Upholding Faith in Solana 🕊️
Weekly News Recap: 🔄 FTX's asset sale plans, 🚨 Terraform's legal tangles, 💼 Genesis' GBTC liquidation, 🧩 SEC's DeFi rule changes, 🛡️ Prometheum's ETH custody, and more!
You are reading the Unchained Weekly newsletter, where we cover all the major news in the crypto space, providing insights into the market's latest trends, regulatory shifts, and technological advancements. Stay informed. Your no-hype resource.
In this episode of Unchained, Lucas Bruder, CEO of Jito Labs, addressed the latest outage on the Solana blockchain.
Despite this hiccup, which led to a five-hour downtime, Bruder maintains a positive outlook on Solana's future. He delved into the causes of the outage, emphasizing the complexity of such systems and the constant need for rigorous testing and improvement. "I think it's definitely a setback, but I think that it's a good reminder that these systems are hard and that there needs to be a lot of testing," Lucas noted, reflecting on the incident's impact on the network and its builders.
He also shed light on the recent technological advancements in Solana's infrastructure, suggesting a promising future for the network, and discussed the potential of the Solana phone, hinting at its ability to reshape user interactions with blockchain technology.
Listen to the episode on Apple Podcasts, Spotify, Fountain, Overcast, Podcast Addict, Pocket Casts, Pandora, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform.
🍿 Today! Live Spaces on ‘Crypto: The Game’
Make sure you don’t miss today’s Spaces to hear everything about ‘Crypto: The Game.’
What time? 4:30 pm ET / 1:30 pm PT
Unchained founder and CEO Laura Shin will be chatting with the game’s founder Dylan Abruscato as well as other notable players from CTG!
Weekly News Recap
FTX and Multicoin Capital Financial Moves
FTX, the bankrupt crypto exchange founded by Sam Bankman-Fried, is reportedly seeking bankruptcy court approval to sell its substantial stake in AI startup Anthropic. The stake, valued at approximately $1.4 billion, represents a crucial asset for FTX as it navigates through bankruptcy proceedings.
Concurrently, FTX creditors are challenging the bankruptcy repayment plan, arguing for compensation based on current crypto prices rather than November 2022 values. An additional argument is that the digital assets themselves could be returned to creditors, rather than a value based on the date of the bankruptcy filing. This leaves a chance that creditors could be repaid in full for their losses.
Simultaneously, Multicoin Capital, a renowned crypto investment firm, is reportedly in discussions to sell its FTX bankruptcy claim, which is estimated to be around $100 million. This development indicates a broader trend within the crypto industry where firms are actively seeking to mitigate risks and liquidate assets in the wake of FTX's downfall.
Terraform Labs’ Legal Woes Intensify with Extradition and Testimony
The legal challenges for Terraform Labs have deepened. Han Chang-joon, former CFO of the crypto firm, has been extradited from Montenegro to South Korea. This extradition, decided upon by Montenegro's Ministry of Justice, comes after Han completed a four-month prison sentence for attempting to travel with forged documents.
In contrast, Do Kwon, Terraform's former CEO, finds his situation evolving differently. A Montenegro court has once again revoked the approval for his extradition to South Korea or the U.S., citing procedural issues and a lack of clarity in the handling of the extradition requests. This decision follows a series of appeals and reversals concerning Kwon's extradition, underscoring the ongoing legal contention surrounding his case.
In a related development, a former Terraform Labs developer testified against Do Kwon and cofounder Shin Hyun-seong in a Seoul court. The developer, referred to as "Mr. Lee," claimed that both Kwon and Shin were aware they were violating local securities laws when promoting the TerraUSD stablecoin. While lawyers for Shin and Kwon disputed these claims, the testimony could impact the case by South Korean prosecutors, who have accused Terraform Labs of defrauding investors.
Genesis Moves to Liquidate GBTC Holdings
Bankrupt crypto lender Genesis, part of the Digital Currency Group (DCG) conglomerate, is reportedly seeking approval to sell its nearly $1.4 billion worth of shares in Grayscale Bitcoin Trust (GBTC). The proposed sale also includes assets from the Grayscale Ethereum Trust and Grayscale Ethereum Classic Trust.
This development follows an intense legal tussle between Genesis and Gemini, a crypto exchange and bank. Genesis had previously pledged GBTC shares to Gemini under the Gemini Earn program, and Gemini subsequently foreclosed on these shares citing Genesis for failing to uphold its financial obligations. Who owns the legal rights to these shares remains in dispute.
Prometheum Marks Ether as Security in Custodial Services
Prometheum, a U.S.-regulated broker-dealer for digital asset securities, has taken a notable step by including the cryptocurrency ether in its new custodial services. The firm set itself up as a special-purpose broker-dealer and crypto custodian through the Financial Industry Regulatory Authority, indicating its alignment with U.S. Securities and Exchange Commission (SEC) guidelines for crypto asset securities.
In choosing ETH as the initial asset for custody, Prometheum is venturing into a gray area of regulation. The SEC, led by Chair Gary Gensler, has so far not definitively classified ETH as a security, making Prometheum's decision to do so a bold move. Aaron Kaplan, co-CEO of Prometheum, has emphasized their focus on tokens with major market cap and liquidity, with ETH being the first among them.
The firm's move to treat ETH as a security could have implications for how digital assets are regulated and classified in the U.S., especially considering the SEC's ongoing ambiguity regarding ETH's status.
SEC Rule Expansion Targets DeFi in Regulatory Push
Continuing with the SEC, a new “dealer” rule has alarm bells ringing within the crypto community. This week, the Commission voted to adopt new rules redefining securities dealers as a market participant acting as a market maker and providing liquidity.
The SEC's decision, described in a 247-page document, clarifies that the dealer framework will apply based on trading activities and not the type of security. The securities include "crypto asset securities" and the rule requires dealers controlling over $50 million in funds to register with the agency.
SEC Commissioners Hester Peirce and Mark Uyeda opposed the rule, expressing concerns about its broad reach and practical implications. Peirce highlighted the challenges for liquidity providers in automated market makers to register, citing a lack of clarity and potential implementation challenges. Uyeda warned about the extensive jurisdiction claimed by the SEC and the regulatory confusion it could cause, particularly in the crypto markets.
The SEC also postponed a decision on a joint ether ETF application by Invesco and Galaxy Digital, continuing to delay direct spot ETH exposure for U.S. investors.
BlockFi and 3AC Settle Dispute With Sealed Details
This week, bankrupt crypto lender BlockFi and the collapsed hedge fund Three Arrows Capital (3AC) reached a court settlement, the terms of which remain undisclosed. U.S. Bankruptcy Judge Michael Kaplan, presiding over the case, ruled that the settlement details should be sealed, stating that disclosing them would be "counterintuitive."
This settlement comes after a dispute where BlockFi claimed 3AC owed it $129 million, while 3AC countered with a claim of $280 million against BlockFi. The disagreement centered around preferential payments made just before bankruptcy, potentially giving the recipient an unfair advantage.
Dymension's Launch and Validator Concerns Amid Price Surge
The Dymension network, a new modular blockchain, has been in the spotlight following its mainnet launch and the airdrop of 70 million DYM tokens, valued at approximately $400 million. Despite this successful airdrop, the launch faced technical challenges, particularly with validator issues. One such problem arose with Chorus One, a major validator holding a considerable portion of the network's voting power. Chorus One experienced technical difficulties, affecting the network's consensus mechanism.
Amid these challenges, Dymension’s native cryptocurrency, DYM, witnessed a substantial price increase of nearly 30% within 24 hours, reaching a market capitalization of $877 million. However, concerns were raised within the crypto community regarding the centralization of voting power. Big Brain Staking, the largest validator on the Dymension network, controls about 18.5% of the total voting power, sparking discussions about the need for more decentralization.
EigenLayer's TVL Soars Following Unpausing of Caps
EigenLayer, an Ethereum restaking protocol, saw a remarkable surge in its total value locked (TVL) following the unpausing of caps on its smart contracts. The TVL soared by $2.8 billion to over $5 billion, marking the largest daily increase in dollar terms since the protocol's mainnet launch in July 2023. A significant portion of this growth is attributed to deposits of Lido's stETH, the most popular liquid staking token.
This surge in EigenLayer's TVL caused the protocol to hold nearly 1.5% of Ethereum's total circulating supply, emphasizing its growing influence in the restaking market. The protocol allows users to deposit various liquid staked tokens, like RocketPool’s rETH and Coinbase’s cbETH, aiming to enhance liquidity and yield-earning opportunities.
Concurrently, Ethereum has reached a notable staking milestone, with over 25% of its supply staked on the network, valued at about $73 billion.