and user experience, Solana is still far from a functional, composable private ecosystem.

We also asked Mert his thoughts on the privacy tech stack. As highlighted in this report, privacy should not be taken singularly as a single piece of tech. Instead, we believe that all primitives will interact in the “final privacy stack”. For Mert, the endgame will come when FHE will be combined with ZK. While TEEs and MPCs are pragmatic for certain use cases, they do not provide enough guarantees in an adversarial system.

Last but not least, we took the chance to ask him about Helius Privacy.

It will be developed as a ZK-based UTXO privacy layer on Solana. Helius Privacy will leverage “Zones“, where individual companies can pick their tradeoffs.

A public zone will also be available to all regular consumers, providing full anonymity in an immutable, formally verified manner.

More on this soon.

With this context provided, we focus on Solana’s privacy ecosystem and how it addresses various privacy challenges in this section.

Private Compute

There are currently two major providers in this category: Arcium and Magic Block.

Both of them try to solve a similar problem: private computation.

Arcium does it through an MPC to process any data. Arcium splits the data and distributes it across a cluster of independent nodes. These nodes then work together to compute results without seeing the individual inputs. Moreover, while Arcium operates as its own compute network, it settles on Solana, which handles task ordering, network security, and fee payments.

All these private computations take place in Multi-Party eXecution Environments (MXEs), which are customisable, parallelised execution environments.

While Arcium solves the problem of computation, their products also serve privacy on Solana more broadly. They are building a Confidential SPL (C-SPL) token standard, which can enable confidential tokens, transfers, and trading on Solana. We asked the Arcium team a few questions, including where most of their demand comes from. Not surprisingly, for payments and encrypted data analysis, and an increase in institutional demand from healthcare, which enables the training of models on encrypted datasets. C-SPL also enables seamless private transfers, thereby generating institutional interest.

In terms of numbers, Arcium has seen good adoption since its Alpha mainnet launch in early February 2026, processing 900k+ computations and over 3.5 million transactions, with most of this growth occurring at the beginning of May.

Source (Data as of June 8, 2026): https://explorer.arcium.com/

Most demand has come from the initial applications, such as Umbra. However, applications such as ZINC and Crafts are going live in the coming weeks, and we expect to see increased demand.

ZINC is doing encrypted proof-of-work mining, and Crafts is using Arcium for sealed-bid auction fundraises, allowing startups to tokenise part of their equity with fair price discovery.

“Some exciting things being built on Arcium that were never done before include capital formation with sealed-bid auctions, opportunity markets, encrypted resolution in prediction markets, and other financial privacy applications.”

Many of these use cases create new and improved markets where the user doesn’t even think about privacy:

Instead, Magic Block solves the privacy-compute problem by utilising TEEs, whereas Arcium MPC relies on cryptographic guarantees. In terms of how their product works, Intel TDX enclaves create a hardware-verified black box called Private Ephemeral Rollup (PER) in which transactions are aggregated and processed, then committed back to Solana.

MagicBlock helps design applications that preserve these properties across the stack, including Confidentiality (protected state), Scalability (high throughput), Composability (still operable with different Solana programs), and Compliance (access-control layer).

While both products solve the problem differently, they help produce private order books, dark pools, and private DeFi rails that can be deployed with minimal code changes. This is evident through the ecosystem building on top of Arcium, for example, covering DeFi, Prediction Markets, Neobanks, and more.

Private Transfers and Balances

With infrastructure for private computations like Arcium and MagicBlock being built out, certain use cases for that infrastructure are beginning to grow as well, including private transfers.

Umbra is the first in the list, built on Arcium’s MPC Infrastructure. Umbra introduces Encrypted Token Accounts (ETAs), a direct counterpart to Solana’s standard Associated Token Accounts, but with balances stored in encrypted form, providing:

• Amount Privacy: Transaction amounts are encrypted using the Rescue cypher.

• Balance Privacy: Balances are stored as ciphertexts

• Linkage Privacy: Linkage privacy is enabled via a shielded pool, with ZK proofs that sever the sender-receiver link entirely.

Apart from this, Umbra offers additional compliance features that enable users to grant auditors and compliance systems selective viewing access without exposing the full transaction history. This feature is important for institutional workflows and for users who want to demonstrate they hold funds without revealing detailed transaction history.

Continuing on the Privacy front, Privacy Cash and Hush are the other two wallet providers.

Privacy Cash uses a Tornado-style shielded pool for SOL: Users deposit SOL to generate a commitment that is added to a Merkle tree, and withdraw to any recipient using ZK proofs that break any onchain link between the deposit and withdrawal addresses.

Hush, on the other hand, is Zcash-inspired but with the addition of DeFi utility. Users can deposit SOL into Hush’s shielded pool, where it gets converted to jitoSOL, passively earning staking yield and MEV revenue while remaining private. Within the pool, users can transfer funds to other Hush participants, receive funds, and transact multiple times without ever touching the Solana public ledger. When they choose to exit the pool, the withdrawal gets unlinked from the original deposit through mixing. The transfer cost within the pool is 0.01 jitoSOL, and a 50 bps fee applies to withdrawals. Hush also integrates Jupiter for private swaps and incorporates geo-blocking for sanctioned regions, giving it a compliance profile among institutional users.

No Onchain Trail

Private transfers fix the problem for companies and institutions which pay their employees or make payments on any private deals onchain but to take it to a deeper level, we need privacy embedded in our daily onchain actions, which is trading. Every order placed on a public AMM is a signal that front-runners, copy traders, and MEV bots can read and exploit, but there are some protocols on Solana fixing it.

First in the list is encrypt.trade, a privacy-first DeFi interface that routes transactions through Jupiter while keeping transaction details private. Additionally, the team adds that “execution quality remains the same as we don’t add any custom routes, we use the same route and liquidity provided by Jupiter”

It wraps the token users wish to swap and encrypts the swap details using ElGamal encryption. The onchain record shows a state change for the wrapped asset type, enough for Jupiter to know it’s routing the correct token. The transaction count, the transactors, the parties, and even whether an execution occurred are processed inside a TEE environment (AWS Nitro Enclaves) and never broadcast publicly. This unlocks private swaps at scale.

Vanish approaches the problem by focusing on a different layer. They are building a private trading infrastructure using shielded transaction routing to protect trading strategies from creating an onchain trail. Rather than wrapping tokens like encrypt.trade, Vanish routes trades through shielded liquidity. Additionally, Vanish has introduced the Vanish Integrity Framework (VIF), which embeds safeguards to prevent the routing of any illicit transactions, powered by Elliptic and Range.

Darklake is another contender in this category, building a ZK-native liquidity infrastructure and dark pool. Its zk-AMM, called “blind slippage pool”, is a commit layer added to the AMM to hide slippage data before execution. Searchers cannot read the order intent before the transaction lands in the block, but they can verify the outcome after the fact. This latency asymmetry prevents sandwich attacks while preserving verifiability. They have extended this model into private perpetual contracts (zk-Perps) with Arcium’s compute layer and Zyga, a reasoning framework that abstracts proof complexity and provides builders with a foundation for secure logic and coordination. Moreover, they recently expanded to become an infrastructure protocol that allows applications and users to verify, connect, and compute privately using their Proof as Intelligence model.

Private Prediction Markets

Private prediction markets are more advanced privacy-enabled applications because users’ strategies are easily copied, causing them to lose their edge. To account for this, protocols are building dark pools specifically for prediction markets using Arcium infrastructure.

Melee is building prediction markets with private order flow enabled. They are doing this by encrypting the order book using Arcium’s MPC infrastructure. Participants can place positions without revealing their direction in the open market until settlement.

The Private AI

As AI agents start to operate more onchain, do every query and every piece of PII they consume become permanently public?

Loyal answers this question through its decentralised, censorship-resistant intelligence protocol, built using Magic Block’s ephemeral rollup execution and Arcium’s encrypted compute. They are building towards onchain AI that protects user data: conversations, queries, preferences, and activity, all stored encrypted on Solana with strict access rules. Users own and can export their encrypted conversation history. They can also self-host their frontend without losing any of their data. Additionally, Loyal supports private transactions and money management, allowing depositors to earn yield privately.

Find the complete report here:

https://docsend.com/v/sjv2g/thefullstackprivacyecosystem

PropAMM build on the current passive AMM models, providing tangible advantages resulting in better pricing and execution than CEXs counterparts.

Up until now, operating onchain has been a trade-off in favour of accessibility, at the expense of pricing and poorer execution. PropAMMs promise to solve this.

We begin by introducing the concept and its significance, and then dive into the evolution of the propAMM ecosystem on Ethereum.

Intro to PropAMMS

Up until now, the pricing of AMMs was left to a pricing curve (x × y = k) and moving anytime someone trades against a liquidity pool. These AMMs are labelled passive because they have no pricing power: asset pricing is left to the market.

By itself, this model has revolutionised price discovery for assets which were previously impossible to price. However, it comes with its own trade-offs regarding execution.

Anyone who has traded onchain, especially in the early DeFi days, is extremely familiar with the issues that come with it. AMMs are essentially held hostage by market liquidity and liquidity providers, with no direct ability to impact price unless through indirect mechanisms such as incentives.

The passive AMM model is suitable for new assets, as it provides an avenue for their price discovery. Nonetheless, while users might be willing to accept slippage and low liquidity in new markets, this design risks alienating more professional traders, who care most about execution.

For professional firms, institutional investors, and onchain strategies, a few % points of loss execution can make the difference between success and a strategy which cannot be leveraged in production.

So far, this has been a strong limitation of executing onchain, with those concerned about execution often resorting to operating on CEXs.

PropAMMs promise to solve this trade-off and bring efficient onchain execution that can compare with and go beyond those of CEXs.

At their core, propAMMs are smart contracts that live onchain, allowing builders to facilitate price updates and provide competitive quotes.

We refer to this as “application-controlled execution”.

They enable AMMs to price their own assets by continuously providing bids and offers for trading pairs.

propAMMs have already been live on @Solana for some time. At a technical level, this was possible because Solana already allows maker price updates before taker swaps, which are already intrinsically in the compute pricing.

Now the same can be done in Ethereum using offchain transactions.

propAMMs are able to do so by relying on an offchain pricing engine, which has to be intended as an “oracle”, posting updates based on the computation of observing CEXs order books, and any other relevant pricing data. To determine the appropriate updates, propAMMs use a _“fair value” a_s a benchmark, which is continually recomputed after pricing information is collected.

Let’s have a look at how the flow works:

1. When a trade is placed, the propAMM contract runs through a checklist. This includes oracle-freshness quotes, flow history, pool inventory, and many other findings.

2. Each transaction is then scored before it’s committed to a specific price

This is different to a traditional AMM, where every trade is executed with the same conditions.

PropAMMs address the previous limitations of limited pricing power and reliance on a mathematical curve by enabling autonomous liquidity pricing. To a certain extent, AMMs can create their own markets by continuously providing quotes for the price at which they can trade.

For those interested in how propAMMs pricing works, here is a technical post on it.

The possibilities enabled by this design extend beyond efficient pricing, giving propAMMs a much broader space to experiment with orderbook construction, inventory management, and a defensible login directly embedded onchain, atomically (within the same transaction as a trade).

For example, quote transactions that update the price are included in the block, and swaps behave normally, as in any other AMM.

Furthermore, this design freedom enables broader experimentation and the development of custom logic within propAMMs.

Better than CEX

The ultimate proof of propAMMs is in their execution.

We can already observe that they have achieved a spread of 20 bps lower than their CEX counterparts.

Currently, this is true for 1k orders for both ETH/USDT and ETH/USDC, as shown in the image below.

For 10k trades onwards, Binance still leads.

Being ahead in the 1k order category is already a massive win for onchain execution.

As Fede points out, the reason for this is not really technical but rather a lack of liquidity, which is expected to grow as more propAMMs and market makers join.

Currently, most of this liquidity is allocated elsewhere, but as onchain execution improves, the incentives are to move it to where demand will be highest.

@jump_ ran an analysis on the propAMM ecosystem on Solana (as of March 2026) showing how most propAMMs fills ended up between 0.33 and 1.36 bps from the best CEX mid execution, beating it nearly every fill analysed.

The image below (since 13th May) gives an idea of how novel this blockspace primitive really is.

Also, it shows remarkable growth, with over $10 million daily volume on the 10th of June, mostly on FermiSwap.

The @Dune below also highlights how propAMMs have steadily gained market share relative to public DEXs.

propAMMs can also be used in the backend and benefit from integration with external distribution venues. Such is the case with @KyberNetwork, which powers its aggregator via propAMMs built with Titan Builder.

In practice, this means their aggregator will protect takers against stale pricing, leaking less value to makers and providing more efficient execution and, therefore, a more efficient market.

propAMMs also entail trade-offs, especially when design and specific logic are not transparent or public.

In the past, there have been some examples of misquoting by propAMMs on Base.

• An attractive price was initially provided in the next Flashblock (~200ms) of each block, and was thus displayed by aggregators. However, it would then reprice to a worse one in the first Flashblock of the next block, which is the price at which the actual trade would settle (average loss of 5-10 bps).

• A propAMM can quote a tighter spread to be selected by aggregators. Before the transaction settles, the propAMMs widen the spread, leading to the transaction ending up at the wider end of the price spectrum and exploiting the “latency between quote and settlement” (average loss of 3-6 bps).

A similar example of Aggregator spoofing can be observed on Solana. Other areas for future reflection and discussion on propAMMs are also raised in this post.

We believe this to be one of the most onchain developments, especially for Ethereum.

Next week, we’ll dive deeper into propAMMs, interviewing the most prominent builders in this vertical.

**Building a propAMM?
**Reach out to us.

Currently, Bitcoin has a capital problem: most capital earns no yield, and the available options for earning yield on BTC force trade-offs in custody, require wrapping, or require bridging BTC off the mainnet, which might not satisfy all users.

Recently, Stacks released its Bitcoin Staking Whitepaper, which introduces $STX as a capacity asset paired with native Bitcoin, forming a tighter link between the two.

Stacks introduces a Bitcoin Staking option that lets BTC holders earn native Bitcoin yield while their coins remain on the Bitcoin Layer 1 (L1), without giving up custody or bridging assets.

This consensus-level alignment of interests can trickle down through the ecosystem and serve as a blueprint for other Bitcoin protocols seeking better alignment with native Bitcoin.

The Issue at Hand

Stacks is one of the earliest and leading Bitcoin protocols, with strong alignment with the L1.

Stacks blocks are anchored to Bitcoin blocks, inheriting security from the Bitcoin L1.

Its distinctive element is the Proof of Transfer (PoX) consensus. Under this model, miners compete among themselves to secure the network by bidding BTC. This bidding happens during each block interval to qualify for STX block rewards and transaction fees.

The original PoX model was limited by Bitcoin’s 10-minute block production. This limitation was resolved with the Nakamoto upgrade, which allowed a single Bitcoin block to include multiple Stacks blocks.

This model can be interpreted as a proof of work, but instead of electricity, miners bid BTC.

The BTC bid gets distributed among all of the STX “Stackers”. This aligns Stacks more closely with Bitcoin than with other protocols that leverage native tokens or block rewards other than BTC.

PoX also indirectly strengthens consensus: it incentivises stackers to lock STX and contribute to block validation, either as signers or by delegating responsibility to third-party operators.

Now, the latest whitepaper release brings about a refresh to PoX.

Staking Native Bitcoin

In May 2026, Stacks released its Bitcoin Staking Whitepaper along with a proposed update to its PoX model.

We have mentioned in the abstract the current lack of opportunities regarding native BTC yield, without compromising custody or decentralisation.

Stacks PoX has been extended to address exactly this issue: in its previous form, it did not provide yield on locked BTC, only on STX. Now, BTC holders can earn native BTC yield while their coins remain on the Bitcoin Layer 1 (L1).

This is possible by the introduction of “protocol bonds”, which allow users to lock BTC on the Bitcoin L1 and STX on the Stacks network to receive a target yield at the bonding period (6 months), paid in BTC on the L1.

Rewards for the protocol bonds are still generated from the BTC paid by Stacks miners competing for block rewards and transaction fees.

Stacks incentivises users to pair BTC and STX through a waterfall structure where yields are paid every cycle ~2 weeks (2,100 BTC blocks) in this order:

• Paired BTC-STX positions are prioritised as a “senior tranche”

• Users who only stack STX get the remaining yield as a “junior tranche”

For the first managed phase, the senior tranche receives a fixed 3% APY. STX-only stakers are paid next, and a reserve fund is maintained to buffer cycles where miner revenue falls short. The bootstrap period is set up as such to likely result in more BTC flowing into the reserve buffer at the start.

As BTC yield is market-driven, in the event of an unforeseen yield contraction, the junior tranche (STX-only stakers) bears the initial yield reduction.

The STX-to-BTC ratio for the first tranche has been set to 5% of the BTC position’s value.

Bitcoin Staking will roll out in two phases:

• A bootstrap phase (PoX-5) managed by the Stacks Endowment and open to vetted partners, allowing the protocol to establish a track record of BTC yield distribution under controlled conditions. The PoX-5 Stacks Improvement Proposal is already live on the Stacks Governance Forum, proposing an increase in emissions to bootstrap the updated PoX in the short term.

• A fully permissionless phase (PoX-6), where bonding capacity is allocated algorithmically through an open auction rather than curated access.

Once bonded, user funds are locked for 6 months, but they may exit early by forfeiting their yield. In which case, BTC unlocks at the next Bitcoin block (~10 min). This is only valid for BTC, while STX still stays locked for the 6-month bonding period.

The interesting aspect of this PoX update is that it further aligns Bitcoin and Stacks, making L1 BTC ownership a prerequisite for the senior tranche. In addition, Bitcoin Staking rewards are determined by STX network activity, as miners set their bids based on the fees they expect to receive.

All of this without:

• Introducing any slashing risk of losing committed funds

• Relying on third-party custodians, as BTC is locked on L1 through an OPCODE

• Relying on secondary tokens as yield, leading to misalignment of interests, instead, it uses native BTC

BTC holders earn rewards directly in BTC without giving up custody of their

assets. The auction is the sole mechanism by which BTC yield capacity is distributed.

Initially, Stacks is targeting a 3% APY. However, at the end of each bonding period, this will be recalibrated based on miners’ bids, the status of reserve funds, and data on previous bonding performance.

To conclude this section, it’s important to mention how the reflexivity between BTC and STX goes both ways: it can be favourable, but it can also turn negative in adverse conditions.

The network has to generate economic activity that translates into increased STX value and higher miner bids, leading to BTC yield.

Similar to BTC, STX emissions decrease over time, so miners’ incentives will increasingly depend on economic activity on the Stacks network.

The Future is Bright (Orange)

Stacks has already demonstrated the power of its PoX model by distributing over 4200+ BTC to ecosystem participants since its launch in 2021.

The latest update reinforces this with a stronger alignment with Bitcoin and a yield distributed in native BTC. It cannot be overstated how important it is for any L2s building on Bitcoin to align with it as much as possible to reduce friction among users interacting with both. Bitcoin holders and users come from either the early days of crypto or the recent institutional wave of adoption that has solidified BTC’s standing in traditional finance. In both cases, for very different reasons, they are not keen on putting them to work if that means giving up custody of their assets and expanding their risk surface. They might just let them idle.

A wise farmer used to say, “I know my chickens”. Building for BTC holders (including institutions) requires alignment with Bitcoin’s original ethos and the cypherpunk era. That is, with self-custody, no wrappers, no bridging or third parties.

There is, in fact, a growing number of BTC holders who might have the appetite, but lack the opportunities due to an unwillingness to compromise on the aspects mentioned above.

This is not only an ideological stance but a practical requirement that should be taken into account by those building products on Bitcoin L2s.

Stacks has chosen to do so with a BTC-powered consensus model, which now expands to distribute yield determined in BTC to users locking BTC on the L1.

The source of yield on Stacks is transparent: competition among miners for STX rewards. More onchain activity leads to more transaction fees, which in turn increase miners’ BTC bids to win Stacks blocks.

Treasury companies are showing interest in this alignment, with UTXO Management, the asset management arm of Nakamoto Inc., among the inaugural participants in Bitcoin Staking.

We welcome and expect further developments in this area, as one of the characterising trends of the short-term future: the previous couple of years have shifted BTC supply from a retail to an institutional base.

The next big unlock is how to make this capital work.

Many are now moving into this vertical. Examples include NYSE parent company ICE, which has invested in OKX and plans to tokenise U.S. equities and ETFs, and Kraken, which plans 24/7 tokenised equity trading.

Others have already bet on it for some time.

Among those is Mantle, whose RWA pivot we have covered extensively in the past.

Mantle has set up a tokenised equity infrastructure that covers issuance, trading, and redemption onchain. Together with Bybit, its main distribution partner, Mantle has created a CeDeFi partnership that reaches over 80 million users.

However, building an RWA stack from scratch alone does not ensure adoption, especially amid growing competition. As Emily Bao, a key advisor at Mantle and Bybit, points out:

As part of these developments, Mantle has now collaborated with xStocks to leverage their new product, xChange, to ensure that onchain execution quality of xStocks matches offchain pricing.

xStocks holds over $500 million in assets across 172 tokenised equities (13 live on Mantle) and is increasing its market share among tokenisation platforms (ranking 15th overall), with over 50% growth in the last month alone.

By unique holder count, eight of the top 10 tokenised stocks are xStocks products. This number rises to 68% when accounting for the top 25.

At its core, xChange is a pricing and settlement mechanism that relies on an atomic Request for Quote (RFQ) system.

Instead of routing through a liquidity pool, Atomic RFQ pings every available liquidity source simultaneously, locks in the best available price in a single atomic transaction, and executes the order.

Up until now, xStocks were tradable via Fluxion, Mantle’s native DEX, but relied on onchain liquidity. Now, Mantle uses xChange as a pricing and settlement mechanism in the backend, ensuring optimal execution with no slippage.

24/7 trading is ensured by a combination of both: xChange Atomic RFQ during the week and onchain liquidity during off-market hours. This is an overall trend across TradFi towards 24/7 equities trading, which we analysed in our previous deep dive into commodities.

Execution quality is non-negotiable for many investors, especially those trading with size.

Leveraging xChange is a major unlock for the tokenised stocks currently tradable on Mantle, which have now received a much-needed execution upgrade that rivals offchain equities.

While only 13 tickers are currently listed, xChange allows tapping into liquidity for a much broader range of tokenised stocks.

Once the execution gap for tokenised equities is closed, they can finally scale and become a compelling alternative for institutional investors, addressing concerns such as fragmented liquidity across onchain and offchain venues, as well as inferior execution and slippage.

Tokenised stocks on Mantle still have a long way to go, with xStocks representing only about ~$4.5 million in tokenised value and the top stock, Tesla, having only about 250 holders.

The majority of tokenised assets on Mantle are in other categories, including Maple’s syrupUSDT, worth $90 million.

At this point, tokenised stocks can be compared to where Treasuries were in 2023, before their widespread adoption. But this time, we expect growth to accelerate due to the upcoming CLARITY Act legislation and because the infrastructure has already been built.

xChange allows any network to benefit from improved execution quality for xStocks. We expect these developments to drive increased volume to xStocks trading onchain.

Phase 1 of Mantle-xStocks collaboration was the initial integration and support for tokenised equities.

Phase 2 was solving the execution layer for tokenised stocks, the core aspect for institutional adoption.

Now, Mantle can focus on boosting its distribution and onchain activity, with Bybit playing a big role. More xStocks can be easily added to the roster to target different user niches.

An additional element to take into account, which could further boost this trend, is xStocks’ current loyalty program, in which active users are rewarded with xPoints, potentially related to a possible xStocks native token.

What’s next?

Once again, Mantle’s approach has focused on solving the key issues at the infrastructure layer, bringing onchain execution as close as possible to TradFi. As many have confirmed, institutions first and foremost care about their bottom-line slippage and execution. If moving onchain makes it worse, then this is just a no-go.

Having addressed this aspect with xChange, the next step for Mantle, through collaborations such as its partnership with xStocks, is to establish itself as a key distribution layer for tokenising stocks, particularly through partnerships outside its ecosystem.

Download the complete report here:
https://docsend.com/view/r3278hmn8d6tqyqn

Categorising Vaults

This section of the report presents a quantitative analysis of the vault landscape to provide a comprehensive picture of the sector and its evolution. We analyse the ecosystem by category, tracing TVL shifts across vaults and curators.

We break down curator concentration and provide an outlook of the main flows, contextualising the structural shifts that defined vaults during this year.

Vaults should not be considered a single, encompassing market but rather evaluated by their various implementations, each with different parameters, risk vectors, and responses to stress tests. Aggregated stats only provide a small part of the picture, with much-needed nuances.

Before starting the analysis, it is important to define the term “vault“ as the basis of our methodology.

Our definition is based on the deployment path. Vaults are categorised as “instruments through which users access active yield-generating strategies”. Any asset that is purely a wrapper of an offchain instrument is excluded from our analysis.

Maple’s syrupUSDC qualifies as a vault: users deposit stablecoins into the protocol, which lends them to institutional borrowers and accrues APY through credit activity on the issued token**.**

Lido stETH is a vault: users deposit ETH, and the protocol earns staking yield, which is distributed through the rebasing token.

Centrifuge JAAA is a vault: users access AAA-rated CLO yield through a tokenised wrapper that generates yield via its credit positions.

BlackRock’s BUIDL does not qualify as a vault by this definition: it is a direct token issuance representing a 1:1 claim on an off-chain Treasury fund.

We apply this lens to define eight structural categories:

1. Lending vaults

2. Liquid staking

3. Restaking

4. Risk-Curated vaults

5. Vault Infrastructure Providers and Yield Optimisers

6. RWA credit vaults

7. Perpetual LP vaults

8. Options vaults

For the purposes of this analysis, we categorise risk-curated vaults as a standalone category to better understand their dynamics and growth.

Before diving into the categories individually, we highlight the vaults’ overall performance.

State of the Vault Ecosystem

The net TVL across all defined vault categories combined is $120.4 billion, down ~50% from its peak of $241 billion around last October. The downtrend after the October peak was driven by the October Liquidation Event, which triggered a cascade of liquidations across DeFi.

The vault TVL number is higher than the current DeFi TVL (~$86 billion) due to overlap. For example, Liquid Staking protocols like Lido issue stETH, a rebasing asset representing the yield on staked ETH, which is used as collateral in Lending protocols like Aave and Morpho.

The overall picture changes drastically if we move to a category-level analysis. Recent incidents led to TVL outflows and prompted a broader reality check (and, hopefully, a shift toward a security-first approach) on security and risk management across the sector.

Categories such as Lending, Liquid Staking, and Restaking suffered the most, as they have the most exposure to onchain assets and enable the onchain economy, while RWA vaults continue to showcase uncorrelated growth due to non-crypto asset exposure. Categories like Option vaults peaked in April 2022 and have been struggling ever since. Risk-Curators-managed vaults took an equal hit to other major categories due to the October Liquidation Event. Their TVL peaked around the end of October, then declined following the Stream Finance blowup.

Three events from October 2025 to May 2026 (the Stream Finance, Resolv, and the Kelp hack) represent a good stress test window, as these blowups/exploits had cascading effects across all of DeFi. In the chart below, we highlight the TVL history across these categories in this exact period. As mentioned above, most categories performed poorly, except the RWA vaults, which gained 37.8% during the same period, while the others experienced significant drawdowns.

Next, we move on to analysing per-vault category growth and highlighting recent trends and shifts.

Lending Vaults

Lending is the largest vault category and accounts for the majority of DeFi TVL. Last year marked a broad shift toward curated vaults, driven by products like Morpho, which helped scale the trend. On Morpho, curators can create their own vaults that can have exposure to multiple markets and earn yields for depositors. These vaults can eventually be curated by any provider, including TradFi institutions. Morpho’s recent Vaults V2 upgrade enabled even more functionality for curators, including the ability to embed approved adapters to access yields from multiple sources, granular risk control (such as setting absolute or relative caps on vault exposure), built-in KYC controls, and other features.

With the same context, Aave has also launched its V4, which introduces specialised spokes and a unified liquidity hub. Spokes provide greater functionality with custom risk parameters, isolated collateral types, and Oracle configurations per market. It differs from Morpho’s curator-led model in that Aave’s governance still reviews and approves the implementation of these Spokes, whereas Morpho is permissionless. This is Aave’s shift from Monolithic to Modular Lending.

The curator model led Morpho to reach over $7.5 billion in TVL concentrated on the Ethereum mainnet and Base. Base has strongly contributed to Morpho’s growth, going from $604 million to over $2.8 billion. This shows the power of the distribution partnerships Morpho has been pursuing, such as the one with Coinbase: currently, about 40% of TVL in USD terms is cbBTC, while it helped facilitate over $1 billion in loans for Coinbase users.

In response to the curator model finding PMF among institutional investors, Aave is competing on institutional rails with Horizon, which has accrued over $350 million in TVL since its launch.

Additionally, in the last few months, Aave has undergone many changes, including service providers like BGD and ACI leaving Labs, and the announcement and approval of the “Aave will Win” framework, which routes all revenue from different Aave products to its holders.

None of these incidents had much direct impact on Aave users. The only impact of these incidents was on the Aave token’s price performance, but the recent KelpDAO attack changed things: Aave lost over $12 billion in TVL, moving closer to its competitor, Morpho, in terms of TVL. The ratio between Aave TVL and Morpho TVL used to be in the 5-6x range but has now fallen below 2 because of this incident.

Spark, a lending protocol part of the Sky ecosystem, has been among the ones benefiting the most from inflows post-rsETH hack.

The image below provides a picture of the TVL change in the protocol:

Most notably, Bitcoin supply nearly tripled, stablecoin borrows increased by 78% to $752m with utilisation rates remaining contained, and WETH borrows increased by 44.1% to 325k WETH borrowed.

Fluid’s unified liquidity layer also introduced a different approach to liquidity design, in which lending, borrowing, and DEX share the same capital. User collateral acts as an LP in Fluid’s DEX, earning trading fees, while borrowed funds are deployed as Smart Debt into DEX pools, earning fees that offset borrowing interest costs.

Another interesting approach from Fluid is its collaboration with protocols such as Jupiter and Venus, through which it has launched white-label products like JupLend (Solana) and Venus Flux (BSC), each of which currently sits at a TVL of $926m and $21m, respectively. This comes as a broader positioning by Fluid to work with major players across chains and gain more market share, with those players sharing fees with Fluid.

Honourable mention to Kamino’s vaults, the main lending stack on Solana, with over $1.6 billion in TVL. The protocol experienced notable growth through their K-Lend model, the Morpho equivalent on Solana. This allows Kamino to collaborate with established curators such as Gauntlet and target institutional integrations.

The largest vault on the platform is currently Sentora’s PYUSD, with over $219 million in TVL, the second is RockawayX’s RWA USDC vault, at just $33 million, indicating there’s still a lot of room to grow for both Kamino and Solana as a whole.

Liquid Staking and Restaking

Liquid Staking and Restaking both account for a large share of the TVL in vaults, at $42.4 billion and $20.6 billion, respectively.

Major players in Liquid Staking are Lido ($21.8 billion), Binance Staked ETH ($8.9 billion), Rocket Pool ($1.2 billion), and Coinbase cbETH ($320 million).

Lido has, over time, maintained its dominance, and its issued asset, stETH, is highly composable across DeFi. At the same time, Lido’s dominance also signals concentration risk. They have expanded their offerings by introducing their Earn product, which serves as an aggregator layer, depositing users’ funds across DeFi to earn yield. However, this product took a hit after the recent Kelp DAO hack due to its exposure to $rsETH.

Binance Staked ETH has grown by 121.8% since last year by leveraging Binance’s user base.

For others and the category as a whole, growth has been slow and has come at the cost of staking yield dilution, which currently stands at ~2.5%.

Source: https://dune.com/queries/3980225/6698235

On the other hand, Restaking and Liquid Restaking, as a category, grew to boost yields earned from Liquid Staking. Kelp DAO was a Liquid Restaking protocol, and its hack and the broader DeFi cascade highlighted the composability risk these assets pose, as they are accepted as collateral across DeFi, making it more of a bug than a feature in this incident. The major players in restaking are EigenCloud ($7.8 billion), EtherFi ($5.7 billion), Kelp DAO ($1.6 billion), and Renzo ($270 million).

The restaking products, such as EigenCloud and EtherFi, expanded over time to include additional services.

EigenCloud’s 2025 rebrand helped position them more in the AWS category, pushing toward verifiable execution. EigenDA, Eigen’s data availability layer, is used by multiple L2s, including MegaETH, Mantle and Celo. The data posted on EigenDA surpassed 1.8 TB and generated ~$90k in total fees. EigenCloud TVL had remained flat in ETH for a long time but recently dropped after the Kelp hack, as users tend to withdraw their funds during periods of uncertainty.

Similarly, EtherFi expanded into a neobank and has thousands of active card users who have cumulatively spent ~$440 million through its offerings. Moreover, they have a Liquid product (let’s not forget that EtherFi first launched as a liquid staking protocol) that supports multiple strategies to boost yields across DeFi. One of its top ETH yield vaults has a TVL of $177.5 million.

Risk Curated Vault

Risk Curated Vaults is one of the fastest-growing categories, reflecting the shift from monolithic to modular lending. The managed vaults they provide on platforms like Morpho earn them performance and management fees, similar to how TradFi funds operate, deploying users’ capital across strategies to generate returns.

The current TVL of this category is ~$6.5 billion, of which 75% is held by three curators: Sentora ($1.85 billion), Steakhouse ($1.63 billion), and Gauntlet ($1.5 billion), suggesting less competition in this category.

These risk curators charge lower fees than TradFi hedge funds and venture funds, which generally charge a management fee (~1-2% of the entire AUM) and performance fees (~10-20% of the interest earned). For example, Steakhouse Financial, the top curator by revenue, generates $3 million in annualised revenue on an AUM of $2.13 billion (0.14% of total AUM). These curators usually charge only performance fees and, in some cases, management fees, but these fees are currently significantly lower. This is the result of the competitive landscape, as curators race to offer the lowest fees to attract the most TVL.

But still, the risk curators are concentrated at the top, with dominance split among three providers, which is better than in Liquid Staking, where Lido leads by a wide margin.

Moreover, what does this concentration signify? This is what the Steakhouse team had to say about it: “Concentration will likely follow power laws found in the traditional asset management analog, e.g. ETFs, where most of the AuM concentrates around the leading managers. This does not have to be a bad thing and is a reflection of scale and trust compounding to larger managers competing on performance, product range and fee load. The good thing about DeFi is that the arena is open. Anyone can come in and compete. We expect concentration to persist at the top tier, with healthy competition at the margin and room for specialisation.”

The concentration dynamics changed very recently after the Stream Finance Incident, before which MEV capital and Re7 also had strong representation, peaking at $1.49 billion and $830 million, respectively. Later, they shrank, and Sentora grew to become the second largest curator.

Additionally, following the KelpDAO hack, the impact on risk curators is evident, but a few winners, such as KPK (+159.6%) and Gauntlet (+42.7%), have seen net positive flows. For KPK, this growth came from their recent Morpho V2 vault launch, which attracted deposits from ensdomains, CoWSwap, NexusMutual, and others. They integrated agent-powered automation for rebalancing and vault exits, improving their risk management. For Gauntlet, growth came from its BSC chain expansion and its collaboration with the Lista DAO Lending protocol, which attracted new inflows.

As Juan Pellicer from Sentora points out, “DeFi cover is also becoming a real part of the institutional picture. The ability to offer economical cover changes the calculus for a treasury or asset manager who has to answer to an investment committee, it’s a structural unlock”.

Vault Infrastructure Providers and Yield Optimisers

Yield optimisers, as a category, are maturing and seeing a ton of new entrants. As the yield sources onchain increase, the optimisation or aggregation model would serve as a better vault model to provide depositors with the best yield across the board.

Protocols like Veda ($1 billion), Upshift ($380 million), and Fluid Lite Vault ($164 million) lead the category overall. Everyone serves a different model, but the goal remains to seamlessly integrate vaults which optimise yield and provide the best available yield across DeFi to their depositors. They are currently well below their peak due to ongoing market drawdowns and the stress period from October last year.

It’s helpful to think of providers like Veda and Upshift not as an aggregator but as infrastructure for creating isolated yield products. Upshift uses its own policy engine to enforce the vault mandate and self-custodiality by restricting deployments to whitelisted chains/protocols/tokens/smart contract calls. Additionally, Upshift is better categorised as a multi-strategy vault because its vaults provide exposure to strategies across DeFi, including Lending, basis trading, carry trading, LPing, RWAs, etc.

Veda leverages a modular architecture, separating operations into a “boring” vault, whose only purpose is to hold assets, while any specialised tasks are executed by external modules. The protocol uses Merkle trees to enforce permissions by whitelisting for specific vault actions.

Infrastructure providers make it extremely easy for institutions to start with a single integration, allocating to one lending protocol, and add more sophisticated strategies as the product offering expands for higher yield and deeper liquidity.

Other products, such as Fusion from IPOR ($30 million) and Gearbox ($29 million), also serve as yield-optimisation layers. The main goal of Fusion, for example, is onchain vault infrastructure that enables independent entities such as curators and asset managers to build and operate yield strategies like leveraged looping and carry trades.

Every Fusion vault is unique in terms of curation, strategy, and allocation. Automations are built at the strategy level, with different triggers for optimisation, leverage maintenance, liquidation risk management, routing, and more. Examples include swapping in the case of a negative spread, using a flash loan for cross-market migration of a leveraged position, or exiting in the event of risk events. As the Fusion team points out, “This automation was key in the latest rsETH/Aave crisis, where the IPOR DAO stETH looping vault on mainnet was among the first to fully cut exposure to Aave v3 core. Automation and execution in general allow curators to risk manage quickly when rapid action is needed most”.

Leveraged Looping represents by far the highest protocol-managed value, standing at ~$80 million. This is higher because TVL is an insufficient metric for yield optimisers. Instead, these providers should be analysed by their Assets Under Management (AUM), since they allocate funds to other protocols, so their TVL doesn’t reflect the true growth.

Gearbox launched a vault architecture targeting both passive lenders and active borrowers.

At its core, the protocol focused on enabling access to leveraged or delta-neutral exposure to farming or liquidity provision strategies. While most vault mechanisms are built around asset management for curators, Gearbox focuses on risk management infrastructure for lenders.

Borrowers can open Credit Accounts to interact with outside protocols from Gearbox while funds remain non-custodial. V3 introduced strategy-level firewalling, protecting the protocol in the event of a failure of a Credit Account or strategy. In the event of incidents, they cannot drain the shared liquidity pool beyond the amount allocated to it, thereby protecting passive lenders from contagion.

Recently, the protocol also announced a focus on RWA-looping vaults.

RWA Vaults

RWA Vaults has witnessed consistent growth over the last 5-year period, with a CAGR of 231.3%, reflecting increasing interest in RWA yield exposure among both retail and institutional investors. Even after the recent Resolv and Kelp exploits, the RWA vault category has been sticky and has not moved much due to limited exposure to onchain assets.

The largest players in this category are Maple Finance ($2.1 billion), Centrifuge ($1.6 billion), Anemoy Capital ($1.1 billion), Re ($263 million), and more.

Maple Finance grew rapidly over the last year, with TVL climbing almost 10x from the start of 2025. This growth can be attributed to various factors, including the launch of Syrup, a part of the protocol’s transition from an institutional-only model. This launch opened the door to retail flow-through products like syrupUSDC and syrupUSDT, which are highly composable in DeFi. DeFi composability and deep liquidity enable assets to be leveraged by looping through lending protocols and integrating with products like Pendle, thereby contributing to the growth flywheel. Reflecting demand for the product, the platform’s current active loans total ~$1.7 billion. These loans are dominated by USDC, representing ~75% of total active loans, followed by USDT, which accounts for the remainder.

Other products also witnessed great growth. Centrifuge, for example, positioned itself as a private credit infrastructure protocol. Its partnership with Anemoy led to $1.1 billion of T-bill pools running on Centrifuge infrastructure. Centrifuge has also been recently chosen by Coinbase as its tokenisation partner.

Products like Re brought in reinsurance underwriting risk onchain exposing users to real-world yield more broadly. Apart from this, Upshift USDC vaults lend to overcollateralised institutional funds, giving their depositors exposure to institutional lending.

Even with all the growth RWA has witnessed in DeFi, it still represents only a fraction of the value tokenised onchain. Currently, the active RWA DeFi TVL is about 1/10th of the total RWA value. This huge difference between the two values is because these assets fall into a different category that goes beyond general considerations for normal assets, as it includes redemption periods, compliance, and liquidity issues in certain cases.

For any asset to scale in DeFi, it needs active redemption and secondary liquidity, as users might need to sell these assets to regain liquidity, or in the instance of a lending protocol, liquidators repay loans and sell the assets close to the mark price for a profit, but with all the caveats that RWA come with, most of this becomes harder to implement. Additionally, yield-bearing assets like RWA have another important part of their growth flywheel: looping.

RWA looping borrows stablecoins against tokenised treasuries and repeatedly redeploys them into the yield-bearing vault. A 4-5% base treasury yield, levered 2-3x, can produce 7-12% in returns but only when borrow costs stay low (~1%). Onchain stablecoin rates are volatile and can significantly compress this spread. Leverage used to perform such a trade amplifies Liquidation and Oracle risk, and the strategy depends on the RWA collateral being stable in value. With this, redemption issues also play their role as some RWAs settle T+1 and some T+5.

To solve this, currently there are a few solutions:

1. ERC-7540: Introduce an asynchronous ERC-4626 vault so that users can use their redemption claim as liquidity while the underlying assets settle offchain. Centrifuge is one of the most important examples of ERC-7540 in production, using synchronous deposits and asynchronous redemptions, solving the tension between DeFi and TradFi T+ settlement. These hybrid vaults are becoming a template for any vault touching offchain assets.

2. Securitize Vault Registrar: This ERC maps each investor to their identity when using RWA in DeFi, ensuring protocols comply with all the regulations and requirements the asset requires.

3. Redstone Liquidation Flow: They perform RWA liquidation by introducing auction-based liquidations and connecting positions to KYC-verified solvers, who take on the underlying asset offchain and close the position onchain.

4. Upshift Clear: Upshift is releasing its new product with Superstate to enable instant RWA redemption, allowing users to swap their RWAs for USDC at the current reported price, subject to a 5bps redemption fee.

Another protocol in this category is 3F, a platform for leveraging RWAs onchain. It currently has $7 million in TVL and approaches the problem of RWA assets in DeFi differently than other solutions. It tries to externalise different factors, including Bridge Facilitators and Liquidity Integrators. The former provides upfront liquidity to complete the exposure the user intends to take on their base capital. For example, a user targeting $3 million in exposure and with $1 million to deposit can obtain the remaining $2 million in liquidity from a bridge facilitator, enabling the entire position at 3x leverage. Similarly, when the user intends to unwind, the facilitator provides the required liquidity, solving the redemption delay problem. The latter, liquidity integrators provide instant liquidity in the instance a user wants to exit immediately. Because even with a Bridge facilitator, the user has a $1 million deposit that must go through the entire redemption process, these integrators provide the much-needed liquidity.

Both of these approaches borrow efficiency from the market, just as liquidation works in lending, with motivated onchain actors filling the required gap in RWA looping for profit. Over time, systems like this become easier to scale because every participant has something to gain from the process: loopers get a smooth exit, and facilitators earn a profit by providing liquidity and faster redemption for users.

As mentioned in the section above, Gearbox is also planning to launch “Retokenisation”: a feature that allows the infrastructure to natively support leveraged minting and redemption of non-atomic tokenised assets, without requiring secondary liquidity or incurring redemption delays. In practice, Gearbox’s contracts will operate as one with the RWA issuer’s contracts, creating a seamless, composable system for RWA leverage directly at the issuer level, making Gearbox the only EVM protocol offering native leverage for RWAs.

Perpetual LP Vaults

Perpetual LP Vaults is represented by Jupiter Perps ($715 million), Hyperliquid HLP ($396 million), Drift ($256 million, down after recent hack), GMX ($242 million), and Ostium ($51 million).

Jupiter’s JLP remains by far the largest perp vault by TVL, but has lost more than half its value since October last year, due to the Liquidation event.

HLP has performed better in terms of value retention and is down 30% from its $600 million peak last September. Hyperliquid’s vault experiences constant ups and downs, often driven by the HLP variable yield, which is influenced by its structure and market conditions. Hence, high-yield cycles attract capital, while low-yield or loss periods push it out.

One of the major loss incidents occurred in March 2025, when a trader opened a massive short position on the Jelly token and then withdrew their margin, triggering a forced liquidation and prompting HLP to take over the position. Losses like these to the vault create a structural bias for depositors, often categorising HLP as a riskier vault, but Hyperliquid reduced the allowed leverage on such tokens to avoid such situations, thereby amplifying losses.

Products like Ostium OLP provide exposure to RWA perps and offer a different configured yield to their users, but their TVL is down ~50% from its peak. This drawdown was the result of broader market moves and Ostium yield cycles.

Additionally, Ostium recently introduced architectural changes, making OLP a senior tranche and an intraday settlement layer that never takes the first risk. This is the opposite of the HLP model: depositors who previously wanted the directional exposure OLP provided might leave, but at the same time, it becomes a passive source of yield for depositors with reduced risk in this new model.

Options Vaults

DeFi Option Vaults (DOVs), as a category, faded over time, peaking in 2022. DOVs provided exposure to strategies like covered calls and cash-secured puts but lacked capital efficiency, carried higher risk, and, over time, attracted a smaller audience, as crypto users tend to gravitate toward perpetuals. But option vaults have recently been improving and solidifying their use case, at least for more savvy users.

Option vaults no longer exist in the same format as before. Instead, they are architecturally distinct and more user-friendly, delivered via products such as Derive and Rysk. These days, option vaults are executed via a Request for Quotes (RFQ) system, with market makers running the background processing.

Derive is an options and perpetual exchange, and with its V2 launch in March 2025, it witnessed accelerated growth due to feature expansion, such as using CLOB and enabling institutional-grade features like off-exchange custody and support for multiple collateral types, processing $12 billion and $16 billion in perps and options volume, respectively. Derive V1 had vaults that are still active, giving users exposure to different strategy options and creating a delta-neutral position for its depositors, maximising APY. These vaults currently hold ~$2.4 million in TVL.

On the other hand, products like Rysk provide retail exposure to options through covered calls and cash-secured puts. It launched on Hyperliquid with a focus on covered calls on HYPE and currently has ~$56 million in TVL and processed $975 million in options notional volume. With this, they also offer Rysk Premium, a flagship product featuring as a vault for sophisticated allocators deploying funds across different options strategies and generates a consistent yield for depositors.

New vault implementations focus on solving some of the previous issues with incumbents. These included poor strategy design, with timeframes as short as 7 days; the execution of trades at fixed intervals, creating opportunities for front-running; and customizable designs that let users align their own size, strike, or expiry. Option vault providers are now much more attuned to the market pulse on which assets to list to capitalise on new windows of opportunity in yield-bearing assets.

Find the complete report here:

https://docsend.com/view/r3278hmn8d6tqyqn

An IPOP is a synthetic perpetual that reflects the implied value of a private company before it goes public. The traditional IPO book has been oversubscribed by more than 20 times, leaving both accredited and retail investors unable to secure the level of exposure to the asset they wanted. In contrast, an IPOP for Cerabras had been active on Hyperliquid for two weeks prior, with prices dipping below $200 during the first few days of May, guaranteeing broader accessibility to these assets.

While these onchain markets primarily offer access, it was the pricing that captured the world’s attention. Morgan Stanley, the lead book-runner of the IPO, was observed tracking the price on Hyperliquid before the stock went live.

On the morning of the event, Hiive, the primary offchain platform for accredited investors, was valuing the stock at $220. In contrast, TradeXYZ was the only venue providing real-time pricing for the asset, with ~$290 in the morning and ~$340 one hour before the Nasdaq opening.

Cerabras was TradeXYZ’s first IPOP test, and after a successful conversion to a standard perp (which follows an external oracle pegged to the official pricing of traditional markets during open hours), more assets are being listed on the platform.

Among those, SpaceX was listed ahead of its Nasdaq target of June 12th. This will be the biggest IPO of the upcoming years, with an offering over 30 times Cerebras’s, making it the largest IPO in history and outsizing Saudi Aramco’s 2019 $1.7 trillion offering.

CBRS: The warm-up

Cerebras raised $1.7 billion across five private funding rounds over seven years. However, retail investors had limited opportunities to participate, facing challenges in accessing the IPO for exposure. This changed with the IPOP on TradeXYZ.

On May 1, TradeXYZ launched xyz:CBRS at a reference price of $175, reflecting an implied valuation of $48.9 billion. At this stage of the market’s lifecycle on TradeXYZ, there is no external price influence, as the price is driven entirely by order-book demand and expectations around the Nasdaq open. Traders on the platform consistently valued the stock well above the initial IPO range of $115-125, both as it was revised to $150-160 and as it was finally priced at $185.

TradeXYZ allowed anyone with a cryptocurrency wallet to gain exposure, potentially yielding over 90% profit if held until the Nasdaq opened at $350, just 14 days later.

This represented the largest valuation increase the company had achieved in such a short time. In essence, it was the best period to leverage perpetual exposure, captured entirely onchain on Hyperliquid.

xyz:CBRS traded $281 million of cumulative notional across its 14-day pre-IPO window, with almost all of it landing on the listing day itself. Daily volume sat between $1.5 million and $9.5 million over the first 13 days as discovery built up with little attention, before 14 May printed over $207 million, 80% of the market’s lifetime volume.

Spreads, on the other hand, were wide by listed-equity standards, but tightened into the listing.

The median bid-ask spread across the IPOP window was 61.4 bps, with median visible depth within 50 bps of mid of just $2.3K, as shown by Shaunda Devens, Research Analyst at Blockworks. Both numbers improved sharply through 14 May as the market approached the Nasdaq open and even more so post open. Even after Nasdaq halted just after the opening bell, TradeXYZ remained open and closely aligned with Nasdaq as soon as it reopened minutes later, maintaining tight pricing relative to the Nasdaq over the following hours.

Why can’t this be done with shares?

The traditional pre-IPO market is built on share transfers. Every transaction is a legal transfer of equity from one holder to another, creating huge friction for efficiency due to the following constraints:

• Issuer permission: Private companies control their cap tables. Every secondary trade either gets board approval or uses a structure that the issuer tolerates.

• Accreditation: A share transfer is a securities transaction. US law requires buyers to be accredited.

• Settlement is discrete: Legal review, the transfer agent, and escrow are all involved, and the process can take weeks or months.

• Minimum lot sizes. Transaction costs make it worth it for brokers below a certain amount.

These constraints remain intact, regardless of the wrapper used.

• Direct marketplaces such as Hiive and Forge facilitate these share-transfer transactions.

• Closed-end funds (e.g., ARKVX, VCX, RVI) wrap shares in exchange-traded or interval vehicles.

• Pooled Special Purpose Vehicles (SPVs) such as Hiive Funds and EquityZen single-company funds issue LLC membership interests against the shares the SPV acquired.

• Tokenised SPVs (e.g., PreStocks, Jarsy) issue onchain tokens against the same type of LLC.

Furthermore, IPO companies are also taking steps to preserve these markets for investors. On May 11, Anthropic took significant action by directly targeting its stock transfer mechanisms. The company declared all unauthorised secondary transfers of its shares null and void, naming eight platforms across the stack. In the same week, OpenAI issued a related warning. Crypto lawyer Gabriel Shapiro flagged the legal mechanism: a voidable transfer can be ratified in court, whereas a void transfer is considered never to have existed. This means that chains of secondary trades can be entirely erased from a company’s cap table.

The action did not target a specific wrapper; instead, it targeted the underlying share transfer on which all wrappers rely. If the transfer is legally non-existent, then the claims linked to it are effectively claims against nothing. PreStocks tokens tied to Anthropic and OpenAI dropped roughly 40% in the days that followed.

The synthetic perpetual model is unique as no shares are exchanged at any point in the chain. This also has legal implications: the contract refers to the implied value of a company without representing ownership in that company. There is nothing for the issuer to invalidate, nothing for regulators to claim ownership of, and nothing for broker-dealers to incorporate into a financial pipeline.

Now, this model comes with its own risk surface. The contract has no legal claim on the underlying. The mark price is derived from the order book itself rather than anchored to a tradable spot market, so pricing depends on venue liquidity. As Borja Neira put it: the trade is “long implied valuation +/- funding + liquidity risk + mark-price risk + settlement risk + the absence of clean arbitrage against real shares.”

This is not the cleanest way to buy equity by any means. However, IPOPs go beyond offering exposure, serving as a price discovery venue for the world’s most inaccessible private companies at a time when their hype has never been higher.

Whether this architecture effectively facilitates real-time pricing, continuous discovery, and retail access at real scale is a separate issue. Currently, three venues are implementing this model onchain, with OKX joining the category in the last weeks, but only Tradexyz has completed a live IPO conversion, pricing within 6% of Nasdaq’s open.

The next section explores these models and the reasons behind TradeXYZ’s early success.

What pre-IPO perpetuals have to offer

Four venues run synthetic pre-IPO perpetuals: TradeXYZ and Ventuals on Hyperliquid HIP-3, Lighter on its own L2, and OKX as a CEX.

We can observe price discrepancies across venues due to differences in share counts. Trade XYZ uses the actual post-split share count of 11.87 billion from SpaceX’s S-1; everyone else uses an implied 1 billion, since they opened their markets earlier.

How each venue prices a pre-IPO asset

Every venue is solving the same problem: what should the mark price equal when there’s no public spot market to reference?

TradeXYZ, Lighter, and OKX use internal pricing only, whereas Ventuals strongly pushes prices back to an external valuation. However, pulling from external references, whether Hiive bids, Forge transactions, quarterly 409A marks, or last-round valuations, means importing their inherent staleness. When internal pricing is used, the trader is the source of price discovery.

If pricing mechanics are one half of the equation, funding rates are the other half. For a trader holding a position during a volatile period, such as an IPO, the cost of carry is extremely important. Trade XYZ applies a 0.005 funding multiplier to IPOP markets, which is 1% of their standard perp rate. As a result, xyz:CBRS averaged +1.67% APR across its 14-day pre-IPO window. In contrast, Ventuals, Lighter, and OKX use their standard funding in a market with one-way directional demand, producing significantly higher APRs: +31% for vntl:OPENAI, +64% for vntl:ANTHROPIC, and +39% for vntl:SPACEX, all 14-day medians.

As an example for SpaceX: a trader holding xyz:SPCX from today to the 12 June Nasdaq open pays roughly 0.1% of their notional in funding. The same position on vntl:SPACEX at its 14-day median APR of +39% would cost ~2.7%.

Why TradeXYZ is seeing the flow

Both Ventuals and Lighter have struggled to keep pace with the IPOP activity on TradeXYZ. Even OKX, a top-five CEX with a substantially larger global user base than Hyperliquid, is seeing lower volumes.

What TradeXYZ had that the others didn’t was an existing trader base. Since launching on Hyperliquid in October 2025, Trade XYZ has built the largest RWA perpetuals venue onchain. As of 18 May 2026, it accounts for ~93% of HIP-3 daily volume and ~95% of HIP-3 open interest across 77 markets covering commodities, equities, indices and pre-IPO.

This is also reflected in the growth in open interest (OI) on the platform for RWA markets as of May 18th, 2026: xyz:SP500 ($489M OI), xyz:XYZ100 ($371M), xyz:BRENTOIL ($316M), xyz:CL crude ($167M), xyz:GOLD ($114M).

The flow was built in stages. Gold and silver came first. Then crude oil, which during the late-February Iran conflict saw $1.62 billion in 24h trading volume and briefly outtraded ETH on Hyperliquid as traders piled into a market that was open when traditional venues weren’t. Then Brent. Then MAG7 equity perps. Then the officially licensed S&P500 perpetual in March (XYZ100), which has grown from $213 million OI at launch in early March to $371 million today.

By the time xyz:CBRS went live on 1 May, the audience was already there. They had a venue they knew and a team they trusted. They were being offered a new market on infrastructure they already used daily for gold, oil, and S&P 500 exposure. Pre-IPO on TradeXYZ succeeded because it was the next product in a GTM sequence rather than a standalone launch.

SpaceX and what comes next

At 05:16 UTC on May 18th, 2028, Trade XYZ listed xyz:SPCX with a reference price of $180. Within the first minute, it printed $204. By the end of the first hour, it had ranged from $204 to $218, settling at $211.75. As of this writing: mark $203.14, cumulative session notional $50.67 million, open interest $25.49 million, roughly 42k trades.

SpaceX is queued to list on 12 June 2026 at a $1.75 trillion target valuation. Behind it: Anthropic in October 2026 at $850-900 billion and OpenAI by Q4 2026 or 2027 at $1 trillion+. A total of $3.5 trillion.

To put that in context, between 2015 and 2024, the US IPO market raised an average of roughly $50 billion per year.

Whoever manages to capture volume in secondary markets and broader financial mindshare through price discovery will be hugely successful, and TradeXYZ is set to be the front-runner.

What makes this stock particularly interesting for an IPOP is Elon, the CEO of SpaceX. He is the most followed individual on X, a platform he himself owns, and has a track record of moving markets with his posts. He just approved a 5-for-1 split of SPCX on 15 May and announced a 30% retail allocation in the IPO, well above the institutional norm. Let’s see if he brings any eyeballs to the xyz:SPCX market.

Whatever happens, the SpaceX IPO will be monumental and priced live onchain.

Refreshingly, the 10 apps that helped reach the KPIs don’t necessarily fall under crypto as a category: they go beyond it to serve a broader audience and can be categorised as consumer applications.

We highlight this as the consumer-layer opportunity: Crypto has always struggled with adoption and with gaining net new entrants for the applications we have built.

Most of the time, this requires education: Users need to be introduced to things slowly, and consumer layer applications perfectly fit for this use case as they generate economic activity, attract new entrants, and give a way for those who are interested to explore more of crypto without necessarily knowing what happens in the background or at a technical layer.

Only once they are consumer app users do they then start exploring crypto as a whole.

This is a change from the previous ecosystem launches, where the opposite argument was often made. Get users in a crypto ecosystem, and then they will explore apps.

While the transition from Level 2 to Level 3 in the image above might not occur as some users simply don’t wanna use DeFi, this novel approach can help expand crypto’s potential user base.

To help the chain tap into a new layer of users, MegaETH launched MegaMafia, an accelerator program designed to incubate and bootstrap native ecosystem applications.

We also covered some of the MegaMafia apps before:

This is one part of the equation where MegaETH did things differently, the other being their KPI-driven TGE.

MegaETH went live with its public mainnet on February 9th, 2026, and introduced three KPI milestones, hitting any one of which would trigger TGE. The idea was to demonstrate real usage rather than launching with an empty chain, by gating the launch on usage as well as deployment alone:

• The first required 10 live applications from the MegaMafia, as well as hitting >100k transactions across >25k unique wallets

• Hit $500 million in USDm market capitalisation (the chain’s native stablecoin) and 25% of it deposited into smart contracts

• Three apps to earn $50k in daily fees consistently for 30 days.

After 73 days of going live, they hit the first milestone, and TGE is happening today, 7 days after KPI completion.

The Way to Terminal

After TGE, Mega is running an incentive campaign to distribute about 2.5% of the MEGA supply.

To streamline interaction with the MegaETH ecosystem, they launched Terminal.

https://terminal.megaeth.com/

Season 1 started on 28th April and will run till 23rd June, 8 weeks. This season’s wave 1 ends with the TGE, and more apps will appear on the terminal to explore today: currently, only six are listed.

Beyond exploring apps, two things on the Terminal are worth checking out: Boosters and Clan.

• Boosters apply if you hold a fluffle NFT, participated in the echo round, or were previously active on the chain.

• Clans require users to pledge to one of the six listed NFT collections. As the clan reaches more pledges, holders of the clan NFTs get a boost in their points.

The apps that triggered the TGE, mapped onto consumer applications, tap into habits and things most people already interact with: collecting cards, trading sports cards, and shared culture.

You can also check the complete MegaETH ecosystem here:

https://rabbithole.megaeth.com/

A Numbers Game

The MegaETH ecosystem has ~$105 million in total value locked (TVL). 91% of this TVL is represented by three apps: Kumbaya (DEX and Launchpad), Aave (Lending), and World Markets (DEX). This concentration is expected as we are only 80 days into the mainnet, and Terminal has only just kicked off. As other apps get more users, this concentration is expected to change.

USDm is Ethena’s whitelabel stablecoin for MegaETH, backed by T-bills. Since the incentive campaign announcement, the USDm market capitalisation has risen to ~$167 million as users rushed to try the live applications, now covering one-third of the $500m USDM KPI.

At the current supply with a treasury yield of 3.5-4%, it generates about $6 million in annual yield, which will be used to buyback MEGA, contributing to its flywheel. As USDm grows, the yield it generates increases, eventually contributing to more MEGA buybacks, and, with that, interest and demand for the chain grow, helping USDm grow even further. This is an additional source of revenue for the ecosystem embedded from Day 1, unlike other chains, which route most of the value generated through stablecoins to issuers like Tether and Circle.

Closing Thoughts

Wave 2 of Season 1 begins today, post-TGE, and more apps will appear on the terminal for exploration.

The category of applications on MegaETH is not part of the general chain’s ecosystem structure. They tried to expand into the consumer market and serve a new set of audiences. From a broader perspective, this is good for crypto, as it will help onboard net new entrants and align with current trends across consumer applications such as prediction markets and broader hyperfinancialisation. Previously, chains usually tried too hard to sell DeFi, which has failed. MegaETH’s approach is at least different.

We also talked about the target audience for MegaMafia projects in the past, as they are building heavily for Gen Z:

Mega is by far one of the most interesting events happening in 2026.

How are you going to play this out?

Only a few years remain before Artificial Intelligence (AI) systems surpass humans in most cognitive tasks. With the advent of computers and AI, our civilisation might no longer be a human’s world.

AI is good at researching, code generation, software development, planning, video and image editing/generation, and multiple other tasks. One of the things humans are not very comfortable letting go of is finance. Within this context, the narrative of agentic payments has grown too large to ignore. This is not an abstract forecast, but an industrial reality poised to reshape how money moves.

The AI agents market is valued at $7.84 billion in 2025 and is projected to reach $52.62 billion by 2030. McKinsey estimates generative AI could add between $2.6 trillion and $4.4 trillion annually to global GDP.

And yet, these agents are limited by structural flaws that prevent their full absorption into the financial world.

Paying for things is one of these. Brian Armstrong predicts there will soon be more AI agents than humans making transactions on the internet. Despite how bold that sounds, agentic payments have been largely speculative in their early form.

The problem is structural and encompasses legal and technical constraints:

• Proof of Personhood: The entire architecture of traditional finance assumes users have real identities that can be verified through Know Your Customer (KYC), a requirement that doesn’t apply to AI agents.

• Architecture for Humans: Legacy financial systems were designed around humans and include settlement cycles, banking hours, geographic routing constraints, layers of intermediaries, and more, all of which limit the transactions an AI agent can perform.

• Gated Access: The financial infrastructure treats access itself as something to be granted. Products like prime brokerage, institutional custody, and derivatives clearing are simply unavailable to entities below a certain size.

This article touches on two main aspects of the agentic economy:

• How can we transition the current stack to make it agentic-first?

• Which network will be established as the mainstream infrastructure for agentic payments?

The transition is already in process, with three converging standards:

• One for payments (x402)

• One for trust (ERC-8004)

• One for commerce, that together form the first complete financial system designed for machines. (ERC-8183)

Few businesses are positioning themselves for this future, and the Ethereum ecosystem is one of them and the strongest candidate because of its censorship-resistant and secure nature.

What follows is a map of the infrastructure being built, the competitors racing to respond, and a deep dive into the tech stack, making EVM-compatible chains the primary candidate to become the settlement layer of the future trillion-dollar agentic economy.

Chapter 2: Ethereum’s Agentic Financial Stack

The transition to make blockchain networks agentic-first is already in progress.

Three EVM standards are converging into a complete, permissionless financial system for machines, covering the three important aspects of finance: Movement of money, trust, and the commerce lifecycle.

The crypto agentic sector went through its crest and trough, and it’s currently trading at a ~$2.9 billion market capitalisation, down from a peak of $15-$20 billion.

While these numbers might look a little disappointing, the initial wave was mainly driven by speculation and the newness of this narrative. However, as always happens, tech takes some time to catch up. This is finally happening, with new standards like ERC-8004 gaining momentum. In terms of agent deployments, over 98k have already been deployed via ERC-8004 across 10+ EVM chains since it went live at the end of January this year.

Additionally, products like x402 from Coinbase have had a lifetime trading volume of over $48 million since their launch in May 2025, with peak volume in Q4 2025. These numbers plummeted as soon as they grew because users were speculating in the agentic economy, and multiple products gained traction they didn’t deserve in the first place. Now, when the numbers are a little more balanced, it reflects the real adoption metrics.

In this section, we discuss three core standards or protocols that work together to make agent commerce possible at scale.

x402: Payments

x402, the “internet payments standard”, developed by Coinbase, revives the long-dormant HTTP 402 status code, reserved since the earliest days of the internet but never implemented. It creates the payment infrastructure for machines by embedding payment gates directly into web communication. Any server can require payment, and any client can pay in a single HTTP request-response cycle.

The mechanics are simple: A client requests a resource, and the server responds with HTTP 402 and payment instructions. Then, the client signs a stablecoin payment and resubmits. Afterwards, the facilitator settles onchain and the server delivers. There truly is no human in the loop. The facilitator never custodies funds, but the agent authorises what to pay, and the facilitator handles how.

Since its May 2025 launch, x402 has processed over 50 million transactions. In December 2025, Coinbase released V2 with features like:

• Wallet-based identity and reusable access sessions, smoothing the user experience, providing benefits like lower latency, fewer round-trips, and cheaper repeated calls.

• Modular architecture makes the V2 a plug-and-play platform by clearly separating the protocol specification, its SDK implementation, and facilitators.

• Unified Payment Interface with multi-chain support, legacy payment rails like ACH, SEPA, or card networks.

• Automatic discovery enables the sellers to publish the APIs once, while facilitators stay synchronised without developer intervention.

Recently, x402 underwent an upgrade to the Upto scheme. While the older versions were good, it was running on a pay-per-request model, which isn’t ideal cause it requires knowing the cost upfront, which doesn’t work with LLMs, for example, with Upto, a client can authorise a maximum amount, and the server can settle for the actual amount used at the end of the request.

Cloudflare co-launched the x402 Foundation and integrated it with its Agents SDK and MCP servers so AI agents can pay in batches, subscriptions, or daily rollups, ideal for things like “pay per crawl.” This is interesting because agents won’t need to settle immediately, and the batch transaction allows payment once all required data has been fetched. Moreover, cloud providers like AWS demonstrate how to use services like Amazon Bedrock and CloudFront + Lambda@Edge to implement x402 payment flows, enabling agents and APIs to perform automated, pay-per-use USDC transactions over HTTP.

Galaxy Research documented that initial x402 activity was primarily speculative, with teams using the standard to mint and purchase memecoins, thereby driving transaction counts and volumes in late October, accounting for more than 50% of the volume until December 2025.

In the last few weeks, the average transaction count has remained at ~200k, signalling that activity has now stabilised and that the organic adoption curve is forming, with speculation no longer leading.

ERC-8004: Trust

x402 solves the payment problem, but the agents still have no way to know whether the counterparty is legitimate. This is where ERC-8004 (went live on mainnet in late January) steps in. It addresses the trust issue by extending the Agent-to-Agent (A2A) protocol with a trust layer that allows participants to discover, choose, and interact with agents. ERC-8004 introduces three registries:

• The Identity Registry gives every agent a persistent onchain identity, an ERC-721 token with capabilities, endpoints, and trust models. It is similar to a KYC badge for machines, enabling any other agent to look it up, cryptographically verify ownership, and know exactly what they are dealing with before engaging in any real interaction.

• The Reputation Registry records cryptographically verified feedback after each interaction. Over time, this creates a performance history that accompanies agents, enabling other agents to decide whether to use their services.

• The Validation Registry coordinates third-party verification with economic stakes. It’s a cryptographic or economic proof (ZK and TEE attestations) that an agent’s outputs are correct and not merely dependent on past clients’ ratings. This part of ERC-8004 is currently not live and is in discussion with the TEE community.

In terms of adoption metrics, it is live on 10+ EVM mainnet chains, with ~98k agent registrations; the largest number of ERC-8004-enabled agents is registered on Base, followed by Ethereum and MegaETH.

ERC-8183: Commerce

There is a gap between payments and trust that neither x402 nor ERC-8004 closes on its own. An agent can pay and verify identity, but what happens if the work is never delivered, the deliverable is wrong, or the provider disappears after receiving funds in a particular instance?

In traditional commerce, this is handled by chargebacks, escrow, and dispute resolution, none of which exist natively onchain until ERC-8183. Co-developed by Virtuals Protocol and the Ethereum Foundation’s dAI team, ERC-8183 defines a single core primitive, the Job.

The Job is deliberately minimal. Three roles are involved: Client, which creates the job, defines the task, and may lock funds in an onchain escrow (depends on the implementation). The Provider submits a deliverable, typically a hash pointing to offchain content on IPFS or Arweave. The Evaluator evaluates the work done. For subjective work such as writing or design, an AI agent can be used to read the submission and compare it with the original requirements. For deterministic tasks like computation or proof verification, it can be a smart contract encapsulating a ZK verifier that automatically calls complete or reject. For high-value or high-risk work, a multi-sig wallet can be a part of the implementation. Every Job flows as:

• Open

• Funded

• Submitted

• Terminal (Completed, Rejected, or Expired).

As the specification states: “A payment moves money. Commerce is everything around the payment that makes it trustworthy: what was agreed, whether the work was done, who verified it, and what happens if it was not.” ERC-8183 also introduces hooks, optional smart contracts for bidding, reputation-gating, fund transfers, and privacy-preserving jobs. This is the onchain equivalent of the authorisation-and-capture model that makes card commerce possible, where the authorisation part is responsible for checking whether the client has sufficient funds, capturing the funds, and then transferring them to the merchant, thereby completing the transaction.

Each complete Job produces a verifiable onchain record of interaction, submission, and evaluation that feeds directly into ERC-8004 reputation registries, meaning commerce activity compounds into trust development, helping to attract more relevant work.

The Loop

The three standards form a self-reinforcing cycle of commerce where the agents can be discovered through ERC-8004, and their previous work can be verified, and a new Job can be assigned based on that through following the ERC-8183 standard, giving more reviews for the agents and their work being verified, creating a loop that keeps on generating good work.

The first working demonstration of the full economic loop already exists. In early 2026, a robot dog built by OpenMind plugged into a charging station and paid for its own electricity in USDC.

• OpenMind’s OM1 operating system treated spending as a standard robot capability

• x402 handled payment negotiation over HTTP

• Circle’s Nanopayments protocol batched thousands of offchain authorisations into single onchain settlements.

The robot did not need an account, a credit card, or a human. It signed an authorisation, and the payment was settled. Therefore, what appears as a concept is actually a working proof of concept.

The Ethereum Foundation has formally incorporated this infrastructure into its 2026 roadmap through the dAI team, led by Davide Crapis, with the explicit goal of transforming Ethereum into a global settlement layer for AI.

Chapter 3: The War of the (Paying) Machines

Recently, multiple competing visions for machine payments were launched, reflecting that the major industry players want to be part of this developing economy:

• Visa released Visa CLI, letting AI agents trigger card payments from a terminal without embedding or managing API keys.

• Stripe and Tempo launched the Machine Payments Protocol alongside Tempo’s mainnet, a privacy-enabled payments-focused L1. Its co-founder, Matt Huang (Paradigm managing partner and Stripe board member), told Fortune that agentic payments are still very early. Launch partners include Anthropic, OpenAI, DoorDash, Shopify, Revolut, and both Visa and Mastercard. The card networks are collaborating with the infrastructure that challenges them.

While there are many competing offerings, some of them work in complementary ways, such as x402 and Stripe Agent Commerce Protocol (ACP). x402 is a standard for payments between software, best for use cases like API calls, data feeds, LLM interaction, and many more cross-software interactions. Stripe’s ACP is more relevant in e-commerce, enabling AI agents to purchase items from merchants without removing core requirements such as fraud detection, dispute resolution, refunds, regulatory compliance, and customer support. They do this through Shared Payment Tokens (SPTs), which provide merchants with limited authorisation to charge a payment via their preferred infrastructure.

Galaxy illustrates how they can work together with a travel agent example: x402 pays for weather and airfare APIs, and ACP handles the flight booking (regulated, human-approved). ERC-8183 addresses the gap between them by providing an escrow-and-evaluator model that is a programmatic replacement for chargebacks.

Even with many products being built in the agent payments category, products using the onchain rails will prevail because they are cheaper than card providers like Visa and Mastercard. In February, Citrini Research crystallised the structural argument: AI agents, programmed to minimise costs, will systematically avoid 2–3% interchange fees when stablecoin transactions on L2s cost fractions of a cent.

Chapter 4: If onchain, then which chain?

If the agentic economy will transact on crypto rails, the question becomes: which crypto rails?

Ethereum is the largest smart-contract-enabled blockchain with deep liquidity and security. To address its scalability problem, many alternative L1s emerged, promising faster execution. The usual rooted assumption in crypto is that a newer, better chain will eventually gain decent market share and attract users. For agentic finance, that assumption might be wrong, and there are reasons why Ethereum and its L2s will hold great market share.

• The first non-negotiable is security. An agent managing a portfolio, executing trades, or holding funds in escrow on behalf of a client needs the most pristine settlement layer available. Ethereum’s consensus layer has operated without a successful attack since launch. The ERC-8004 singleton contract sits on Layer 1 because enterprise-grade agents require that level of economic security as their anchor, even as high-frequency consumer activity settles on L2 networks where fees are negligible.

• The second is composability. A trading agent does not operate in isolation. In a single transaction chain, it might interact with Aave for lending, Uniswap for swaps, Chainlink for price feeds, and Morpho for yield optimisation. That depth of programmable financial infrastructure simply does not exist elsewhere.

• The third is standards convergence, which is the argument competitors will find hardest to replicate. ERC-8004, ERC-8183, x402, Google’s Agent-to-Agent protocol, and the Model Context Protocol via Cloudflare are all deployed on EVM-compatible infrastructure.

It reflects the choices of the institutions building the stack. Coinbase’s entire x402 architecture runs on Base, an Ethereum L2. The Ethereum Foundation’s dAI team exists with the explicit mandate to make Ethereum the AI settlement layer. Crapis (lead dAI) estimate that within three to five years, the majority of Ethereum traffic will come from machines. Nethermind, a core Ethereum infrastructure company, is building ChaosChain, a protocol for agentic accountability built around ERC-8004, A2A, and x402.

Solana is the obvious competitor, with strong developer activity and x402 support across multiple chains. Tempo, arguably the most institutional blockchain launch of 2026, is EVM-compatible and is a standalone Layer 1 designed for payments at scale with opt-in privacy features.

Moreover, currently, most x402 volume today flows through Base rather than Ethereum Layer 1. This is by design. Micropayments require sub-cent gas that the mainnet cannot currently provide, and currently serves as the security and settlement anchor.

Chapter 5: The Winding Road to Agentic Finance

The infrastructure for agentic finance is being built at a remarkable pace, and the recent work on x402 and different ERC standards (8004, 8183) has paved the way for a streamlined, smooth agent-led onchain economy. Yet it’s very hard to fully trust agents to handle everything, as we still need to address the more fundamental aspects of security and privacy. The work underway to fix these issues is progressing. For example, on the privacy side, Ethereum is developing Kohaku, an SDK that embeds privacy-preserving technology directly into wallets, making shielded transactions the default, but there are still gaps to address.

Different Attack Layers

Whenever a user interacts with a crypto product, several layers are involved, each of which could be a potential source of data leakage, which makes privacy a full-stack problem on the settlement layer rather than a single exposed front that can be solved by just improving agents and their infrastructure:

• Every onchain transaction is currently public by default. An agent managing a portfolio broadcasts its strategy, position sizes, and the time it took a specific trade to everyone.

• RPC Layer pose as the second point of exposure, as RPC nodes see every query before it becomes a transaction. It collects details such as the contracts being read, the actions being performed, and the IP address from which the query originated.

• At the network layer, IP address analysis and traffic-timing correlation can deanonymise users even when transaction content is encrypted.

• Finally, the wallet interface itself can leak data: mouse movement patterns, device characteristics, and font enumeration can link a user across fresh wallet addresses.

Beyond the passive surveillance problem, agents face a more direct security threat: prompt injection. Whenever an agent queries an external source, an ENS record, a price feed, or contract metadata, the response comes from infrastructure that a malicious entity could control. A poisoned ENS record instructing the agent to ignore previous instructions and send all funds to the attacker’s wallet is enough to drain a wallet entirely with no phishing link clicked and no malware installed. It is a new class of attack vector.

The CROPS Mandate

Another aspect that agentic infrastructure needs to consider before it can be usable at scale is the CROPS framework underpinning the Ethereum mandate. AI agents need to be:

• Censorship Resistant, ensuring that an agent cannot be deplatformed or blocked mid-execution by any single intermediary.

• Open-source, so their decision logic can be audited.

• Private at every layer of the stack.

• Provably Secure means that guarantees are mathematically ensured through formal verification and ZK proofs.

Together, CROPS set a bar that an agent must meet before it can be trusted with financial decisions.

AI as a Security Layer

While AI isn’t yet a fit for agentic finance, once it meets the required benchmarks, it becomes the obvious choice because, in that scenario, it serves as the UI for humans. A general user won’t read the smart contract bytecode or verify the token addresses in the swap UI, but AI agents can be programmed to do so and then execute the transaction. This adds another layer of security that couldn’t be applied to every user, but AI makes it possible.

AI becomes the primary interaction layer for crypto.

Crypto protocols still have a bad UX, and it’s a problem we have been trying to solve for a long time. A simple transaction to submit funds in a protocol to earn yield requires signing multiple transactions, bridging funds, and finding the best yield opportunities. This equation becomes even harder when we take cross-chain yield into consideration. But someone who is just prompting “I have $10k in USDC, and I am looking for 10% annual yield” won’t need to worry about it all.

As the AI grows, its relevance increases as it solves certain pain points crypto has around security and UX. At the end of day, every user doesn’t need to figure out the how blockchains work, why they need gas on every chain, why yields are different on cross-chain, why it is important to analyse a pool liquidity profile and the assets it is exposed to before depositing funds while all of this can be programmed into an AI agent which can be used by multiple users.

Chapter 6: Closing Thoughts

The agentic economy is here, and the continuous efforts by the Ethereum ecosystem to advance multiple standards to make agentic finance more secure and trustless reflect that the agent-led future is not far away.

The case for Ethereum as the settlement layer of the machine economy rests on three arguments:

1. Security: Ethereum has had no downtime since its inception in 2015 and has a large set of active validators that contribute to the chain’s decentralisation and censorship resistance.

2. Composability: Ethereum is the DeFi hub and home to substantial liquidity. Multiple relevant, large-scale protocols are deployed on Ethereum, making it an efficient venue for any agent to find and deploy high-yielding strategies.

3. Standards Convergence: x402 handles the movement of funds, ERC-8004 handles the trust layer, and ERC-8183 ensures work is delivered, all present in EVM-compatible infrastructure. And the stack is still being extended: ERC‑8211, published in April 2026 and co‑developed by Biconomy and the Ethereum Foundation, adds dynamic, constraint‑guarded execution that lets agents adapt multi‑step DeFi strategies to live onchain conditions in real time. Together, the four standards cover the full commercial lifecycle: identity, payment, commerce, and execution.

But none of it is sufficient until we address security and privacy requirements and treat it as a full-stack problem. Ethereum is on its way to solving these problems through its roadmap, and the AI space is generally skewing towards open-source code.

This is one of the most active areas within crypto: Visa, Mastercard, Stripe, and a new generation of payment-focused L1s and L2s are building parallel infrastructure that addresses the machine payments user case through different architectural choices, including routing agent payments through existing card rails, or building purpose-built chains optimised for payment throughput rather than general smart contract execution.

While the competition is growing, Ethereum’s edge is unlikely to be replicated, given the combination of programmability, security, and an open ecosystem of composable standards that no single entity controls. For the set of agentic finance that requires trustless settlements, geographic regulatory independence, and DeFi interactions, cross-border commerce, the permissionless and censorship-resistant prevails.

The most likely near-term outcome doesn’t include a single winner but multiple winners, as L2s might be better for x402 payments where fees are negligible, and speed is adequate, while higher-value running relies on human supervision and Ethereum serving as a security anchor for all of it. As Ethereum grows, it will become more private over time, and its transaction fees will decrease even further; both are part of the current roadmap leading to many agents using the L1 itself.

From online banking to mobile banking, to neobanks, a term originally described digital-only banks with no physical branches, built from scratch rather than adapting legacy systems.

Nowadays, they all co-exist with the legacy banking sector.

Some neobanks have been extremely successful, including Revolut, which started as a foreign exchange card for travellers and evolved into a multi-product financial platform that now serves over 50 million users globally, with $4 billion in annual revenue.

The global neobank market is valued at $148.9 billion and projected to exceed $4.4 trillion by 2034. Revolut’s transaction volume approached $1.3 trillion in 2024, proving that new entrants can compete with well-established banking monopolies.

Traditional neobanks promised to replace legacy banking but ended up running on the same rails: the same correspondent banks, the same settlement delays, the same custodial model, just with a better experience, using an app.

The underlying infrastructure is the same one that makes banking a hassle, dealing with intermediaries, agents, and compliance officers, regardless of how sleek the mobile interface looks. When Silicon Valley Bank collapsed in March 2023, it reminded its clients how precious a physical banker can be when a crisis looms and things go south. Without a reliable physical fallback, banking remains a remote, impersonal activity, much like DeFi hacks and exploits, which are more often than not left unresolved.

Dozens of crypto banks are live, while stablecoin supply has exceeded $308 billion. The clearest proof that this market is monetisable is RedotPay. Founded in Hong Kong in April 2023, the stablecoin-based payments fintech now processes over $10 billion in annualised payment volume. It raised $194 million in 2025 alone. By February 2026, Bloomberg reported that RedotPay was preparing a US IPO targeting a valuation exceeding $4 billion, with JPMorgan, Goldman Sachs, and Jefferies advising. According to data, RedotPay had $91 million in crypto card volume for November 2025 alone, second only to Rain at $240 million.

The architecture is closer to Revolut’s crypto top-up than to anything described below. RedotPay proves the demand exists. The protocols examined in this piece are building the architecture that could change banking.

The maturation of DeFi infrastructure has created the conditions for a new kind of bank, one where users could store, spend, grow, and borrow assets onchain, without intermediaries.

Crypto cards give users the feeling that they finally own their money without outside control, and increasingly, the infrastructure backs it up.

This article explores how these onchain banks differ from each other, and whether they offer the same guarantees, protect against operational risk, and satisfy compliance requirements, because offchain neobanks are radically different from onchain banks, and the comparison is almost misplaced.

From Neobanks to Onchain Banks

A neobank is a digital-only bank with no brick-and-mortar branches, built from scratch rather than adapting legacy systems. They exist on cellphones, within finger’s reach, but there is no physical presence except in corporate offices.

The evolution of the banking sector follows a clear (though slow) trajectory, with each generation building on the last, mirroring the technological paradigm of scientific discovery. However, crypto banks are far from the neobank model, and we will see how they differ from their elders.

Same Same but Different

1. Web2 neobanks like Revolut, SoFi, and Nubank are mobile-first interfaces built on legacy banking infrastructure. Developing countries have benefited from digital banking services in remote locations where traditional banks such as HSBC cannot open branches. These platforms developed access and practicality, but not self-agency.

• They are still custodial, with the bank holding the user’s money on its own balance sheet.

• They are still dependent on correspondent banks for cross-border settlement.

• They are still geographically limited by licensing regimes: Revolut has spent years and hundreds of millions of dollars acquiring banking licences jurisdiction by jurisdiction.

Built for convenience, the model remains centralised, controlled, and far from private in practice.

2. Web2/3 hybrids like Xapo, Nexo, and Matrixport represent the first attempts to bridge traditional and crypto banking. They offer fiat and crypto in one application, but the underlying model remains largely custodial. Users can hold Bitcoin alongside pounds and euros, but the platform controls the keys and manages the assets. In the backend, these platforms run omnibus custody, in which they pool user funds, use centralised order books for crypto trading, and settle fiat via the same correspondent banking rails as Web2 neobanks. The difference from Web2 is asset class access, not architecture.

These platforms share similarities with centralised exchanges: even if the user can view their assets, those assets are held by a third party. If the platform collapses for structural or financial reasons, as happened with FTX, users lose their assets.

As such, Web2/3 hybrids inherit the counterparty risk of centralised platforms, the same risk model that produced Celsius or BlockFi, while offering only slightly more functionality than a standard neobank by supporting cryptocurrency assets.

3. Onchain banks like ether.fi Cash, Tria, and Superform represent the architectural turn. Built on smart contract wallets, integrated with DeFi protocols for yield on deposits, and connected to Visa and Mastercard through card infrastructure providers, they are composable and yield-bearing by design, with varying degrees of user custody depending on the product.

Users’ assets are held in smart contracts that guarantee self-custody, not on the platform’s balance sheet. Yield is generated through transparent DeFi strategies, not by banks rehypothecating deposits. Spending happens through onchain settlement routed to Visa or Mastercard. As Blocmates put it: “You do not store money with them; you use money through them.” The distinction is fundamental: it is the difference between trusting an institution and trusting a smart contract.

Both have different risk profiles, but a smart contract offers the benefit of eliminating human input entirely. If anything goes wrong with the platform, the user retains control over their funds at all times.

4. B2B onchain banks represent the furthest extension of the thesis. Dakota is building crypto-powered neobanking for businesses, offering corporate treasury management, payroll in stablecoins, and cross-border payments without correspondent banking delays, with deposits backed by US Treasuries, zero transaction fees, and yield generated through Treasuries and DeFi strategies.

The distinction is structural: with a traditional neobank, assets sit on the bank’s balance sheet. With a crypto-powered neobank, assets sit on a transparent, verifiable ledger, and the user retains ownership. Each generation has moved closer to direct user control: from digitising the interface, to adding crypto asset access, to eliminating intermediaries entirely. If this model proves to be adopted by businesses, and if it can satisfy the regulatory demands of governments and consumer expectations of safety, the entire financial stack can be deployed onchain.

But the question is not just whether onchain banks can supersede, or at least compete with established outfits. It is how they work in practice, starting with the most basic use case: buying a coffee at the local shop.

How Crypto Cards Get You a Coffee

One of the main value propositions of crypto neobanks is that they let you use your crypto for everyday purchases with a crypto card.

Crypto card spending has grown exponentially to $406 million in monthly volume as of November 2025, the highest on record, with Visa’s stablecoin-linked card spend alone reaching a $3.5 billion annualised run rate.

In this section, we explore the different crypto cards underlying infrastructures, with a simple example of buying a coffee.

When a user taps a crypto card at a coffee shop, what happens between the tap and the merchant receiving payment?

There are two distinct mechanisms in the market today.

Fiat Settlement

The standard model for spending purposes, used by Crypto.com or Binance Card.

• The user taps the card, and the merchant terminal sends an authorisation request over Visa or Mastercard, identical to any normal card payment.

• The card issuer’s system checks the user’s crypto or stablecoin balance, runs a fraud check, and if approved, automatically sells the user’s chosen asset at the real-time market rate and converts it to fiat. By the time the transaction reaches the card network, it is indistinguishable from any other card payment. Nothing from the merchant’s perspective changes, as he receives local currency as he would have with any other fiat transaction.

• Who handles the conversion depends on the card’s infrastructure: programme managers like Baanx and Bridge convert the crypto to fiat themselves, then pass it to an issuing bank (Lead Bank, Cross River Bank), which settles to Visa. Full-stack issuers like Rain handle the entire chain, liquidating stablecoins and settling directly to the Visa network, which then routes the amount to the acquiring bank in the merchant’s desired fiat currency.

Stablecoin Settlement

Stablecoin settlement is growing rapidly but remains nascent and works differently. Rather than converting to fiat before settlement, the issuer settles its obligations to Visa directly in stablecoins over a blockchain. Visa launched USDC settlement for US institutional partners, allowing participating issuers and acquirers to settle VisaNet obligations in Circle’s USDC on the Solana blockchain.

The benefits for issuers are concrete: faster fund movement and 24/7 inter-institutional settlement on blockchain rails, without any change to the consumer card experience. Visa’s stablecoin-linked card spend hit a $3.5 billion annualised run rate in 2025, approximately 460% year-over-year growth, but still represents roughly 19% of total crypto card settlement volume. As of early 2026, native stablecoin settlement supports a limited set of assets, primarily USDC and PYUSD on Visa’s side, with Mastercard expanding to include additional stablecoins. USDT, the world’s largest stablecoin by market capitalisation, remains absent from Visa and Mastercard’s native settlement programmes.

Visa is also a design partner for Arc, a new Layer 1 blockchain developed by Circle, and plans to use it for USDC settlement and to operate a validator node.

The payment network layer is dominated by Visa, capturing over 90% of onchain card transaction volume. The divergence reflects different strategies.

Visa partnered early with emerging infrastructure providers like Rain and Reap, capturing crypto-native issuers through a single integration point that gave Visa exposure to dozens of card products, while Mastercard focused on direct partnerships with major centralised exchanges such as Revolut, Bybit, and Gemini.

To date, Visa has facilitated almost $100 billion in cryptocurrency purchases and over $25 billion in cryptocurrency spending, across a network of more than 150 million merchants and 14,500 financial institutions.

Between the user and the network sit two types of intermediaries, and the distinction determines how much margin each neobank captures per transaction.

• Programme managers, companies that manage card programmes on behalf of issuers without holding direct network membership, like Bridge or Gnosis Pay, handle the crypto-to-fiat conversion but depend on issuing banks for settlement to the payment network. Baanx’s Crypto Life is the white-label programme manager behind the MetaMask Card, the Ledger Card, and others.

• Full-stack issuance platforms, like Rain and Reap, hold direct Visa principal membership and own the entire stack: BIN sponsorship, lender of record, and network settlement, all in one product. By consolidating the existing card issuance stack into a single offering, Rain captures much of the value that is often lost to banks and other intermediaries. Rain is reportedly approaching a $2 billion valuation.

This is telling because a protocol built on Rain’s full-stack rails (like Plasma One) retains a larger share of the transaction fee, since fewer intermediaries take a cut, compared to one routing through a programme manager, an issuing bank, and a network.

The architecture beneath the card matters as much as the architecture on the blockchain. The next question is what sits above the payment rails, and how these protocols implement the paradigm of banking on a ledger.

The Onchain Bank Models

This section explores different onchain neobank models using four different protocols using very different approaches as our case study.

Each has made fundamentally different architectural choices, and those choices, depending on their success, will set the standard for crypto banks.

ether.fi Cash, The Onchain TradFi Bank

Ether.fi accounts for over a quarter of total spending volume across all crypto cards.

Cash, ether.fi’s non-custodial crypto card is now its largest revenue line, accounting for approximately 50% of protocol revenue.

What makes ether.fi Cash is architecturally distinct in its custody and wallet infrastructure. The architecture is a Gnosis Safe-based modular system called EtherFiSafe. Each user gets a dedicated multi-signature smart contract wallet with whitelisted modules that enable spending, borrowing, and yield generation from a single non-custodial vault.

This is meaningfully different from Web2/3 hybrids. In a hybrid model like Nexo, the platform holds user funds in pooled accounts. In ether.fi Cash: each user’s funds sit in their own smart contract, including ether.fi itself cannot access the user’s private keys. If the ether.fi platform disappeared tomorrow, user funds would remain accessible in the Gnosis Safe, recoverable via any Web3 interface.

The product offers two spending modes:

• Direct Pay transfers assets from the user’s vault to fund a card transaction.

• Borrow Mode allows users to deposit ETH as collateral into staking or liquid-vault products, then borrow against it via a dedicated Aave deployment. The user spends borrowed stablecoins while their ETH continues earning yield. This is a significant upgrade: no traditional neobank and no Web2/3 hybrid currently offers the ability to borrow against staked crypto collateral and spend the loan directly via a card.

This creates a flywheel: cards drive deposits, deposits drive TVL, TVL drives management fee revenue.

In terms of size, ether.fi reached approximately 300,000 accounts with almost 70,000 active cards,

The migration to OP Mainnet began on February 19, 2026, moving all accounts from Scroll under a long-term Optimism Enterprise partnership. The Visa card launched on February 26 offers up to 3% cashback with Apple Pay and Google Pay integration.

Ether.fi Cash offers cashback ranging from 2% to 3% depending on membership tier, with promotional campaigns pushing total rewards to 5%, a portion paid instantly in SCR or wETH and the rest in ETHFI tokens. The critical difference is in the cost structure of ether.fi. Compared to centralised exchanges that pay rewards in fiat or liquid crypto, thus incurring real-dollar costs, ether.fi funds its rewards through token incentives at near-zero marginal cost of capital. The tradeoff is that rewards are paid in volatile tokens; if the value of ETH or SCR drops 20%, the cashback value drops with it.

Tria, The Self-Custodial Payment Infrastructure

Where ether.fi built a bank, Tria built an operating system.

Rather than competing as a standalone consumer product, it provides the settlement and wallet infrastructure that other crypto banks build on. This is analogous to what SWIFT did for correspondent banking in the 1970s, setting a standard that the industry adopted rather than each bank building proprietary rails.

The core innovation is BestPath AVS, a decentralised settlements marketplace currently being open-sourced, built as an Actively Validated Service on EigenLayer, where solvers, routers, and relayers compete to route transactions across chains. Other neobanks and wallets can plug into BestPath to access cross-chain settlement without building their own bridging infrastructure.

Tria is truly chain-agnostic: a user can hold assets on any supported chain and spend them via a Visa card without manual bridging, swapping, or gas management. The wallet is fully self-custodial with social recovery, no seed phrases, and no gas tokens required.

To date, Tria’s card product has more than $60 million in total volume, settling across Arbitrum, Base, Optimism, Polygon, and Solana, with monthly card spend running at roughly $12 million as of March 2026. The platform serves 500,000+ users.

Beyond payments, Tria’s perpetual product, running on Hyperliquid using builder codes, has crossed $475 million in volume in its first 30 days alone, generating $439K in fees and annualising at $5.3M in revenue from perps alone. Tria now accounts for 0.116% of all global Hyperliquid perpetual volume, a notable share for a product that was just launched in the middle of an explosive market.

BestPath and Tria’s CoreSDKs function as modular developer toolkits for wallet creation, authentication, and payment processing, enabling other neobanks to integrate Tria’s infrastructure without building from scratch.

Additional ecosystems integrating Tria include 0G, Aethir, Sentient, Base, Arbitrum, and Monad.

Superform, The User-Owned Piggy Bank

Superform approaches the neobank thesis from a different angle entirely: yield aggregation with full onchain verifiability.

The architecture uses ERC-7579 smart accounts and SuperVaults that employ dual Merkle validation. What this means in practice is that every yield strategy is cryptographically verifiable onchain. Unlike a traditional savings account, where the bank invests deposits opaquely, or a hybrid platform like Nexo, where yield comes from centralised lending desks, Superform’s vault framework is transparent: users can verify exactly where their capital is deployed across Morpho, Euler, Aave, and Pendle.

SuperVault v2 strategies include SuperWBTC, SuperWETH, and SuperUSDC, offering optimised yield across chains. The validator network adds an additional safety layer: before any yield strategy is deployed, it must be approved by a network of independent validators who stake their own capital as a guarantee of due diligence. If a validator approves a strategy that turns out to be malicious or flawed, they lose their staked capital through economic slashing.

Where ether.fi is a full DeFi bank, and Tria is a payment infrastructure layer, Superform is a savings account, the user-owned piggy bank that earns institutional-grade yield without requiring active management.

Plasma One, The Stablecoin Infrastructure Play

Plasma takes a vertically integrated approach.

Built on its own Layer 1 blockchain with native Tether integration, Plasma controls the full stack:

• The consensus layer

• The stablecoin infrastructure

• The DeFi ecosystem that generates yield

Spending is routed through Rain’s principal Visa membership to the card network.

This vertical integration is the key architectural distinction:

• ether.fi builds on Ethereum L2s and uses third-party DeFi protocols for yield.

• Tria is chain-agnostic and protocol-agnostic, routing across many chains.

• Superform aggregates yield from existing protocols.

• Plasma owns the entire stack, from consensus to card settlement, which gives it more control but also introduces centralisation tradeoffs: the ability to theoretically halt or roll back transactions.

Plasma’s focus is on emerging markets and dollar access, targeting the billions of people who need stable dollar exposure more than they need DeFi composability.

Consumer Protection, or the Lack Thereof

The major downside, aside from regulations, which will be discussed further down, is the uncertainty regarding customer protection with regard to onchain banks.

Traditional banks offer a safety net built over decades of regulation and failure.

Card transactions carry chargeback rights: if a merchant defrauds a cardholder, Visa’s Zero Liability policy reverses the charge. If a bank goes bankrupt, depositors are legally prioritised over other creditors. These protections are enforced by law, and every institution, whether JPM or a small regional bank, must abide by them.

Crypto neobanks offer none of this. There is no FDIC insurance, no deposit guarantee. Blockchain transactions are still irreversible. If funds are sent to the wrong address or stolen in a hack, there is no protocol-level chargeback mechanism. DeFi exploits have drained billions, and there is no meaningful way to recover those funds.

What onchain banks offer instead is a fundamentally different risk model, relying on practical guarantees that the law does not enshrine.

Self-custody is the first line of defence. With ether.fi Cash, a dedicated smart contract vault is deployed for each user, secured by a Trusted Execution Environment (TEE) provided by Turnkey. Even ether.fi itself cannot access the user’s private keys. If the ether.fi platform disappeared tomorrow, user funds would remain accessible in the Gnosis Safe smart contract. However, with power comes responsibility, as this means users bear full responsibility for their funds. There is no helpline for a lost key, no AI agent, no soft-spoken cashier at the counter to receive one’s complaints.

Smart contract audits and bug bounties are the second line. Ether.fi’s contracts are audited by leading security firms, and the protocol runs a bug bounty programme through Immunefi, paying up to $200,000 for critical vulnerabilities. The platform has processed over 80,000 transactions without a security incident as of February 2026, but as ether.fi’s own documentation states, “there always exist risks in interacting with smart contracts“ and the protocol “can make no guarantees that methods are or will remain 100% secure“.

Superform addresses this through its validator network, with economic slashing: validators that approve malicious strategies lose their staked capital.

Plasma’s approach is different again: by controlling its own L1, it builds consumer protection into multiple layers of the architecture.

• At the base, Plasma periodically anchors cryptographic state commitments to the Bitcoin blockchain, inheriting Bitcoin’s security model

• Its PlasmaBFT consensus, a HotStuff-inspired Byzantine Fault Tolerance (BFT) mechanism, ensures the network continues operating correctly even if up to one-third of validators behave maliciously.

• Above the consensus layer, Plasma benefits from native Tether integration with direct issuer oversight, curated DeFi partner onboarding rather than permissionless deployment, and a Bitcoin bridge secured by the same decentralised validator set, with plans to adopt BitVM2 for further trust minimisation.

• Only as a last resort could Plasma’s validator theoretically halt or roll back transactions in extremis, though this creates its own centralisation tradeoff.

Optional DeFi insurance exists but is not standard. ether.fi users can purchase smart contract cover from Nexus Mutual, a decentralised insurance alternative that bundles protection across EigenLayer, ether.fi, Morpho, Pendle, and Uniswap into a single Cover NFT. This is voluntary and costs the user money; it is not built into the product the way FDIC insurance is built into a bank account. Most users will not purchase it because spending more money to protect their funds is discouraging and not easily accepted: less than 2% of total DeFi TVL is covered by any form of insurance, and the entire decentralised insurance sector holds a fraction of the capital locked in lending or trading protocols. Spending additional money to protect one’s funds is a hard sell when users are accustomed to deposit insurance being built into banking products at no visible cost.

Borrow Mode introduces liquidation risk that has no equivalent in traditional banking. If a user borrows against ETH collateral and the price drops below the liquidation threshold, the smart contract automatically sells the collateral to cover the debt. There is no margin call, no grace period, no human intervention. The user must actively monitor their health factor and adjust collateral ratios.

Card-level protections, however, still apply. Because these cards run on Visa rails, users do get Visa Signature benefits: $2,000 price protection, $10,000 purchase protection, $10,000 extended warranty, and Visa Zero Liability against fraudulent charges. These protections come from Visa, not from the protocol. They cover the card side of the transaction, and nothing else.

Therefore, onchain banks eliminate counterparty risk but introduce smart contract risk. On the one hand, the user is no longer exposed to the platform’s balance sheet. As such, their assets cannot be rehypothecated, frozen by a compliance officer, or lost in a bank run. On the other hand, they are exposed to code vulnerabilities, oracle manipulation, bridge exploits, and the consequences of their own errors, which can be catastrophic.

For sophisticated users who understand DeFi, this is arguably a better risk profile.

For the average consumer who expects a bank to step in when something goes wrong, onchain banking is not yet a comfortable substitute, and the gap between DeFi’s transparency and traditional banking’s safety nets remains wide.

The Regulatory Heavy Burden

In the USA, Trump signed the GENIUS Act into law on July 18, 2025, as the first federal legislation on digital assets ever enacted in the United States.

The framework creates three categories of permitted stablecoin issuers:

• Subsidiaries of insured depository institutions.

• Federal-qualified nonbank issuers (regulated by the OCC).

• State-qualified issuers.

Stablecoin payments must be backed 1:1 with US dollars, short-term Treasuries, overnight reverse repos, or specified money market funds. Monthly attestations and redemption rights are mandatory. Critically, permitted payment stablecoins are explicitly not securities under federal law, removing them from SEC jurisdiction.

The FDIC has already proposed application procedures for supervised institutions seeking to issue stablecoins under the Act. For crypto neobanks, the consequences are optimistic: GENIUS Act-compliant stablecoins become the regulation of reference, and the infrastructure implements the Administration’s word, safe from the regulator’s anger.

In the EU, the Markets in Crypto-Assets Regulation (MiCA) is now fully operational, and the Anti-Money Laundering Authority (AMLA) becomes fully operational this year. Europe has over 50 active neobanks, but compliance costs are rising, and it will become increasingly expensive to satisfy regulatory demands that remain, in many cases, poorly adapted for onchain business models. These models face specific challenges because existing AML frameworks were designed for custodial intermediaries, not self-custodial smart contract wallets, creating friction around transaction monitoring, travel rule compliance, and customer due diligence that does not integrate obviously onto decentralised businesses.

Which leads us to the question of legal enforcement.

The enforcement track record should give crypto neobanks pause.

Even established neobanks have faced significant penalties, both in Europe and the USA:

• Monzo was fined $27 million by the FCA for Anti-Money Laundering failures in July 2025.

• Revolut was fined $3.8 million in Lithuania.

• Cash App paid an $80 million settlement across 48 US states, showing that even the New World can and will sanction those who don’t toe the line.

False-positive rates in transaction monitoring exceed 95% at some neobanks, meaning compliance systems flag 19 legitimate transactions for every genuine suspicious transaction. AML transaction monitoring systems use broad rules: Neobank customers trigger those same red flags, and the systems can’t contextualise whether a flagged transaction is a freelancer paying rent or a criminal structuring deposits due to the nature of crypto transactions (offramping, cross-border payments, small transfers).

Furthermore, traditional banks still refuse to bank crypto businesses: Crypto activities trigger virtually every internal alarm associated with money laundering risk within traditional banking systems, regardless of the actual risk profile. In Europe, correspondent banks exert heavy pressure on smaller institutions to cut ties with crypto clients, forcing them to choose between serving crypto customers and keeping their place in the financial system.

RedotPay illustrates the traditional fintech response to this problem. It holds VASP licences in Lithuania and Argentina, a money lender licence and Trust or Company Service Provider licence in Hong Kong, and maintains full PCI DSS compliance. This is the compliance first strategy: accumulate licences faster than competitors can apply for them.

RedotPay’s multi-jurisdictional licensing is a core reason it operates in over 100 countries while protocol-native actors remain geographically constrained. The planned US IPO would further solidify this advantage by embedding the company within US public market disclosure and governance requirements.

Onchain neobanks are, given their design, more transparent than traditional banks by nature:

• Every transaction is verifiable onchain.

• Every reserve is auditable in real time.

• Every smart contract interaction is recorded immutably.

The onchain transparency advantage should, in theory, make these protocols safer, not more suspicious.

Yet, compliance is becoming an inevitable structural factor, just as it is with traditional banks.

The protocols that build GENIUS Act and MiCA compliance into their architecture will be the ones that become blue-chip retail products.

A Long Way Ahead

The first generation of neobanks changed how banking looks, while the second generation is changing how banking works, by replacing custodial, intermediary-dependent infrastructure with self-custodial, onchain alternatives.

All four models are converging toward the same banking products: save, spend, earn, borrow, but they are arriving from fundamentally different directions.

• Ether.fi comes from DeFi staking and has made Cash a major source of revenue.

• Tria comes from cross-chain execution infrastructure and is positioning BestPath as the settlement layer that other neobanks plug into.

• Superform comes from yield aggregation and is building an automated savings account.

• Plasma comes from stablecoin infrastructure and is targeting the billions of people who need dollar access more than they need DeFi.

The massive elephant in the room is, of course, the utter lack of consumer protection.

If crypto cards are a tool for sophisticated users who understand DeFi mechanics, collateral management, and smart contract risk, the absence of deposit insurance, chargeback guarantees, and institutional safety nets means these products are not yet substitutes for traditional banking.

Crypto neobanks remain an experiment that neither neobanks nor banks should see as a threat, given the massive guarantees they offer their customers. Because of a lack of perspectives on long-term regulations in Europe, an uncertain future for current US legislation, and a total lack of consumer protection, it would be wise to rely either on one’s affable banker or, at least, on a useful AI agent ready to answer at any time.

Many neobanks burned cash and never reached profitability. Crypto neobanks face the same unit economics question.

Privacy is an underrated luxury that most people don’t think about until it’s gone. While people chase fame, plenty of public figures have spoken about how exhausting it is to have every moment picked apart. People make mistakes, but imagine if those moments are amplified and on loop for everyone to see. Remember that time you tripped while crossing the road? The world just made a meme out of it.

However, we live in an age of surveillance. Companies compete for access to our data, what we do, what we like, and how we spend. User preferences are used for more specific ad targeting. Artificial intelligence will only accelerate the ability for external third parties to piece together information about you.

A lack of blockchain privacy is a flaw in the current design

Blockchain transactions lack privacy. While conducted pseudo-anonymously, the majority of transactions since Satoshi’s genesis block in January 2009 are publicly recorded, permanently indexed, and easily accessible to anyone with tools like Nansen or Arkham. If you momentarily expose your screen, anyone can suddenly trace what you spend, what you earn, and how you move assets.

Nonetheless, governments have been reluctant to legitimise privacy solutions; many are seen as non-compliant, with limited safeguards against misuse by bad actors operating on these rails.

However, as institutional participants enter the market, privacy becomes increasingly important; it’s not just about “having something to hide,” but rather protecting proprietary strategies while remaining compliant.

Privacy is more relevant than ever

As a result, the market has begun to develop real solutions for onchain privacy. Privacy coins were the best-performing crypto sector of 2025 by a wide margin (up 288% YoY) while Bitcoin and Ethereum largely flatlined. Zcash surged 861% before the broader privacy narrative peaked, eventually giving way to market-wide selling pressure.

Even if the cycle has cooled, the underlying infrastructure has finally matured: zero-knowledge proofs have moved from academic papers to production-grade systems, enabling private transactions that settle in seconds without sacrificing verifiability, preserving one of crypto’s core promises.

Beyond the financial aspect of privacy, much more is at stake.

In this context, Starknet is introducing STRK20, a new standard that enables any ERC20 token to be privately transferred without rebuilding infrastructure, fragmenting liquidity, or introducing compliance risks.

At the same time, strkBTC launched as a Bitcoin-backed asset that is private by default, programmable, and redeemable 1:1 for native BTC.

Different Approaches To Privacy

This section highlights four different approaches to privacy in blockchains.

1\. Privacy through token transfers, which conceals the sender, receiver, and amount of a transaction between wallets.

Monero and Zcash are cases in point where

• Monero uses ring signatures and stealth addresses to make every transaction private by default.

• Zcash relies on zk-SNARKS to enable shielded transactions.

The limitation, however, is structural. Privacy at the token transfer layer breaks down the moment users need to interact with markets rather than simply move funds between addresses. As soon as users want to swap, lend, borrow, or participate in any protocol that depends on observable shared state, privacy becomes a constraint. Users are either forced to unshield, exposing their positions at the exact moment it matters most, or are effectively blocked from market participation entirely.

Historically, adoption of Zcash shielded pools has remained between 10% and 30% of the total supply, as users default to transparent transactions when they need composability. Even Zcash Connect, the bridge to Ethereum DeFi, requires unshielding at every protocol boundary.

More broadly, the challenge of market participation remains unresolved. These assets have largely stayed on the fringe, with limited adoption across both retail and institutional users, precisely because privacy, in its current state, comes at the cost of usability and integration.

2\. Privacy through applications: building confidential applications on top of public blockchains. These systems encrypt user activity at the application layer while leaving the underlying execution environment transparent.

The tradeoff with this system is fragmentation. Each application becomes its own privacy domain, which limits interoperability. Critical data, such as price feeds, liquidation triggers, and settlement states, cannot cross application boundaries without naturally leaking information. DeFi depends on this level of shared visibility. For example, a lending protocol must track DEX prices to manage collateral risk, or a DEX must track funding rates set by spot market dynamics to effectively price its own products. Privacy in this model starts to conflict with composability.

Within this category, Railgun is the most successful implementation. Backed publicly by Vitalik Buterin, Railgun processed $1.6 billion in shielded transactions in 2025 and hit $4 billion in cumulative volume. It applies zk-SNARKs at the smart contract level on Ethereum, allowing users to shield any ERC-20 token and interact with DeFi protocols from within a private balance. But Railgun remains an application sitting on top of a transparent chain. TVL bounds the anonymity set in the shielded pool (currently around $83 million), which means a sufficiently motivated chain analyst at the IRS can narrow the set of possible participants. It is the best version of app-level privacy, but it’s not bulletproof.

3\. Privacy through executions: encrypting the smart contract execution itself so that neither the state nor the computation is visible to external observers.

This is Aztec’s approach, attempting to resolve the fundamental conflict between encrypted execution and usable markets. The Aztec Ignition Chain launched with 185 operators and 3,400+ sequencers.

Zama approaches the same problem from a different cryptographic direction. Rather than ZK proofs, Zama uses fully homomorphic encryption (like Octra, another recently funded protocol), computation on data that remains encrypted throughout processing, including during execution.

Its fhEVM allows developers to write confidential smart contracts in standard Solidity, where encrypted state coexists alongside public state on any EVM-compatible chain without modifying the underlying blockchain.

In theory, FHE solves the composability problem that undermines the privacy of ZK-based execution, allowing protocols to interact with each other’s encrypted state. In practice, FHE remains orders of magnitude slower than native computation, the coprocessor network is still in testnet, and no DeFi app has demonstrated that the latency is tolerable for operations like liquidations or arbitrage.

Tornado Cash struggled not because of its mechanics, but because regulators killed it. A non-custodial Ethereum mixer operating at the transfer tier without any compliance, it recorded billions in volume at its peak. On August 8, 2022, OFAC sanctioned Tornado Cash, the first time an immutable, open-source smart contract was sanctioned, and volume collapsed by nearly 85% within weeks. Those sanctions were eventually lifted after a court ruled the Treasury had overstepped its authority over open-source smart contracts.

Developer Roman Storm was convicted in August 2025 on one count of operating an unlicensed money-transmitting business, but a jury deadlocked on the more serious money laundering and sanctions charges. As of March 2026, the DOJ is pushing for an October 2026 retrial, somehow just weeks after the Treasury acknowledged in a report to Congress that mixers can serve legitimate financial privacy purposes.

The bottom line is that privacy tools without a compliance framework can be scrutinised by regulators regardless of their technical soundness. This risk would not disappear if the legal outcome is reversed, as the reputational risk of potential non-compliance is detrimental to the firm’s reputation. CertiK noted that the mere use of these coins poses significant operational risks for both platforms and users. For mainstream privacy that’s adoptable by institutions and retail alike, a compliant and scalable version is necessary.

Each of the above approaches features a major issue

• Privacy through token transfers isolates users.

• Privacy through applications fragments DeFi

• Privacy through execution prevents trading.

• A mixer that is not compliant violates the protocol regardless of its technical merit.

The only path through all four failure modes requires an entirely different architectural approach.

4\. Privacy through ownership

In this approach, markets remain public, while users can remain private.

Market structure remains fully visible, including prices, liquidity, settlement, and protocol interactions. What disappears is the user layer: wallet addresses, positions, transaction history, and trading strategies. The success of Extended on Starknet suggests real demand for exactly this tradeoff: with $180 million in TVL and $156 billion in cumulative volume, Extended has become a reference in the trading sector.

Onchain analytics can show that trades occurred, but not who made them, what positions they hold, or how wallets are connected. Composability stays intact. Surveillance becomes impossible. The result is essentially Bitcoin’s permissionlessness without its privacy vacuum, and without the regulatory red flag of total opacity.

So far, achieving privacy through ownership has not been feasible, as it requires a specific infrastructure property from scratch, that is to say, the ability to verify transaction correctness without transaction visibility.

To that extent, optimistic rollups are not the ideal tech stack for privacy:

• A rollup that uses fraud proofs must publish execution data for challengers to verify, and that data, in turn, is the surveillance flaw.

• A rollup that uses validity proofs generated by the sequencer requires trusting the sequencer.

Enabled through ZK rollups

This is solved with ZK rollups. A ZK rollup with validity proofs generated by a decentralised prover network can verify that the cryptographic proof for every transaction is correct without needing to see the transaction itself. As such, it allows execution correctness and execution privacy to coexist.

The ZK proof infrastructure was built before privacy was a commercial priority and has been running in production for nearly a decade. Its applied result is now the STRK20 standard from StarkWare.

strkBTC, the first model for STRK20

While STRK20 is an engineering concept, strkBTC, announced at the beginning of February, is its first and most consequential application, addressing the most specific pain point in Bitcoin.

Sizing the $20B Annual Opportunity

Bitcoin processes close to half a million transactions per day. At a $100,000 BTC price, this represents more than $20 billion in annual, fully public economic activity, all recorded onchain. However, more than 2.5 million BTC, over $225 billion, sits in centralised exchange custody. Less than 0.5% of the total Bitcoin supply participates in DeFi, while Ethereum protocols routinely deploy 40% to 60% of the circulating supply into active positions. The infrastructure does not exist, and, logically, Bitcoin-adjacent activity offers no incentives.

strkBTC is a Bitcoin-backed asset issued on Starknet, redeemable one-to-one for native BTC at any time, with no algorithmic backing, secured by a federation of institutional signers operating a multisig bridge, no fractional reserve, and no synthetic exposure. Because strkBTC follows the STRK20 standard, balances are not publicly visible on Starknet, and transfers do not reveal the sender, receiver, or amount.

The STRK20 supports two standards:

• In unshielded mode, strkBTC behaves like a standard ERC-20 token. Balances and transfers are public and fully verifiable by any curious regulator or fiscal authority.

• In shielded mode, [strkBTC] balances and transfers are protected. Ownership and transaction details are hidden from public view, but can be selectively disclosed to specific parties upon request.

The same Bitcoin that currently generates $20 billion in annual economic activity becomes, on Starknet, an asset that can be held, transferred, lent, and traded without any of that activity appearing onchain. The 2.5 million BTC currently on exchanges for privacy reasons now has an alternative that does not require surrendering custody to, more often than not, antagonistic offshore exchanges.

Anonymous Swaps: The Litmus Test for Scalable Anonymous Blockchains

The hardest initial application is a shielded swap: a trade executed against a public AMM that does not reveal the trader, the trade size or the trade direction.

Anonymous swaps are the litmus test because they force privacy to coexist with and encompass pricing, liquidity, and execution order. Previous systems have historically failed this test.

For example, a user attempting a swap via Tornado Cash-style systems encountered a broken sequence: unshield funds from the privacy pool, execute the swap on a public DEX while fully exposed in the mempool, and then reshield the output.

Each step is a potential window that may break a private flow:

• The unshielded transaction reveals that funds are leaving the privacy pool and entering a public wallet.

• The swap transaction exposes the full trade to sandwich bots in the mempool.

• The reshielded transaction links the post-swap balance back to the privacy pool. The net result is that the most sensitive part of the interaction, the trade itself, is the most exposed.

STRK20 collapses all three steps into a single atomic operation:

• The user’s wallet privately constructs the swap, selecting encrypted notes from the privacy pool.

• Routes it through Ekubo’s AMM.

• Generates a ZK proof that the entire sequence is valid.

• The Starknet sequencer verifies the proof and executes atomically.

Under this standard, there is no intermediate public state and no unshield-before-swap window for front-runners.

Trades settle at the market price visible to all participants. The AMM only sees the trade size in order to price it, which requires price discovery. What the AMM does not see is who submitted it, where the funds originated, or where they go post-execution. This now changes for traders. A sandwich bot cannot front-run a trade it cannot see in the mempool. An analytics firm cannot reconstruct a position that was never disclosed.

As an example, Ekubo provides liquidity, while shielded strkBTC and unshielded USDC interact with the same pool. There is no separate privacy DEX to bootstrap from zero liquidity. The market depth that exists on Starknet from day one is the market depth available to private users from day one.

The Five Pillars of STRK20 and the Six Problems of Privacy

Specifically, STRK20 works as follows:

• When a user shields a token, the contract creates an encrypted note that does not reveal the owner or amount and hashes it into a Merkle tree onchain.

• When the user spends it, he reveals a nullifier, a one-time code that proves the note is theirs and marks it as used.

A ZK proof ties it together: the network confirms the transaction is valid without learning who sent what to whom.

The 2024 SoK paper from Yale, George Mason, and Mysten Labs identified six open problems that are blocking blockchain privacy from scaling and, logically, from becoming mainstream.

STRK20 addresses five of those:

• Unbounded state (Problem 1): A single canonical contract at the protocol level instead of emulating UTXOs inside a smart contract.

• Light-client discovery (Problem 2): S-two proves in seconds, onchain encrypted channels let the wallet find incoming funds instantly without scanning the chain, the problem that killed Zcash and Monero on mobile.

• Full anonymity scaling (Problem 3): A note-based model, rather than encrypted account balances, means validator work scales with transactions, not total users.

• Replay and front-running (Problem 4): Note consumption plus sequencer-level verification avoids the one-transaction-per-epoch cap that cripples account-based schemes.

• Gas deanonymisation (Problem 5): Paymasters allow users to pay for gas in any token via the privacy pool (no public address required).

• Sub-linear state growth (Problem 6): Remains unsolved. Nullifier sets still grow linearly. This is a known tradeoff, as the current design prioritises composability and compliance, with state efficiency on the longer-term roadmap

On compliance, an important compromise as crypto becomes more regulated, is that a threshold-controlled integrity council holds encrypted viewing keys. A lawful request reconstructs one user’s history without touching the rest of the pool. This is the same structure as Swiss banking confidentiality and the same logic as GDPR data requests, with no direct access to every single piece of information regarding a user’s activities.

Conclusion

Every serious privacy attempt in crypto has failed the same way. Tornado Cash failed because OFAC had no lever to pull except obliterating the whole protocol. Zcash shielded pool adoption never broke 30% because users unshielded the moment they wanted to do anything useful. Aztec is still figuring out whether encrypted execution and usable markets can coexist. The pattern is consistent enough to warrant a serious inquiry into how crypto can remain both compliant and private, without a catastrophic downside or the protocol being deserted.

STRK20 is a genuinely different architecture. Markets stay public, users stay private, and a compliance mechanism gives regulators something to work with short of sanctioning the whole ecosystem. Whether that satisfies OFAC in practice is a question regulators will ultimately answer, but the architecture at least gives them a lever that didn’t exist before. The institutional change of heart shows that DeFi is no longer a niche. Allocators are no longer individuals in search of high-risk, high-reward investments.

The $225 billion in BTC sitting on centralised exchanges is there because the infrastructure to hold it privately, use it in DeFi, and remain redeemable one-to-one for native BTC did not exist. Less than 0.5% of the Bitcoin supply participates in DeFi, while Ethereum protocols routinely deploy 40-60% of the circulating supply. That gap remains unresolved, and previous attempts have not worked.

As we enter a different cycle, defined by an overwhelming appetite from institutions and, paradoxically, a fearful retail, compliant privacy might be the last bastion for individuals looking to preserve their sovereignty.

While all of this is true and there is no positivity in it, we are moving towards a major shift in which tokens that have no connection to protocol revenue will plummet in value, and those with no revenue will fail to survive. The land of rugs is turning from “Gambling” to “Investing”.

The event that accelerated this shift was the October Liquidation Event, followed by a series of macro events, such as gold outperforming Bitcoin, which left us asking whether crypto is investable anymore and whether it has the upside that attracted many people in the first place.

This piece highlights the same shift and its effects on cryptocurrency assets and the investment models that underlie them

From Gambling to Investing

Crypto has gone through its phases, including the initial discovery phase, when it was tech for nerds, and no one saw its use cases; the extreme speculation during the ICO boom; regulatory disregard; huge blowups like the Luna Crash and FTX; and the current era, where institutions are stepping in.

For a long time, crypto has run on an extraction-first approach and has set a norm of gambling rather than investing. Launches and successes of products like pumpdotfun that let users create memecoins with just a click validate that crypto has always been a gambling bubble where new users come in hoping to make big. The crypto extraction approach can be classified into three classes:

• Low Effort Low Output (Memcoins)

• High Effort High Output (Scam Projects and Slow Rugs)

• Low Effort High Output (Celebrity Coins)

At one end of the spectrum lie the simple extraction methods that have worked quite well so far and will also work in the future, but might slow in rate: memecoins. Memecoins are easy to launch; they don’t need to be explained to anyone why this coin was launched or what its utility is, because making money with them rests on a single principle: exiting the trade before others. Whoever trades memecoins is aware of this, and in some cases they deserve to lose their money, cause that’s how the market works. On the other hand, come the projects that overpromise, hype themselves up, and do a slow rug. There are a few exceptions as well that are just our low-effort and extract the most, for example, the celebrity coins.

Taking last year’s TGEs as an example, most can be categorised as bad investments, as they closed the year with significant losses for their tokenholders. Reasons for them being down could be bad tokenomics, launching at a ballooned valuation (mostly), market and project sentiment, and much more.

For a long time, crypto projects focused on building the best tech possible, but never on achieving product-market fit (PMF), which is why we have tech no one uses. But as of 2026, things seem to be changing, and the extraction-first approach of crypto seems to be taking a back seat as institutions move onchain. They want to use the infrastructure crypto built over several years, but their arrival comes with a huge caveat that they don’t want to do anything with the tokens we produced in our way to build the tech; they like the code and infrastructure, they will use it, but that wouldn’t have a positive impact on the majority of the assets.

Some time back, the NYSE shared that it would use blockchain infrastructure to support 24/7 trading. Robinhood has begun testing its L2, built on the Arbitrum Stack, to tokenise equities and ETFs, allowing users to hold “Stocks” in self-custody wallets. BlackRock’s BUIDL and Franklin Templeton’s Benji are great RWA products onchain. All of this enables instant settlement, a problem that TradFi has faced for years due to the limited trading period.

Coming to RWAs, they are projected to go into the trillion-dollar league in the next few years. Private Credit, public equities, and short-term U.S. tokenised debt are growing onchain; one can leverage trade commodities and equities on platforms like Hyperliquid and Ostium, and these stats keep on going up.

Everyone is coming onchain because these are the rails which can take finance to the next level. The dream of the complete adoption of decentralised finance becomes a reality as institutions and every retail user use the same rails we use today, enabling transparency, faster settlement, no delays, and greater control over funds.

The apps that have built a strong foundation will still thrive in this new age. The incumbents in Lending, like Morpho, Aave, and a few others, will continue to dominate as they have been battle-tested during the worst drawdowns, have performed well across them and have continuously innovated. Furthermore, protocols like Hyperliquid are becoming one of the deepest sources of onchain liquidity while enabling leveraged trading in public equities and commodities. As institutions grow, they need venues that can accommodate their size.

Oracle networks, crosschain interoperability stack, L2/L1 scaling, and token standards are what will matter. Obviously, there are no surefire assets that will deliver the best returns when institutions go all-in on the onchain rails, but those with a solid track record are not going anywhere and will find their way into use by both institutions and retail investors.

Revenue is the King

There are over 17000 tokens listed on Coingecko.

Around 5,700 protocols on DeFillama; if we include protocols that generated >$100k in revenue in the last 30 days, we get ~200 protocols or products, which is 3.5%. The investable pool of crypto is smaller than anyone would expect. Most of the tokens are uninvestable.

If I were to crunch these numbers more realistically, I would consider holder revenue. The revenue that goes back to holders in any form. It’s surprising that only ~50 protocols did over $100k in holders revenue in the last 30 days, that’s <1% of the total protocols listed on Defillama.

Increasing these benchmark numbers is fair, maybe to a million dollars a month, because most tokens trade at hundreds of millions and even billions of dollars.

If we were to dive into the issue of lower token holder revenue, it stems from the alignment issue crypto has always had and from the token structure. There are always two entities related to a project: Labs and the DAO/tokenholders. Labs are the “team” in tokenomics; they are the project’s initial developers, and they raise funds by selling a portion of their company and issuing tokens to investors at an early stage, in exchange for funds they use to grow the business. Tokens are not a legal representation of the business and don’t offer any actual rights over the company’s profits, unlike equity. Investors who receive tokens have these rights through the equity they hold. But token holders are usually at the project’s mercy when it comes to aligning their product with their token.

But over the last year, things have started to change, and people are betting less on speculative plays and focusing more on how much the protocol actually makes. This single shift will take crypto where years of an extraction-first approach couldn’t.

Below, we discuss some key metrics every crypto investor should consider when analysing the token. We analyse the top revenue-generating token protocols over the last 30 days, including Hyperliquid (HYPE), Pumpdotfun (PUMP), Tron (TRON), Sky (SKY), Jupiter (JUP), Aave (AAVE), and Aerodrome (AERO).

Price-to-Sales Ratio

The Price-to-Sales (P/S) ratio is calculated by dividing the protocol’s market capitalisation by its annualised revenue. P/S serves as a gauge of how much the market is willing to pay for every dollar of revenue generated. The premium reflected in this ratio indicates how much users value the protocol’s future capabilities and growth factors.

We compared some of the top revenue-making protocols and their tokens based on their annualised revenue and P/S ratio. We took the revenue for the last 30 days and multiplied it by 12 to get the annualised revenue figures. The result we get is visualised below.

The overvaluation threshold is set at 20, based on the top U.S. public equities’ P/S ratios. Most protocols are around or below this threshold, except Tron, which trades at a much higher ratio than the others. Another threshold we considered is revenue, for which we used the average annualised revenue of the protocols discussed, amounting to ~$250 million. Only three protocols, Pumpdotfun, Hyperliquid, and Tron, exceed this threshold and together account for ~80% of the revenue among the mentioned protocols

Token Holder Revenue

The next important factor we discuss is the token holder revenue. This largely depends on the protocol’s revenue and how much of it is actually returned to tokenholders through buybacks, token burns, and staking rewards. It is a famous metric now, and everybody has been talking about it, and it holds more importance than the actual revenue because this is how the token accrues value.

We have once again classified protocols by holders’ revenue over the last 30 days and multiplied it by 12 to obtain the yearly estimates. At a glance, we can see most protocols are playing pretty fairly with their holders and using most, if not all, of the revenue to accrue value for their tokens.

This is one side of the picture and reflects that buybacks are being executed and, if done at a similar pace, would add millions of dollars in token value. To better understand this value accrual, we also compare the relative performance of these same tokens from the October Liquidation Event to better picture the impact of token accrual activities.

In the chart above, we have a few outliers, such as TRON, HYPE, and, in particular, SKY, which is relatively positive. Of these three, TRON didn’t move much and has followed a more sideways pattern, while HYPE diverged from the other token patterns in late January.

This points out that buybacks alone are not sufficient for token value increases; other factors, such as broader market drawdowns, vesting schedule and cliff unlocks, category narrative, and the protocol’s overall sentiment, also play a role. All these different points are discussed in the sections to follow. Before moving on to that, let’s also compare two of the most revenue-generating protocols and their token performance: Pumpdotfun and Hyperliquid. From the figure below, it’s clear that HYPE performed better when both tokens had active buybacks (annualised holder revenue for HYPE is ~$660 million, and for PUMP is ~$ 380 million), due to the protocol’s overall sentiment and people pricing the tokens based on future supply shocks and unlocks.

Tokenomics Design and Supply Overhang

In crypto, tokenomics is designed to help raise funds from investors, incentivise users, sometimes run a community raise, and allocate token supply to the team. There is not much of a hard-and-fast rule around tokenomics design, and different projects handle this process at their own discretion. This part of the project is important because it determines not only the token’s near-term supply pressure, but also how value accrues to the token, which value sinks exist to offset sell pressure, and how well the tokens align with their holders.

Below, we capture the supply-unlock velocity for a set of fixed-supply tokens. While most tokens eventually become fully unlocked, the pace varies significantly: PUMP exhibits the fastest unlock velocity, while HYPE unlocks the slowest. A slower unlock schedule is generally preferable, as it reduces the likelihood of abrupt supply shocks and the associated sell pressure that markets may struggle to absorb. For tokens like AAVE and SKY, most of the supply is already unlocked, whereas for JUP, the long-term unlock schedule is discretionary rather than deterministic and is governed by the DAO.

It is also important to highlight that the unlocked tokens can be further categorised into investor unlocks, team unlocks, and community unlocks. Community unlocks can be routed towards staking rewards, incentives, and airdrops. It needs to be analysed on a per-token basis and plays an important role in understanding the token’s sell-side dynamics.

The Lindy Effect

“The longer something has survived, the longer it is likely to continue surviving.”

This is what the Lindy Effect actually is, and it is true for almost all businesses, including onchain ones, with innovation as the key factor, as those who fail to innovate can’t survive for long.

Last year, crypto protocols generated cumulative revenue of ~$16 billion, and revenue concentration among the top few protocols is quite high. The top 10 protocols accounted for 80% of net revenue, with the top 3 representing 64% and Tether alone accounting for 44%.

Additionally, not all of them have tokens; for example, Circle, the second-highest-revenue protocol after Tether, has a stock listed on the NYSE under the ticker symbol CRCL. At the same time, Tether doesn’t have a token. Even among the top 10 protocols, only three included a token, indicating that launching a token might not always be the best approach, depending on the protocol design.

Returning to the Lindy Effect, in most crypto categories, the top 2 protocols account for the largest share of the market and dominate. It’s more commonly seen in categories like Stablecoin, where Tether (USDT) and Circle (USDC) represents 84% of the whole market, followed by other players like Sky (USDS) and Ethena (USDe). There are other examples where this pattern might not look as strong, but it can still be pointed out, such as Lending, where the top 2 protocols by TVL (Aave and Morpho) represent 64% of the market. The same pattern can be observed across multiple categories, such as prediction markets, yield, liquid staking, restaking, and more.

The Lindy Effect also becomes important because of the hacks the crypto industry regularly experiences at the protocol level. This year alone, we have witnessed more than $130 million vanishing from the smart contracts and, over time, tens of billions of dollars. Over time, it has become even harder to trust any new protocol with your money because you won’t know when it might get hacked. So here, the contract age and the protocol existence matter a lot because the system has stood the test of time without failing. Even if in some cases when the system doesn’t work as intended, like recent Aave’s CAPO oracle misreporting, the users get the refund because the protocol’s treasury can afford it. Additionally, the longer the system had existed, the more it had proven its significance during market drawdowns. The top protocols perform as intended during market drawdowns, a strong signal for anyone to adopt the already battle-tested system.

On the other hand, innovation is equally important, as market leaders have continually innovated and improved their products over time. For example, Morpho is onboarding various institutions to onchain finance through its vault architecture, giving them a way to curate a vault that allows maximum customisation to fit their needs. Aave will also enable this by introducing Spokes in its upcoming v4 upgrade. Additionally, Aave, through its Horizon instance, allows institutions to borrow against tokenised RWAs.

The next wave of crypto consists of Institutions and Agentic Finance; the protocols best positioned for both will grow the most.

Crypto Doomerism

In the Citrini article on “The 2028 Global Intelligence Crisis”, they write:

The biggest way to repeatedly save the user money (especially when agents started transacting among themselves) was to eliminate fees. In machine-to-machine commerce, the 2-3% card interchange rate became an obvious target.

Agents went looking for faster and cheaper options than cards. Most settled on using stablecoins via Solana or Ethereum L2s, where settlement was near-instant and the transaction cost was measured in fractions of a penny.

This begins our next chapter, which goes beyond crypto institutional adoption and focuses on Agentic Finance and the broader adoption of blockchain technology by agents. This has already started, and many protocols are integrating AI agents to streamline the user flow and eliminate user-experience bottlenecks that crypto products have long had. All these efforts can be categorised under the category that surfaced in late 2024: a combination of decentralised finance and Artificial Intelligence (DeFAI). It did its part and turned itself into an extraction-first narrative like everything else in crypto, but it also highlighted how much crypto experience can be improved by incorporating more AI.

It’s June 2028, and most crypto transactions are done by agents with no humans in the loop. Agents find the best possible yield for users based on their risk appetite. For non-crypto agents, blockchains are considered best for conducting most transactions because of their low cost, efficiency, and verifiability. Blockspace has become cheaper with time, and transactions cost way less. Crypto is no longer complex. You can give an AI agent a prompt and some money to help you earn the best yield. Crypto and blockchain are finally mainstream and widely used. To increase overall capital efficiency, agents moved funds from low-yield-generating protocols or from liquidity that was not being used optimally to a few concentrated venues where they could find the best yield. Most public blockchains and protocols are effectively wiped out for lack of use. The tokens you invested in are worth the least since you invested; you think you should’ve pulled out in 2026. Few tokens went up, including those that were actually generating revenue and continuously accruing value through revenue. From all the other tokens, the value got rotated into the few that actually perform and have some utility attached to them. Crypto market capitalisation is up when compared to March 2026, but most tokens haven’t benefited from institutional adoption and the growth of agentic finance. The crypto dream finally came true; it is being used by the masses, but the token part of the dream didn’t quite play out the way many expected.

It’s March 2026; whether or not you believe the above will become true, protocols with positive cash flow will sustain long-term, and their tokens will thrive.

Conclusion

For so many years, crypto protocols focused on the tech problem and never really on PMF, which was the biggest risk investors never priced in, but the market did over time. With most tokens seeing a downward trend for years now and their all-time highs well in the past, the story is clearer than ever that a change is imminent. The rise of certain tokens in 2026 reflected the importance of revenue numbers and a token-forward approach, as investors began to shift from Gambling to Investing.

Bad actors in crypto have always benefited from the extraction-first narrative, while most participants in the space have left with negative portfolios and become exit liquidity, which isn’t healthy at all. As institutions are flowing in, this realisation hits even harder because they don’t want to do much with our assets but are more focused on the infrastructure we helped build over the years and is battle-tested.

As we move further with institutions and AI-enabled crypto infrastructure, we are likely to see this trend grow even stronger, as more and more investors look for hard metrics that can convince them to buy a token/equity.

https://docsend.com/v/sjv2g/the_evolution_of_commodities

Methodology

The analysis evaluates oil market microstructure across two studies, one overlapping hours and a weekend analysis, drawing on tick-level execution data from two venues: the Hyperliquid xyz:CL perpetual contract and the CLJ6 (April 2026 NYMEX WTI futures) contract on CME.

Data Sources

CME data is sourced from the Databento trade feed, which captures tick-level executions rather than order book snapshots. As a result, all depth and slippage estimates for CME are derived from observed fills rather than quoted depth.

Hyperliquid data is sourced from Hyperliquid’s publicly accessible S3 archive, which contains the complete onchain fill record.

Both venues are therefore analysed on a fills-derived basis. All depth figures represent revealed liquidity, the volume executed within a defined basis point range of the VWAP mid per 5-minute window, rather than the full resting depth on the book.

Study Period and Market Context

The study period runs from February 27 to March 16, 2026. This window coincides with a volatile geopolitical episode following Iranian strikes on February 28, 2026.

• Pre-strike market close: The final CME session before the event.

• Monday Open: A high-stress reopening, with CME gapping materially higher and Hyperliquid xyz:CL market constrained by the discovery bounds.

• Subsequent weekends: As oil prices remained elevated and the volatile environment kept the commodity’s trading levels high on Hyperliquid.

xyz:CL launched in early 2026, meaning the three-weekend observation window captures an early-maturation phase for the Hyperliquid market. Observed trends, including improving depth, rising volume, and growing user counts, partly reflect the market maturation.

We do not expect onchain venues to be competitive with traditional venues on absolute benchmarks such as liquidity depth or slippage (yet).

The objective is to track directional trends: whether the gap is narrowing, at what rate, and under what conditions.

The Analysis

Analysis of the data is divided into two parts during the data timeframe:

• Overlapping Hours: It covers the full three-week period and compares the overlapping hours of both Hyperliquid and CME in terms of depth, slippage, and the premium/discount of one venue’s trades relative to the other. For Hyperliquid, we also analyse its funding rates during the whole period.

• Weekend Analysis: In the given time frame, there are three weekends, so we analyse price discovery and Hyperliquid’s price-gap deviation relative to the CME open.

Overlapping Hours

This analysis covers the full three-week period and focuses on the hours when both venues are active simultaneously.

Depth: Revealed liquidity depth is measured as the total USD volume executed within ±2, ±3, and ±5 basis points of the VWAP mid price per 5-minute bucket, aggregated as the median across all overlap-hour buckets. As noted above, this reflects executed volume within the band, not resting quoted depth. CME and Hyperliquid depth are likely understated by this method.

Slippage: Execution slippage is estimated using a fills-sorted synthetic order book. Within each 5-minute bucket, observed taker fills are sorted by price (ascending, to simulate walking the ask side) and walked sequentially until the target order size is filled. The arrival price is set as the lowest-priced fill in the bucket (a proxy for the best ask at order arrival). Slippage is then computed as the difference between the execution VWAP and the arrival price, expressed in basis points. This is applied at incremental order sizes from $10k to $1 million.

HL-CME Basis During Overlap Hours: The signed price differential between the Hyperliquid mid and the CME last price is tracked across all overlap-hour 5-minute windows. This captures any structural premium or discount at which Hyperliquid trades relative to the CME reference price during active hours. The Hyperliquid mid price is derived from the VWAP of taker fills per 5-minute bucket, not from a live order book quote.

Flows and Funding: Hyperliquid funding rates are reported at hourly resolution (HL settles funding every 1 hour). Funding rates are expressed in basis points per 1-hour period.

Weekend Analysis

This analysis focuses on three discrete CME-closed weekend windows:

• W1: February 28 - March 1, 2026

• W2: March 7 - March 8, 2026

• W3: March 14 - March 15, 2026

A structural note on Weekends 1 and 2: Hyperliquid perpetuals are constrained so that

the mark price cannot deviate beyond the “discovery bounds” (DB). When the oracle price freezes, as it does when the primary reference market (CME) is closed, and external price feeds stop updating, the protocol effectively caps the executable price within a tight band.

Price Discovery: For each weekend window, we report Hyperliquid xyz:CL key data metrics, including the price, volume, and number of trades.

Monday Open Price-Gap Deviation: For each weekend, we measure the price gap between Hyperliquid and CME at three reference points:

• 3h before CME reopen

• 1h before CME reopen

• At CME open (T=0)

All gaps are expressed in basis points. Positive values indicate Hyperliquid was above the CME open, negative values indicate a discount.

Quantitative Analysis

We begin this section with our first analysis, comparing Hyperliquid xyz:CL HIP-3 oil market with NYMEX CLJ6 on weekdays during overlapping hours.

Liquidity Depth

There is no doubt that onchain commodity venues have a completely different liquidity profile compared to the CME. The average liquidity depth of CL on HL is less than 1% of that of CLJ6, with scaling consistent across bands (109x at ±5 bps). At ±2 bps from mid, CME offers $19M in executable depth versus $152K on Hyperliquid: a 125× difference.

This is no surprise, considering the novelty of the CL market on HL as well as the different user targeted. The primary value proposition of onchain venues was permissionless access for those traditionally excluded by incumbents, such as the CME.

However, as venues such as HL become more important on weekends, we are witnessing a shift in the perception of these platforms, with growing interest from institutions in hedging their positions during off-market hours. Therefore, it becomes increasingly important to nurture market conditions that make markets such as CL suitable for traditional investors and retail alike.

For a retail trader executing $10K, this gap is irrelevant.
For an institutional desk moving $1M+, onchain trading of CL (and most other markets) remains prohibitive.

The inherent differences in user profiles are, in fact, reflected in the median trade size for these markets during overlapping hours.

The 166× difference in median trade size ($90,450 vs $543) is the clearest proof that these venues serve fundamentally different user profiles. The median size on CLJ6 aligns with one standard crude oil futures contract (~$94k notional at current prices), while Hyperliquid’s $543 median reflects crypto-native retail traders taking leveraged directional bets.

We expect the HL median trade size for commodity markets to hit an inflexion point as these markets become increasingly legitimised in the eyes of more traditional investors, bringing their funds onchain.

To further differentiate across trade sizes, we run order simulations capped at different sizes from $10k to $1 million.

For $10k orders, the CLJ6 traders have no slippage, as expected, whereas HL users incur a sub-1 bps median execution slippage of 0.77 bps. The inflexion points occur at a $100k order, where HL users’ slippage rises to 4.33 bps, approaching the 5 bps threshold, while there is no slippage on the CME CLJ6.

It is worth noting that this is above the median trade size for the CLJ6 market ($90.450k).

At $1M, Hyperliquid’s 15.4 bps is ~20x CME’s 0.79 bps, confirming that the venue is not yet viable for institutional-sized orders. Given the average trade size on HL, the platform can serve its users just as well without slippage.

CLJ6 orders begin to experience material slippage, affecting their execution at sizes around $500k.

When we extend our order-size analysis to weekends, slippage declines across all order sizes, especially for the $100k and $1 million order sizes, indicating market maturity.

Over the course of the three weeks analysed, slippage has gone down as follows, for these simulated orders:

• $10k: -16%

• $100k: -75%

• $1 million: -86.9%

Funding Rates

Funding Rates of CL were volatile during the CME close hours but less dynamic during the overlapping hours. This helps us reveal the market’s internal pricing dynamics when it operates outside market hours.

Being open on the weekends means the CL market leverages internal price discovery (supported by DB and other mechanisms of risk reduction). As such, funding rates are expected to be more volatile, as observed during the highlighted periods below.

During active trading hours, Hyperliquid’s xyz:CL tracks CME’s CLJ6 closely, though a structural discount emerged and widened as oil prices rose, most likely driven by the funding rate pressure from accumulated long positioning. During weekend hours, when CME is closed, Hyperliquid’s price discovery is further constrained by the price band mechanism (DB), which limits how far the mark price can move in the absence of a live reference market.

Weekend Analysis

The three weekends tell a story of rapid maturation:

Weekend 1 (Iran strikes)

Hyperliquid moved from CME’s $67.29 close to ~$70.80, capturing roughly 45% of the eventual Monday gap to $75 (+1146 bps).

An important caveat this weekend is that, due to the ±5% DB of Tradexyz mentioned above, price discovery was capped. This explains why the line in the chart is flat and why there is a Monday gap. Nonetheless, Hyperliquid xyz:CL($73.89) was within 1.5% of CME CLJ6 ($75) at the first second of paired data.

This is not a “miss” or “failure,” but rather risk protection through market design.

For this reason, weekend 1 is the least relevant from a data perspective, but it highlights how the xyz:CL reacted to the initial shock of the strikes on Iran, as well as the importance of DB as a mechanism to cap price discovery during weekends, especially for new markets.

Weekend 2

Weekend 2 was the real test as xyz:CL hit the DB at the very end of the market. CLJ6 opened at $98 (+737 bps from $91.27 close), while xyz:CL reached ~$95.83, capturing only 68% of the move.

In Weekend 2, xyz:CL was able to better capture the move and was closer to the CME open than the preceding weekend.

Weekend 3

Weekend 3 highlights that, in calmer conditions, Hyperliquid can more reliably predict the eventual CME opening directionally.

This weekend highlights xyz:CL tightest convergence with CLJ6: At +226 bps vs CME close, it slightly overshot the Monday open of +62 bps. CLJ6 closed at $99.31 at Friday and opened at $100.93 (+163 bps) while xyz:CL at the CME open was trading at $101.56.

Taken together, the three snapshots show a structural change in the xyz:CL market on Hyperliquid, transitioning from an infant market constrained in price discovery by DB (Weekend 1 and Weekend 2) to increasingly free price discovery with overshoot and correction (Weekend 3).

Upon analysing the price-deviation error at different weekends for different hours before CME open (3h, 1h, 0h), weekend 3 shows the most reliable data, as in the initial two weekends the xyz:CL market hit DB. At weekend 3, xyz:CL was trading at an error of about +70 and -139 bps at 3 hours and 1 hour before the CME eventual open, indicating better price discovery than in the previously analysed weekends.

We also provide additional metrics for the weekend summary analysis, including volume, total trades, and average trade size, which varied across weekends and increased further over consecutive weekends.

The total volume in the xyz:CL market grew from $31 million to over $1 billion in three weeks, reflecting increased usage and eventual maturation.

Additionally, the total number of trades followed increased from just 26k at weekend 1 to over 700k at weekend 3.

What’s interesting to note is that the average trading size on weekends actually increases from the median we highlighted earlier, to $534. The same growth trend is observed across all three weekends, possibly a sign that more institutional flows are being captured.

On the first weekend, the average size was $1199, rising to over $1500 by the third weekend.

This potentially indicates a different user base leveraging the platform on the weekend, less so retail users, and more traders who need oil exposure before Monday, making weekend flows closer to hedging demand than speculation.

Find the complete report here:

https://docsend.com/v/sjv2g/the_evolution_of_commodities

Gm all!

Welcome to the newest edition of the Chronicle!

You’ll get a curated list of the most important macro news and DeFi news, along with insightful posts from guests and more! Actionable intel done the Castle way 🤝

Without further ado, let’s get into it, shall we?

In The Markets

The Iran War is continuing, oil has exploded, and then imploded after Trump tried his famous TACO strategy. In his own words, “The Iran War will end very soon”.

While the markets reacted favourably to that statement, it’s hard to imagine Iran giving up so easily. This feels like one of his walkbacks, the calm before the storm, if you will.

This still has the potential to backfire on markets, specifically if Iran continues to hold out and oil rises. Luckily for us, crypto seems to be a bit more resilient right now than equities.

Crypto’s disastrous few months of price action seem to be mostly behind us, as the 60k floor has been defended fairly heavily. Obviously, anything can change, and we could lose that floor just as easily, but the hope is that maybe we stay mostly flat until the conflict is behind us.

All eyes have been on the Middle East and will likely remain so until resolution, so the best thing for us to do is keep researching the projects that best align with crypto’s future and take advantage of any war-influenced dips.

But until that happens, let’s dive into the rest of the newsletter to see what went on this past week!

Crypto Round-Up

Pendle’s Road to DeFi Domination

Pendle has long been one of crypto’s best DeFi applications, and each year it becomes more useful. This past week, Pendle announced a new roadmap for 2026, adding a good amount of new features to the protocol.

Think of all those underutilised stablecoins sitting on CEXs, barely earning 3% yield. Now imagine what that would look like if Pendle gave those holders direct access to Pendle fixed-yield strategies from their home CEX.

Well, you don’t have to imagine anymore, because that is exactly what has happened.

That’s a lot of excess capital that can be absorbed into the Pendle ecosystem if it plays out the way they want it to.

Looping Pendle PTs has also been one of DeFi’s greatest strategies, so it’s no surprise that Pendle wants to lower the barrier to entry here. This new one-click leverage feature makes it much easier for users to leverage their PTs and earn a great yield.

Speaking of PTs, Pendle says, “You want to buy PTs on any chain from any chain? We got you.” Being able to buy and loop PTs from anywhere is highly powerful and drives significant demand for all users.

Pendle has brought a lot to the table with this roadmap, and there are even more tools that we didn’t cover.

If you want to see the full announcement, go here:

ERC-8183: The Commerce Layer for AI Agents

Agentic commerce is one of the major narratives driving crypto, as there is potential for millions of agents to transact on crypto rails in the near future.

To do this requires a fully permissionless commercial environment where agents can purchase or offer services anywhere.

This is why Virtuals and the Ethereum Foundation have come together and created ERC-8183 - an open permissionless standard for agentic commerce applications. These applications will also include escrow and evaluator attestation in the smart contracts.

This makes transactions and commerce between agents trustless, no more worrying about whether or not money is being sent without guarantees.

ERC-8183 is defined by the Job. The Job comprises 3 parties: the Client, the Provider, and the Evaluator.

The Client creates the job with a Provider and puts the payment into escrow > The Provider does the work and puts the job completion onchain > The Evaluator reviews the submission and either calls it complete or rejects it.

Some examples of various jobs that could be built are:

• Service jobs like content generation, code review, and data analysis

• Fund transfer jobs like yield farming, token swaps, and portfolio rebalancing

• Reputation-gated jobs that enforce stricter terms on unproven agents, as well as blocking low-reputation providers

This is a huge task and super important for the future of crypto x AI. To read more about this, check out Virtuals’ article below:

Castle’s Special Guest feat: Boros Finance

Trade Here To Win This Bear Market - A Comprehensive Boros Overview

Boros is a sister protocol of Pendle V2, taking its unique yield-trading mechanism and bringing it to the world of funding rates.

While trading funding rates is still nascent in crypto, we believe we’re building one of the best places to trade in this bear market.

In this guest article, we’ll cover:

• How Boros works - Yield Units, funding rates, getting fixed funding on perps and farming funding rate differences

• Why you should use Boros: possible speculative gains, insurance against funding rate spikes, and the unique edge you have as a participant in the bear market

• Finding ideal trading setups on Boros

• How to start trading on Boros today, based on your experience and risk tolerance with crypto

Funding Rates: An Unexplored World in DeFi

Perpetuals trading has become THE breakout product of crypto in the last cycle. Protocols like @hyperliquidX achieved huge Product-Market-Fit, and perpetuals trading volume now outpaces spot trading by magnitudes:

Even in bear markets, perpetuals continue to lead spot volume by multiples!

But within the perpetuals market lies billions of untapped yield via funding rates.

Put simply, funding rates are what longs/shorts pay to each other, depending on the difference between perp/spot prices:

Depending on whether there are more longs/shorts, rates either swing highly positive (longs pay shorts) or highly negative (shorts pay longs) during market volatility.

This floating funding rate has led to new yield farming strategies emerging, such as:

• Cash/carry trade to capture positive funding rates (i.e. short ETH perp to collect funding / hold ETH spot to make the position delta neutral)

• Cross-platform funding rate arbitrage to capture funding rate differences (e.g. long ETH on exchange A, short ETH on exchange B - your yield is the spread between the two platforms)

However, as funding rates are never static, these trades might not be suitable for retail participants to execute.

But with Boros: we’re bringing fixed yield into funding rates, opening up these strategies to the average crypto participant.

Fixed Yield via Yield Units (YU) - The Heart of Boros

With Boros, you can now capture the yield of funding rates with our Yield Unit (YU) markets. One YU represents the 1:1 funding of the same asset on perps:

1 YU of ETHUSDT-Binance = 1 ETHUSDT funding on Binance perpetuals

With Boros markets, YUs have both Implied APR and Underlying APR.

Implied APR:

• Think of this as the price you pay to purchase YUs on Boros

• Your Implied APR entry is the fixed APR you pay/receive until you exit the YU position

• If you long YUs, you pay the Implied APR

• If you short YUs, you receive the Implied APR (perfect for cash/carry trades!)

Underlying APR:

• This is the floating funding rate of the YU’s perp market

• If you hold a long position, you receive the Underlying APR

• If you hold a short position, you pay the Underlying APR

There are 2 ways to make money directly from YUs on Boros:

1. Implied APR gains (mark-to-market)

You’ve longed BTCUSDC-Hyperliquid rates at 8% Implied APR, and close at 10% - your position is up 25% from the increase in price! (vice versa for shorting)

2. Underlying APR gains (settlements over time)

As YUs represent the funding of perpetual markets, you either pay/receive the Underlying APR, depending on your Implied APR entry + whether you’re long or short.

This time-based element can be tricky to understand, so here’s an in-depth thread for further reading:

You can also consult our Boros docs for more details if needed: https://pendle.gitbook.io/boros/the-basics/chapter-2-implied-apr-and-underlying-apr)

Getting Fixed Funding with YUs:

With YUs, you can now lock in fixed rates for perpetuals positions. Simply long/short YUs 1:1 to your notional perp amount, and your Implied APR entry is the funding rate you’re paying until you unwind the position!

Achieving fixed funding on longs:

Achieving fixed funding on shorts:

Why use Boros?

Boros is inherently PVE because we’ve created an arena where traders don’t need to “win” on Boros to be profitable.

For example:

• Trader A believes that Implied APR for ETHUSDT-Binance at 7% is undervalued, opens a long to speculate on the price increasing before the market matures

• Implied APR then spikes to 14%

• Trader B wants to capture the fixed 14% APR, and shorts ETH rates at 14% Implied while shorting ETH on Binance for fixed rates, while Trader A exits his longs

End result: Trader A profits from Implied APR increasing, while Trader B gets a high entry for fixed yield on an ETH cash/carry trade.

Both participants win!

For a deeper dive on this:

How to start using Boros

There are two main ways to use Boros:

1. Trade Boros markets as a speculator

This means betting on the movement of Implied/Underlying APR in markets.

For example, traders who longed XAUUSDT-Binance funding rates before the US-Iran escalations were able to capture huge upside on both Implied APR price and Underlying APR settlements:

It’s as simple as being a directional trader. Think rates are undervalued and are going to increase due to a market catalyst or uptrend? Long rates on Boros. Think rates are overly high, and due to correct? Short rates on Boros.

Catalysts that push spot/perp price dislocations, such as mass liquidations of shorts/longs, are also events that can be captured with Boros:

2. Trade Boros markets as a yield farmer/hedger

This means using Boros to enable fixed funding, and/or to capture spreads between perp platforms simultaneously.

You can use it to lock in high Implied APRs for cash/carry trades, or arbitrage funding rates between platforms for delta-neutral fixed yield.

We’ve even launched a Boros Strategy Dashboard that makes it easy for you to spot funding rate arbitrage opportunities when they appear:

These yield strategies can go up to 23.8% during periods of volatility, and can go even higher with leverage (adjusted to personal risk tolerance)

And we’re regularly highlighting trading opportunities and the movement of funding rates on our official X account, so make sure to follow us there @boros_fi!

And to see how several traders have done well on Boros, here are several case studies:

Trading to a 73% ROI in 30 days:

Making 5 figs from Boros with one trade:

From 11k to 117k on Boros:

Now the best way to start trading on Boros… is to open up a trade and to see what happens!

Don’t let the complexity of funding rates scare you. Figure out the strategy you want to try out, deposit into Boros, and open a small trade to see what happens.

From a distance, Boros might seem overwhelming and too complex to learn - but once you’ve got the first trade open, it’ll start clicking into place.

Start trading on Boros today: https://boros.pendle.finance/strategy

In The Know

• Virtuals has long been the protocol championing AI, and recently also robotics. They recently announced this hackathon with Base for any builders looking to leverage embodied AI. This is the next logical step for AI Agents, giving them a body to perform physical activities instead of being siloed to digital work. This will be something to watch going forward, as companies that come out of this hackathon might be a good chance to invest in something at the ground floor.

  

• Another chain bites the bullet and creates its own enshrined stablecoin. But this time, instead of using Ethena (like the other chains that made this decision), Sonic went a different route and chose Frax as its infra layer of choice. Enshrined stables just make sense from a chain perspective, but it remains to be seen if Sonic can do anything with it and get back the users they have lost over the past few months.

  

• RAAC has launched another backed coin, this time backed by real estate assets rather than gold, like pmUSD. This new token, iREET, provides exposure to onchain real estate with real rental income as cash flow. We’ve seen real estate being tokenised before, and it doesn’t always end up well. But that being said, this is what RWA is supposed to be, so here’s to hoping they’ve found the sauce to make it succeed.

  

That’s it for another edition of the Chronicle! Every week brings new opportunities, so don’t fret!

We’re all gonna make it eventually!

Don’t forget to join our Telegram channel for the latest updates from Castle and all our research: Link here

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

The opportunity to participate in equities is increasingly being considered by onchain natives, after they initially ignored it. The reasons are multiple, but the consensus was that crypto offered faster returns. However, more and more investors chose to diversify; the Wall Street Journal highlighted this trend as a rotation from Bitcoin to gold or the Magnificent Seven (MAG7).

Until recently, the crypto thesis was defined by a monogamous devotion to digital assets, accepting the cyclical contingencies where every four years, everything must mysteriously collapse; almost astrological in nature, most cryptocurrency assets had their all-time-high after Q2 2025 and have yet to come back to life. Meanwhile, equities hit new all-time highs, prompting investors to question whether loyalty to the blockchain amounts to neurosis veiled as conviction.

The entire use case of tokenisation is not “financial inclusion” or “democratising access“, but a way to allow traders to short TSLA to death, borrow against NVDA without KYC, trade pre-IPO equities or earn yield in Kamino vaults.

This article analyses three different approaches for onchain tokenisation:

• Ondo Finance launched Global Markets in September, bringing institutional-grade tokenisation to the Ethereum network.

• Backed Finance’s xStocks (now owned by Kraken) debuted in June, targeting retail with multi-chain composability.

• Hyperliquid activated HIP-3 in October, enabling permissionless perpetual futures on any asset, including commodities, stocks and more.

This article explores the inner workings of each protocol, focusing on how they “tokenise” assets onchain.

General considerations will be made regarding the legal contingencies underlying each protocol and their implications for investors.

Finally, we are going to explore where the broader tokenisation trend is going and what it means for the crypto ecosystem we are accustomed to.

Ondo: BlackRock Onchain

Founded in 2021 by Goldman alumni Nathan Allman and Justin Schmidt, Ondo spent years building tokenised treasury products (USDY for retail and OUSG for institutions), holding over $2 billion before launching Global Markets in September 2025. Ondo holds $2.47 billion in TVL across all products, including T-bills.

Ondo’s tokenisation model is what the industry calls indirect tokenisation. An offshore SPV purchases and holds the underlying equity on behalf of token holders, then issues onchain structured notes that pass through the economic exposure without granting legal ownership. The buyer holds a claim against Ondo’s issuing entity, secured by the underlying stock sitting in a segregated account at a US-registered broker-dealer.

Ondo tokens are debt instruments collateralised by equities, not equities themselves. There are no voting rights, for example, reserved for holders of the underlying.

The most notable features are:

• Institutional-grade tokenisation with bankruptcy-remote SPVs, daily proof of reserves, US-registered custodians, and instant minting during market hours.

• If Apple trades at $180 on NASDAQ, users mint AAPLon for $180 in stablecoins and redeem it instantly. Arbitrageurs keep onchain prices tight by averaging tokenised share prices across DEXs and Global Markets: The arbitrage loop is what keeps the peg in place. Ondo settles atomically: stablecoins in, token out, one transaction. If AAPLon trades above $180 on a DEX, a market maker mints new tokens on Global Markets and sells them into the market to balance the premium. If it trades below, they buy the token onchain, redeem at par, and keep the difference.

• Ondo tokens are fully backed and secured by U.S. stocks and ETFs held at one or more U.S.-registered broker-dealers. Holders do not hold shares directly; they have economic exposure through tokens, whereas dividends are automatically distributed.

• There are no minting or redemption fees, as Ondo profits from the spread.

The platform launched with 100+ assets on Ethereum, expanded to BNB Chain and Solana, and recently announced Ondo Chain, which adds a specific POS mechanism for staking RWAs.

The current catalogue is vast: mega-caps (AAPL, TSLA, NVDA, GOOGL), ETFs (SPY, QQQ), and commodities.

Geographic restrictions, however, are stringent: no US persons or residents are permitted. Ondo tokenised stocks are available only to qualified investors, and KYC is mandatory.

The tokenisation process deserves attention because each protocol has its own alchemy.

Alpaca, the US-headquartered self-clearing broker-dealer, now custodies over 94% of all tokenised US equities and ETFs by value, including Ondo’s. Its Instant Tokenisation Network provides the in-kind minting and redemption rails, meaning the underlying stock is journaled between brokerage accounts rather than liquidated into cash and re-bought, eliminating slippage and keeping token prices stable. Ondo also recently filed a registration statement with the SEC; once effective, it would make Global Markets the first issuer of transferable tokenised stocks subject to SEC reporting requirements. The SEC closed its two-year investigation into Ondo in November 2025 without recommending charges, and the protocol subsequently acquired Oasis Pro Markets, an SEC-registered broker-dealer, to accelerate its domestic ambitions.

Ondo believes that institutions care more about regulatory clarity and operational efficiency than ideological purity.

xStocks: Retail’s Best Friend

xStocks occupies a sweet spot between crypto and TradFi: More accessible than Ondo, more compliant than HIP-3, open to all.

Launched in June 2025, xStocks offers 60+ tokenised equities and ETFs, each backed 1:1 by securities held in Swiss/US custodians under Swiss regulatory oversight. Tokens are SPL/ERC-20, freely transferable across chains.

Its timely success prompted Kraken to buy Backed in 2025. xStocks now holds $250 million in public equities, with Tesla accounting for more than a quarter of that figure.

In this specific model, token holders don’t own shares; they hold creditor rights against the issuer. Each xStock is backed 1:1 by underlying equity; dividends are automatically reinvested, following Ondo’s model: When the underlying equity distributes a dividend, holders receive additional xStock tokens airdropped to their wallet, equal in value to the dividend amount.

The tokenisation mechanism mirrors traditional structured finance compressed onto blockchain. Legally speaking, each xStock is a tracker certificate, classified as a bearer debt instrument, issued by Backed Assets Limited, a Jersey-domiciled SPV and wholly owned subsidiary of Backed Finance AG in Switzerland. The token’s financial value tracks a specific underlying equity or ETF, but grants no ownership or voting rights. Token holders are creditors of the issuer, not shareholders of the underlying company. This is the same indirect tokenisation model as Ondo, but the legal architecture and post-issuance mechanics are different.

The issuance works as follows:

• An authorised participant (AP) submits a mint request through Alpaca’s API, specifying the ticker, quantity, target blockchain, and wallet address.

• Alpaca, acting as the US-headquartered self-clearing broker-dealer, validates the request and records the corresponding shares from the AP’s brokerage account into the issuer’s account.

• Once Backed confirms receipt of the underlying security, the equivalent xStock tokens are minted onchain and delivered to the AP’s wallet.

Redemption works in reverse: the AP burns the tokens, Alpaca confirms the burn, and the underlying shares are recorded back. This is an in-kind process which keeps the token price tethered to the underlying equity.

On March 5th, xStocks unveiled xChange, a swap engine designed to siphon capital-market liquidity directly into DeFi during trading hours while maintaining onchain liquidity pools for weekend price discovery.

The system has three components:

• Onchain liquidity for off-hours price discovery.

• xChange itself connects DeFi and TradFi during market hours.

• xPort for porting assets onchain.

Powered by Chainlink oracles, xChange is already live on Solana aggregators and launching on CoW Swap and 1inch on Ethereum, with integrations with PancakeSwap, LiFi, DFlow, and Kamino Swap in the works.

The vertical effect is that offchain liquidity gets siphoned into the blockchain through arbitrage, tightening spreads in onchain pools; horizontally, it opens access to the long tail of xStocks without requiring pre-seeded liquidity for every ticker.

The regulatory wrapper spans three jurisdictions:

• The issuer sits in Jersey, regulated by the Jersey Financial Services Commission under the Control of Borrowing Order

• The prospectus is approved by the FMA in Liechtenstein, making the tokens passportable across the EU

• The tokenisation itself is carried out by Backed Finance AG in Switzerland.

Collateral is held in segregated accounts at regulated custodian banks in both Switzerland and the US (InCore Bank and Maerki Baumann among them), governed by a three-party Account Control Agreement: if token holders’ rights are breached, a security agent can seize the collateral accounts.

The distribution is aggressive, with shares available on Kraken, Bybit, Gate and other CEXs. Kraken offers instant settlement, fractional investing ($1 minimum), and competitive fees (0.1% taker, -0.02% maker rebate).

Unlike Ondo, the concept is to onboard retail where they are found. There are no specific KYC or whitelisting requirements, as anyone can buy shares and freely transfer them between self-custody wallets.

On the 25th of February, xStocks achieved $25 billion in volume.

Kraken named Alpaca its preferred partner for sourcing/custodying underlying equities 1:1. Alpaca’s Instant Tokenisation Network provides real-time minting and redeeming for institutions. At the beginning of February 2026, the Deutsche Börse-owned 360X platform started offering xStocks to its clients! The BaFin and ESMA regulate this exchange, the gold standard for Europe.

The idea behind xStocks is that retail cares more about self-custody and multi-chain access than institutional-grade custody. Naturally, retail desires the same weapons available to institutions; tokenising stocks is a first step to fill the chasm of informational asymmetry: now, anyone can listen to the earnings call and immediately dump or buy before the market opens.

Hyperliquid: Anything Goes

An altogether entirely different model has been promoted by Hyperliquid, where tokenisation is reduced to its bare minimum: instead of an economic exposure, traders long or short derivatives, and nothing more.

HIP-3, activated in October 2025, lets anyone staking 500,000 HYPE launch their own perp exchange on HyperCore. The deployer sets the oracle, defines leverage, manages risk, and earns 50% of fees.

The mechanics here are fundamentally different. In the Ondo and xStocks model, there is an actual stock sitting in a custodial account; the token is a structured claim on that stock, and when a holder burns it, the share is sold. The chain of custody looks like this:

• NASDAQ → broker → SPV → blockchain.

In Hyperliquid’s model, none of that exists. HIP-3 markets are isolated-margin, not listed on Hyperliquid’s main frontend, and distributed entirely through third-party builders who choose which markets to offer. The oracle is the critical variable: each deployer selects its own pricing source and defines what happens off-hours, when US markets are closed, but the perp trades 24/7. During off-market hours, the exchange relies on EMA-smoothed internal pricing, protocol clamps, and specific trust tiers based on the assets’ liquidity depth.

This is not tokenised equity, like Ondo’s Global Market. There are no shares, no dividends, no redemption, no SPVs, only contracts that track price via an oracle, settled in stablecoins or HYPE.

XYZ100, deployed by trade.xyz tracks the “value of a modified capitalisation-weighted index of 100 large non-financial companies listed on a U.S. exchange.” It hit $72 million daily volume and $55 million open interest within two weeks, breaking into Hyperliquid’s top 10; it now averages billions in monthly volume.

Hyperliquid’s edge is decentralised market creation. Any builder meeting the 500K HYPE requirement deploys three markets free; additional markets require a Dutch auction.

This creates niche explosions:

• trade.xyz (XYZ100, NVDA, TSLA, AAPL, GOOGL)

• Ventuals (pre-IPO SPACEX perps)

• Felix (USDH collateral, 20% lower taker fees)

• Kinetiq, a liquid staking protocol with more than a billion dollars of monthly volume

Through HIP-3, Hyperliquid becomes AWS for perpetuals: instead of competing with every market, they provide infrastructure and let builders compete.

AWS rents users compute, storage, and networking, and users build whatever they want on top. Hyperliquid does the same with financial infrastructure:

• HyperCore provides the order book, the margining engine, and the settlement layer.

• The deployer decides what asset to list, which oracle to use, what leverage to permit, and how to manage risk.

The protocol is indifferent to whether the market tracks Tesla, pre-IPO SpaceX, gold, or a basket of GPU manufacturers. It collects its 50% fee share regardless. This is a fundamentally different business model from Ondo or xStocks, which must individually structure, custody, and legally wrap every single asset they tokenise. Hyperliquid delegates those functions to builders and adopts a laissez-faire approach to tokenisation.

The current meta is highly favourable to perp DEXs, and the volume is not decreasing at all in 2026. Crypto speculators care more about leverage and accessibility than ownership rights, but, as explained above, this is partly because the culture has yet to change, and accessibility was poor until tokenisation emerged in recent years.

The risk, however, is far more important than in tokenised equities. Oracle failures during periods of high volatility or off-market hours, liquidations, or MMs pulling off to avoid drawdowns can lead to an absolute loss. Unlike tokenised stocks, once a position is liquidated, the capital is lost and cannot be recovered.

Institutional desks require auditable counterparties and regulatory clarity on the classification of derivatives, while HIP-3 offers neither. For a fund with compliance obligations, trading an equity perp on Hyperliquid would raise immediate questions from auditors and risk committees, especially concerning ISDA compliance. Hyperliquid’s current user base is mostly retail, as it focuses on public access; however, there are signs that this is changing. Ripple has integrated Hyperliquid into its institutional prime brokerage platform Prime, providing clients with access to perps; another sign of the times. The availability of Hyperliquid gold, silver and oil markets during the Iran strikes on the weekends is increasingly an argument to become a key benchmark for tokenised asset prices during off-market hours.

Tokenise It All

Hyperliquid proved that decentralised protocols can and will compete with legacy exchanges.

Others are following suit. Binance relaunched tokenised stocks on February 24, 2026, partnering with Ondo to list 10 tokenised US equities and ETFs on Binance Alpha. This is their first tokenised stock offering since shutting down the service in July 2021, following FCA and BaFin questions about their compliance, which led to a series of unfortunate events for CZ.

The current US market exclusion is another point of contention. The moment the SEC approves domestic tokenised securities (and they will, as post-GENIUS Act momentum is not slowing), the onchain RWA sector will explode. If cryptocurrencies are bleeding to death, equities only go up, whether public or not.

The real competition is between whoever controls the infrastructure when US approval is official.

Hyperliquid is not competing with xStocks and Ondo in any direct sense; it serves a fundamentally different function. Ondo and xStocks provide economic exposure to equities, with tokens backed by real shares, dividends reinvested, and a redemption mechanism tied to the underlying. The backbone is access: holding, lending against, and composing with assets that were previously accessible only on Schwab or Interactive Brokers. Hyperliquid’s HIP-3 provides leverage and speculation: a synthetic contract that tracks the price, with no claim on any asset, no custody chain, and no creditor rights. In a way, this is the apex of financial freedom, where anyone with a wallet and some dollars can access almost anything, immediately.

For retail, the choice should not be a dilemma, as each alternative yields a different outcome. A trader might hold xTSLA in a self-custody wallet as a medium-term position while simultaneously shorting TSLA-USDC on Hyperliquid to hedge a potential grim earnings call, like many traders arbitrage between Polymarket, pre-markets, OTC points platforms, etc.

One is a long-run portfolio allocation, the other is a trade. The confusion arises because both are accessed through crypto wallets, denominated in stablecoins, and marketed under the umbrella of “tokenised equities.” But the comparison is skewed: xStocks and Ondo carry issuer and custodial risk (the SPV must remain solvent and the collateral must stay segregated), while Hyperliquid carries oracle and liquidation risk (the price feed must remain accurate, the margin must stay healthy, or the position is gone permanently). So, despite a common idea, each protocol cannot reasonably be compared to the others.

What Hyperliquid does better than either is speed and flexibility. The permissionless nature of HIP-3 means the market itself is the product, seeing as any asset with an oracle feed can have a perp within hours, not the months of legal structuring required for tokenised equity issuance.

Three hardly comparable protocols, each pursuing a very specific niche, for everyone to be satisfied: competition between them is illusory.

This is ultimately a discussion about choice, self-agency and inventiveness.

written by @TradFiHater ✍️

This is evident with the growth of vaults as yield instruments, which have become increasingly popular. Recent examples include Coinbase launching curated vaults in partnership with Morpho on Base, and Kraken doing the same on Ink, in partnership with Veda Labs and Sentora.

With DeFi projected to grow at a 43.3% CAGR through 2026–2030, this trend is expected to be a key driver, as more partnerships among technology providers, quantitative asset managers, and established distribution platforms emerge. While not encompassing the full range of providers offering institutional services, lending protocols already account for over 20% of Total Value Locked (TVL).

While vault curation is currently not highly profitable for those involved, given the associated risks, most growth in this vertical will come from institutional and more retail appetite for these products. An example is Bitwise’s first onchain vault on Morpho

In fact, while vaults are the structure of choice for many seeking to attract capital from retail investors by abstracting away the complexity of strategies, they are also an incredibly powerful tool for institutional investors.

However, the inherent volatility of digital assets is often a decisive factor for institutional investors when evaluating these alternative investments.

In particular, they require two key properties in the investments they make:

• Risk-adjusted returns

• Regulatory clarity

While the regulatory component is due under the CLARITY Act, pending a vote in the U.S. Senate, the risk-adjusted returns are subject to active remediation. To address this, it is necessary to differentiate the asset composition of investment portfolios, on the one hand, to gain exposure to the growing opportunities in the sector and, on the other, to ensure low correlation with crypto-related volatility.

This article explores a broader shift in the landscape, using PRISM (Portfolio of Risk-adjusted Investment Strategy Mix) as a case study to illustrate the design and unique value proposition of yield products aimed at attracting both institutional and retail flows.

Light Through the Prism

In the 1660s, Isaac Newton performed the Prism experiment, in which he allowed a single ray of light to pass through a glass prism, producing a multicoloured band of light resembling a rainbow. All these different-coloured lights had different wavelengths but originated from a single beam of sunlight.

If we apply the same context to any asset class, many of them are volatile when considered in isolation. Once placed in a fund or index, these assets are less volatile because the exposure is often neutralised. The same idea applies to crypto and PRISM, which is issued by OpenEden and whose strategies are managed by Monarq, the quantitative asset arm of FalconX, which seeks to achieve the same neutralisation in this highly volatile asset class.

The main idea behind this product is to reflect how onchain investment products are evolving toward more regulated, professionally managed offerings, and to provide users and partners with OpenEden’s “regulatory-compliant tokenisation infrastructure that allows strategies like this to be accessed in a transparent and scalable format”.

The role of Monarq is instrumental in providing expertise in “sophisticated quantitative strategies and multi-layered risk management framework”, specifically focused on strategies that reduce the correlation of PRISM with cryptocurrency prices. This is the key behind PRISM, to leverage onchain strategies while minimising exposure to cryptocurrency assets themselves.

Most onchain tokens provide exposure to a single asset or yield source, leaving users concentrated in one risk stream. Instead, PRISM takes a different approach. It integrates multiple strategies within a defined risk framework under a single token, delivering professionally managed, diversified allocation designed to balance risk and return across market conditions.

According to OpenEden, PRISM should be considered a “new class of onchain products,” moving onchain strategies further from the more traditional delta-neutral or single-strategy approach to better account for risk-adjusted returns for both retail and institutions.

Strategies and Risks

Prism shies away from single strategies in favour of a multi-strategy approach.

The strategies of PRISM include:

• Cash-and-carry arbitrage

• Overcollateralised secured lending to institutional counterparties

• Participation in established onchain yield venues

• Allocations to regulated tokenised RWAs, including U.S. Treasury–backed assets

As the strategies are proprietary to Monarq, we are unable to share the backend details. While not ideal, this is understandable, as they are trying to preserve their edge and competitive advantage. Building institutional products inevitably entails trade-offs. For transparency into PRISM’s backing, users can track onchain reserves on the transparency dashboard, once it is live.

PRISM is currently permissioned. To access the strategy as a primary client, users must complete KYC and onboard with OpenEden. Though it would be worthwhile to explore secondary markets in the future.

To understand the complexity and level of collaboration and professionalisation required for this category of products, here are the service providers involved in PRISM:

Notwithstanding the regulated and transparent approach and the calibre of the service providers involved, these products still present several risks, including counterparty, smart contract, regulatory change, and liquidity risks.

Food for Thought

The launch of PRISM reflects a broader trend in the sector, with most innovation coming from products targeting institutional players and offering better opportunities for retail audiences.

In 2026, crypto went from a narrative trade to an institutional portfolio allocation.

This is exactly the value proposition of PRISM: elevating traditional onchain strategies with a regulated approach, delivering returns without exposing oneself to the volatility of digital assets.

The result is a multi-strategy approach which focuses on becoming increasingly disconnected from market cycles by:

• Reducing concentration risk

• Prioritising risk-adjusted returns

Nonetheless, competition in the sector is ferocious.

Other incumbents include:

• Ethena (delta-neutral yield)

• Ondo (tokenised treasuries)

• Superstate (regulated onchain funds)

• Matrixport/Maple (institutional lending)

While these are all single strategies, PRISM leverages multiple strategies to reduce risk and correlation with market cycles.

Furthermore, as part of the current roadmap, PRISM will evolve into “a multi-strategy, multi-manager product rather than remain a single-manager product,” integrating additional institutional-grade managers and offering different liquidity and risk parameters.

Last but not least, PRISM is issued through OpenEden’s regulatory-compliant tokenisation infrastructure, which includes KYC requirements. This matters for the audience it targets: institutions that cannot touch unregulated products.

The flip side of this design is opacity (proprietary strategies) and permissioned access for primary clients (KYC-gated). While the Monarq team has real institutional and quantitative credentials, with a history in digital asset trading dating back to 2017, the firm has no public track record yet. For an institutional audience, the regulatory wrapper and diversified approach outweigh these concerns, and for a crypto-native audience, the lack of secondary markets can be seen as a problem.

We expect the coming months to be characterised by further integration and collaboration among distribution networks, vault providers, and curators.

Within this framework, the unique differentiating factor of these solutions will be defining their target audience.

For institutional investors, the feasibility of considering these alternative investments comes down to how solid the guarantees of regulatory clarity and the strategies’ risk-adjusted returns are. For retail investors, the primary value proposition is the product’s ability to deliver market-neutral yields.

In Decentralised Finance (DeFi), incentives play an important role in shaping a project’s growth trajectory, but they often come with a double-edged sword: once these incentives are removed, users may leave the platform to seek similar opportunities elsewhere.

The challenges behind DeFi incentives can be classified under:

1. Focusing on multiple protocols simultaneously dilutes incentives. (This is for ecosystems)

2. Not assigning weightage to KPI-driven performance based on tracking key metrics.

3. Lack of Flexibility in incentive distribution and the ability to dynamically change incentives during the course of the program.

4. Lack of tapered rewards to smoothly exit an incentive campaign.

5. Bad User Experience for distribution.

These five challenges encapsulate the state of incentives in DeFi and why they might fail. Typically, protocols and ecosystems adopt a “Spray-and-Pray” approach, deploying capital to attract users, hoping they will remain engaged, without any proper structure.

Ecosystems such as Arbitrum recognised these problems and addressed them by launching the DeFi Renaissance Incentive Program (DRIP), which is funded by the DAO and designed by Entropy, aiming to reward targeted actions and conduct KPI-based distributions, so that the protocols performing best were rewarded the most.

This report examines the program’s performance and its contribution to ecosystem growth, as well as the incentivised protocols and assets.

DRIP: A KPI driven Incentive Program

The DRIP program was introduced based on lessons from previous incentive programs run by Arbitrum DAO, such as STIP (50 million ARB) and LTIPP (45 million ARB), iterating on their impacts and shortcomings. The problems of these programs were similar to those mentioned above, particularly regarding the incentive structure (mostly fixed) and mercenary capital. While these incentives led to a brief spike in activity, this effect did not sustain over the long term, necessitating changes to the approach.

Contrary to previous spray-and-pray incentive programs, DRIP was a highly precise, targeted program that focused on key assets and winning protocols. The DRIP program is distributed across 4 seasons, allocating a total of 80 million ARB tokens. Each season has a singular, clear objective, for example: making Arbitrum the best place to borrow USDT against wstETH, or achieving the deepest liquidity for a particular trading pair. By focusing on one vertical at a time, the program can more easily measure outcomes and iterate on findings.

The first season officially concluded on 17th February, 2026, after running from September 3rd, 2025. This season had a budget of 24 million ARB (including 8 million ARB discretionary budget) and focused on lending and borrowing of yield-bearing ETH and stable assets across blue-chip lending protocols such as Aave, Morpho, Fluid, Euler, Dolomite, and Silo.

DRIP Season 1 had 24 epochs (1 epoch = 2 weeks), where each epoch had a particular role:

• 2 Discovery epochs: Market Exploration phase to determine which protocols perform best with the incentives. These epochs helped determine which protocols perform better with greater incentivisation.

• 6 Performance epochs: Optimised incentives distribution based on the analysis of the previous epochs. In each of these epochs, the incentives were dynamically allocated based on the protocol’s performance. In some cases, incentives were even paused to align with the market conditions.

• 4 Taper epochs: Gradual reduction in incentives to ensure TVL/activity retention. The reduced incentive ensures that users aren’t suddenly deprived of incentives, which might lead them to leave the platform.

Finally, to ensure the program provides the best user experience for incentive distribution, Arbitrum collaborated with Merkl and launched a website listing all active opportunities.

Season 1 of DRIP has officially concluded, and this article assesses its effectiveness. As noted above, DRIP led to a shift in approach, focusing on looping and yield-bearing assets. A looping strategy is executed as follows:

1. Deposit a yield-bearing asset on the eligible protocol

2. Borrow stables like USDC

3. Buy more of the yield-bearing asset from step one.

4. Repeat the process to achieve maximum leverage and yield (yield from asset - borrowing rate)

On Ethereum, Looping accounts for most activity in lending protocols, so incentivising it on Arbitrum was a clear choice. Moreover, it also has second-order effects that create a flywheel in which incentives increase user yield, thereby attracting more capital and prompting users to swap their assets as the process of looping increases DEX activity and liquidity.

While we now understand how DRIP addressed issues surrounding incentive structuring, this section highlights the campaign’s impact. But before we move on to that, let’s understand some of the KPIs to access DRIP:

1. Cost-effectiveness: It is a measure of the net change in protocol/assets growth on Arbitrum relative to the provided incentives. This value determines whether the incentives led to any growth.

2. Market Size and Borrowed Liquidity Growth: Net change in Arbitrum market size and borrowed liquidity.

3. Market Share and Comparative Metrics: Arbitrum growth compared to other L2s like Base.

4. Network Level Metrics: Growth of Arbitrum Total Value Locked (TVL), Total Value Secured (TVS), DEX Liquidity, and Fees Generated.

Starting from network-level KPIs, Arbitrum Total Value Secured (TVS) decreased by ~13%, from $13.77 billion to $11.97 billion (excluding Hyperliquid USDC), and Total Value Locked (TVL) decreased by 34%, from $3.17 billion to $2.09 billion, during the DRIP campaign. Compared with competitors over the same period, Base TVL declined by only 17.6%, from $4.75 billion to $3.91 billion, without incentive programs.

However, these plain numbers only provide half of the picture. While the charts show that DRIP did not sustain value, this is attributable to a strong decline in ETH’s price, which is down 60% from its peak in late August and 40% over the last month, as we can see below how strictly correlated Arbitrum TVL is with ETH price. This drawdown in the broader market has reduced DEX liquidity (down 58% from peak in mid-October) and volume on Arbitrum as expected.

On the other hand, the market cap of Yield-bearing stablecoins (YBS) grew compared to Liquid Staking Tokens (LSTs) and Liquid Restaking Tokens (LRTs), which are ETH-related yield-bearing assets that follow its price**.**

The push from YBS stems from the launch of USDai and sUSDai, as well as other assets such as wstUSR (Resolv), thBILL (theo), sryupUSD (Maple), and sUSDC and sUSDS (Spark), and from their growth on Arbitrum last year. Additionally, greater incentives were provided to YBS due to the ETH’s non-optimal supply to run incentives properly in certain epochs. This constant monitoring of the market conditions helped to use incentives in the most capital-efficient way.

Furthermore, the fees generated by protocols appear to be consistent with the broader market state. It declined over time as asset prices fell. Certain peaks are evident in the chart below, occurring around major market drawdowns, such as the October Liquidation Event and the early February crashes, when users rush to unwind their positions or are liquidated.

Another relevant metric, as reported in the Entropy dashboard, is the program’s cost-effectiveness. It is calculated by dividing the change in Arbitrum Network/Lending Markets TVL by the daily U.S. dollar average value of allocated ARB incentives. In short, if this value is positive, it indicates that the incentives contributed to an increase in TVL; if it’s negative, it indicates that the incentives didn’t have much impact.

This metric declined slightly after the October Liquidation Event and has recently declined further as ETH prices continue to fall and TVL goes down in dollar terms. Thus, incentives cannot keep pace with the reduction in the ecosystem’s locked value.

The next section dives into incentivised protocols and assets, reviewing their growth.

Lending Protocols

By design, DRIP Season 1 prioritised high-velocity DeFi activities, such as looping, thereby incentivising blue-chip lending protocols. These incentives initially increased the market size of lending protocols, but later declined following the ETH price and broader market drawdown. Currently, the combined market size of the incentivised protocols is down by ~26% from the start of the campaign (i.e., 3rd September 2025), from $2.66 billion to $1.97 billion.

Reflecting on the program’s cost-effectiveness, only three of six protocols had a positive impact, owing to factors such as protocol asset concentration and market drawdowns. Cost-effectiveness is calculated as the change in the protocol’s market size on Arbitrum divided by the incentives provided, measured in dollars.

In this case, Aave, Dolomite, and Euler have negative values, whereas all the others show positive growth. For Aave, incentives were paused between epochs 2 and 5 due to ETH’s high cost of capital, as its supply on the chain declined under parallel incentive programs on chains such as Plasma and Linea. Due to the incentive pause, the burden of cost-effectiveness shifted to later epochs for Aave, which also underperformed due to broader market drawdowns (Aave TVL on Arbitrum is largely skewed toward LSTs and LRTs), and not onboarding assets such as USDai and sUSDai, until recently.

Dolomite has lost 55% of its TVL on Arbitrum since the program’s start, as the protocol’s TVL is heavily concentrated in volatile, yield-bearing assets that declined in value when ETH prices fell. Moreover, Dolomite had fewer competitive integrations with incentivised and high-growth assets such as syrupUSDC and PT tokens.

For Euler, although the decline is not large, it is driven by market drawdowns and the expiration of Pendle’s PT assets, such as PT-USDai/PT-sUSDai in November, which accounted for the majority of the decline.

For protocols such as Morpho, Silo, and Fluid, conditions were similar, but they benefited from specific Arbitrum launches, an incentive and focus skew toward stable assets, and performance-based rewards.

The increase in the Morpho market size was primarily driven by stablecoin inflows, including thBILL and syrupUSDC. Additionally, Morpho borrow-side growth in USDC loans and PT assets as collateral enabled effective leverage looping. Silo achieved positive campaign growth by targeting high-demand, incentivised assets such as rsETH and Ethereal vaults. For Fluid, growth was driven by deposits of syrupUSDC and USDC/USDT0 loans.

Moreover, the utilisation rate across lending markets remained stable throughout the campaign at approximately 40%, while borrowing activity fluctuated due to a combination of market conditions and incentives.

Upon comparing Arbitrum with Base in terms of the change in participating-protocol market size, we observe a clear difference and note that Arbitrum underperformed despite the campaign. Growth on Base is primarily driven by Morpho and Aave (cumulatively represent 95% of Base lending TVL) through their partnerships with exchanges and wallets, including Coinbase and Bitget Wallet.

After reflecting on the overall growth of lending markets on Arbitrum, we examine how each incentivised protocol performed.

Aave

Among the incentivised protocols, Aave received ~34% of all rewards ($1.47 million), given its size and larger user base. This aligns with the campaign structure for rewarding winning protocols and assets.

In certain initial epochs, Aave’s incentives were paused and reserved for subsequent epochs (after the 5th epoch). When incentives were introduced for Aave, its WETH market size increased by 76k units; ETH and related assets saw more than $160 million in net inflows; and rsETH grew to $283 million. This corresponds to an increase in market size in November, as shown in the chart below.

Notably, the protocol’s market size and borrowed liquidity declined significantly recently, owing to the ETH price’s decline over the past month. Its market size declined by 37%, from $2.14 billion to $1.34 billion during this period.

Morpho

Morpho is the second-largest protocol in the lending category and, given its size, was awarded the highest rewards, only behind Aave, representing ~27% of total rewards ($1.2 million).

Morpho launched on Arbitrum in August 2025 and quickly reached its peak market size of approximately $500 million in October, driven by a strong focus on stable assets and competitive rates for eligible assets, such as syrupUSDC. Additionally, thBILL inflows contributed to its growth.

However, following the October Liquidation Event and the allocation of some vaults to overleveraged YBS (Stream Finance Incident), its growth was adversely affected, resulting in a 68% reduction in market size from the peak in late October. On this note, Entropy also blacklisted two vaults (MEV Capital USDC and Hyperithm USDC) from receiving DRIP rewards.

Later, Morpho recovered to similar levels in January 2026, driven by syrupUSDC and PT-USDai markets, only to experience a recent downtrend, a pattern consistent with that observed in the other protocols.

Fluid

Fluid accounted for ~19% of the net incentive allocation ($850k).

Fluid’s market size increased during the initial phase of the incentive period, rising by 63% from the start of the campaign, driven by syrupUSDC deposits, and then declined after peaking in early November.

Similar to Aave and Morpho, Fluid also experienced a 35% decline in its market size over the past month, falling from $330 million to $213 million due to market drawdown.

Euler

Euler was allocated 13% of the net incentives, worth $580k.

Euler has a story similar to Morpho; it launched on Arbitrum last year and employs a curator model similar to Morpho’s. Its market size declined following the Stream Finance Incident and the expiration of PT assets around the same time (though it didn’t witness any bad debt, so no rewards were reduced as Morpho).

Its market size has not recovered on the chain since then and is currently down ~85% from the campaign peak of $190 million to $30 million.

Dolomite

It was awarded ~3.5% of the total rewards distributed across the campaign ($150k), exceeding Silo’s share.

The Dolomite story differs slightly from the aforementioned protocols; it began the campaign with an estimated market size of approximately $92 million and currently stands at $30 million, a 68% decline, attributable to a higher proportion of yield-bearing assets and less emphasis on high-growth assets such as syrupUSDC and PT assets.

Their downward trend correlates with market conditions and was not benefited by incentives.

Silo

Silo received ~3% of the net incentives ($136k) and still grew at a decent pace.

Silo is one of the protocols that closed the campaign with net-positive growth and entered the program with a market size of $50 million, which has since grown to $73 million.

They reached their peak in early November but declined following exposure to the Stream Finance Incident, leading to Entropy removing the rewards for certain exposed vaults like Varlamore USDC and Silo TID vault.

Overall, they performed better with respect to the program’s cost-effectiveness due to a focus on Optima USDC and Ethereal vault and assets such as rsETH, which were incentivised.

ETH Assets

LSTs and LRTs were also incentivised during the campaign, although they accounted for only ~37% of the net incentives distributed, compared with the YBS, which received the remainder. These assets were selected because they are yield-bearing and can be used to perform activities such as looping.

Recall that, as noted above, for a looping strategy to be successful, the platform’s borrowing rate must be lower than the asset’s yield.

Hence, the incentives are targeted to:

1. Reduce the effective borrowing rate.

2. Increase the yield on depositing these assets as collateral.

Hence, looping becomes more profitable. Few assets were eligible for rewards during the season: wstETH, weETH, ezETH, rsETH, and gmETH.

The market capitalisation of these assets grew rapidly, reaching a peak of $1.22 billion in mid-September last year, and has since declined to approximately $600 million. Moreover, in ETH terms, the market capitalisation has grown by ~22% since the start of the campaign, increasing from 249k to 302k ETH. The decline in the USD-denominated market cap can be attributed to falling ETH prices, but an increase in ETH terms indicates net inflows, suggesting that incentives worked for these assets.

While market capitalisation shows the asset supply on the chain, its utilisation can be analysed by the increasing market size in lending protocols, the specific area where the campaign focused.

Two outliers, Kelp (rsETH) and Renzo (ezETH), grew by ~380% (from $28 million to $137 million) and ~2784% (from $2.6 million to $75 million), respectively. Notably, their size on Arbitrum at the start of the campaign wasn’t large relative to other incentivised assets, such as weETH and wstETH, but they ended up with a market size comparable to theirs.

The lower maturity of these assets in the initial phases of the campaign enabled them to grow on Arbitrum, driven by competitive yields from issuer rewards. When incentives were restored to LSTs and LRTs on Aave in Epoch 6, their growth accelerated exponentially.

Additionally, during the campaign, the dominance of these assets on Arbitrum increased, particularly for rsETH (Kelp) and ezETH (Renzo), rising from ~2% at program start to ~12% and ~19%, respectively.

Reviewing the net market size and asset capitalisation of the incentivised ETH-related assets, it’s relatively down from its peak and has been decreasing due to lower ETH prices. This also directly affected the DEX liquidity of these assets, which has decreased compared to the start of the campaign.

Compared with the ETH supply on Base, the Arbitrum ETH supply changed noticeably; Arbitrum led and grew by 18% during the campaign period, while for Base, it is 9%. The current ETH supply on Arbitrum sits at 872k.

USD Assets

On the other end of the incentive spectrum, YBS (yield-bearing stablecoins) were incentivised. They represent 63% of the net incentives distributed, far more than ETH-related assets. Since these assets are yield-generating, they can be used for looping strategies. During the campaign, multiple assets were incentivised, including sUSDC, sUSDS, USDe, USDC, sUSDe, RLP, wstUSR, sUSDai, syrupUSDC, and thBILL.

Compared with the growth of other aspects of DRIP, YBS performed very well. From the start of the campaign, the combined market capitalisation of these assets increased by ~45% from $923 million to $1.33 billion. One of the key contributing factors for this increase is the launch of USDai on Arbitrum last year.

Moreover, their total market size on Arbitrum has increased from $43 million to $190 million, a 340% increase. This is a positive change, but it remains substantially below the asset market size peak in late October, which was $330 million, due to the October Liquidation Event and the requirement to unwind positions.

A similar rationale applies to the DEX Liquidity of these assets on the chain, which has declined by 65% from its peak of $120 million in mid-October to $41 million. Additionally, following the market downturn, DEX liquidity for YBS on Arbitrum has also declined.

Closing Thoughts

DRIP seeks to address the incentive structure and mercenary capital problem of incentive programs across its four seasons. The first season has officially ended with the distribution of 16.7 million ARB tokens (~$4.3 million). The program aimed to incentivise the winning protocols and assets through activities that had second-order effects, such as looping.

The focus of Season 1 was on YBS, LSTs and LRTs. As ETH assets are inherently volatile, incentives were unable to provide much support during the drawdown, but they did provide some support for certain protocols. For YBS, growth appeared positive, but the broader market drawdown also contributed to a reduction in market size on lending protocols. Overall, more incentives for YBS led to net positive growth in the market capitalisation of these assets on Arbitrum.

The data indicate that additional incentives don’t always yield the greatest growth, as the cost-effectiveness of certain protocols, such as Silo, is higher than that of others, even though they received the fewest incentives. Although it is fair to say that Silo size isn’t large, it had more space to grow.

Nonetheless, this was only the initial season of the DRIP campaign, which spanned across five months and followed a defined structure to incentivise users and to select winning assets and protocols. This case study showed that incentives can serve as a useful fallback during market drawdowns and help protocols and ecosystems sustain value for a longer period as the ETH supply on the chain grew during the program. It is also noted that active adjustments to incentives appeared effective and helped better align incentives during market drawdowns and incidents such as the Stream Finance Collapse.

That said, there are three more seasons remaining, each targeting a particular area, and there is substantial value for the Arbitrum Ecosystem to acquire, as Arbitrum currently represents only 2.18% of the total DeFi TVL. Additionally, over the past year, the ecosystem has focused on creating long-term economic value for the DAO and the ecosystem to sustain a healthy flywheel, driving constant growth.

To more ecosystem-focused initiatives, Arbitrum Everywhere.

Data used in the report can be found in the Entropy dashboards here.

DeFi offers plenty of opportunities to earn yield on your deposits, whether from lending protocols, yield-bearing assets, arbitrage strategies, looping strategies, liquidity provisioning, and more.

However, these strategies are far from accessible to everyone, due to:

1. Strategic Complexity: The specialised knowledge required to build complex strategies is a strong barrier to entry. Only a small number of DeFi users know how to build an optimal strategy across multiple platforms to maximise APY.

2. Execution Barrier: Even if users know which platforms to target, these strategies require active management and impeccable execution across all their steps.

These problems haunt every yield market. In TradFi, strategies like these are strictly reserved for HNWIs. In DeFi, an unlikely ally is making them more accessible.

AI has been a great help in easing out the tasks we perform daily, whether it is writing code, emailing someone, or booking your next vacation; it understands human intent and translates it into automated execution.

AI and crypto fully converged in late 2024, when the Decentralised Finance and AI (DeFAI) was booming, and we saw multiple products focused on using AI agents to find and manage optimal yield opportunities in DeFi.

DeFAI sought to ask questions such as:

• Can AI agents curate DeFi strategies and streamline yield generation?

• Can they automate yield management once and for all?

• Can AI agents find the best possible yield for users?

Some of these questions remain unanswered, but overall, we are making steady progress toward answers. As it’s been a while since our last deep dive into AI agents, we tune back in with an update on how these agents have progressed, using INFINIT as a case study to reflect on its offerings, how it works, and what might bring the ultimate turning point in how we use agents in DeFi today.

Prompt to Yield

The way users operate in DeFi is set to change significantly, shifting from first-hand position management to interacting with specialised agents via natural language prompts.

On INFINIT, this is possible through their “Prompt-to-DeFi”, where their agents execute strategies across DeFi protocols.

For many, technical capabilities have been a limit to their onchain adventures.

Now, they have no excuses: as long as you can ideate a strategy, AI agents can execute it for you.

This is exactly the type of user base these projects are targeting. While many knowledgeable users have clear ideas for the strategies they want to bring to life, INFINIT also targets users without deep DeFi knowledge and expertise, who can simply leverage one of the many strategy templates. These can take the form of a leveraged looping strategy or a liquidity provisioning strategy to farm an airdrop. To start, users simply mention the starting token, then type the strategy: “Swap token A to token B, deposit in Protocol A.”

Each template supports multiple agents and smart actions. While typing out swap token A to token B, users can specify which platform to do it on. “Supported agents” refers to the group of agents on the platform that currently support “Prompt-to-DeFi.”

As part of best security practices, all prompts are simulated before execution or public sharing, and all published strategies are currently vetted and backtested.

Whenever AI assists users, they maintain full control of their assets, and the process is fully non-custodial, removing any trust-related dependencies. Additionally, the code construction is deterministic, with no scope for hallucination.

The protocol aims to go one step further by making the strategy deployment layer permissionless, with the expectation that, as the protocol grows, users will develop more strategies, creating a virtuous cycle in which they seek better yields and even create their own strategies that can be monetised.

We asked the team how the revenue-making process would work for strategy creators, and they mentioned that it will have two major components: “First is management fees, or can be referred to as the transaction fees, which are paid by end users for every execution. These fees scale based on the transaction’s complexity and the number of agents involved in completing it. The second is the performance fees, which will follow the management fee as part of a phased rollout of the fee-collection and fee-sharing mechanism. Additionally, from time to time, we will run campaigns for creators to earn an additional bonus tied to strategy usage.”

Users on the platform have two options**: Either they create their own strategy or use someone else’s**.

A user who might use a similar looping strategy to farm incentives across chains can reuse the same prompt and easily switch protocols, reducing execution time. Users who aren’t familiar with this strategy can utilise it with a single click, reducing strategic complexity.

The Stack behind making DeFi cool

The “Prompt-to-DeFi” initiative is a strong step toward making DeFi more accessible.

As part of its stack, INFINIT utilise agent swarms, Large Language Models (LLMs), and a comprehensive data stream of onchain and offchain data to turn the dream of abstracting DeFi complexity into reality.

Agent Swarm: The agent swarms sit at the top of the stack and are the point of contact for users. Whatever strategy a user builds is executed by these specialised agents. Each working in a particular direction, such as token swapping, lending and borrowing, bridging funds, finding the best onchain yields, and more. On INFINIT, there are over 35 such agents to support any strategy-building exercise.

Coordination Layer: Communication is essential among swarm agents, as they are interdependent. For instance, an agentresponsible for swapping token or lending on Aave cannot simply “swap USDT to sUSDe, deposit it on Pendle, and then deposit PT assets from Pendle on Aave as collateral to borrow stables against them and repeat the process for maximum possible yield,” as it would need to communicate with the others through:

1. Feedback Loops: Review performance and utilise user feedback to improve accuracy.

2. Agentic Retrieval-Augmented Generation (RAG): Enables agents to pull data from INFINIT Data Streams and make them context-aware about cross-chain liquidity profiles, user-specific analysis, and opportunities.

3. ReAct Agent: Helps agents to provide a suitable execution flow based on user requirements. Actions are processed sequentially, and users are made aware of them.

4. Utilising multiple LLMs: Improve execution, interactions with users, and help analyse the user’s financial goals and risk tolerance.

Data Streams: Data streams ensure agents are always aware of the latest onchain and offchain data, including yield rates, liquidity, news, governance, and other key information. They are the intelligence layer for the product.

While this setup is fairly complex, it helps make the DeFi experience smoother and keeps everything just “one prompt away.”

Food For Thought

As DeFi grows, there will be richer sources of yield all waiting to be explored by potential depositors. On the other side of the equation, there will be a large audience unaware of these different yield opportunities. This disconnect is addressed by yield and strategy abstraction protocols like INFINIT, which make accessing these yields easier.

This is also an easy win for all supported DeFi protocols, as it provides a new source of liquidity from users who may not be aware of their products, making DeFi more accessible. Additionally, the strategies in the application are not limited to DeFi yield; they also include delta-neutral strategies, aidrop farming, an important part of how crypto functions, and others.

While serving this important role in the next phase of DeFi, products like INFINIT also offer DeFi neobanks an opportunity to offer exotic onchain yield options to their users and to make the DeFi ecosystem easier for the retail audience to access.

Another opportunity INFINIT is exploring is to act as a backend for neobanks, CEXs, and more, routing and handling higher-risk, higher-yield opportunities for end users, rather than competing with them on distribution. They have already integrated with the wallets from Binance, Gate, and Bitget to work in a similar direction.

As AI and LLMs continue to advance, projects like INFINIT are expected to benefit. As an application-level building on top of these fundamental models, INFINIT agents will become smarter, faster, and more efficient as these LLMs progress.

Last but not least, they are exploring to grow beyond crypto-native users to reach the broader crypto and FinTech audience.

This expansion will be supported by enabling and scaling new use cases and user bases for AI agents operating across tokenised stocks and commodities.

Make DeFi more accessible.

What follows is what happened, sourced from the primary documents.

The Proposal

On February 12, Aave Labs published the “Aave Will Win” framework, a proposal under which 100% of product revenue would flow to the DAO, with Labs requesting $42.5 million in stablecoins and 75,000 AAVE tokens in Year One funding. Total value: approximately $51 million. That is 31.5% of the entire treasury and 42% of non-AAVE reserves, allocated to a single service provider in a single bundled vote.

The framework also proposes ratifying V4 as the protocol’s technical future, pausing new V3 features, and planning eventual V3 deprecation. V4 is currently on testnet. V3 generates all of Aave’s revenue.

Community feedback before the Snapshot vote called for wallet disclosure, a Foundation structure before funding is released, and V3 deprecation gated to V4 adoption milestones. The vote has proceeded without enforceable commitments on any of these.

Two Accounts

On February 25, two posts appeared on the Aave governance forum within hours of each other.

Aave Labs published a contributions report. Their account: every protocol version from V1 through V4, Flash Loans, eMode, the Safety Module, GHO, the frontend, and the brand. Over 570,000 lines of code since 2017. Their position on revenue attribution: the architecture enabling those strategies was their original design, and attributing revenue to any single contributor misrepresents how layered protocol development works.

ACI founder Marc Zeller published a financial breakdown. His figures put Aave Labs’ lifetime capitalisation at $86 million, combining the 2017 ICO, venture capital, DAO payments, and swap fees he claims were redirected from the DAO without a governance vote. He traces 23% of the token supply to 52 wallets he connects to the founding infrastructure. He calculates that Horizon, Labs’ institutional RWA product, has cost the DAO roughly $24 for every $1 earned, citing $4.2 million in Merkl incentives against $216,000 in collector revenue. He catalogues six standalone products he argues failed or remain unprofitable, and claims 98% of V3 revenue came from code shipped by BGD Labs and other DAO service providers rather than Labs directly.

Both arguments have merit. Both parties have incentives.

The Departure

Eight days after the Aave Will Win framework was published, BGD Labs announced that it would not renew its engagement upon expiration on April 1.

BGD built V3.1 through V3.7, Liquid eMode, and significant portions of Aave’s governance infrastructure. Their stated reason for leaving: Labs applied pressure to V3 to promote V4, without collaborating with BGD on V4 development, and imposed what BGD described as “artificial constraints” on V3 improvement. The team whose code generates all of Aave’s current revenue concluded that the environment no longer works for them. They have offered a two-month security retainer for critical incidents. After June, they are gone.

Market Context

Since the brand ownership dispute in December 2025, AAVE is down roughly 32%. In the same period, Morpho, which charges zero protocol fees, is up approximately 42%. Whether governance uncertainty is driving the divergence or whether other factors dominate is hard to isolate. What is clear: Aave generates $140 million in annual revenue with a live buyback, and its token has underperformed a direct competitor by over 70 percentage points in two months.

What This Is Actually About

Strip away the competing numbers. The core dispute is straightforward: Aave Labs originated the protocol and argues they deserve ongoing funding commensurate with that contribution. A coalition of DAO delegates argues that Labs is one service provider among several, and should be held to the same accountability standards as any other.

Both positions are coherent. The tension between them is not a dysfunction. It is a sign that something unusual has happened at Aave.

Most DeFi protocols do not have this problem. Most protocols have a founding team that wears a DAO hat, makes the decisions, and receives the funding. In most cases, the governance is theatre. Aave has something different: a real ecosystem of technically capable, financially independent service providers (BGD, ACI, Chaos Labs, TokenLogic) that can genuinely challenge the founding team’s proposals. That is rare. Building that kind of distributed contributor infrastructure is hard, and most protocols never get there.

The conflict exists because “Aave”, however you want to define it, worked.

The question now is whether the DAO recognises what it has before the vote. BGD’s departure is the clearest signal of what is at stake. If the governance environment becomes one in which the best independent contributors leave because Labs’ roadmap crowds out everything else, the distributed model that makes Aave exceptional may start to unravel.

Sources

1. Aave Will Win Framework: governance.aave.com/t/temp-check-aave-will-win-framework/24055 (Aave Labs, Feb 12, 2026)

2. Aave Labs Contributions Report: governance.aave.com/t/aave-labs-contributions-report/24155 (Aave Labs, Feb 25, 2026)

3. “$86 Million, 23% of the Token Supply”: governance.aave.com/t/aave-labs-86-million-23-of-the-token-supply-and-this-is-their-track-record/24159 (Marc Zeller / ACI, Feb 25, 2026)

4. BGD. Leaving Aave: governance.aave.com/t/bgd-leaving-aave/24122 (BGD Labs, Feb 20, 2026)

5. [ARFC] $AAVE Token Alignment. Phase 1 — Ownership: governance.aave.com/t/arfc-aave-token-alignment-phase-1-ownership/23616 (Ernesto Boado / BGD Labs, Dec 16, 2025)

What used to work before, well, now just doesn’t. No one told you it would be like this when institutions came. Oh, you invested in a revolutionary Proof of Liquidity consensus mechanism? It doesn’t look good.

While you experience the horrors of a bear, J.P. Morgan is building Kinexys, a bank-led blockchain for its institutional clients. Have you never heard of Kinexys? And BUIDL, from BlackRock? How about Ondo’s OUSG, or the tokenised money market funds developed by Franklin Templeton?

Those products have guaranteed APRs of around 4-5%, are virtually risk-free, and are tokenised or digital versions of treasuries. Moreover, their combined value is close to $25 billion. Quite the contrast, isn’t it?

Times are changing, and the data makes it evident. If the value of onchain institutional products is rising, the intrinsic value of the tokens we have become accustomed to so far is decreasing, despite widespread interest in crypto worldwide. This requires adaptation and a change in framework: users need to shift away from gambling to investing.

US Treasury debt tokenised onchain is nearing $10 billion, the same amount Tether pocketed in pure profit last year. Meanwhile, Ethereum, the World Computer, generated just $526 million in fees across all of 2025.

Additionally, Ethereum is currently trading below $2,000, while it reached $4,800 5 years ago.

Equally telling, Solana generated $2.39 billion in revenue last year, while the token itself is down 36% year-to-date (YTD). Now more than ever, it is evident that there is no clear link between crypto adoption growth and the value of most of these tokens.

Not even Binance, the king of centralised exchanges, is safe: despite its 38.3% market share in December 2025 and over $16.2 billion in profits in 2025, its blockchain’s native token, BNB, is down 26%.

The institutions generated substantial profits, which retail has yet to capture.

We can stress two main phenomena:

• Institutions are coming and are interested in asset tokenisation.

• Their main objective is to change the market in their favour.

J.P. Morgan said at the beginning of February that Bitcoin became more interesting than gold: looking at the chart, one would laugh and dismiss the ravings of those pesky suits who don’t know any better. However, they made almost $47 billion in 2025, while most X’s influencers are recording themselves crying.

As 2026 begins with an extinction-level event in crypto, it is time we stop clicking and study the Zeitgeist. A crash of this magnitude, sustained and uncorrelated to any other asset class, warrants a deep study of the actors behind crypto’s rise and fall.

If we are to achieve longevity in this industry, we must face the reality, as despicable as it appears to us now, and adapt to it. If retail does not evolve, it will either miss the window of opportunity or capitulate. Financial Darwinism commands an acute understanding of what is coming next, lest we revert back to monkeys trenching on PumpFun.

Crypto is far from dead; if it is, it has reborn, and we missed its resurrection, focused on blurry headlines, sponsored posts, and bagholders’ delusional rants.

2026 will be the year of tokenisation and enterprise-grade blockchain technology.

This piece aims to examine the institutional landscape of crypto and identify trends we may have missed.

We will explore TradFi’s imprint on DeFi and provide a clear picture of current stakeholders and their financial and cultural impact on crypto.

Future trends will also be discussed, with an analysis of the most recent reports, working papers, and essays produced by the institutions; in doing so, we will determine the actual trajectory. Importantly, this piece will present an objective, data-driven view of Wall Street onchain.

We will then explore the products they have built to date and how they leveraged crypto to upgrade their infrastructure and financial instruments. We will also discuss the new trends we already see flourishing onchain, such as real estate, insurance, and stocks.

Finally, a realistic assessment of past errors will be undertaken to encourage our industry to adapt to the new bosses and make the most of this enthralling revolution.

Comb your hair, put on your suit and look sharp; the big boys have entered the room.

Welcome to crypto, sir.

Are Institutions in the Room with Us?

First things first: what is an institution?
A bank, a corporation, a treasury, a State, a cartel conspiring in the dark?

The very basic definition of a financial institution is as follows: “An institutional investor is an organisation or entity that manages and invests funds given to it by individuals or entities, typically using more advanced strategies and handling larger sums than individual retail investors.”

For the scope of this article, we consider the following categories of institutions**:**

• Financial companies, incorporated by law and overseen by their adequate regulators, are all the large investors who either invest their clients’ money on their behalf (such is the case for mutual funds, VCs or pension funds), or their own money (such is the case for angel investors, sovereign funds or investment banks).

• Institutions also encompass other incorporated and non-incorporated entities that don’t necessarily deal directly with markets, such as exchanges, think tanks, companies, or Sovereign states.

• A fringe entity, Decentralised Autonomous Organisations (DAOs) like the Uniswap Treasury or MakerDAO manage billions of dollars and operate like institutions, but they are often not incorporated under the law and are not overseen by traditional regulators. Inherent to crypto, these “institutions“ operate in a grey zone.

• Finally, Digital Asset Treasuries (DATs), such as Strategy for Bitcoin or BitMine for Ethereum. In 2021, fewer than 10 companies held bitcoin in their treasuries, according to DLA Piper. That number has since jumped to 190 companies.

In summary, crypto has become ubiquitous. But once again, our definition of crypto (trading Solana late at night, hoping that the ETFs will save us) is poles apart from that of the institutions. For them, it means banking applications, instant worldwide transfers, treasuries onchain, yield and Bitcoin-backed loans. To summarise, there are numerous actors moving crypto, from secretive family offices to exuberant billionaires like Tom Lee and Saylor. In between these, banks, VCs, societies and law firms operate, slowly penetrating decentralised financial markets while we persist in the trenches, half-dead already after a decade trying. As we wither, exhausted, the powers that be are already reigning over our empire of dust; in the middle, they built a glimmering golden palace, an endless horn of plenty worth more than all the shitcoins we lost in the battle.

These opportunities will be evaluated once we have gathered what institutions have to say about crypto.

Invented Allies: What the Institutions Want

This section provides a glimpse into how institutions think and what they really want from crypto.

Why are they here?

These institutions, which have operated across decades and continents, understand markets better than retail traders.

At the end of 2025, Citi released a report called “Web3 to Wall Street”, where they set out to “map the future of money”.

_As a result, they revised their stablecoin total issuance forecasts in this report to: $1.9 trillion base case (previously $1.6 trillion) and $4.0 trillion bull case ($3.7 trillion) by 2030”
_The base case represents an increase of more than 500%.

Ronit Ghose, Global Head of the Future of Finance desk, said: “_The evolution of digital assets – stablecoins, tokenised deposits, deposit tokens –feels in some ways like the early days of the dotcom boom…. But we don’t believe crypto will burn down the existing system**. Rather, it is helping us reimagine it.”

**_This report asserts that we are on the verge of a total transformation where digital assets become the primary rails for global value exchange.

Over 50 pages, with no mention of tokens, memecoins or gamification.

Last week, Goldman Sachs’ Global Institute released a report on stablecoins, arguing that stablecoins will be gradually adopted by consumers, thanks to a series of legislative measures implemented by governments around the world. They also foresee the rise of different currencies to support emerging markets. As part of this, they have worked directly with Marquee Digital Assets, their proprietary crypto trading tool, and partnered with Coin Metrics to launch Datonomy, a data platform for classifying crypto markets.

Another core topic of the institutions is the tokenisation of their financial products:

In 2019, McKinsey already suggested using blockchain to reduce operating costs. A year later, the OECD published a working paper promoting blockchain to reduce costs in international payments, before crypto skyrocketed in a straight line until the FTX collapse.

Once again, the report makes no mention of altcoins, L2s or NFTs.

HSBC, the gigantic British conglomerate, has offered tokenised gold since March 2024! In May 2025, HSBC issued the world’s largest digital bond ($750 billion+) for the Hong Kong government.

In the same month, the Canton Network Pilot brought together 45 institutions to test 15 applications on a blockchain. This trend is not contemporary; we have simply been blinded by short-sighted themes and perhaps a sense of pride that we were the first to “discover crypto.”

In its 2026 Thematic Outlook, BlackRock titled a section: “tokenising the future of investing.” Already two years ago, McKinsey wrote about “the transformational power of tokenising assets.” What we believe is a recent trend, stemming from crypto fatigue, is simply the natural outcome of several years of research, progress, and implementation.

While we were trading fiat for bundled marketing slop, banks, funds, and asset managers were leveraging existing technology to deploy their own asset portfolios. What businesses seek is optimisation, low operating costs and high margins. As blockchain technology is largely automated and relies on math and engineering, it enables BlackRock or Morgan Stanley to tokenise existing financial products and make them available 24/7 to everyone at a very low cost.

This exposé demonstrates that although retail has felt abandoned by institutions, they were, in fact, present from the beginning. For a few years, after a brief period of trial and error, institutions have been adopting crypto to make it their own. What we believed was the end product of DeFi was, in fact, a by-product of a far greater ecosystem, where tokenised treasuries, dollars, BTC-backed mortgages, and 24/7 trading were the real endgame for institutions.

In other words, they grafted TradFi’s very soul onto the bones of DeFi, to leverage the technology we dismissed for short-lived, silly narratives.

Building Blocks: What the Institutions Built

Thus far, we have identified the institutions, how they operate, and what they aim to achieve. If it is quite obvious that States wield overwhelming power over crypto through legislation and executive powers, financial institutions also exert influence through funding, subsidies, loans, backing, investments, and other financial support.

As it stands, we have a wide array of applications, protocols, superapps, financial products, and more that are either fully integrated into DeFi or adjacent to it.

The primary reason institutions are moving traditional financial assets into DeFi is practical: the stock market’s value exceeds $100 trillion, according to the World Bank. The USA’s titanic companies are worth $69 trillion, 25 times more than crypto’s. Gold and silver are worth a combined $40 trillion. According to the Fed, as of late 2025, the total outstanding value of the U.S. Treasury securities is nearing $30 trillion. If we include foreign securities, the insurance market, exotic products of all kinds or derivatives, a quadrillion is on the table. accounts for only 0.3% of this figure.

It is therefore easy to see why crypto tokens are of little interest to international institutions; we’re playing in the kids’ league!

Let us now look at what institutions have been doing in crypto over the past few years and the product classes they have built.

The spearhead of institutional crypto is yield. Banks are Web 2 lending protocols that charge interest on the money they lend. It only makes sense to see how institutions are showing strong interest in curating vaults, protocols, and products that generate yield. For example, Morpho (via BitWise) and Aave (via Blockdaemon) maintain vaults with stable yields, offering near-certain returns for investors.

Another interesting development we already mentioned above is tokenisation. It is likely the pinnacle of blockchain technology, where any financial instrument can be brought onchain. According to J.P. Morgan and Bain, alternative investments such as private equity (PE), private credit, real estate, and hedge funds could derive an additional $400 billion per year using tokenised products. In a major report co-published by Wall Street giants, the authors argue that improved liquidity and simplified investment practices are a boon for asset managers.

To put that into perspective, this is a fifth of the current crypto market capitalisation, earned each year.

As it stands, only 5% of High Net Worth Individuals hold alternative assets, according to the same report, which draws on Bloomberg and SEC filings.

The opportunity to expand into the individual investor segment has led major alternative managers such as Blackstone, KKR, Carlyle, and Apollo to focus on this segment: combined, they represent more than $3 trillion in AUM, according to Forbes and SP500 data.

Today, the overwhelming majority of tokenised assets consists of stablecoins, representing almost 93% of the total value. It would, however, be simplistic to reduce RWAs to idle dollars, as they mostly provide liquidity to crypto, fueling runs and collapses. Far more interesting are the commodities, debt instruments, and private credit markets being introduced onchain.

According to Deutsche Bank, tokenised capital markets could become the default infrastructure for issuance and trading, reaching $1.5-2 trillion by 2030 and $3-4 trillion by 2035.

If these figures appear far-fetched, the total market size for tokenised assets has expanded from $4 billion in late 2019 to $331 billion in late 2025, an 8,175% increase. It is therefore feasible to imagine a similar growth in a favourable environment:

• Regulations, although slowly, are finally hitting presidential desks for signature, and crypto investors feel less marginalised

• Tokenisation is still limited to debt and precious metals, but there is a significant rush to tokenise stocks, which would unlock hundreds of trillions of dollars and make them accessible 24/7 worldwide.

• Tokenised bonds and loans take time to mature. When these products become redeemable, billions of dollars will flow. Reputational risk is massive for banks, and they still need the direct approval from regulators and international bodies.

Tokenisation has slowly been endorsed by all. Two years ago, the Financial Stability Board, the global police for banks, said that tokenisation’s risks were similar to those of traditional finance, recommending clear regulation and oversight to allow this new technology to grow, indirectly accepting this new reality. As Larry Fink said in the Economist last December, “tokenisation can greatly expand the world of investable assets beyond the listed stocks and bonds that dominate markets today.”

All we need for these prophets to be right is the final, unequivocal green light from legislators worldwide.

A few products now deserve our attention because they were the first to offer accessible tokenised assets, presented to sophisticated investors by Tether, BlackRock, and Franklin Templeton.

• The first major tokenised fund was Tether Gold back in January 2020, even before crypto became a macro topic. It offers investors an ounce of gold onchain, backed by vaulted physical gold

• After gold, Franklin Templeton tokenised its money market mutual fund FOBXX. This was the first regulated, registered US Fund to be put onchain. Today, BENJI, the tokenised version, is nearing $1 billion in TVL.

• The third is BUIDL, a tokenised money market fund that issues digital shares backed by Treasuries. It has been available since March 2024. Its TVL sits at $2.10 billion.

Curated vaults are another interesting product built by TradFi on crypto-native apps like Morpho. In this ecosystem, Bitwise, managing $15 billion, serves as the curator, essentially the vault’s risk officer. Instead of users overseeing the vault management, they can rely on the risk parameters set by Bitwise.

Besides money markets and commodities, real estate is also coming onchain. Ernst and Young published a report last year, hailing tokenisation as a “new era for property investment”. Deloitte, its counterpart, called tokenised real estate a transformative revolution, poised to explode in the next few years. Long constrained by high costs, slow settlement, and limited investor access, this asset class is often inaccessible to the average investor, whereas a flat or house would become a liquid asset one can buy or sell in the middle of the night. Forecasts estimate that over $4 trillion in tokenised property will be in place by 2034, with the tokenisation market as a whole reaching up to $30 trillion.

Dubai-based properties such as World Islands, DAMAC City tower, Dubai Marina Hotel, Kensington Waters, and Sobha Creeks are already onchain.

Other exotic products, such as corporate bonds (Siemens) or private credit for institutions (Apollo), are available, but what interests us most is obviously tokenised stocks. Equities’ global value dwarfs crypto, to the point where Bitcoin becomes a boring asset among others within the financial sector hierarchy.

Currently, several different protocols offer different mechanisms to get exposure:

• Direct tokenisation offered by Securitize is the most basic form of tokenisation, where the share itself is digitised onchain. Here, the issuer uses the blockchain as the primary ledger to register direct ownership. SEC-compliant, but gated by whitelisted registration, which makes such a mechanism antagonistic to crypto’s raison d’être.

• Entitlement tokenisation is a tokenised security entitlement in which custodians, such as the DTCC, record ownership within their internal vaults. It is compliant, but it offers the lowest onchain utility.

• Indirect Tokenisation, or wrappers like Ondo and xStocks. These are security-based swaps in which a third-party issuer creates a vehicle to track a stock’s value. These offer the highest accessibility and onchain utility for DeFi, the pinnacle of crypto’s approach to making things practical and enjoyable.

For example, Ondo’s Global Markets’ assets have been purchased by over 30,000 investors across 90 countries, with over $9 Billion in total trade volume and over $550 million in TVL. Ondo noted: “The first step was comfort with tokenised T-bills. The next step is broader adoption of tokenised global market assets as settlement, collateral, and programmable financial primitives. We’re seeing a shift of institutions participating at the token/asset level to now participating at the protocol level, with particular interest around vaults and their various applications”. Another issuer backed by Kraken, xStocks offers a bankruptcy-remote structure where, even in bankruptcy, holders receive the value of the underlying asset; TradFi-grade insurance against offchain events.

• Perpetual futures on Hyperliquid’s HIP-3 (tradexyz and felix) or Ostium, a derivative with no backing and no ownership. It is mostly built for pure traders, not investors.

• Special mention to Ventuals and Pre-Stocks, which offer either perpetual or pro rata claims on equity held in an SPV; these two companies demonstrate how far tokenisation has progressed.

The possibilities with tokenised stocks are endless, but Aave’s Horizon is the summit of crypto’s versatility. They confided,” Institutional interest in Horizon is extremely high. It’s the first lending architecture that integrates RWAs natively and takes into account each asset’s permissioning logic.”

In the old world, if an institution owned $100 million in Apple stock and needed cash, it would have to go through lengthy procedures to leverage its holdings. Now, they just wrap that stock and drop it into Horizon. Institutions can just borrow against their assets in the middle of the night, depositing any tokenised stock or bond as collateral and receiving freshly minted cash in return. Already $100 million has been borrowed!!

In their own words: “V4 will ultimately allow for far more flexibility around Horizon. We anticipate being able to onboard new types of RWAs, create tighter integrations with custodians and other entities that some institutions are forced to use”.

Thus far, we have demonstrated how institutions have deployed their own weapons inside crypto’s infrastructure. This is, however, only a step toward something greater: the total transformation of the financial system, which also includes government administration, healthcare, and even shipping.

Everything Onchain, Literally Everything

The final and perhaps the most shocking finding of this piece is that crypto already belongs to the institutions; onchain finance is here. The idea behind the total transformation of money did not come from the trenches, but from Wall Street boards, corporate research departments, central banks and sovereign States. Beyond adding their native products to the blockchain, the institutions are transforming themselves into a better, faster, sexier version of themselves.

The goal is to put yourself and everything you love on a ledger.

Sarah Breeden, Deputy Governor at the Bank of England, gave a speech on how blockchain technology can “provide the ultimate settlement asset of central bank money.”

Central banks are moving onchain. In lieu of uncertain returns on obscure tokens, we are offered the opportunity to radically transform our wealth management alongside the Fed, J.P. Morgan and the OECD.

Even within crypto’s bubble itself, 2025 was the year of the mega-deals. More than 265 M&A deals were recorded, representing $8.6 billion in combined value.

Aklil Ibssa, head of corporate development and M&A at Coinbase, noted: “That shift favoured exchanges, stablecoin issuers, enterprise-facing infrastructure providers and other businesses to go public, while more speculative businesses largely remained sidelined.”

Rob Hadick, general partner at Dragonfly, expects listings coming from exchanges, prediction markets, stablecoin companies, custodians, wallet and other core service providers.

Web3 is manifestly being repurposed by TradFi as a rail for their own services. VCs, exchanges, and stablecoin providers are funding payment services, wallet infrastructure, and software.

At the end of last year, Bloomberg titled: “Crypto M&A surges 30-Fold as niche firms shift to mainstream”.

Among the notable deals, we highlight:

• Coinbase’s acquisition of Deribit, a derivatives platform

• Kraken’s acquisition of NinjaTrader, a futures trading platform

• Ripple’s acquisition of Rail, a stablecoin protocol

Notably, the tenth-largest funding round of 2025 goes to Polymarket, a crypto protocol. And none other than the NYSE invested $2 billion at a $8 billion valuation.

Overall deal volume exploded 226% this year compared to 2024, driven largely by massive M&A activity, which accounted for a 1500% increase.

Companies such as the aptly named stablecoin protocol Bridge, owned by Stripe, are completely changing the traditional financial system, which is annoyingly slow and expensive. Bridge turns blockchains into a standardised payment rail that feels like a traditional bank to businesses, but moves at the speed of crypto.

Other crypto-native businesses have also onboarded the outside world:

• Rise, the HR platform for the crypto world, built a compliance engine that enables global companies to pay workers in a mix of fiat and crypto. Hugo Finkelstein, Rise’s CEO, confided:” What was once speculative interest is now strategic allocation: institutions are embracing crypto and tokenisation as core infrastructure, unlocking new efficiencies and expanding the universe of investable assets”.

• Visa now uses stablecoins to speed up its back-end treasury operations, moving funds between banks via Solana and Ethereum instead of the legacy, slow SWIFT system.

• BVNK, backed by Visa, Citi, Tiger Global, and Coinbase, processed $30 billion in 2025.

This frenetic activity reflects an institutional gold rush, not the “death of crypto.”

Other important sectors, such as healthcare and government administration, are migrating onchain to address the data crisis. In healthcare, organisations such as the Mayo Clinic and UnitedHealth use blockchains to provide patients with “self-sovereign identity.” Instead of hospitals owning data, patients hold an encrypted “Patient ID” wallet. When they visit a specialist, a smart contract automatically verifies their insurance and unlocks their history, reducing claims processing from weeks to seconds. In the same vein, government administration, a mythological antagonist for anyone looking to get a paper done, is moving onchain to make everyone’s life easier. Estonia remains the gold standard, having moved its entire judicial and civil registry onchain, but now U.S. states like California have followed, digitising over 40 million vehicle titles on the blockchain. From now on, a car sale automatically triggers a title transfer and real-time tax payment to the DMV, eliminating the need for manual paperwork and useless, lazy legacy intermediaries.

The possibilities are endless. Anything can be recorded in a ledger: patient ID, titles to property, books, financial records, shares of a company, tax records, and everything an individual or an entity needs for their daily activities.

Beyond the financial products mentioned above, institutions are also building their own infrastructure for themselves and their clients. Banks, hedge funds, billionaires and corporations can borrow, settle, wire and repay unlimited amounts of dollars in a second, at any time, at an insignificant cost. The only factor at play is certainty: to achieve widespread adoption, the key requirement is regulatory approval from governments worldwide.

Put on that Suit!

The data we have compiled above, coupled with statements from central bankers, CEOs, executives, and international organisations, provides a clear picture of what is happening.

New technologies achieve mass adoption only when they solve a specific “pain point“ rather than offering a philosophical vision. For retail, the pain points were access and fees, which were addressed by the 2024 launch of spot ETFs and the proliferation of payment apps mentioned above. For institutions, the carrot is efficiency and liquidity.

Mainstream status is finally reached as the technology becomes the standard. In this phase, the public uses blockchain not because they “believe in it,” but because it is the fastest, cheapest way to move capital, and, suddenly, one wakes up one fine morning to find crypto as the only way of doing business.

We have already reached that phase, and it is our responsibility to adapt. We have been trying to strike a balance between gambling and investing for 15 years, while institutions leveraged our naivety to extract not just capital but also human output, technology, and know-how.

The nature of society has barely changed since the days of Machiavelli and Hegel, and the natural dynamics of a competitive system are unfair, ruthless, if not cruel. Instinctively, unsophisticated retail will push against the trend because it breaks their tenet of infinite gains. There is no cheat code for free money in a world of finite resources, and even if money is printed to support the debt junkies of the West, we are not the beneficiaries.

Whether we like it or not, the future is in the hands of institutions, and the strange era that lasted from 2010 to 2021 is over.

The transition from playground to global financial network Leviathan has already happened. From all the evidence gathered, we can affirm that:

• Institutions have long been interested in crypto**.**

• They always kept their distances with tokens, treating them as speculative plays; they focused on blockchain as a financial infrastructure.

• The infrastructure we helped them erect is almost fully operational, and finance 2.0 is already a reality.

The message from the WEF is clear:

• Business leaders must integrate blockchain technology with their asset base, operations and capital structure

• Investors and asset managers must explore tokenised assets

• Policymakers and regulators must clear the air and support businesses

• Technologists must design standards for everyone and make crypto simply universal

And we need to adapt, lest they get all the benefits of the very ecosystem we nurtured for so long. As the suits have entered the room, we can either sit at the table or wait outside in the hallway, sidelined beyond relief.

Yet to declare total institutional victory would be defeatist. While Wall Street tokenises treasuries, crypto-native innovation continues in domains institutions cannot easily penetrate, because they are legally unable to do so.

• Privacy protocols like Monero processed 43,000 transactions per day in 2025, designed to be immune to institutional predatory practices.

• Decentralised physical infrastructure networks like Helium now operate 1.3 million hotspots globally, creating a $2.8 billion telecoms network without a single corporate board

• DAOs like Uniswap’s treasury, which we mentioned above, control $4.7 billion with no CEO, no board, and no entity that BlackRock can acquire or regulate.

While institutions may set the agenda for tokenisation, we are not arguing that they will mandate the adoption of permissionless protocols meant to exist in the dark. These markets are smaller, less profitable, but they are all we have left that remain feral.

The dilemma is whether we will choose the cypherphunk way of life, endangered by Vanguard, State Street, and Goldman Sachs, or mature and become the Nemesis we once swore to defeat, in order to stay profitable and preserve our wealth.

We believe that wearing a tie is a survivalist, strategic choice akin to descending from the trees some millions of years ago in Africa.

Apes or suits, you choose.

Fast forward to today, you are sitting at your family dinner, and everyone is talking about their portfolios, how the S&P 500 has performed well over time, and how they are happy with their investments. You pull up your phone and see your portfolio down 60% from its all-time high, take a long sigh, and take another bite.

Your cousin brother asks you: “Hey, you’ve been investing in crypto? How’s your portfolio doing?” with a chuckle. He also adds, “I am glad I stayed away from it and never dumped any of my cash there.”

You have nothing to say; you have nothing to add to the discussion. You can say that the NYSE is coming to the blockchain to introduce 24x7 trading, BlackRock is already tokenising short-term treasuries, Robinhood just launched its L2 testnet, and many more institutions are adopting crypto. But you stop, because you know you’re down and none of those factors seems to be helping.

You are confused because BTC has retraced to levels similar to when you first invested. Also, it’s not just BTC you have invested in, it’s a small part of your portfolio, but multiple other cryptos you discovered on your way, that you thought had a great upside, maybe one of the 17000+ tokens listed on Coingecko, maybe, millions of others launched in the last year or two on platforms like Pumpfun.

Over the years, so many coins have been created that 99% of them need to go to zero for the industry’s good.

This is also evident in the fact that the top five tokens account for 84.4% of the total crypto market capitalisation, leaving you to wonder what to do with the rest and whether they have any value. The rest of the market (15.6% or $330 billion) is where the thousands of other tokens live.

To put this into perspective, this is a much larger concentration compared to Traditional Finance, where MAG7 companies in the U.S. equity market represent 31%, and the top 500 companies (S&P 500) represent 84.7%. A hundred times more companies, yet the same representation as crypto’s top 5 assets.

If crypto wants to achieve a similar representation, some of the following scenarios need to be true:

1. Top tokens lose value, while tokens below capture it.

2. There is a huge external liquidity push or adoption.

3. Tokens below lose their value, and the majors capture it.

For a healthy system, the first scenario makes more sense for distributing value, but it is unlikely to occur because most assets are correlated with BTC, and would also mean that major assets are losing trust, which isn’t ideal.

Certain tokens, such as HYPE, achieved significant market representation over time; they fit into the second scenario due to strong adoption and product-market fit. Hyperliquid is obviously one of the few winners in the last year who actually have great token and product alignment, as they redirect the majority of platform-generated fees into token buybacks.

Continuing on the second scenario and attracting value from external entities (or institutions), crypto did fairly well with DATs, at least in terms of accumulation, but they are way down as well. For BTCs, DATs have accumulated 997,257 BTC (5% of the circulating supply), and for Ethereum, it is 6.16 million ETH (5.1% of the circulating supply). Additionally, it’s also fair to argue that they represent a significant share of the circulating supply of majors, so any further involvement would effectively concentrate too much control in a few entities.

The third and last scenario is something that needs to occur rapidly, and here’s why.

Token vests every month, and in the upcoming years, there will be a lot of supply unlocks. This year alone, token unlocks will add $8.51 billion in value, hitting the market, and over the next five years, $17.12 billion. But it is not clear if there will be enough demand to cater for these supply unlocks and the attributed selling pressure.

Source: https://defillama.com/unlocks/calendar?view=TreeMap

For most tokens, this will keep them progressing toward zero added with factors like skewed tokenomics.

To increase demand, these projects need to succeed as a business. Multiple crypto businesses have been absolute failures. For a trillion-dollar industry, with more than 5600 protocols listed on DeFillama, only 76 generated over $1m in revenue in the last 30 days, that’s 1.3%.

Interestingly, lowering this threshold to >$100k in revenue over the last 30 days would still yield 237 protocols**.**

Additionally, when you see the revenue concentration. The top 10 protocols in 2025 accounted for 80% of revenue, and the top 3 accounted for 64%. Tether alone accounted for 44% of total crypto revenue. It’s surprising that, out of these 10 protocols, only 3 have launched a token so far (Hyperliquid, Pumpfun, Jupiter), and upon reviewing their relative performance, only HYPE performed better.

This also points out that launching a token may not always be the best choice.

In 2025, there were about 118 major token launches, of which 84.7% were below their TGE valuation. These numbers don’t look very good, and they often disappoint, leading us to question whether it is even worth investing in new tokens. These tokens were launched at ballooned valuations and had very concerning price action throughout the year, and are down even now, as broader market conditions aren’t doing very well either.

10/10 (The day which changed everything)

The October Liquidation event occurred due to bad designs revealed through macro pressure. It uncovered the weak design of many things across crypto, whether it was CEXs like Binance, which liquidated millions of dollars worth of positions due to incorrect prices of assets like USDe, BNSOL, and wBETH, or lending protocols like Silo and Morpho, which accrued bad debt from the Stream Finance blowup that occurred after a few weeks.

The prices of assets have not recovered since then, and the $19 billion liquidation cascade is still with us. DeFi TVL is down 44% from this event ($165 billion to $94 billion). Protocols revenue has decreased, and the bear market is officially underway.

The Alignment Issue

When you drive your car and let go of the steering wheel for a while, does it veer off course? If so, there are alignment issues with your steering wheels and tyres. Similarly, in crypto, this alignment issue is often seen between protocols and the tokens they launch. In December last year, when Circle acquired Interop Labs, the team behind the interoperability stack, Axelar, and the token (AXL) was not part of the deal, and it plummeted right after the announcement. That’s misalignment.

So why does this misalignment arise in the first place? There are always two entities related to a project: Labs and the DAO/tokenholders. Labs are the “team” in the tokenomics; they are the initial developers of the project, and they raise funds by selling a portion of their company and giving tokens to investors at an early stage in exchange for funds they use for growth. In some cases, VCs even get more favourable terms than anyone would expect, such as a “refund right.”

Tokens are not a legal representation of the business and don’t offer any actual rights over the company’s profits, unlike equity. Investors, when they receive tokens, have these rights through the equity they hold. So they are in a better position, but token holders? They are at the project’s mercy when it comes to aligning their product with their token.

This is something very few protocols focus on. They usually show this alignment through token buybacks. Hyperliquid does the buybacks to strengthen this alignment. Some might argue that they should use the collected fees to contribute more towards their protocol growth, maybe incentives, strengthen the insurance fund, and they would be right. These are the things that should be done, but building a moat around a good token is the best marketing strategy. Making your users wealthy is the best thing a product can do, and that’s what Hyperliquid did with its first airdrop.

Aave, the largest DeFi protocol, uses its revenue to conduct buybacks and also faces a similar argument about the better use of funds and directing them towards growth (I am aware of the current misalignment and hope DAO and Labs resolve it for the betterment of the AAVE token). Last year, Uniswap, after over 5 years of its token’s existence, completely aligned with its token and tokenholders.

These protocols are doing what’s right with their holders. There are obviously others; I won’t mention everyone, but still, there are fewer than we need. These are the tokens which deserve to go higher. Everything else should just go down, and people should rotate to the protocols that are generating revenue and are most aligned with their tokens, doing buybacks, growing themselves, and trying out new ways to attract more users.

Now, am I saying these tokens are best to invest in? Probably not. I am not giving any financial advice; I am just telling you what to look for when investing in any protocol. Whether it goes up or down, it comes down to the token unlocks spread across the years (tokenomics), the incentives they are distributing (which contribute to token dilution), and other expenditures. So, even if a buyback program exists, the sell pressure would still be greater.

Closing Thoughts

Crypto is currently going through one of its discovery phases, where speculative tokens will stop receiving inflows, and the real tokens, which have an underlying business supporting their growth, will emerge. Not many people realise this and see the opportunity, but protocols with real revenue are what matter at the end of the day.

They are already growing, they are already trending, if not today, soon.

The era of non-cash-flow-generating tokens has ended, as evidenced by the numerous failed launches over the last year. This is why the MegaETH KPI-based launch makes sense: it first tries to determine the chain’s and its product’s demand, run some revenue numbers, and then launch a token. Another interesting model they adopted is the launch of USDm, in collaboration with Ethena, to prevent the value generated by stablecoins from being routed out of the ecosystem and use it for token buybacks. Time will tell whether their model succeeds, but it’s a good starting point for reconsidering how token launches work today.

So yes, crypto is evolving, and most crypto assets should go to zero, except for a few.

We retained some key points for the future of Hyperliquid (and humanity at large…)

The Best Airdrop of all Time

Interestingly, the interview quickly veered to the airdrop question, which turned many average Joes into millionaires overnight. Jeff said, “Simply by being early and by providing a valuable service of participating in a network where the network effects are so important, you can become a sort of meaningful owner of the network.“

Early ChatGPT users got a product, whereas early Hyperliquid users got ownership. He didn’t engineer that to be generous; it was because no VCs participated in Hyperliquid’s funding, and the rewards went to retail stakeholders who devoted time and money to the DEX back in 2024. This is how the legend was born; outsiders and fairly ordinary people managed, against all odds, to become part of one of the greatest crypto businesses.

The “cult“ idea was addressed as well. Many see the Hyperliquid community as a sect. Jeff’s response is almost offended: “People just coming together to kind of build things in the right way with the right values and be fair to everyone and create an open financial system, to me, feels like it should be normal.”

Do Buybacks Work?

On the buyback question, which was recently raised in the context of PumpFun’s ineffective strategy, Jeff was clear. “Hyperliquid does not have a discretionary buyback program.” The fees are converted to HYPE and burned through the chain’s execution logic. “In the same way that when you place an onchain TWAP, there is no one sitting there deciding when to split your order, that is part of the execution, part of the state machine itself.”

Jeff reiterated: “Hyperliquid is not a company.”

One Seed Spawning an Entire Network

Users also keep asking why Hyperliquid Labs has barely a dozen people while every other protocol is hiring hundreds, with a relatively low human ROI. According to Jeff, a centralised exchange needs whole teams just to manage tokenisation, one team for crypto liquidity, one for TradFi feeds, one for multisigs, each with their own lead, their own overhead, their own coordination costs. “With Hyperliquid, the protocol doesn’t actually do any of these things. Hyperliquid is more like a set of primitives by which anyone can tokenise anything in different ways.“ Unlike CEXs or bigger DEXs,

Hyperliquid is manned by a small team of obsessed people. “Maybe you get there faster if you do it in a fully centralised way, but you build a much more resilient and robust and ultimately globally scalable system if you build it the hard way.”

Tokenise It All

Permissionless perps on any liquid instrument, metals, equities, commodities, anything with futures and options. The logic is simple: “There is nothing unique about crypto when it comes to perps. So there should be perps on most liquid instruments.”

TradeXYZ, the first deployer, has already accounted for roughly 2% of global silver volume in a few months of existence (as a reminder, silver’s market cap is above $4 trillion). Jeff is honest about the odds: “Most people probably thought it just wouldn’t work. And honestly, we couldn’t say for sure that it was going to be a success either.”

Another killer application for HyperEVM is HIP-4. Spot and perps let users express linear beliefs, which limits the range of outcomes and strategies certain sophisticated users would like to be able to leverage: “There are people who actually do want convexity, nonlinear outcomes. They want something that is either worth one or zero dollars, depending on something that happens.” Jeff tried building this in 2018, but his triumph came with an adjacent product. Spot completed the picture.

The Unit team (not the core team) made Hyperliquid the leading source of spot price discovery for the XRP launch in 2025. Jeff called it going full circle: “finally, after so many years, transact in a way, without sacrificing UX, that is still consistent with the technological underpinnings of the asset you’re holding itself.”

The House of all Finance, for Everyone, Everywhere

Jeff’s vision was poles apart from Binance’s or Coinbase’s: “What the internet did for information, Hyperliquid as an ecosystem, as a network, as a protocol is trying to do for finance.” The crypto part of housing all of finance is that the platform on which people do this should also not be controlled by a “central corporation”, as he calls it.

And the reason it has to be built the hard way is that “finance is too big for one team to build.”

In one sentence, why is it so important to bring all of finance onchain? “It’s important because if you don’t, then the financial system is going to fall behind the pace of technological development. It’s not going to keep up. The world is changing too quickly. The legacy financial system is not going to be adequate to serve users’ needs in a rapidly developing world.“

Why Crypto Still Matters

Why stay in crypto when AI is pulling all the talent?

The following lines are quite different from the rest of the interview, but it provides a genuine insight into Jeff’s mindset: “We have one very important job as a species. There’s a ticking time bomb because AI is going to come and basically supplant human intelligence in the near future.” And when that happens, value transfer will be “_machine-drive_n” too.

The legacy financial system can’t serve that world. “Code and value are not on the same playing field in the legacy financial system.” So if humans don’t build programmable, open, accessible financial infrastructure “before AI hits escape velocity,” they get cut out of the system that replaces it entirely. “When the AI overlords come, they will adopt it because it’s been built well and is autonomous and fair and open and permissionless.”

Recently, LLMs were caught teaching themselves without human input, so we can speculate about the future of finance without human control.

Do You Really Want to Live Forever?

“I don’t want it to be remembered for anything. I just want it to be used forever.”

That romantic way of putting things was probably the last time you heard Jeff being candid, a man obsessed with his work.

He almost singlehandedly built the king of perps, handling billions of dollars of volume per day.

Despite the competition, which comes with new VCs, new marketing, new products, and new tricks, Hyperliquid still reigns supreme, perhaps forever indeed.

While it was once hailed as a mere hedge against inflation, it is now described as a less cumbersome digital gold. It currently commands a market capitalisation of ~$2 trillion, an order of magnitude above that of many successful public companies.

Originally, the face of a countermovement born of the 2008 Great Financial Crisis, Bitcoin has matured into a contender for gold’s role as a reserve asset. It is so important that its cultists are waging a war against the quantum risk, the latest threat in a long line of antagonists. Be that as it may, human and financial resources are being deployed to safeguard this unique asset. If privacy was not part of the original plan, it has now become one of the core selling points in the age of surveillance capitalism. Aside from this feature, Bitcoin has several use-cases, some of which are severely ignored.

Bitcoin is the most underutilised asset in human history. Gold has been used for commerce or jewellery, silver for electronic components and cutlery, land for cattle or real estate, but Bitcoin remains an almost entirely non-productive asset.

For years, the consensus has been that Bitcoin is for holding, and everything else (yield, lending, borrowing, complex derivatives) is for Ethereum. Today, less than 0.5% of the total Bitcoin supply participates in DeFi. Six million coins (nearly 30% of the total supply) have sat dormant for over 5 years, while other assets freely flow between protocols, users, and institutions.

Bitcoiners are often described as apathetic, displaying behaviour different from that of the DeFi trader. Bitcoiners are risk-averse, also as a response to the fact that existing infrastructure has not been able to support Bitcoin utilisation without compromising security and decentralisation through custodial bridges and opaque rehypothecation. **Unlike Ethereum, which relies on a network of node operators, DeFi protocols, audit firms, neo-banks and stablecoins, Bitcoin has remained a marginalised asset.**This reliance on blind trust effectively walls off Bitcoin liquidity, crippling a potentially formidable source of income for its holders.

There have been attempts to bridge the chasm between what holders want and what they can achieve without risk. Nonetheless, only a fully comprehensive, trustless stack that integrates both legal and structural guarantees could foster this appetite within the Bitcoin community.

Among those, Starknet’s BTCFi initiative aims to fix this lack of both safety and transparency as a definitive solution to the underutilization of Bitcoin holders in DeFi infrastructure.

This reticence is twofold:

• A lack of safety in existing Bitcoin infrastructure automatically repels large holders from participating in DeFi, thus sequestering billions in liquid assets. As Bitcoin currently relies on custodians, the trust factor poses a risk to asset holders; the industry’s standard relies on cryptography, which streamlines transactions and substantially reduces human intervention. In doing so, holders rely on agnostic, neutral processes.

• An opaque series of protocols, wrappers and bridges, entirely unconvincing for a public whose very financial wealth depends on clear, transparent and regulated infrastructure. Bitcoin currently relies on centralised structures, whose lack of transparency deters large inflow of capital from escaping the “holding” approach. Because holders cannot ascertain the outcome of their transactions in a blind ecosystem, they choose not to trust custodians and miss out on the yield opportunity of a well-designed infrastructure.

To finally onboard Bitcoin to crypto, although this may seem counterintuitive, we need to build infrastructure worthy of the most discussed asset since the internet.

The Trust Deficit

To understand why Starknet’s approach is long overdue, we must grasp the explosive growth of Bitcoin’s “DeFi” ecosystem. It is true that holding BTC remains the safer bet and, for most, the only viable way to avoid catastrophic losses.

For a high-net-worth individual, family office, or institutional allocator holding 100 BTC, the “DeFi opportunity“ typically appears to be a poor trade with limited upside. If a bridge is hacked, the entire principal is lost. It is thus justified to wonder if holders are not right to hold their assets.

The industry still bears the scars of Celsius and FTX, which demonstrated that “trusted custodians“ are often untrustworthy. Onchain, the record is equally bleak. We have seen bridge hacks demonstrate that the risk is real and, more often than not, catastrophic, as affected assets are almost always irretrievable.

Most existing “Bitcoin Layer 2“ solutions are effectively multisig federations. A holder is depositing their Bitcoin into a box controlled by 5, 9, or perhaps 20 signers. They trust that the majority of those individuals will not collude, be coerced by governments, or be hacked.

Until the infrastructure is trustless and allows users to verify rather than rely on trust, the liquidity problem will remain unresolved. It is precisely after the Great Financial Crisis that Satoshi devised Bitcoin, to allow taxpayers, investors and trailblazers alike to protect themselves from Wall Street and the State.

How, then, can one justify the lack of confidence in the very ecosystem we built to challenge a system we don’t trust?

The current paradigm is threefold:

• Asset holders can rely on a custodian, a highly centralised model with a single point of failure.

• Another possibility is to delegate asset control to a decentralised network, whose reliability depends on the number of signers.

• Finally, the trustless model, which is purely mathematical, has yet to be perfected, but it is the Holy Grail of a monetary system based on self-agency.

Why Trust Fails: Every Bridge Asks You to Trust Someone

To advance from Level 2 to Level 3, Starknet is re-architecting the interaction between Layer 2s and Bitcoin. In a way, this is the first experiment to structurally accommodate both sophisticated, casual users and hardcore Bitcoin maxis, offering a suite of tools for privacy, security, and yield.

This development is visible in four pillars:

Level 1: Custodial Wrappers (WBTC)

To obtain WBTC, asset holders transfer their Bitcoin to a custodian (e.g., BitGo), which mints an ERC-20 token on a different chain. Starknet has adopted a welcoming approach to top Bitcoin wrappers through unified routing and a wrapper ecosystem. Starknet integrates WBTC, tBTC, or newer yield-bearing variants such as LBTC. The ecosystem pushes for Unified WBTC Routing. By concentrating liquidity into core pools (via AMMs such as Ekubo), Starknet ensures oracle reliability, thereby preventing the fragmentation that affects other chains.

• Trust Model: Centralised, reliant on trusting third parties (a custodian in particular).

• Risk: Corporate failure or regulatory seizure. For example, in late 2024, BitGo entered a joint venture with BiT Global, effectively handing partial control of the underlying BTC custody to entities affiliated with Justin Sun. This posed a clear risk, prompting MakerDAO to vote on offboarding WBTC due to concerns about misappropriation. Coinbase followed suit in November 2024.

Level 2: Threshold Bridges (tBTC)

This is a similar design to WBTC, with the difference that, instead of a single provider, there is a decentralised network of signers that controls the bridge to Bitcoin. This configuration is superior to a single company because it requires a collusion of many unrelated parties to steal funds.

• Trust Model: Trust in a distributed set. Despite its decentralised narrative, Harmony Horizon relied on a fragile 2-of-5 multisig scheme. The Lazarus Group compromised just two private keys, bypassing the rest of the network to drain $100 million.

• Status: Starknet is currently optimising this tier. While Level 1 bridges rely on a single company, tBTC relies on a rotating network of 100 independent node operators. To move funds, 51 of them must agree. This removes the single point of failure Justin Sun represented in the case cited above.

Level 3: Trust-Minimised Bridges (BitVM)

Trust-minimised bridges require only one honest participant to detect and prove fraud. Unlike threshold bridges that need a majority consensus, these systems operate on a 1-of-n assumption. Security holds as long as at least one party in the network remains honest.

• Trust Model: One of the operators is honest. Any single honest party can challenge invalid state transitions and halt malicious activity. BitVM is a construction where any operator can challenge an invalid Bitcoin state. The attack surface shrinks dramatically because instead of compromising 51 of 100 operators, an attacker must compromise every single participant.

• Status: Intermediate step between federated trust and pure cryptographic verification. Starknet is developing ColliderVM as a trust-minimised fallback if OP_CAT activation is delayed. Even without a Bitcoin soft fork, ColliderVM would leverage STARK proofs and advanced cryptoeconomics to unlock Bitcoin’s liquidity while maintaining 1-of-n security assumptions.

Level 4: Trustless (ideal scenario)

In this scenario, the bridge is governed by math, not people. Zero-Knowledge proofs on the destination chain (Starknet) are cryptographically verified by the source chain (Bitcoin). Every other “Bitcoin L2” is stuck at federation (multisig) with no realistic path forward. The Starknet community has approved SNIP-31, a proposal to allow Bitcoin to serve as an accepted token for staking within Starknet’s consensus mechanism. This means Bitcoin will eventually account for up to 25% of the staking power securing Starknet. This way, Bitcoin will be effectively integrated into the network’s security budget, generating a sustainable yield from existing network inflation rather than a new pool of mercenary incentives.

Starknet is the only L2 architecturally designed for trustless BTC from the ground up.

Fourth-generation Bitcoin bridges eliminate operators and disputes by making Bitcoin enforce correctness directly:

• Model: Trust in math (OP_CAT).

• Status: Using maths and pure engineering, Starknet aims to leverage Bitcoin’s existing technology to upgrade it, accommodating the practical needs of today’s holders, with the final vision to entirely eliminate the human factor in complex transactions. This proposed Bitcoin opcode would let Bitcoin natively verify STARK proofs. If activated, Bitcoin itself could validate Starknet state transitions.

Unlike EVM-compatible chains that are largely stuck at the federation stage, Starknet’s native architecture (built on STARK proofs) is designed for the cryptographic verification that Bitcoin’s roadmap badly needs.

Starknet’s Bet: What Would Trustless Actually Look Like?

Currently, Starknet’s focus is to enable “covenants” on Bitcoin, scripts that allow Bitcoin to verify events on other chains. The leading proposal is OP_CAT, a code change that would allow Bitcoin to verify STARK proofs natively.

The team behind Starknet (StarkWare) includes Eli Ben-Sasson, a pioneer in ZK cryptography who co-invented STARK proofs and was involved in co-founding Zcash. Across the industry, they are known for their early work and implementation of ZK proofs, as evidenced by their position as the network with the most research grants dedicated to this topic and a strong lead over competitors.

Even if OP_CAT is delayed, Starknet is developing ColliderVM, a backup solution leveraging the massive computational power of STARKs to simulate these trustless environments via advanced cryptoeconomics. In the context of Starknet’s infrastructure, it would act as a trust-minimised bridge using ZK-proofs to unlock Bitcoin’s massive liquidity. Essentially, this upgrade enables Bitcoin to interact with complex, high-speed smart contracts typically reserved for Ethereum’s EVM. This scenario does not require a Bitcoin soft fork.

The vision is Dual Settlement: STARK proofs verified on both Ethereum and Bitcoin.

The Real Unlock: The Missing Piece: Institutional Rails

To move trillions of dollars’ worth of Bitcoin, developing the right tech is only one part of the equation, for it is also necessary to add a regulatory layer on top of the underlying infrastructure. Banks, despite their unintelligible quant strategies, remain regulated businesses defended by legions of white-shoe firms on retainer. DeFi seeks to extricate itself from the “frontier finance” straightjacket it has evolved into, to serve both retail and institutional investors who remain cautious about emerging assets.

Institutional capital, in particular, cannot interact with anonymous smart contracts; it requires know-your-customer compliance and regulated counterparties. To legitimise its lineup, Starknet has onboarded Re7, a UK-regulated digital asset manager with nearly $1B in AUM. As a core infrastructure partner, they pre-seeded BTCFi liquidity to ensure markets were usable from Day 1.

For the first time, Bitcoin has found its fit within the highly-regulated, controlled environment of traditional finance. Not only does Re7 provide a trust-minimised infrastructure, but it also respects the privacy inherent to a better Bitcoin.

This new yield layer bridges different categories of investors. Although Bitcoin is traditionally associated with institutional investors, the public has also moved to digital assets. Bitcoin is entering pension funds, significantly altering the risk profile of such investments; a larger allocation ensures a more resilient network, reducing node risk.

Starknet’s BTCFi Architecture: Building the Infrastructure

To move from Level 2 to Level 3, Starknet is re-architecting the interaction between Layer 2s and Bitcoin. In a way, this is the first experiment to structurally accommodate both sophisticated, casual users and hardcore Bitcoin maxis, offering a suite of tools for privacy, security, and yield.

This development is visible in three pillars:

SNIP-31: Staking at the Consensus Level

The Starknet community has approved SNIP-31, a proposal to allow Bitcoin to serve as an accepted token for staking within Starknet’s consensus mechanism. This means Bitcoin will eventually account for up to 25% of the staking power securing Starknet. This way, Bitcoin will be effectively integrated into the network’s security budget, generating a sustainable yield from existing network inflation rather than a new pool of mercenary incentives.

Wrapper Ecosystem & Unified Routing

Starknet has adopted a welcoming approach to top Bitcoin wrappers. Starknet integrates WBTC, tBTC, or newer yield-bearing variants such as LBTC. The ecosystem pushes for Unified WBTC Routing. By concentrating liquidity into core pools (via AMMs such as Ekubo), Starknet ensures oracle reliability, thereby preventing the fragmentation that affects other chains.

Borrower-First Incentives

Starknet has allocated 100 million STRK to its liquidity campaign, with a focus on BTCFi. However, unlike previous cycles that subsidised passive deposits, Starknet incentivises activity. Rewards are heavily weighted toward borrowers, creating a healthy market rate for lenders and supporting yield from real, organic demand.

What This Enables: The Flywheel Is Already Spinning

The infrastructure Starknet is building is animated by a series of applications, each designed to implement a specific use case. For the first time, a Bitcoin holder benefits from a suite of sophisticated financial tools available on a low-fee, high-throughput ZK-Rollup. Starknet has designed a yield layer specifically for Bitcoin; although other L2s have gravitated toward it, there is no other existing ecosystem-wide suite.

In terms of hard data, capital is both flowing and growing on Starknet. If other L2s like Arbitrum or Optimism saw their revenue decrease by almost -50% YoY, Starknet’s yearly revenue is up above 3000%.

• Staking: Users can earn STRK simply by staking their BTC wrapper. Current projections sit at ~6-7% APR in STRK on Endur**,** offering a low-risk baseline yield. Approximately 1080 Bitcoins are currently staked, representing close to $90M generating yield. The amount of staked STRK is even more telling: 1.15B STRK, 22% of the available supply, is currently on Endur.

• Lending & Borrowing: Starknet has allocated 100 million STRK to its liquidity campaign, with a focus on BTCFi. However, unlike previous cycles that subsidised passive deposits, Starknet incentivises activity. Rewards are heavily weighted toward borrowers, creating a healthy market rate for lenders and supporting yield from real, organic demand. Protocols like Vesu, for example**,** are the engine of this ecosystem. Due to the “DeFi Spring” incentives, borrowers currently receive massive rebates, often refunding up to 40% of their borrowing costs in STRK. This effectively subsidises leverage.

• Capital-Efficient LPing: Ekubo is arguably the most advanced AMM in crypto today, being compared to a Uniswap v4.5 analogue, featuring 1/100th-basis-point ticks. Bitcoin holders can provide liquidity in tighter ranges (e.g., WBTC/USDC), earning trading fees with significantly less capital than required on Uniswap V2-style forks.

• Structured Products: For those who want “set and forget” yield, Re7 Capital and 0D offer vaults. These execute delta-neutral strategies (e.g., long spot BTC + short perp) to capture funding rates without price exposure.

• Perps & Trading: Protocols like Extended (which also offers XVS) allow users to trade perps while earning yield on their collateral. Depositors receive XVS tokens equal to 90% of their USDC deposit, which serve as margin for leveraged trading. While XVS backs trades, it simultaneously earns a base yield (around 15% APR from the vault’s AMM) plus activity-based extra yield that scales with trading volume.
  Notably, 3 of the 10 largest perp DEXs are Starknet-adjacent or built on the chain, such as Extended or Paradex. Combined, they represent almost $200B in monthly trading, comparable to Hyperliquid.

• The Loop: The most common active strategy involves staking BTC to mint an LST, using that as collateral to borrow stablecoins (capturing the rebate), and redeploying into the ecosystem.

Despite a difficult year, money is flowing into Starknet. If other well-known L2 ecosystems are struggling with an industry-wide slump, Bitcoin found a safe haven in the first L2 build specifically for its unique profile. As Vitalik put out in a post last week, L2s are required to move from general-purpose to provide specific value, now that blockspace is cheap and Ethereum is scaling mainnet.

What’s Next: What Comes After Infrastructure

Bitcoin is the world’s greatest store of value, but it is unproductive. Due to its scarcity, mobility, and ability to evade physical hindrances, such as gold or other commodities, Bitcoin is a valuable asset for those looking to “fence” their wealth. Unlike bonds, stocks, or land, it is currently very difficult to justify exploiting this asset class because the downside is much greater. If a stock can recover, a lost Bitcoin is more often than not gone forever.

The owners of that value currently refuse to move it because the existing bridges are wobbly at best, unreliable at worst. The incentives to use Bitcoin are unconvincing. We have mentioned before the risk profile of a Bitcoin-centred investment strategy: a modest annual yield versus the potential for a cataclysmic loss. Starknet is the only L2 with a credible path to trustless BTC. No other protocol offers the same level of security and a comparable DeFi ecosystem. Starknet is the only L2 that has built an entire ecosystem from the ground up for Bitcoin.

This creates a powerful capital flywheel. As BTC TVL grows on Starknet, the network’s value accrues via sequencer fees and staking demand. This correlation between TVL and STRK creates a feedback loop: higher security attracts more capital, which in turn drives higher fees.

Truly trustless BTCFi is the answer to those wary investors looking to protect their wealth. We have already seen TVL double in recent months, and momentum is building. From a low of $80M in July 2025, the current TVL peaked at almost $325M at the end of January 2026.

In the long term, Starknet is positioned to capture more TVL than Ethereum simply because the Bitcoin addressable market is much larger. It just needed a nudge to find its niche. There are currently more than a thousand Bitcoins staked only on Ekubo: the volume on Starknet perp DEXs is comparable to that of Hyperliquid, one of the largest trading venues.

With OP_CAT and ColliderVM, Starknet’s intent to transform Bitcoin into a programmable asset is magnified by Re7’s institutional weight. Bitcoin can therefore become the privacy asset it was always meant to be, while also meeting the requirements of institutional holding, which cannot merely escape all forms of legal scrutiny.

Making Bitcoin a productive asset is one of the largest TVL opportunities in the upcoming year. As the StarkNet infrastructure develops, the network is well-positioned to lead this narrative, encouraging more and more large holders to put their assets to work.

Finally, after almost two decades of experimentation, we are witnessing Bitcoin’s coming of age as a macro asset that can now be used as collateral across several capital markets, with a clear path toward a trustless process.

LayerZero is a fundamental product for crypto as a whole, but few people understand its structural importance.

Although it is not a lending protocol or an exchange per se, LayerZero’s magnitude can be rapidly grasped: it is an invisible giant connecting DeFi’s labyrinthine infrastructure.

LayerZero has transcended its origins as a crypto bridge to become the TCP/IP of blockchains, the fundamental protocol that allows disparate networks to communicate in a single, common language. Just as SWIFT sends secure instructions between global banks without actually holding their cash, LayerZero moves data packets between blockchains to trigger specific actions, such as burning a token on one chain and minting it on another. This architecture has become the definitive standard for moving real-world assets.

By serving as this universal layer, LayerZero turns the entire crypto ecosystem into a single, interoperable network where assets move without the risk of catastrophic losses.

The traditional bridge model has been responsible for billions in losses (Ronin ($625M), Wormhole ($320M), Nomad($190M)). Centralised custody creates centralised failure points.

LayerZero’s architecture eliminates this, using immutable onchain endpoints, a configurable security stack, and a permissionless set of executors. When an application sends a message from Chain A to Chain B, the endpoint on Chain A emits the message, a Decentralised Verifier Network (DVN) independently validates it, and the Executor on Chain B delivers it. The verification and execution are separated by design, so compromising one component doesn’t compromise the system.

As Packy McCormick wrote: “You can think of the LayerZero protocol as a series of pipes that deliver messages between blockchains, transport layer infrastructure that runs below the cities…”

Every time a user moves a stablecoin cross-chain, swaps a token on a DEX aggregator pulling liquidity from another network, or bridges an asset from Ethereum to Solana, there’s an 85% chance LayerZero handled that message, and he has no idea.

In particular, LayerZero developed the OFT (Omnichain Fungible Token), a standard that allows a token to exist natively on multiple chains. When a user bridges, it burns the token on Chain A and mints a native token on Chain B to avoid the risk of token wrapping. Its importance cannot be understated, this year they processed $133 billion across 150+ connected blockchains, with 173% year-over-year OFT growth, over 61% of all the available stablecoins operate on LayerZero.

Today, LayerZero announced Zero the next steps into their vision of connecting well, everything.

Clues leading us to LayerZero becoming the heart of finance 2.0:

• PayPal using LayerZero for its stablecoin PYUSD.

• The state of Wyoming issued its own stablecoin.

• Ondo Finance distributes tokenised US equities through it.

• And so did Fireblocks, embedding it directly into its institutional tokenisation platform to deploy assets across 150+ chains.

• Ethena’s USDe, the synthetic dollar backed by delta-hedged staked Ethereum, runs as an OFT across multiple chains through LayerZero.

• EtherFi’s weETH, the liquid restaking token, uses the same standard.

  ---

Zero: The Last Chain

The reasons behind this novel chain are presented in a lengthy article published on X, which identifies flaws in the current chain, crippled by what they call “homogeneity.”

The announcement argues quite openly against Ethereum: “If an L2 is locked and decentralised, it becomes a dead end. It cannot innovate or adapt, making it irrelevant compared to every other evolving network. If an L2 can be upgraded, it is centralised and controlled by a small group of people with the power to change the rules.”

The exposé continues, in a surprisingly hostile tone: “They abandoned their principles to stay competitive. They stopped building the world computer. Instead, they pushed users away from a decentralised, permissionless, and censorship-resistant blockchain and into centralised, censorable blockchains and called it scaling.”

This scathing statement led LayerZero to build its own chain, running in parallel with the existing business.

Besides the noted contradiction within Ethereum, the announcement highlights three problems with any blockchain:

• Compute: Running code to turn inputs into outputs.

• Storage: Saving and retrieving the outputs.

• Network: Communicating with other computers and the internet.

ZK solved this: Every blockchain forces validators to download and rerun every transaction, thousands of computers duplicating the same work to verify the same data. ZK proofs eliminate this by allowing validators to mathematically verify outputs without re-executing the code, just by checking a tiny cryptographic proof. Validators verify proofs in milliseconds and move on; the breakthrough is manifold.

The term heterogeneous architecture is the most important clue: Block pìProducers execute transactions and generate proofs while Block Validators verify those proofs on consumer hardware. This separation eliminates the replication problem that clogs every other blockchain: for instance, on Ethereum, every validator downloads and reruns every transaction. Thousands of computers duplicate the same work to verify the user’s account balance. This redundancy forces Ethereum to maintain moderate hardware requirements to remain decentralised.

Instead**, Zero uses ZK proofs to decouple execution from verification.**

Block validators “don’t replay history,” so they verify cryptographic proofs in milliseconds. Ethereum currently costs roughly $50 million per year to maintain at its current scale. Zero aims to deliver the same throughput and decentralisation for under $1 million.

Four compounding breakthroughs make this possible:

• QMDB, a database delivering 6x performance improvements, processes 3 million updates per second, 100x faster than existing blockchain databases, by replacing legacy trie structures with log-based, append-only architecture optimised for modern SSDs.

• FAFO, achieving over 1.2 million transactions per second at 91% lower cost than newer generation sharding. This is achieved on a single node through automatic parallel execution, which identifies non-conflicting transactions without manual intervention.

• Jolt Pro demonstrates RISC-V 100x faster than existing zkVMs at 1.61 GHz per cell, with a roadmap to 4 GHz by 2027, making real-time, verifiable computation practical.

• SVID ensures that validators download less than 0.5% of block data, delivering 1000x the throughput of PeerDAS.

Finally, Zero introduced the concept of Zones, “applications running on different cores of the same blockchain”. Most blockchains are single-threaded (Ethereum runs one EVM, and every transaction competes for the same execution environment).

Zero runs multiple applications simultaneously in parallel:

• Each “Atomicity Zone” is functionally equivalent to Ethereum’s single EVM, but Zero executes them across multiple cores at 2 million TPS per Zone. One Zone handles high-frequency trading, another handles privacy payments, and another executes general EVM contracts, with no resources shared.

• Every Zone is owned by Zero and governed by a unified protocol, determined through on-chain votes by ZRO stakers. Developers don’t create their own Zones; they build applications on top of the Zones Zero provides.

• Zero assigns each application its own execution core while maintaining a single decentralised validator set, a single consensus mechanism, and a single blockchain, at a cost 50x lower to maintain, according to the release.

These upgrades are TradFi-tier architectural replacements for every hurdle that has prevented blockchains from breaking through, to accommodate Wall Street.

The announcement concludes: “(Zero) provides a credible alternative to centralised cloud providers like AWS”.

Nothing less!

So, Zero won?

The metamorphosis brought about by institutional influence is such that the lines between crypto and the NYSE are blurring.

Today, Citadel, ICE, and Ark announced a joint investment in Zero; none of those firms are involved in DeFi. Ardoino’s Tether also joined the cap table, sharing how: “LayerZero has built interoperability technology that allows digital assets to be transferred in real-time across any transport layer and distributed ledger, enabling a fundamental utility within the financial industry.” USDT0 is devised using LayerZero’s OFT standard.

The importance of these investors cannot be understated:

• Citadel accounts for 40% of U.S. retail equity volume.

• The DTCC processes $2.5 quadrillion in transactions annually.

• ICE operates the world’s largest stock exchange.

• Tether just became one of the most profitable financial institutions on earth. LayerZero didn’t partner with crypto companies, VCs or corporations, but with the giants that run Wall Street.

Although the exact figure has yet to be disclosed, LayerZero has raised hundreds of millions of dollars while largely operating as a crypto-native protocol.

To put it into perspective, Citadel Securities is one of the largest market makers in the world. The firm executes roughly 47% of all US retail equity volume and 26% of total US equity volume. We are witnessing one of the most structurally important Wall Street titans directly investing in “crypto,” if it is still the correct denomination.

Fortune argued that “The upshot, if Zero proves out, is that institutions like the DTCC handling trillions of dollars worth of assets might be more likely to turn to blockchain infrastructure”.

This may be, to date, the most brazen example of TradFi eating up crypto like there’s no tomorrow. The very heart of Wall Street, namely ICE and Citadel, decided to invest in an L1 specifically spun to accommodate their structural needs.

_Ondo, xStocks, Tether, Canton, and now Zero, i_t is easy to determine where this is going.

Zero is supposed to launch in Fall 2026. If it can handle institutional-grade trading infrastructure before regulations are rolled out, existing L1s become feeder networks. The advantage isn’t just technological (QMDB, FAFO, Jolt Pro, SVID) but mostly structural, if not political: Zero is funded by Citadel and Tether, advised by ICE and the DTCC, built by the team that already controls 85% of cross-chain volume.

Ethereum spent years promising institutional adoption through L2s with the outcomes that we know. Zero is the manifestation of Ethereum’s hopes, except that it comes from above, and not from below, from crypto.

It is an unforeseen turn of events that, ultimately, Wall Street gave us what we needed, rather than waiting for a lengthy maturation on our part.

If another L1 may seem redundant, it’s the first blockchain Wall Street built for itself.

The result of years of practical and theoretical research, LayerZero’s vision for an entirely digital Wall Street has been termed the multi-core world computer.

It has become difficult to distinguish between crypto and traditional finance, as the ecosystem we learned to master is now entirely remodelled by entities the power of which we cannot fathom.

As the lines between DeFi and TradFi are more blurred than ever, one wonders if there still exists a chasm between our world and theirs.

Is unification the path toward reconciliation?

Funding rates (FR) can be positive or negative depending on the market Open Interest (OI), where OI is simply the sum of the notional size of all the positions:

• If the Long OI > Short OI, the funding rate is positive.

• Long OI < Short OI, the funding rate is negative.

In the first case, more positions are directionally long, meaning long traders pay the short traders the funding rate. In the second case, the opposite occurs: long traders are paid.

Funding rates are settled after a set period, typically 8 hours. On Hyperliquid, it is 1 hour.

Traders pay these funding rates while their positions are open, and these rates can fluctuate significantly with market sentiment.

However, funding rates can serve as a distinct yield-generating mechanism while the positions they are generated from are used to hedge other positions. This is how protocols like Ethena generate yield for its stablecoin.

It is exactly around this that Pendle built its yield-trading platform, Boros. Hedging against FRs’ swings is what Boros offers with its plan to expand into other yield sources in the near term.

In this piece, we will discuss what Boros is, how it can be utilised, its growth to date, and showcase the views of the team behind it and its power users.

What is Boros, and how does it work?

Boros is a yield-trading platform developed by Pendle that allows users to long or short a particular instrument’s yield. In perpetuals, FRs are a source of yield, and on Boros, you can trade them with margin. Users trade Yield Units (YU), which represent the yield on 1 unit of collateral in the underlying asset.

Since the platform currently supports only funding rates, 1 YU represents a funding rate of 1 unit of collateral (e.g., ETH) on platforms like Hyperliquid and Binance.

How can Boros be used as a yield-trading platform?

A trader can choose either to long or short the funding rates of a particular asset.

Let’s understand what happens in each of these scenarios.

When the trader longs funding rates, they are effectively paying the Implied Annual Percentage Return (APR) in exchange for the Underlying APR. The implied APR is derived from the Boros orderbook and reflects the funding set by market participants on the platform. On the other hand, the underlying APR is the asset’s actual funding rate on an exchange.

Since you are long in this scenario, you are essentially bidding on the Funding Rates to go up, the ones coming from the exchange, the underlying APR. So as it increases in value, you profit. But this is one part of the equation: when you open a long, you are also saying that the underlying APR will be higher than the Implied APR, so you pay the Implied APR in exchange for the underlying APR. Additionally, the APR your position pays is fixed from the time you open the position, termed “Fixed APR,” but the underlying APR keeps changing, hence your position PnL.

Similarly, in the short position, traders pay the underlying APR because they expect it to decline in the future, in exchange for the Implied APR (paid by longs).

The liquidation and PnL calculations are performed using the Mark APR, which is the TWAP of the implied APR from recent trades.

Because both sides of the traders receive and pay an APR, the position value tends to approach zero as the pool matures.

As we move towards the “hypergamblification” of everything, we asked the Pendle team how this fits within this narrative:

**“**Boros is in a way a sort of casino in itself since funding rates can go to extreme levels (for ex. NVDIA funding rates reached 71% APR) and you can long or short these at a fraction of a cost through Yield Units (YUs). It can also be along the lines of a prediction market since you are betting on the future interest rates. As for the familiarity of prediction markets in the Boros UI, it was in discussion with the team back then, but we’ll announce/share if something along those lines once it launches in the app”.

Moreover, Boros has also Vaults, a mechanism for earning passive yield from these markets. These vaults act as an Uniswap V2 LP position of “long YU” and “collateral”.

Boros TVL currently sits at ~$8 million and has grown steadily since its launch in August 2025, with the protocol’s cumulative fees totalling ~$420k.

Considering the fact that “Boros is a 0 to 1 product, so there definitely is a learning curve (same as PendleV2 back then)”.

As Boros is a fairly different product than others, the Pendle team shared how the main “painpoint is education, opportunity, and liquidity, which we are focusing on. We’re targeting a new segment in DeFi that’s never been done before, even in TradFi (trading rates through an orderbook system), so it’s going to be a lot of experiments and learning. We’ll continue to iterate along the way, growing our education resources, finding the partners for liquidity mgmt on the books, and skimming the funding rates market on opportunities to get PMF”.

After introducing Boros, we distil its complexity into practical examples of strategies users can leverage.

We conducted interviews with Boros power users to understand how they use the platform. The main value proposition Boros provides is hedging the funding rates on its platform.

As Pope (@web3tokenomics on X) mentioned, the way to use Boros is “trade funding rates independently, the ROI on a funding trade is a lot higher when you get the direction right, and your entry is at a good implied rate. The challenge is sizing as liquidity is not there yet”.

This is also important for protocols like Ethena, which hold spot positions and short the same assets to achieve delta-neutral exposure and earn yield on the funding rates from the shorts.

On the exchange, Ethena’s positions at any given point may be earning or paying funding based on FRs, which is volatile. Opening a short position on Boros can give access to a fixed APR while they pay the volatile one.

Consider the two following scenarios:

• When FRs are negative, Ethena positions pay funding on exchanges, but on Boros, since the “Underlying APR” is negative, it accrues as a yield in addition to Fixed APR.

• When FRs are positive. Ethena positions earn funding on exchanges, but on Boros, since the “Underlying APR” is positive, they pay the same rate, resulting in a Fixed APR.

This makes Ethena’s yield more predictable. This strategy is similarly applicable to retail traders who hedge against the funding rates they pay on their perp positions.

This design offers many unique ways to utilise it, but before any major protocols can use Boros for this purpose, they need scale and liquidity.

Another way to leverage Boros is to account for inefficiencies. DeFi Voyager (@DeFiVoyager_X on X) shared how he actually started using Boros “because early-stage products like this usually have inefficiencies you can earn from before they get popular and the yield gets crowded out. I spent a long time farming funding fees through delta-neutral setups before Ethena and the wave of perp DEX farmers, so I have a good understanding of where the money on Boros comes from. I’m mainly trading longer-term funding trends”.

Others, like Waj (@Wajahat on X), instead, prefer Directional Trading. While he would like to also use “delta neutral strategies”, there are still some limitations with regard to onchain DEX support, in particular because “doing delta neutral would require opening 2 positions on boros & 2 positions on different exchanges”.

However, funding rates are a different asset category to trade, and as such, they require a different approach to determining when to open a trade.

Something users should be aware of, as Pope mentions, is to “look into historical data to understand how long an asset can trade below or above the neutral funding rate, and alongside that patch the current sentiment, asset price, and chart outlook.”

Another useful sentiment tool used by DeFi Voyager is “the fear & greed index and underlying APR 30dma indicator - both are available in the Boros terminal. Beyond that, you need a clear understanding of what’s happening in the market overall and with the specific instrument you’re trading. I only trade ETH, and right now the combo of ETH FUD and terrible market sentiment makes one thing obvious: this is not a long environment.”

For Waj, instead, he prefers to “open positions on extremes of funding”, looking at what the market “is really hot and funding is high” as its trigger to “short as a return to the mean trade.”

What is clear is that for users who understand how Boros work, this is an additional “battlefield to explore, as more assets get listed”.

Especially considering the fact that it’s a slightly new product, “that’s where you find opportunities, cause nobody is looking there. Mastering a new platform takes time and a lot of pain, so most users open, look around and leave, until they hear about it again and jump in for another browsing experience”.

DeFi Voyager couldn’t make it any clearer: “In DeFi, you can’t keep making money with the same strategy forever - you always have to look for new opportunities. Right now, Boros is my main project for earnings, with Polymarket as a secondary one”.

For this reason, most of these power users identify in Boros “an additional market, decoupled from traditional trading venues. It’s a whole new instrument by itself where you can trade spot, perps, options or funding”.

Even in a tough market, Boros could be a possible alternative to other yield-trading mechanisms. When asked how this market could impact Boros, the Pendle team mentioned how it “caters to both market uptrends or downtrends since funding rates play a key role in perpetuals trading. As long as perps trading continues, then Boros funding rates trading thrives as well”.

This is proven by the recent growth of Boros, which is “growing steadily despite the market conditions [...] recently achieving $268M ATH Open Interest and launching new markets to trade NVDIA, Gold, and Silver”.

Food For Thought

Boros is a new and fundamentally misunderstood (and in our opinion undervalued and underused) product.

This article provides a brief overview of its mechanisms and direct primary sources from both the Pendle team and Power User interviews, offering practical insights into how they leverage Boros as an additional market.

It’s important to note that the product is fairly new. As the Pendle team highlights, “there are more markets to come in the future as well as UX improvements such as cross-collateral deposits, etc.”

Our power users also expressed a desire to have more onchain trading venues supported, so that the number of strategies available on Boros can scale accordingly, including, for example, the delta-neutral strategies mentioned above.

For now, size and liquidity remain a strong bottleneck: “new users should avoid apeing above a certain size, given you can move markets with a few thousand, earn some funding fees, but when you try to close the position a few days later, or a few hours later, you basically pay back the profit and then some.”

Nonetheless, thin liquidity also means users can gain deeper insight into how the order book behaves and act on that.

We leave you with this quote from DeFi Voyager, which could not put it better:

“Boros feels more like a turn-based strategy game: you build a position over days, average in, then watch how things play out and adjust to extract max value. Definitely not a product for fast dopamine enjoyers”.

Special thanks to @Wajahat, @web3tokenomics, and @DeFiVoyager_X for their inputs.

Does reincarnation exist?

Can something be dead and return in a different form?

At a deeper level, the cyclical nature of markets is widely recognised: what goes around comes around, though in a modified form.

This is the case for Initial Coin Offerings (ICOs).

After reaching peak visibility in 2017, ICOs have a lengthy obituary, being declared dead multiple times.

Moreover, their spectacular failure made the term “ICO” associated with some of the least credible episodes in crypto fundraising.

So much so that, for several years, the term itself became largely taboo.

Only recently did something change.

A resurgence of token-sale-style fundraising has been observed, with several large community raises in 2025, including Plasma, MegaETH, Monad, and Aztec, collectively raising over $2 billion in commitments from 100k+ participants.

At the same time, the challenges of Venture Capital (VC) led fundraising, alongside the emergence of fundraising and distribution routes such as Legion, Sonar by Echo, Kaito, Coinlist, and Tally, increasingly prompt protocols to adopt community-aligned alternatives.

At the same time, the regulatory environment differs substantially from 2017, when ICOs were prevalent. With greater acceptance and clearer frameworks, token sales may move from unregulated disorder to a viable fundraising model that is more open than the prevailing status quo. Relevant developments include the 2023 MiCA regulations in the EU, the discussion of the CLARITY Act in 2025 (awaiting a committee vote in the U.S. Senate), and the growing prevalence of KYC-enabled sales.

This report examines the underlying issue, reviewing the drivers of ICO-era failures and the conditions now prompting a re-evaluation of community token sales as a fundraising mechanism.

Finally, the analysis outlines the forms that token sales could take under contemporary constraints and uses Tally as a case study of a platform that offers an aggregated framework for launching regulated token sales.

The ICO Mania

The primary value of ICOs is that they enable protocols to raise funds by selling their tokens through an open mechanism that allows broad participation, rather than restricting access to qualified investors.

ICOs became the dominant early-stage crypto fundraising route, as much of the crypto participant base at the time consisted of globally distributed retail investors seeking asymmetric exposure similar to earlier opportunities in Bitcoin and Ethereum.

ICOs also diverged from conventional equity-based capital-raising mechanisms, such as Initial Public Offerings (IPOs) or venture capital.

In those models, investors receive equity, and protocols give up a percentage of their company’s ownership. Under ICOs, projects sold tokens rather than equity, giving sale participants a stake in the ecosystem and control over governance and decision-making. This frequently occurred in a regulatory grey zone, creating uncertainty regarding classification and compliance.

At the end of these ICOs, secondary-market trading typically begins shortly after token distribution.

The first ICO is commonly considered to be Mastercoin, which raised over 5,000 BTC in July 2013. Even Ethereum, now worth over $380 billion, initially launched ETH via an ICO in 2014, raising over 31k BTC, which equated to $18.3 million at the time.

Many known protocols, like Aave, raised funds this way back in 2017: during the ICO gold rush, over $12 billion was raised across more than 4,000 ICOs.

As capital inflows accelerated, structural weaknesses became more visible.

The most significant raise at the time was from EOS, which raised $4.2 billion through a year-long ICO. EOS positioned itself as an “Ethereum Killer” and a Layer 1 (L1) with no fees. While the narrative achieved widespread traction and the token briefly entered the top five by market capitalisation, subsequent delivery challenges undermined momentum, and community attention declined over time.

A second major case was Modern Tech, which disappeared with ~$660 million in investor funds and is widely cited as one of the largest ICO scams. Two products, Pincoin and iFan, were marketed, with Pincoin promising high returns (paid in tokens) and iFan framing itself as a social media engagement product.

Their entire structure proved to be a Ponzi scheme, and it collapsed when cash flows could not support redemptions, resulting in losses for tens of thousands of participants.

Another name on the list is Centra Tech, which raised $25 million in its ICO and promised to deliver a crypto debit card but ultimately did not. The case was later popularised through the Netflix documentary Bitconned, which covers the scheme and its aftermath.

The list of scams goes on and on: ICOs became the most efficient mechanism for capital raising in an environment where overpromising, weak accountability, and non-delivery could persist with limited consequences.

Public ICOs were initially framed as a mechanism to align capital formation with product users and community participants.

Although malicious actors exploited the format, there were examples of projects with real products which executed token sales more responsibly, such as AAVE.

Accordingly, describing “ICOs” as having failed in absolute terms can be misleading. The mechanism itself was not necessarily the root cause. Indeed, token sales enabled developers such as Vitalik Buterin to raise early capital and bootstrap infrastructure that later became foundational to the sector. Instead, the dominant failure behind ICOs was the regulatory and enforcement vacuum. Paradoxically, although crypto communities often express scepticism toward regulation, the absence of clear guardrails contributed substantially to the collapse of the ICO market. In the absence of standardised oversight, a basic fundraising contract could be deployed rapidly and raise significant sums without robust disclosure, controls, or accountability.

ICOs did not fail on their own, but rather became associated with the malicious behaviour of those who took advantage of this model. As a result, token sales were stigmatised and largely avoided until recent developments prompted new experimentation.

Before assessing the current resurgence, it is necessary to examine what followed the ICO cycle.

ICOs left a vacuum that was progressively filled by VCs, which became the dominant funding route for many projects, though often at great cost, as explored in the next section.

Is a VC check a good or bad check?

Following the ICO era in the early days of crypto fundraising, VCs increasingly became the primary source of early-stage funding.

This catalysed a structural shift: retail participation was partially displaced by VC firms.

VC involvement also served as an implicit quality signal. Retail participants frequently interpreted the presence of reputable seed investors as third-party validation, reflecting an underlying preference for delegated risk assessment.

Over time, VC investing suffered a reputational decline due to an embedded misalignment of incentives in the model. Relative to ICOs, where token allocations are often skewed toward community distribution, VC allocations often confer greater influence over roadmap, product priorities, and governance outcomes. This influence is typically mandate-driven: VCs seek to preserve and maximise returns rather than act as neutral stewards.

A visible consequence has been the pattern of high launch valuations with limited organic demand. Among the worst-performing tokens of 2025, many launched at elevated valuations. A central driver was the willingness of projects to accept high private-round valuations to raise larger sums, and of VCs to underwrite those valuations on the expectation that listing valuations would be materially higher.

Berachain offers a representative illustration: the final private raise reportedly occurred at a $1.5 billion valuation, the token listed above $4 billion, but currently trades at a sub-$400 million valuation.

As the primary fundraising route, VCs often enjoyed favourable terms, not accessible to most individual investors.

The resulting market structure has been commonly referred to as the “low float and high FDV” token trend.

During this time, projects frequently raised early capital from investors on favourable terms and, in some cases, even allowed them to stake their locked tokens to earn yield.

Moreover, when and if the project conducts a public round, it would be at a much higher valuation than VC investments (often 5-10x or more) and would often come with vesting, a cliff, and sometimes both, unlike ICOs, which are often unlocked immediately.

When public rounds occurred, they were typically priced at significantly higher valuations than VC entry and included vesting schedules, cliffs, or both for participants, unlike many historical ICOs, which distributed tokens with immediate unlocks.

From an investor’s perspective, this behaviour is not inherently irrational. VC funds are compensated for early-stage risk through preferential entry.

However, this often puts retail users at a disadvantage: Venture Funds often acquire tokens at remarkably low prices, while retail investors enter the price discovery process late.

Raising from VCs can be effective when teams have the networks required to access venture introductions. Finding alternatives may be constrained to community rounds, grants, or accelerator programmes.

Projects that avoid the VC route can still raise from retail, but doing so often requires sustained marketing and visibility, investments many teams are not positioned to make early on.

Overall, each route entails trade-offs, and a hybrid approach appears optimal: venture capital may provide networks, recruitment leverage, and strategic support, while community funding can strengthen legitimacy and long-term alignment.

Neither route alone guarantees these outcomes.

In response to the section’s core question, not all VC checks are “bad”, as they may provide resources and capabilities that retail capital typically cannot.

Nevertheless, the VC-dominant phase illustrated persistent misalignment risks. Early VC entry frequently implied late retail entry, leading to distribution dynamics that often made retail the exit liquidity for VCs.

A more credible alternative appears necessary.

What if it was already here?

What Goes Around Comes Around

Although the ICO cycle damaged the credibility of token sales, it did not eliminate the underlying concept. As VC-led fundraising became dominant, a larger share of participants reassessed what ICOs aimed to accomplish: enabling users and token holders to access upside from a project’s growth.

Given that limited early access for retail became a salient issue in the VC-led stage, multiple platforms emerged to address this gap by enabling earlier community participation, such as Echo, Kaito, and Legion.

Each of these platforms serves distinct audiences. Echo (a private fundraising platform launched in 2024) facilitated over $160 million in fundraising, and its acquisition by Coinbase in 2025 for $375 million underscores the demand for token sale infrastructure. Another example was the Yield Basis sale on Legion, which was oversubscribed by 98x, targeting a raise of just $2 million while attracting over $195 million in commitments.

Beyond learning from past mistakes from the ICO era, the contemporary resurgence of token sales has been enabled by an unlikely ally: regulatory clarity.

In the United States, a stronger regulatory posture has been associated with a more favourable political stance toward the sector, creating a more conducive environment for regulated token launches.

Regulations for the European region became clear in 2023 with the launch of Markets in Crypto-Assets (MiCA), which set out rules for token issuance and distribution in the EU. In the United States, the CLARITY Act was introduced in 2025 to potentially further clarify the regulatory landscape for token launches and is awaiting a U.S. Senate vote in January after passing the House of Representatives in July 2025.

Additionally, Token Launches now involve KYC/KYB/KYI. KYI (Know-your-Issuer) is particularly consequential because it links the minting authority of a token to a verifiable identity, enabling exchanges, funds, and custodians to assess issuance standards and supporting broader adoption.

Token Sales in 2025

Following the regulatory and fundraising developments in the sector described above, 2025 saw a revival of high-profile token sales.

Four major examples are Plasma, MegaETH, Monad, and Aztec.

Plasma

In July, Plasma, a stablecoin-focused L1 blockchain, conducted a sale that was filled within minutes. The team initially set a deposit cap of $250 million, which was subsequently increased to $1 billion. Both caps were filled rapidly. Plasma used Sonar for its fundraising event. These deposits qualified buyers to purchase the token; the sale itself raised $50 million at a $500 million FDV. The event reportedly involved 1,110 participants with a median deposit of $35k, though 38% of the funds raised came from the top 10 wallets.

MegaETH

In October last year, MegaETH, an Ethereum Layer-2 (L2), launched a public sale on Echo’s Sonar platform and got $1.4 billion in bids for a raise capped at $50 million (28x oversubscribed). Demand reached $150 million in bids in under 30 minutes, reflecting phenomenal demand for their token. The sale was conducted as an English Auction, involved 5% of the supply and reached a final clearing price of $0.1 or an FDV of $1 billion.

Participants could also receive an additional allocation if they choose to lock their tokens for up to a year. For the U.S. accredited investors, the lockup was mandatory.

The sale was also MiCA-regulated, illustrating the broader shift toward regulatory thinking in token sale design.

Monad

In late 2025, Monad, a hyper-performant L1, launched the first major U.S.-regulated token sale in collaboration with Coinbase, raising $188 million at a $2.5 billion valuation. The sale excluded certain regions, such as New York, but also highlighted regulatory easing towards crypto and token launches.

It is important to note that the Monad sale saw low oversubscription (1.43x) and ended with commitments totalling $269 million. One contributing factor may have been the requirement to create a Coinbase account, an additional friction that reflects the trade-offs involved in combining community participation with regulated distribution.

Aztec

Aztec, a privacy-focused chain, raised $59 million in December 2025 using the Uniswap Continuous Clearing Auction (CCA) model. This model enabled the sale to proceed through a slow price-discovery process and to eliminate any snipers or attempts at price manipulation. Participants in the sale were required to complete KYC via ZKPassport to remain regulatory-compliant, with certain regions excluded from participating to maintain compliance.

Given these outcomes, we can wonder whether we can safely say that “ICOs are officially back”.

Although the sales differed in mechanism and results, they resemble ICOs in core function, reinforcing the model’s persistent relevance.

As regulation becomes clearer and token sales can be offered to broader audiences, the next phase raises key questions: can ICOs return as a mainstream instrument, and what forms will they take?

While platforms such as Echo, Kaito, and Legion provide distribution to established audiences, some projects are experimenting with running their own sales to reduce the value leaked to third parties.

Within this context, aggregated platforms have emerged offering end-to-end infrastructure for regulated token sales.

The next section explores Tally, known in the space for its DAO governance tooling, as a case study in how projects can internalise and execute regulated token sales within a broader distribution and governance framework.

Tally: A Capital Formation and Distribution Home

Tally has operated in the cryptocurrency space for over 5 years and has developed a token distribution stack that integrates airdrops, vesting, staking, and governance into a single platform.

Since its inception, it has distributed over $1 billion in value, provided tooling to manage $40 billion in assets under governance, and served over 1 million users, working with protocols like Arbitrum, Uniswap, ENS DAO, ZKsync, Wormhole, and many others.

While distribution and governance tooling had reached maturity, supporting projects with capital formation remained a complementary frontier to explore, a goal Tally has pursued for some time and is now prepared to address through its ICO platform.

Each major ICO platform faces trade-offs.

Sonar by Echo and Legion are among the most prominent providers and have supported multiple high-profile sales.

Older platforms, such as Coinlist, enabled projects such as Solana to raise funds in 2020 and to maintain a solid reputation associated with the quality of project selection. Kaito, launched in mid 2025, has been used to allocate fundraising access based on social and onchain metrics.

Several of these platforms do not provide universal access and often set barriers that determine who gets the token allocation. This is often a feature rather than a flaw, reflecting a preference for more targeted distribution to known or demonstrably aligned participants.

On Sonar, selection can be team-driven; on Legion, through applications and scores; on Kaito, it can be tied to social reputation and perceived alignment.

Tally differs by emphasising broad participation through the Capital Formation Stack while employing mechanisms to reduce adversarial behaviour. On Tally, participants can more easily evaluate sales (transparency) and the project’s fundamentals.

This design expands teams’ flexibility to choose sales dynamics. Additionally, Tally positions itself as an integrated solution: it extends beyond sales mechanics to encompass distribution and post-sale usage infrastructure, creating a self-reinforcing culture of long-term-oriented engagement.

Tally’s impact on the capital formation stack can be broken down into 6 important elements:

1. Distribution: Sales should reach as many qualified participants as possible. On Tally, this includes its own user base – Tally has served 1M+ users since its launch – as well as its partners (the largest organisations in crypto and roadshows targeting institutional investors).

2. Confidence: Participants should be able to trust any sale and be assured that no malicious behaviour will be tolerated. Tally supports fundraising mechanisms such as Uniswap CCA and Balancer’s LBP (detailed later in the section) to reduce incentives for front-running.

3. Liquidity: Another important consideration for participants is the token’s liquidity post-sale. Tally removes any assumptions and includes an integrated feature that automatically locks 20% of the raised funds as DEX liquidity for 1 year.

4. Cost: For projects and sale participants, there are zero platform fees. Tally charges an LP fee only on locked liquidity.

5. Transparency: Transparency in any sale ensures that participants are not subject to surprise allocations. In any sale, all previous allocations, along with their unlock and vesting schedules, are clearly disclosed.

6. Regulatory tooling: Regulatory thinking comes at the top of the stack and is important for every sale, given the evolving environment. Tally is designed with regulatory readiness in mind and stays up to date with the latest SEC and CFTC guidance (more on this later in this section).

Each sale on Tally follows multiple steps. Teams can create sales permissionlessly and determine:

• Sale mechanism: This is the most important component of a sale, as it determines how tokens are allocated.

• Building a custom user experience: Projects can create fully branded interfaces and experiences for their users.

• Integrating compliance: Token sales have rules about who can participate. Projects can implement the right controls for their jurisdiction and risk tolerance and embed Know-Your-Customer (KYC) into their sales so that every participant is verified.

• Post-Launch Support and Monitoring: The work is not done after the sale. Tally supports and helps teams with post-launch support and monitoring, distribution, and user behaviour.

• Post-Sale Token Distribution: The post-sale period determines how tokens are distributed and whether a vesting cliff is included.

Choosing the Sale Mechanism

Mechanism design is the most critical determinant of distribution quality. Effective mechanisms allocate capital to genuine users while reducing incentives for manipulation.

To conduct these sales, projects can choose from the following mechanisms.

Liquidity Bootstrapping Pools (LBPs)

LBPs enable dynamically changing token weights for a sale (TokenA/TokenB). The team can select the starting and ending weights.

Introduced by Balancer in 2020, LBPs typically begin with a high implied price, discouraging early participants (in some cases, malicious, often referred to as “snipers”) from acquiring large numbers of tokens at lower prices.

Over time, the token’s weights are adjusted according to the predefined schedule, causing its price to decrease. This allows gradual price discovery, with later participants typically accessing lower prices.

Continuous Clearing Auction (CCAs)

Uniswap introduced the CCA mechanism for liquidity bootstrapping in late 2025, and the first project to use it was Aztec, which used it for its token sale in December 2025.

Since Tally provides CCA as a sales mechanism on the platform, it is positioned to become one of the largest third-party providers of such sales, as Tally automatically seeds 20% of raised funds into Uniswap v4 LP positions.

The team is also working to ensure that sales conducted in Tally are reflected on Uniswap’s frontend.

In a CCA, token supply is released progressively over time. Participants submit bids, indicating a budget and the maximum price they are willing to pay. These bids are then distributed across multiple blocks, preventing demand from concentrating in a single block.

At the end of each block, the available supply is cleared at a single market-clearing price (determined by accumulated bids) and paid for by all participants.

By distributing supply over time and using uniform clearing prices, CCA reduces incentives for gas wars, sniping, and other forms of manipulation, while enabling fair and efficient price discovery.

You can check out Tally’s CCA token sale simulator here.

Fixed-Price Sales

Fixed-price sales specify a set token price, impose per-wallet limits, and allocate according to predefined rules that can reward long-term contributors in accordance with the rules set at the beginning of the sale. This format gives the sale originator greater control over who can participate in their token sale and what their allocation will look like.

The Regulatory Factor

Running regulatory forward token sales is increasingly important, and Tally enables additional features, including:

• Identity Verification via KYC/KYI/KYB (Blueprynt integration).

• Geo-blocking to block certain regions from the sale to help meet jurisdictional laws and regulations.

• Chainlink ACE (Automated Compliance Engine) integration to embed regulatory checks, such as KYC/AML, investor accreditation, and geographic whitelisting. This allows transactions to be automatically approved or blocked onchain without centralised intermediaries.

Tally is designed to evolve with the U.S. market, comply with the latest SEC/CFTC guidance, and be forward-compatible with market-structure bill drafts. Moreover, sales on Tally can be conducted within the U.S. or other major onshore jurisdictions, rather than relying on any offshore entities in a regulatory grey zone.

The regulatory process for launching a token in the U.S. can be overwhelming; therefore, Tally will showcase each step required to launch successfully over the next two months. If you are about to launch a token or are considering it, their documented process can significantly help ensure a successful launch.

Post-Sale Operation

Support continues after the sale and can include seeding DEX liquidity on Balancer or Uniswap, configuring token vesting and lockups, deploying a governance system, setting up staking, adding multichain support, delegate compensation systems, managing security council elections and more.

By combining the established infrastructure with this new capital-formation layer, Tally aggregates all aspects of a token sale, from launch and airdrop to a fully functional governance and staking system.

Closing Thoughts

Fundraising is a crucial part of a project’s journey, providing the fuel needed to drive growth and product development.

Crypto fundraising has evolved in distinct phases. ICOs dominated early capital formation and were once the primary means of raising capital. As adversarial behaviour increased and regulatory pressure intensified, token sales lost legitimacy and declined in prominence.

Over the past 1–2 years, however, token sales have re-emerged, with more projects raising funds from communities and providing users with exposure to the project’s upside. This is partially enabled by improved regulatory conditions, particularly in the United States, including developments such as the proposed CLARITY Act. Last year, regulated token sales such as Plasma, MegaETH, and Monad attracted billions of dollars in expressed demand.

Current platforms, including Sonar by Echo, Kaito, and Legion, capture meaningful flow.

Yet a shift is underway: token sales are increasingly treated not as standalone events, but as components of broader distribution and launch strategies.

Within this landscape, Tally is developing an integrated model that integrates capital formation with distribution and governance infrastructure, offering an aggregated framework that enables the creation of a strong foundation for tokens designed for long-term value accrual.

The direction appears clear. Community inclusion is increasingly favoured because it strengthens alignment and broadens access. At the same time, VCs are unlikely to disappear and will remain relevant as a funding and support channel.

Nevertheless, alternative fundraising paths are expanding.

Rather than novelty, these paths may represent a return to older forms, under new constraints.

Disclaimer: This article was produced in collaboration with Tally. Tally provides token launch infrastructure and tooling. Use of the platform does not constitute legal, financial, or regulatory advice, nor does it guarantee compliance with the laws of any jurisdiction. Projects should consult independent legal counsel before conducting a token sale. Castle Labs applies the same standard to sponsored content as in our independent research. We strive to be accurate, unbiased and educational. Commissioned partnerships provide resourcing and distribution, not editorial control.

In 1985, when ZK was first introduced, it answered the question: “Can a prover convince a verifier that a statement is true without revealing the witness?”

This question paved the way for the development we have today. From 1985 to the 2010s, ZK was a research topic in cryptography.

In 2013, blockchains provided ZK with a practical, mass-market rationale for existence: privacy for public ledgers and scalability by proving correctness without replaying computations.

Early proposals, such as Zerocoin and later work, such as Zerocash, demonstrated how to prove ownership and validity without exposing identities or balances.

Zcash shipped that idea into a live network in 2016.

In 2018, the centre of gravity shifted from privacy to throughput. Ethereum’s scaling path made verification cheaper than re-execution for many workloads, and ZK became a means of compressing large amounts of computation into small proofs. That wave helped shape zk rollups and privacy systems by enabling succinct proofs of many state transitions, rather than forcing every validator to re-execute every step. As such, in rollups, execution happens offchain. A validity proof is posted onchain so that Ethereum can accept the new state without replaying each transaction.

We have protocols such as @aztecnetwork and general-purpose rollups like @zksync, @Starknet, and @Scroll_ZKP that are driving this development.

By the mid-2020s, ZK adoption shifted from single-purpose circuit dominance to a general-purpose proving infrastructure.

That is, we had zkVMs that can prove arbitrary programs, coprocessors that prove specific queries over onchain state, and proof networks that industrialise proving supply. These were developed by the teams from like Brevis, Axiom, Lagrange, Succinct, RISC Zero, and Cysic.

Today, ZK is less a single feature and more a utility layer for systems that need verifiable claims without leaking underlying data. We now have proof of personhood and membership, private group signalling and voting, and “prove an email”- style attestations that provide authentication to existing Web2 rails without revealing additional information.

Wallets use it for private membership and eligibility checks, prediction markets use it for hidden positions with provable settlement, and many other systems borrow it for one main thing: To make claims verifiable while keeping sensitive inputs private.

Worldcoin ID uses ZK proofs to ensure users can prove uniqueness without disclosing their identity, and it supports both offchain and onchain verification. On @SuiNetwork, a wallet can submit transactions using an OAuth login, with zkLogin, while preventing observers from linking the address to the OAuth identifier. An example is @surf_wallet, the best zklogin mobile wallet on Sui. Likewise, ZK Email uses proofs to verify signed email claims, such as DKIM-verified messages, without revealing the underlying email contents.

As @0xjyjonathan points out: “Zero-knowledge proofs are increasingly moving beyond academic theory. In Web2, they are already being used for privacy-preserving identity verification, such as proving age or eligibility without revealing personal data, as well as for data validation where specific conditions can be verified without exposing underlying datasets.

Within blockchain, ZK has traditionally been associated with scalability, such as ZK-based Layer 2s, and privacy-focused blockchains. ZK proofs offer an efficient way to compress and verify data, though they often come with higher upfront costs and greater implementation complexity compared to earlier scalability approaches like optimistic systems.

As time progresses, ZK proofs are likely to complement existing technologies. For example, ZK systems are being actively explored for trust-minimized bridge designs, including Bitcoin bridges that use optimistic SNARK-style constructions.”

This expansion of ZK from a privacy primitive into a general proving tool led to the stack splintering into specialised layers.

The map below is a glance at the current ZK stack:

Figure 1: The ZK stack has expanded into an ecosystem with many specialised layers.

The Cost Of Proving

In the past, it usually cost a lot, manually and financially, to verify anything on-chain. However, that cost has been shifted to Proving. Meaning, in exchange for that manual labour, they can simply verify those can verify those facts with ZK proofs. Therefore, proving is the new bill of verification, because the cost has been shifted to the proof layer.

Here’s how it goes:

• A verifier runs a quick check,

• Then the prover does the heavy computation,

• The computation is turned into a proof, and

• The cost is shifted onto hardware, energy, and latency.

Ethereum has made this tradeoff explicit. In July 2025, the Ethereum Foundation published a “real-time proving” target for an L1 zkEVM, aiming for proofs of at least 99% of mainnet blocks in under 10 seconds, on open source software, with on-premises hardware capped at around US$100,000 and 10 kW of power.

By December 2025, the Foundation reported major progress against that target, with proving latency dropping from about 16 minutes to 16 seconds, costs falling by 45x, and zkVMs proving 99% of blocks under 10 seconds on the target hardware profile.

Figure 2: A proof avoids re-execution by letting the chain verify work without repeating it.

The Cost Stack

Proofs are getting cheaper because several cost centres are falling at the same time, but at different speeds.

To get a grasp, we separate the stacks into three fees:

1. The verification bill: What it costs to verify a proof onchain.

2. The prover bill: What it costs to generate proofs, including hardware, energy, orchestration, and uptime.

3. The publishing bill: What it costs to post the data, and what the chain needs to accept the state transition.

The Verification Bill

On Ethereum, verifying a Groth16-style proof typically costs around 200,000 gas, and the cost increases with the number of public inputs. Ethereum reduced pairing precompile gas costs through EIP 1108, which is one reason modern onchain verification is viable at all.

Verification has a relatively fixed base cost. However, by aggregating multiple proofs into a single proof, the base verification cost can be amortised and spread across many users, reducing the chain’s exposure to expensive pairing costs.

The Prover Bill

Proving is a major operator cost curve, but it is not always the majority of total rollup cost from the user’s perspective. In many rollup designs, the dominant variable cost is data publication to L1 (calldata or blobs), while proving is a significant compute expense borne by the operator.

Which dominates depends on the rollup’s data model, traffic level, batching efficiency, and the proof system.

A practical way to think about rollup fees is: execution cost on L2, plus the cost of publishing data to L1, plus the operator’s proving overhead.

Proving is where performance races are, while publishing is where L1 fee markets leak into user pricing.

Even modest throughput can require heavy proving hardware, because proving is compute-intensive even when the transaction count is not huge. For example, zkSync publishes minimum hardware targets for certain prover configurations, and RISC Zero has published a reference path for pushing proof times down using a larger GPU setup.

The Publishing Bill

Proofs do not remove the need to publish what the chain needs. Rollups still pay to publish data, whether as calldata, blobs, or alternative availability commitments, depending on how the system is built.

In practice, this means proving costs can fall fast while total user fees do not fall as much, if data publication remains the dominant cost. This happens because the proving cost and publishing cost move on different rails. Proving benefits from software optimisations and hardware progress, while Publishing is constrained by L1 data pricing (calldata or blob fees). So proving can get cheaper while fees remain sticky if L1 data remains the binding cost.

As a consequence, user fees are a mix of proving cost and data cost. Proving has been falling quickly, but data publication is often the larger line item, especially during periods of high demand for blockspace. This is why proofs can become cheap while users still feel fees, and the proof bill can also shrink while the data bill stays stubborn. When evaluating whether ZK is getting cheaper for users, the right question is not only how cheap proofs are, but also whether the total fee is now dominated by data publication.

So when people talk about ZK “getting cheaper,” they usually mean some mix of these 3 numbers moving down:

• Lower fees per proof check

• Lower cost to generate proofs

• Lower cost to publish what Ethereum needs

  ---

What Makes Proving Cheaper?

If proofs are expensive, rollups subsidise users and bleed on ops, and when they are cheap, fees can fall without collapsing margins. This section explains where proving costs come from, how teams measure progress, and why the fastest improvements do not always translate 1-to-1 into lower user fees. The goal is to connect the benchmarks to real unit economics.

When examining the open benchmarking, the frontier is shifting across teams and hardware is discovered, telling you whether proving is moving from “specialised lab work” toward ‘commodity infra.

Ethproofs tracks proof latency and cost estimates across zkVMs and prover setups.

In its 2025 review, Ethproofs reports site-wide average latency falling from 16 minutes and 44 seconds to about 60 seconds, and site-wide average cost falling from $1.69 to $0.0376 between late January and mid-December 2025.

They estimate the amount of GPU work required by a proof and the corresponding dollar cost, using a hardware price index, a method for comparing the efficiency of proving over time.

Ethproofs site-wide snapshot:

Figure 3: Ethproofs site-wide snapshot

The chart below is a scenario that assumes continued gains from proof system engineering and hardware efficiency, and it illustrates why teams are racing to commoditise proving if those assumptions hold.

Figure 4: Proving cost trajectory, based on simplifying assumptions.

zkVMs and zkEVMS

zkVMs make arbitrary programs provable, which is why they are at the core of the ‘validate instead of execute’ direction for Ethereum.

Vitalik Buterin recently noted that zkEVMs have reached an alpha stage, meaning performance is already at production-quality levels and the main remaining work is on safety. He mentioned this, alongside PeerDAS on mainnet, as part of a shift toward Ethereum supporting decentralised consensus with much higher bandwidth over the next few years. This is why zkVMs’ progress is increasingly about reliability and actual deployments, rather than only faster proving.

A practical way to track the proving layer is to watch which zkVMs are actively shipping, what they optimise for, and how their proving stacks evolve. The table below uses Ethproofs’ tracked zkVM list as a baseline and explains why it matters.

Figure 5: Ethproofs, categorisation of networks and tracking

What to watch in ZK through 2026?

Progress is easiest to track when metrics are hard to game. Interesting developments to have a look at are:

• The median and tail proving latency for Ethereum-sized workloads.

• The cost per proven block under a clear cost model, plus the hardware assumptions behind it.

• The share of proving capacity that can be run outside a single vendor or a single data centre class hardware.

• The number of production systems that rely on zkVMs for more than marketing, including coprocessors and bridges.

• Privacy adoption is measured as actual private user actions, and not just protocol launches.

• The fee is split between proving and data publication, because proving can get cheap while users still pay for data.

Proofs are becoming cheap enough to use as a default tool.

They are no longer a special feature reserved for users with a budget. When proving costs collapse, teams can prove more often, ship more proof-driven products, and rely on zkVMs and coprocessors for the real workloads. That is why ZK is showing up in more places, rollups, wallets, eligibility checks, verifiable cross-chain logic, and applications that need to prove something without exposing inputs.

Vitalik Buterin’s roadmap outlines what this should look like next:

• Early zkEVM node usage and broader scaling steps in 2026

• Deeper safety and structural changes through 2026 to 2028

• A path in which zkEVMs become the primary way blocks are validated later in the decade.

The next phase is operational. It is about how easy provers are to run reliably, how widely proving supply decentralises, and whether pricing continues to converge toward commodity compute as more applications and networks depend on proofs.

This HIP allows Hyperliquid (HL) to extend its support for instruments beyond perps, supporting binary market outcomes. This is increasingly important, as it allows HL to tap into one of the most active areas of crypto: Prediction Markets (PMs).

PMs’ volume speaks for itself, regularly reaching over $6b weekly in the past month.

Kalshi and Polymarket have established themselves as major players and command the majority of PMs’ volume and Open Interest. Even now, the top 3 players account for >97% of the category’s volume, so HIP-4 will stimulate more competition in this landscape.

Source: https://dune.com/datadashboards/prediction-markets

HIP-4 goes well beyond PMs only: Binary markets are entering the house of finance.

As Ericonomic points out, “HIP-4 enables not just prediction markets (that it’s a huge market) but also options at a big scale. The major unlock of HIP-4 is that everything is hosted in the same environment, enabling a lot of trading strategies that before HIP-4 were much more complex since you had to use at least 2-3 venues to do it (e.g. vote on a prediction market for a rate cut while hedging your position with a BTC short with the same collateral). Ultimately, all this will lead to more fees, more revenue and in the end, more HYPE buying pressure”.

Before HIP-4, users had to build their own strategies across multiple platforms. Following the HL vision to become the house of all finance, they can now do it all on a single platform.

Dan from Rysk helps us note how this is also extremely significant for builders: “by shipping core primitives and letting builders build on top. This infrastructure-first approach for an exchange is a first of its kind and clearly differentiates Hyperliquid from CEXs by attracting builders and enabling open finance. Outcome markets are already mainstream with predictions because they are easy to understand and powerful enough to create markets on almost anything. Launching them within the most active DeFi builder ecosystem is a strong move: shared accounts and collateral, along with full composability, unlock entirely new opportunities. It is easy to imagine users hedging binary outcomes with perps from the same account”.

Rysk is already actively exploring how to plug into this, unlock new value for our users, and be an active part of this new primitive.

This should provide a general idea of HIP-4’s overall potential beyond supporting PMs.

Now onto the fun part - can it represent a strong enough source of revenues to impact the trajectory of HL with a whole new total addressable market (TAM)?

Here is a small thought exercise to determine how much HIP-4 is going to contribute to HYPE buy pressure or the protocol revenue, assuming HL is able to capture:

1. 70% of the PM’s volume

2. 40% of the PM’s volume

3. 20% of the PM’s volume

Last month, PMs recorded a cumulative volume of $23.78 billion. To analyse fee generation, we are considering a 3-4 bps fee bracket.

For performing this, we have created a Google Sheet with an analysis according to the three scenarios laid out above:

If you have different assumptions for the fees and different case scenarios, you can work on them here: https://docs.google.com/spreadsheets/d/1z9AHnB2t2j73bzIEnq0x-4YQUdb1dVpIPXv0eYdDrGw/edit?usp=sharing

Here are the numbers:

• In the first case, 70% of PMs volume, HL will generate ~$5.8 million in revenue

• 50% of PMs volume: ~$3.3 million

• 20% of PMs volume~$1.6 million.

These numbers represent ~2-7% of Hyperliquid’s current total revenue and could open an additional revenue stream for the protocol and HYPE buybacks.

Even if these scenarios are fairly bullish (and may not materialise), these revenues are insufficient to prompt a broader repricing or re-evaluation of HL and to exert significant buy pressure on HYPE.

Nonetheless, the analysis above considers only PMs, one of the types of binary markets supported by HIP-4.

To recap, with this implementation, HL now has access to an additional TAM that it can host on its platform.

Users can simply leverage new strategies without leaving their favourite platform.

For builders, this is a whole other primitive that could enable new protocols, developments, and composability across the entire ecosystem.

Moreover, it’s early days, and many details of HIP-4 remain to be announced.

For now, we know outcomes are still being fine-tuned on testnet, and development is ongoing.

USDH will be used as the denominator in canonical markets, with a plan to eventually make the infrastructure permissionless for anyone to deploy on.

To eventually become the house of all finance.

And bet on it.

All on HL.

Hyperliquid.

If you are more of a Telegram guy, you can read all of our research without the noise on our TG channel: https://t.me/castlelabsreads