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Weekly Attestations
June 17, 2024

🔮 Curve Liquidations, Pectra Update, MiCA Elections, Bitcoin on the Balance Sheet, Farcaster Growth

MetaMask Pooled Staking, ZK Sync Airdrop, Crypto Political Funding, Stage 2 Decentralization, Hong Kong

🔮 Curve Liquidations, Pectra Update, MiCA Elections, Bitcoin on the Balance Sheet, Farcaster Growth

Top Stories

Farcaster User Growth Stalls

Farcaster, a decentralized social media platform, recently raised $150 million led by Paradigm following reports of a raise aiming at a $1 billion valuation earlier in March. The platform surged in popularity after launching the Frames feature in January, which integrates interactive apps like polls, live feeds or interactive galleries directly into posts. Farcaster user identities are tied to wallets, enabling better UX for value transfer and interactive experiences that necessitate or benefit from financial transactions. Farcaster attracted a wave of new users after the launch of Frames, with daily posts soaring from 10,000 to over 500,000 in March, peaking at 1.5 million casts daily thereafter, but have since declined to below 700,000 alongside a sharp drop in post reactions. With over 47,500 active casters, Farcaster faces challenges including a recent bot exodus possibly due to platform adjustments, amidst critiques of being an "echo chamber" among its crypto-focused user base. Nonetheless, it remains competitive in the decentralized social network space.

Source: The Block

Ethereum's Pectra Upgrade Expands, Potential Split Into Two Forks

Ethereum's forthcoming Pectra upgrade is shaping up to be its most expansive yet, prompting developers to consider splitting its deployment across two hard forks. With nine Ethereum Improvement Proposals (EIPs) confirmed and five more under review, Pectra aims to introduce significant changes like Verkle Trees for statelessness and EIP-4444 for data deletion, enhancing node efficiency and decentralization. Consensus layer upgrades like EIP-6110 and EIP-7251 focus on improving staking mechanisms, while execution layer enhancements such as EIP-2537 and EIP-7865 aim to boost interoperability and smart contract functionality. Contentious proposals, including EIP-7702 for advanced wallet features, underscore ongoing debates over security and usability. The potential split into two forks reflects Ethereum's complex development process as it navigates towards scalability and innovation amidst evolving blockchain challenges.

MetaMask Introduces Pooled Staking for Ethereum

MetaMask, a popular web3 wallet, has rolled out a pooled staking service for Ethereum, enabling users to stake any amount of ether with validators managed by its developer, Consensys, to earn rewards. Previously, only users holding a minimum of 32 ETH (approximately $115,000) could stake directly in Consensys-operated validators. MetaMask users now have the flexibility to unstake their ether at any time, albeit subject to Ethereum's validator exit queue. However, regulatory uncertainties have led to the pooled staking service being initially unavailable to users in the U.S. and UK. MetaMask intends to potentially expand this service to these regions in the future, signaling a broader accessibility to Ethereum staking for global users.

Soure: Ethereum Validator Queue

ZKsync Announces 3.6 Billion Token Airdrop to Community

ZKsync, the third-largest zero-knowledge proof-based Ethereum Layer 2 scaling solution, will distribute 3.675 billion ZK tokens in an upcoming airdrop, constituting 17.5% of its total token supply. Beginning June 24, eligible community members can claim tokens until January 3, 2025. These tokens will empower holders to participate in governance decisions and pay network fees within the ZKsync protocol. A significant portion of tokens, 49.1%, is earmarked for ecosystem initiatives, while 17.2% will serve investors, and 16.1% is allocated to Matter Labs, with a staggered unlocking schedule from 2025 to 2028. The airdrop prioritizes equitable distribution, capping allocations per address and recycling tokens for wallets with insufficient holdings. Despite a recent decline in total value locked (TVL) to $750 million, ZKsync continues to foster community engagement through incentivized participation and strategic token allocation.

A TON of Growth

Telegram's integration of The Open Network (TON) has propelled it to become the fastest growing major Layer 1 blockchain in 2024. TON's total value locked (TVL) surged from $14 million to $386 million this year, driven by initiatives like the Open League incentives program and a strategic partnership with Tether. Leveraging Telegram's massive user base of over 900 million monthly active users (MAU), TON has introduced innovations such as an ad-sharing program and TON-native wallet solutions like Tonkeeper, which operates seamlessly within Telegram. Looking ahead, TON aims to enhance cross-chain interoperability and expand its ecosystem, signaling continued growth and adaptation within the blockchain space.

Arbitrum Plots Stage 2 Decentralization With Permissionless Transaction Validation

Arbitrum, the top Layer 2 network by TVL, is advancing with significant upgrades aimed at achieving "Stage 2 decentralization" and integrating zero-knowledge proofs. The community is on the verge of approving a proposal for permissionless transaction validation, supported overwhelmingly by ARB holders in a recent vote. The upgrade will introduce the BoLD dispute resolution protocol, ensuring that state roots for Arbitrum are posted solely through the network's code, eliminating centralized control. This move enhances security by protecting against delay attacks and allows for seamless withdrawals from Layer 2 rollups to Ethereum mainnet via verified state root values. Arbitrum's evolution toward Stage 2 decentralization aligns with Vitalik Buterin's criteria, marking a significant step in enhancing network autonomy and security. See similar: Partners Take Another Crack at Uncollateralized Loans on Arbitrum and Arbitrum to Distribute $215MM in ARB to Boost Gaming Ecosystem 

Regulation

Curve Finance Founder Michael Egorov Faces Significant Liquidations Amid CRV Price Plunge

Michael Egorov, the founder of Curve Finance, has encountered substantial liquidations totaling nearly $140 million in on-chain loan positions across various DeFi platforms due to a drastic decline in CRV token prices. Egorov had utilized approximately $141 million worth of CRV tokens as collateral to secure nearly $100 million in stablecoin loans from platforms such as Inverse, UwU Lend, Fraxlend, LlamaLend, and Aave. With CRV experiencing a sharp drop of over 20% within 24 hours and 40% over the past week, many of Egorov's leveraged positions faced forced liquidation, resulting in his collateral dwindling to $33.9 million against $20.6 million in outstanding debts. Despite efforts to repay debts on platforms like Inverse and UwU Lend, Egorov has grappled with challenges, including health rates nearing liquidation thresholds. This event underscores Egorov's ongoing management of high-risk leverage in the volatile DeFi environment, reflecting past instances of navigating substantial risks and liquidity crises dating back to 2023.

Source: X (Formerly Twitter)

EU Parliament Elections Impact MiCA Implementation Uncertainty

The conclusion of EU Parliament elections on June 9 introduces uncertainty to the implementation of MiCA, a critical regulation for the crypto industry. With 70% of newly elected MEPs being newcomers, potential shifts in legislative direction are anticipated. Committees on Economic and Monetary Affairs, Civil Liberties, Justice, and Home Affairs, and Internal Market and Consumer Protection, alongside party coordinators, will influence MiCA's details. Key decisions include assessing DeFi risks, integrating tokenization and NFTs, and potentially advancing discussions on the Euro CBDC bill. They will also determine enforcement actions for stablecoins lacking e-money licenses, which face MiCA compliance starting June 30. Despite the centrist Europe’s People Party retaining a significant share, there's a noticeable far-right shift, although crypto remains non-partisan in EU policy-making. The upcoming appointment of new European Commission leaders after summer will further shape digitalization goals and legislative priorities, adding to the regulatory ambiguity surrounding MiCA as it nears its implementation anniversary.

Bitcoin on the Balance Sheet

Semler Scientific, a small med-tech firm with a $200MM market cap, made headlines by investing $40MM in Bitcoin, marking it as their primary treasury asset and boosting their stock and visibility. This move follows similar strategies by larger firms like MicroStrategy and Tesla, albeit on a smaller scale, highlighting a trend where companies are turning away from U.S. Treasury Bonds due to low yields amidst inflation. New accounting standards requiring digital assets like Bitcoin to be reported at fair market value are also encouraging this shift, potentially leading to wider corporate adoption. While skepticism remains among some analysts regarding Bitcoin's volatility and suitability as a treasury asset, Semler's bold step underscores a growing interest among smaller firms in diversifying into digital assets amid changing financial landscapes and regulatory environments.

Biden Campaign Explores Crypto Donations Amid Election Strategy Shift

President Biden's re-election campaign is actively considering accepting cryptocurrency donations through Coinbase Commerce, sources informed The Block. This initiative mirrors Donald Trump's recent move to embrace crypto contributions via the same platform. Biden's team views this step as pivotal in appealing to pro-crypto voters and mitigating potential electoral repercussions from their stance on digital currencies, sources revealed. The discussions signify a recognition of cryptocurrency's increasing role in U.S. political campaigns, with crypto-backed super PACs playing a significant financial role.

Terraform Labs Announces Dissolution, Calls for Community Takeove

Chris Amani, CEO of Terraform Labs, announced the company's decision to dissolve operations and encouraged the community to assume control of the Terra network. The plan involves selling off Terra ecosystem projects such as Pulsar Finance and Station Wallet, along with Enterprise DAO, and burning unvested native Luna tokens. This move follows a proposed $4.47 billion SEC settlement related to issues with Terra's UST algorithmic stablecoin, which suffered a significant collapse in 2022. The settlement also imposes financial penalties and bars co-founder Do Kwon from holding officer or director positions in public companies, underscoring Terra's shift towards community-led governance amid regulatory challenges.

Hong Kong Faces Challenges with Tough Crypto Exchange Licensing Rules

Hong Kong's shift from a ban to a competitive regulatory regime aimed at rivaling Singapore has encountered setbacks. Despite initial optimism for mainland Chinese market reopening, only 24 firms applied for licenses compared to Singapore's 70, with seven withdrawing just before rules took effect on June 1. High compliance costs, estimated at $12-20 million, deter smaller firms, while larger entities like OKX and Binance affiliates withdrew, linked to mainland China. The Securities and Futures Commission's insistence on barring mainland Chinese residents from platforms further dims prospects. Hong Kong's strict stance signals its intent as a stringent crypto hub, with only two firms approved and 11 awaiting decisions in a restricted operational state, underlining regulatory challenges amidst industry expectations.

Other Domestic Regulation Updates

Other International Regulation Updates

Pain & Gain

Pain

Gain


Important Legal Notices

This reflects the views MJL Capital LLC (“MJL”), but it should in no way be construed to represent financial or investment advice. Nothing in this correspondence is intended to constitute or form part of, and should not be construed as, an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite, or otherwise acquire or dispose of any security, including any interest in any private investment fund managed by MJL. Any such offer may only be made pursuant to a formal confidential private placement memorandum of any such fund, which may be furnished to potential investors upon request and which will contain important information to be considered in connection with any such investment, including risk factors associated with making any investment in any such fund. Further, nothing in this correspondence is, or is intended to be treated as, investment or tax advice. Each recipient should consult their own legal, tax and other professional advisors in connection with investment decisions.

Domenic Salvo
Domenic Salvo

Domenic Salvo is a Managing Partner at MJL Capital, helping lead Portfolio Research and Investor Relations.

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