Every week, infrastructure is improving, more institutions are being onboarded along with their assets, and regulators are taking friendlier stances.

Despite this, the lack of positive price action for major assets is hard to ignore, with a Saylor-shaped black cloud over Bitcoin, and the ETH & SOL experiencing extremely low sentiment.

Here’s what we’ll cover in this edition:

• EthLabs announced as a non-profit R&D lab to make Ethereum the settlement layer of the global economy

• Bank of England reverses its stablecoin restrictions to open up viability to issuers

• Mantle leads all L2s in RWA capital deployed as it crosses $90M in DeFi

• Ambire goes live with EIP-7730 clear signing in an industry-wide effort

A new era for Ethereum

Anxiety and frustration have been circling the Ethereum camp in recent times, with ETH barely making a new ATH in the last cycle and the token trading at the same price as over 5 years ago, amid exits from the Ethereum Foundation (EF) and a realignment of its mission as an organisation.

We already covered Vitalik’s take on the EF’s purpose in the Chronicle, as they chose longevity over breadth, specialising in censorship resistance, capture resistance, open-source, privacy, and security (CROPS).

This week brought another exit, with Hsiao-Wei Wang, Co-Executive Director of the EF, stepping down. But a number of later announcements have begun to paint the picture that all this re-jigging of personnel and leadership positions did, in fact, have some sort of end goal.

Yesterday, the EF said that “realising Ethereum’s potential takes a coalition of organisations working together in pursuit of a shared vision.” This accompanied the announcement of EthLabs, a non-profit R&D lab for Ethereum and ETH.

So what exactly is EthLabs, who is funding them, and how are they different from the EF?

EthLabs is intent on making Ethereum the settlement layer of the global economy. They liken this to how the internet became the global network we use today.

They aim to work with all ecosystem participants and “turn what they actually need into protocol work, shared standards, infrastructure, and shipped products.” They are primarily funded by Bitmine, Sharplink, and Joe Lubin, with contributions from 50+ others.

From their statement, they believe in:

• Credible neutrality (of the network)

• ETH as an asset

• DeFi

• Real adoption

It is critical that this organisation does not overlap with the EF and its mandate, and, to be fair, at first glance, it appears they have aligned on this. The EF is taking a strong CROPS approach, focusing solely on the network’s fundamental resilience and longevity. EthLabs, on the other hand, looks to be tackling exactly what we have been begging the EF to do for years. More support for the onchain financial system, more value back to ETH, more people onchain and benefitting from it.

Now that the segregation of these two entities has been configured, their purposes set, and their funding secured, we need to see real results in the form we have never seen before from an Ethereum-aligned organisation. There is a real risk that this organisation does not differentiate itself meaningfully enough, with the majority of the team coming from the EF or core Ethereum R&D roles. They will say the EF and its mandate were holding them back, but we will need to see it to believe it.

You can read more about the EF’s strategy moving forward from Aerugo here.

GBP stablecoin cleared for growth

The UK has never been a great progressive when it comes to crypto-friendly regulation, but its stablecoin framework, when first published, was particularly restrictive:

• £20,000 limit per individual

• £10M limit per business

• Minimum 40% of backing assets in central bank deposits (non-yielding)

Now, after pressure from the House of Lords committee and the wider crypto industry, the Bank of England (BoE) has U-turned, paving the way for viable stablecoin businesses in the UK.

Under the new rules, users and businesses will face no restrictions, and stablecoin firms (capped at £40B) will be allowed to allocate up to 70% of their reserves to yield-generating short-term U.K. government debt (T-bills) with yields of around 4%. While the issuer can collect this yield, no interest can be paid to users, though activity-based rewards are permitted.

Across the globe, activity-based rewards will become the regulatory standard, as is already the direction of the Clarity Act in the US. What’s yet to be seen is how creative the issuers and their partners can be in using this loophole to their advantage when designing onboarding and retention schemes, such as cashback and loyalty rewards to high-value users.

Stablecoins have been dominated by USD since their inception, with EUR becoming small runner-up in recent years, now sitting at $668M market cap (0.2% of total stablecoins). That puts into perspective just how far behind GBP is today, sitting at just $31.8M. The foundation is now being put in place, but does GBP have any chance of catching up to EUR, and will a heavyweight issuer like Circle deploy in the UK?

Non-USD stablecoins are vital for a balanced, global economy moving onchain. These currencies have completely different yield sources, users, and access to jurisdictions that the US does not. Each new non-USD stablecoin is a new opportunity for every business that operates within that currency’s orbit.

Mantle: where RWAs are deployed

RWA growth across the industry has been a major talking point in recent years, now sitting at an order of magnitude higher than it was 2 years ago, but people are starting to wonder: when will this capital actually become productive within the ecosystem, rather than simply residing onchain?

This is what Mantle has been focused on for some time now: ensuring RWAs have the distribution they need, and not simply stopping at tokenisation. As a result of their continued momentum, they are seeing success. Mantle now leads all L2s in RWA capital deployed across DeFi, with over $90M. Not only is this the largest L2 by total, but also by utilisation, with 38% of all RWAs on the chain deployed in DeFi.

The greatest example of productive RWAs is Syrup USDT, a yield-bearing receipt token for USDT deposited into Maple’s Syrup lending vaults, which accrue interest from overcollateralized lending to institutional borrowers. Syrup USDT is the largest RWA by DeFi active TVL at $736M, with Mantle as the only L2 on which it is supplied, following a partnership last year among Bybit, Mantle, and Aave to bring institutional-grade DeFi liquidity onchain.

For RWAs to really thrive onchain and create a big enough moat vs offchain assets, the capital needs to be productive; not only does it need to move more frictionlessly, but it should also achieve higher capital efficiency through its use as collateral and other composable opportunities. Mantle is positioning itself well in this regard, but we want to see a wider array of RWAs make their way onto Mantle and into their DeFi ecosystem, further diversifying its inventory and solidifying its position as an RWA leader.

Clear signing is live on Ambire

We’ve all been there. Signing a transaction in your wallet with no clue what the raw data staring back at you means. Simply trusting that the smart contract and UI are safe, blind signing a transaction you cannot understand.

Clear signing fixes this by defining how apps describe transaction intent so wallets can show users what they’re actually signing.

Transactions are complex, and there are millions of different transactions that need to be decoded. Almost every app uses different contracts, but after an industry-wide effort to standardise and publish clear signing metadata, instead of seeing long strings of numbers and letters, you’ll see:

• Action type: swap, transfer, LP, token approval, etc.

• Which asset and amount are involved

• Who are you interacting with

• What permission are you granting

• Network fees

Until EIP-7730, there was no universal standard for clear signing. This is a huge unlock for wallets, which can focus on shipping a better product for their users instead of re-inventing the same thing as everyone else.

Ambire now supports clear signing with EIP-7730.

If you’re building apps or wallets in the Ethereum ecosystem, make sure to check it out, use of the standard, and contribute to the verification of apps and contract interactions:

https://clearsigning.org/

• What impact will the joint venture between OKX + NYSE (ICE) have on the growth and adoption of tokenised equities?

• What share of payments and remittances from companies like MoneyGram, which just joined Solana as a validator, will run onchain in the near future?

• What further growth and adoption will Coinbase and Base see after their flurry of announcements last week across their ‘system upgrade’, now offering tokenised equities, Pre-IPOs, options trading, and more

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.

It covers the growth of tokenised asset classes, issuers, and the utilisation of RWAs in DeFi.

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

Table of Contents:

The rate of progress in onchain markets has never been higher.

The largest stocks in the world are accessible onchain with deep liquidity, regulators are designing future policy with blockchains in mind, banks of all forms are accessing onchain yield and capital, and AMM designs are evolving to handle these new flows.

This week:

• SpaceX ($SPCX) was traded pre-Nasdaq listing across a range of venues onchain not only opening access but accurately pricing the stock itself

• The SEC revisited a two-decade-old debate about how trading venues compete, opening the door to AMMs

• Aerodrome is preparing to flip the liquidity incentives that define the product to a forward-looking predictive mechanism

• Morpho raised one of the biggest rounds DeFi has ever seen, with no equity involved

• PropAMMs are rapidly improving in performance on Ethereum, but who actually provides users with the best executable price?

• Stacks is giving native yield to BTC without it leaving the network

SpaceX goes live with onchain leading price discovery

Last Friday, SPCX went live on Nasdaq, opening at $150 after an initial indication of $175. TradeXYZ and other perp venues called the lower price despite the higher indication, converging with Nasdaq after the print within minutes.

With the Nasdaq closed on weekends, onchain venues like TradeXYZ on Hyperliquid have an advantage: they are open 24/7, allowing access to directional traders and hedgers alike and attracting both the onchain and TradFi crowds. They are also getting better and better at predicting the Monday opens. xyz:SPCX sat at $171.75 on Monday morning when the Nasdaq opened at $171.81, a 0.03% deviation, all priced onchain.

Across two prior Pre-IPO Perpetual (IPOP) markets, TradeXYZ tested its product methodology ahead of the largest IPO in history. xyz:SPCX set a new record for IPOPs, with $1.38B in volume on IPO day.

xyz:SPCX now ranks as the 3rd-highest-volume market on Hyperliquid (~$1.1B/24h), behind only BTC & ETH.

We pulled live order book data ahead of the opening print last Friday, which showed TradeXYZ had the largest open interest on SPCX with $315m, ahead of Binance’s $300m. Binance still led on 24h volume, but TradeXYZ’s depth, spread, and confidence in asset conversion make it the current leader in Pre-IPO trading - something almost no other venue can say when going head-to-head with a CEX heavyweight like Binance.

The SEC reopens equity trading rules after 20 years

The agency recently proposed rescinding Reg NMS Rules 611 and 610(e), which govern order protection and locked or crossed quotes in US equities. They essentially ensure users get the best price across exchanges.

That system assumes a certain kind of market: visible quotes, protected venues, and brokers routing between them. This way of doing things is at odds with onchain finance, which has evolved without these guardrails. For example, AMMs do not publish quotes in the same way exchanges do, so their automated, hard-coded pricing formulas cannot comply with such rules in the first place.

Now, the SEC is not rewriting equity rules specifically for onchain finance, but it is reopening a debate that will likely define how tokenised equities get to trade across exchanges, wrappers, perps, AMMs, solvers, and app-specific venues into the far future.

Aerodrome wants to make liquidity incentives predictive

Aerodrome has dominated as the leading DEX on Base over the years, pioneering the MetaDEX model, a ve(3,3) system where veAERO voters direct emissions toward liquidity pools, earning the fees and incentives attached to the pools they vote for. But now, according to WuBlockchain, Aerodrome will migrate to a predictive allocation mechanism that tries to anticipate where future demand will be.

Instead of directing incentives to high-volume and fee pools of the past, users will be rewarded for predicting the pools’ future performance.

Liquidity incentives are one of DeFi’s core products and have been key for bootstrapping and growing protocols across the industry. They ultimately decide where capital ends up, which pools gain depth, and which assets can be traded with size, especially on a protocol like Aerodrome.

The limitation is that liquidity incentives are mostly reactive, meaning capital often chases yesterday’s activity rather than tomorrow’s demand. If Aerodrome can make its incentives more forward-looking, it could improve the efficiency of liquidity allocation.

Morpho’s record-breaking raise with no equity in sight

Morpho’s $175m raise was not just one of the largest DeFi financings to date, it was a different kind of financing than we are used to, sparking wide discussion on token alignment, VCs, DAOs and more across socials.

The headline left much to the imagination, with few details about the valuation and no mention of tokens or equity. Morpho had previously committed to having only one asset, the MORPHO token, so people went digging for answers.

For those in tune with governance forums, Morpho DAO had approved a 150m MORPHO grant to the Morpho Association through MIP 131, giving the Association a token mandate to fund growth, partnerships, and institutional expansion. Whilst governance activity in Morpho DAO is extremely low, Morpho has shown a strong, tokenholder-aligned route to increase its distribution, growth, and runway.

This is a strong signal to the industry in support of token-first companies, at a time when investors are tired of equity taking the upper hand over tokenholders, who often feel ignored, overlooked, and exploited. If Morpho, one of the leading protocols in onchain finance can do it, why can’t others?

May this catalyse a renaissance in token-first principles and the structure of ownership in tokens over equity.

PropAMMs and the performance enhancement of Ethereum

For years, crypto market participants have had to choose between using a centralised exchange (CEX) to benefit from higher performance and operating onchain for accessibility, but at the expense of execution.

But propAMMs are changing the record.

“Permissionless blockchains have reached the point where the market structures built atop them can not only provide comparable execution to centralised exchanges (CEXs) but outcompete them entirely,” said Jump, one of the largest crypto market makers, in a recent article.

Instead of relying on passive AMM curves, propAMMs allow market makers to actively update prices, while swaps still settle onchain, giving onchain venues something they have historically lacked: tighter, more responsive pricing without sending the whole trade back to a centralised exchange, as some intent-based solutions attempted.

While the passive AMM model has its place, especially for longer-tail and less established assets, for core and in-demand pairs, execution matters, and liquidity and volume will flow and reside wherever this performance is highest.

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 have been live on Solana for some time because of the chain’s logic. Now the same is being done on Ethereum using offchain transactions.

This technology is only just getting started on Ethereum, but we can already see early success, with a spread 20 bps lower than its CEX counterparts for $1,000 orders on both ETH/USDT and ETH/USDC. While Binance still wins out for $10,000 trades and above, the issue is more with liquidity than anything technical. Most of this liquidity is currently allocated elsewhere, but as onchain execution improves, the incentives are to move it to where demand will be highest.

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

Expect us to dive deeper into propAMMs and interview the most prominent builders in this vertical for you soon.

Stacks is trying to make BTC productive without leaving the chain

Over the last couple of years, since the launch of Bitcoin ETFs, BTC has become an increasingly institutionalised and legitimised asset.

But far less development has occurred to put this capital to work effectively. In fact, over $1.4 trillion in BTC is currently sitting idle.

This idle BTC earns no yield, and the available options force trade-offs in custody, require wrapping, or require bridging BTC off the mainnet. Something conservative BTC holders would rather steer clear of.

Stacks’ Bitcoin Staking upgrade attempts to address this directly.

Rick Bartelink, Stacks CMO, states that: “BTC does not leave the L1, with the 5% in STX being the only L2 part you have to bond your BTC with.” They have ensured that BTC holders can earn native BTC yield while their coins remain on Bitcoin L1, without giving up custody or bridging assets.

Rick said Stacks’ research shows Bitcoin holders and institutions are far more accepting of having a “side option on different assets, as long as their BTC stays on the L1,” pointing to UTXO, the asset-management arm of Nakamoto, as an example.

“STX is the asset that secures the network.” By bonding BTC and STX, Stacks is trying to bootstrap Bitcoin liquidity into its ecosystem while positioning STX as “BTC’s beta asset” and “the rails of a Bitcoin economy.”

To ensure yield far out into the future, it’s clear that BTC Staking needs “a meaningful level of activity” for fees to become the main driver of the reward pool. That translates to liquid staking, STX surplus redeployment, Bitcoin holders becoming Stacks users, and more activity flowing into native apps.

The first liquid version will use a trust-minimised bridge, because “unilateral exit is a holy grail problem on Bitcoin no one has yet to solve.” Rick also noted that only Ethereum comes close to fee sustainability over time, while even Solana still relies predominantly on emissions.

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, a yield distributed in native BTC, and treasury companies like UTXO Management, the asset management arm of Nakamoto Inc., becoming inaugural participants in Bitcoin Staking on Stacks.

Read more about our coverage of Stacks here.

• Hyperliquid HIP-4: Outcome markets have been live for several weeks now, with additional markets and trading volume increasing. With the World Cup now live and sportsbetting available on the platform, we’ll be watching how much market share the new venue can absorb from Polymarket and Kalshi

• OpenAI and Anthropic Pre-IPOs: The success of SPCX is unlikely to be a one-off, with two more IPO giants still to come within the next year.

• AI, robotics, and machine payments: With Tether’s latest investment in NEURA Robotics, we will be watching for early signs of demand for wallets, stablecoins, and programmable payment rails from autonomous machines and agents.

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.

Download the complete report here:
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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.

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

written by @francescoweb3 and @noveleader ✍️

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PropAMMs are all about onchain execution

As @jump_mentioned in their last article on the matter, “permissionless blockchains have reached the point where the market structures built atop them can not only provide comparable execution to centralised exchanges (CEXs) but outcompete them entirely”.

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” as 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.

written by @francescoweb3 ✍️

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Castle Labs

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Over the last couple of years, since the launch of Bitcoin ETFs, BTC has become an increasingly institutionalised and legitimised asse.

However, far less development has occurred to put this capital to work effectively: over $1.4 trillion in BTC is currently sitting idle.

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.

written by @francescoweb3 ✍️

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Disclaimer: This article was produced in collaboration with Stacks. 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.

This week, we look at the boring bit crypto has historically skipped: making the thing actually work, and work at scale.

Crypto has no shortage of products people can technically use. The gap moving forward is whether those products can be routed, priced, secured, explained, and distributed at a level that competes with centralised exchanges and, more importantly, traditional finance.

The signals this week say so:

• Ethena partnered with Coinbase, integrating into its custody, wallet and perps stack, then added Janus Henderson as an RWA distribution partner

• Bridge infrastructure is being broadly audited across the industry post-exploits

• Tether is expanding the utility of XAUt, its tokenised gold asset, into a crypto card, redefining the expectations of an onchain neobank

• L2BEAT expanded its suite of tooling to privacy, just as Ethereum researchers have set out to make privacy a default property of the protocol

• We also sit down with Privacy Pools on what compliant and legally sound privacy actually needs to look like after Tornado Cash

This new era will often be less romantic, but much more important.

Ethena secures Coinbase and Janus Henderson distribution

Coinbase is becoming Ethena’s custodian, wallet provider and perpetuals venue, supporting Ethena’s security and operations across more than $5bn in assets, while USDe expands to Base and the wider Coinbase ecosystem.

What this actually means is that:

• Ethena will start using Coinbase Custody

• USDe can get access to institutional lending through Coinbase Asset Management

• Coinbase will likely be added as a basis trading venue for USDe

• USDe can grow on Base

• sUSDe can be offered as a savings product to Coinbase users

To further firm up the alignment, Coinbase Ventures backed Ethena by purchasing ENA in the open market.

Ethena is getting the distribution it could not achieve on its own, and Coinbase is able to diversify its own stablecoin partnerships, relieving reliance on Circle, which has been focusing its efforts on Arc, a USDC-native L1 for stablecoin finance, with USDC gas, predictable dollar fees, built-in FX, opt-in privacy and Circle platform integration.

That distribution push went one step further today, as Ethena partnered with Janus Henderson, a $480bn asset manager, to allocate and support the distribution of its liquid, high-quality CLO tokenised funds. Janus Henderson has also made a strategic investment in ENA, will allocate into USDe as part of treasury cash management, and is exploring ways to distribute USDe to clients through exchange-traded instruments.

For Ethena, new initiatives and partnerships have been commonplace over the past year. They want USDe and its use cases to grow and expand, serving as a yield-bearing dollar product distributed through exchanges, wallets and institutional rails. So they are pushing in every direction they can, with Coinbase and Janus Henderson the latest surfaces.

However, not all of their endeavours have achieved strong starts.

Ethena’s Hyperliquid push has not really worked yet and, given TradeXYZ’s dominance, may never succeed. HyENA was meant to be a strong player in the Hyperliquid ecosystem, giving traders access to yield on their collateral, but Blockworks’ HIP-3 data shows HYENA producing just 0.4% deployer APR, barely above Felix Perps at 0.3%, with Felix announcing their HIP-3 deployment shutdown just yesterday.

Converge, Ethena and Securitize’s chain, purpose-built for onchain finance, also remains a roadmap mystery, with no word from the X account or blog for nearly a year.

MegaUSD (USDm) has had some success, using Ethena’s USDtb rails to direct reserve yield toward sequencer costs. This was an example of Ethena experimenting with whitelabel stablecoin infrastructure that other ecosystems can package. MegaUSD now sits at around $200m in circulation, down from highs of more than $560m one month ago.

Ethena’s first few distribution experiments outside of Binance and Bybit, while credible, have been patchy in outcomes, so partnering up with Coinbase, the centralised market leader in the US and controller of one of Ethereum’s largest ecosystems in Base, then adding Janus Henderson’s institutional RWA channel, gives it a cleaner shot at making this one a firmer success.

L2BEAT weighs in on Chainlink’s CCIP vs. LayerZero

The fallout from the KelpDAO hack has led several large protocols to switch their bridging partner to Chainlink CCIP, but what does this actually do for bridging risk and the trust assumptions involved? Your friendly neighbourhood watchdog L2BEAT took a look.

As a quick recap, the exploit was not as simple as LayerZero being a bad bridge. It came down to the RPC infrastructure behind the distributed validator network (DVN). This RPC was compromised, and because Kelp had only a 1/1 DVN, there was no secondary verification of the compromised node’s broadcast. LayerZero put the loss at 116,500 rsETH, roughly $292m.

The most recent move was by Virtuals, which migrated bridging infrastructure for more than $700m of VIRTUAL from LayerZero to CCIP.

So what did L2BEAT actually find?

Moving to CCIP is not the same as moving to a trustless bridge. It is a move from LayerZero’s highly configurable security model to Chainlink’s more standardised, operator-managed one, where validation is handled by Chainlink’s Offchain Reporting (OCR) signer set, which verifies incoming messages from other chains. L2BEAT notes that the set is equivalent to a 6/16 multisig.

Despite this seemingly more secure validator set, CCIP’s complexity is extremely high, spanning 70 chains, different contract versions, various time locks controlled by deeply nested multi-sigs and individual logic, and governance tied to each token on each chain. All of this, combined, will no doubt affect a project’s ability to conduct proper due diligence when integrating with CCIP.

Chainlink CCIP definitely feels like the option for teams wanting to outsource more of the bridge-security surface to a provider. LayerZero, by contrast, still operates as a more customisable solution, allowing projects to own their own security by spinning up their own DVNs and bringing in third-party DVNs to strengthen the security of their bridging token infrastructure.

CCIP may provide projects with better defaults and mitigate some of the vulnerabilities exposed by Kelp’s 1/1 DVN setup, but it does not eliminate bridge trust. It moves that trust into Chainlink’s signer set, upgrade paths, admin roles, token pools and per-chain deployments.

Tether wants gold to behave like a bank account

After diving into neobanks and crypto cards last week, you may have assumed that they would all run on USD stablecoins, or maybe EUR once adoption picks up.

But gold?

Tether and Fasset are now looking to normalise storing tokenised gold inside your bank balance, earning, borrowing and spending against it.

Their gold-backed Visa card converts XAUt into USDT and then fiat at the point of sale, pays up to 6% cashback in XAUt, and lets users round up change on everyday spend into tokenised gold.

Paolo Ardoino is looking to change the script on gold entirely: “Historically, gold has been a store of value, not a medium of exchange. This initiative changes that narrative.”

It’s becoming apparent that the next wave of crypto neobanks will not all simply be stores for USDC. They will package different assets for different users: dollars for stability, yield-bearing assets for savings, gold for inflation and currency fear, tokenised equities for global retail, and definitely some higher-risk products too.

So who wants gold in a bank account?

Think about users in a market where the local currency is unstable, the US dollar is distrusted, expensive to access, or politically loaded, and gold already has cultural trust. Fasset itself has a strong distribution network across Asia and Africa, where this asset is likely to be welcomed.

It’s an interesting move by Tether, testing whether tokenised gold can move from “store of value asset” to a “daily balance users can spend, save and accumulate around”. This is the exact kind of product that crypto enables, and would have been impossible in the previous world.

We expect this kind of experimentation to grow rapidly: different assets, different rails, different users, different wrappers, all targeting increasingly niche use cases across the globe.

Privacy as default infrastructure

Privacy is no longer just a mixer for funds. The more interesting work is happening within the stack itself: private execution, shielded assets, wallet-level privacy, compliance-aware disclosure, encrypted state, and better ways to measure the tradeoffs between them.

To emphasise the steps the industry is making, we just published our latest flagship report, covering the privacy ecosystem in crypto and the core enablers of confidential execution today: https://docsend.com/v/sjv2g/thefullstackprivacyecosystem

L2BEAT’s new privacy dashboard is another useful sign that this shift is happening.

Rather than treating privacy as a loose category based on vibes, it compares protocols against the CROPS principles: censorship resistance, openness, privacy, and security. The dashboard currently tracks Tornado Cash, Railgun, and Privacy Pools, highlighting the differences among immutable, fixed-amount pools; upgradeable DeFi privacy with opt-in compliance; and enforced-compliance designs.

The numbers are still small compared with the rest of DeFi, but not irrelevant. L2BEAT has Tornado Cash with roughly $385m in TVL and $120m in 30-day volume, Railgun with roughly $77m in TVL and $50m in 30-day volume, and Privacy Pools with roughly $8m in TVL and $5m in 30-day volume.

Privacy is finally being built (and judged) with hard, concrete design choices.

• Is the system immutable?

• Can it support arbitrary amounts?

• Does it have a trusted setup?

• Can users prove they are not part of a bad set without revealing everything?

• Can it plug into DeFi?

• Can it survive compliance pressure without becoming meaningless?

This week, a similar design-first approach reached the token standard layer, with pERC-20 now filed as draft ERC-8287.

The proposal is not simply “ERC-20 but private”. It deliberately breaks normal ERC-20 assumptions. There are no public balanceOf, approve, allowance, or transferFrom. Assets exist as encrypted ZK-UTXO notes from issuance, using an Orchard-style model adapted from Zcash. Transfers consume old notes and create new encrypted notes, while nullifiers prevent double-spends without linking the user to a public balance.

There is a long way to go before this standard is implemented, and the surrounding work needed to integrate a whole new token standard within DeFi would not be light. But it is a signal that privacy will migrate to the infrastructure level. Whether the key change occurs at the protocol, asset, or wallet layer remains to be determined.

Our report argues that the next adoption wave will come from the full stack: private execution, compliant disclosure, usable wallets, institutional confidentiality, and seamless retail privacy.

Privacy is no longer only about hiding transactions; it’s increasingly a requirement for usable financial infrastructure.

Individuals need protection from surveillance, profiling, harassment, and political exposure, whilst institutions need confidentiality around balances, counterparties, order flow, payroll, treasury movements, client data, and strategy.

AI agents will need private computation, prediction markets will need private order flow, and data markets will need selective disclosure.

Onchain finance cannot mature if every meaningful action remains fully public by default.

Privacy is normal

It is no longer just a cypherpunk ideology. It’s becoming necessary onchain infrastructure for both user protection and institutional adoption.

Crypto has always had a financial privacy problem.

Public blockchains made finance auditable, but they also made financial behaviour permanently observable. Wallet balances, counterparties, payroll, treasury movements, order flow, strategy, liquidations, swaps, transfers. All of it is part of a public data trail.

As chain analytics and AI make that data cheaper to process, an open, transparent ledger starts to look like surveillance infrastructure.

Usable privacy in crypto cannot just mean hiding everything from everyone; that much is clear.

The more realistic path is selective disclosure: systems that can hide sensitive information from the public while allowing users, institutions, auditors, and regulators to prove specific facts when required.

We had the chance to sit down with Mike from Privacy Pools, one of the Ethereum-aligned protocols building in the post-Tornado Cash era, to discuss how they are approaching the landscape.

Mike framed the protocol’s V1 as “an MVP to test whether there was demand for compliant privacy.” The early numbers are modest: roughly $20m in volume and around 5,000 individual deposits, but the team is keen to get V2 out and begin a new wave of growth.

Privacy Pools aims to preserve user privacy while preventing addresses linked to exploits, scams, or hacks from using the pool to privately break the onchain link. The protocol also allows each user to share their transaction record with others for reporting and compliance purposes.

On legal liability for privacy protocols, Mike said the team “looked at the Roman and Alexey lawsuits and took every point they were indicted on, then modified our protocol to mitigate that indictment point.”

For a protocol like Privacy Pools to grow, it needs distribution, and more importantly, distribution that feels seamless.

Privacy does not scale if users have to leave their wallet, open a separate app, pay extra, and think like a privacy power user. Privacy Pools V2 is being built with the opposite in mind: embedded privacy through wallets, bridges and transaction surfaces.

Mike’s north star is simple: deprecate Privacy Pools’ own front end, and let regular, everyday interfaces route the traffic.

This aligns with our report’s broader conclusion: privacy is no longer only about hiding transactions. It is becoming a requirement for usable financial infrastructure.

The first wave of crypto privacy was ideological.

The next one is practical.

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.

Find the complete report here:

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

Table of Contents

Castle Labs

Research and Advisory for Digital Assets

The second quarter of the year has come to an end, with a clear winner.

Hyperliquid ($HYPE) continued to diverge from the rest of the major tokens, recording an ~85% move higher in the month, with HYPE touching an all-time high of $74.

This is reflected in HYPE.D, Hyperliquid’s share of the total crypto market cap, rising at the sharpest rate seen to date, as well as the launch of HYPE ETFs, which have absorbed more than 1% of HYPE’s total market cap in under two weeks.

All this whilst continuing to post records in open interest on its RWA perpetual markets.

This is a very different picture from the rest of the ecosystem, characterised by three consecutive weeks of outflows across all digital asset investment products, totalling $2.617B in May.

In other news, the CFTC approved regulated US perps, but not everyone is cheering on it, with Jamie Dimon criticising Coinbase and stablecoin rewards, and vowing to fight the Clarity Act.

In this week’s Castle Chronicle, we dive into:

• The CFTC clearing the first US-regulated perp

• Paxos is receiving securities settlement relief from the SEC

• A new wave of fixed-rate lending products is coming

• The State of Onchain Neobanks from Atomist’s ETH Milan speech, with interviews from EtherFi, KAST, MoonPay, and Osero.

CFTC opens the door to onshore perps

Regulated US perpetuals were given the green light last week when the CFTC approved KalshiEX’s BTCPERP, the first true bitcoin perpetual cleared on a US-regulated exchange.

This news arrived alongside:

• A policy statement on how it will treat future perp listings

• A staff advisory on 24/7 trading, clearing, and settlement

• A no-action relief allowing Coinbase to offer its US clients access to perps on Deribit, the offshore venue it now owns

After the years the industry has spent circumventing US regulation, it cannot be overstated how much of a positive signal these statements are for builders and, more importantly, risk-averse institutions, who continue to operate with greater confidence.

Ambiguity in the past has driven these markets offshore and, in the words of Hyperliquid Policy Center, left American traders and institutions without “access to regulated venues”. They welcomed the CFTC’s move while asking that the framework work for the onchain protocols where most perpetuals activity actually occurs.

Kalshi’s perp launch is expected within the month, with more than a dozen assets to follow. The questions on everyone’s lips are who will come next, when this grace will be extended to onchain protocols, and what they will have to comply with to be included in the framework.

Paxos gets the SEC’s clearing-agency nod

Perps were not the only piece of crypto infrastructure handed a regulated win last week. Paxos’ settlement arm won temporary registration as a clearing agency from the SEC, making it the only blockchain-native firm cleared to settle securities as a central depository. This comes seven years after a 2019 no-action letter, showing just how long the industry has been waiting for authorisation to innovate within regulated boundaries.

Clearing and settlement isn’t the most glamorous corner of finance, but it is a hugely important one. This is the layer that determines whether a trade actually completes, and it has been dominated by a handful of incumbents, such as the DTCC, for decades.

A crypto-native firm holding this licence means tokenised securities can settle on infrastructure built for the following generation of programmable finance. Meaning less friction, greater access, and more possibilities.

Slowly but surely, crypto-native firms are being granted access to traditional parts of the financial stack, just as traditional firms are beginning to dip their toes onchain. Not everything is simply happening in one direction.

Jupiter and Morpho ship fixed-rate lending

Two of DeFi’s biggest names launched fixed-rate credit products this past week.

Jupiter, Solana’s DeFi heavyweight, opened Offerbook to public beta, a peer-to-peer marketplace where borrowers post almost any Solana asset (tokens, NFTs, even trading-card collectables), and lenders make USDC offers at a fixed rate and term. There are no oracles and no price-based liquidations, so as long as the borrower repays on time, the collateral is theirs, whatever happens in the market. It is built primarily for the long-tail assets that the majority of pooled lenders will not touch, running on RainFi, the P2P lender Jupiter acquired in December, with 230,000 loans already in its locker.

Morpho, meanwhile, released the whitepaper and open-sourced the code for Midnight, its fixed-rate, fixed-term credit protocol. The design is similar to an onchain bond market, where lenders and borrowers post offers but do not lock capital until settlement, so a lender can keep earning elsewhere until a borrower fills the order.

Fixed-rate lending onchain has had a tough time in the past. Yield Protocol wound down in 2023, citing a lack of demand, and other survivors struggled to grow without incentives and remained a minute fraction of variable-rate giants like Aave.

These previous models meant lenders had to park capital waiting for borrower demand that often failed to arrive, leaving these assets completely unproductive. Morpho’s design aims to overcome this, paired with the distribution they already have to the institutional users that fixed-rate products are catered towards.

The demand for each product is still unproven, and they are targeting vastly different customer segments, but the industry is maturing to the point where these kinds of products are more likely to be welcomed than the triple-digit APR farms of old. We will be tracking the adoption of Morpho Midnight in particular, and how successful they are in onboarding and matching lenders and borrowers with this new product.

The State of Onchain Neobanks

A couple of weeks ago, our co-founder, Atomist, took to the stage at ETH Milan to present some of our research around onchain neobanks: their origins, evolution, and future trajectory.

We have all heard of Revolut, which started as a travel card for people tired of bank FX rates. Today, it has 70 million users, six billion in annual revenue, and moved 1.7 trillion in 2025. The global neobank market is already worth $357 billion and projected to pass $5 trillion by 2035.

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.

During the rise of regular neobanks, a separate growth story has been happening. Stablecoins. Total supply just crossed $320 billion, and with it the arrival of new utility and applications for blockchains. One of these is onchain banking, and with it, storing, spending, growing, and borrowing capital.

Crypto card spend climbed to $656 million a month in May, up from $271 million a year earlier, a 230% jump. Visa processes around 90% of it, and its own stablecoin settlement pilot is now running at a $7 billion annualised rate, up 50% in a quarter.

Crypto cards give users the feeling that they finally own their money, and increasingly, the infrastructure backs it up.

What makes these onchain banks different is that you do not store money with them, you use money through them.

We spent the last few weeks talking to the people building in this growing sector, and the demand they describe often comes from outside of crypto and outside the West. Emanuel from Kast told us its traction is with “modern, globally mobile people, USD earners and businesses,” and that it is expanding across Latin America and the Middle East. EtherFi’s growth lead (masterzorgon on X) sees the same pull in emerging economies, where “users want access to USD via stablecoins.” This isn’t just degens spending gains anymore, it’s people in the real world who want dollars and can’t easily get them through their local bank.

Crypto cards have come and gone for years, so the obvious question is, why is this time any different? MoonPay’s Andrea Mars thinks the arrival of stablecoins has changed everything: earlier cards asked you to spend a volatile, appreciating asset and “triggered a taxable event on every swipe.” Stablecoins remove both problems, and the yield on the backing, sourced onchain, can fund the rewards. EtherFi’s read is simpler: the use case was always obvious, and “now it’s a matter of delivering a consumer-grade mass market product.” Anyone who used the CeDeFi cards of previous cycles knows they weren’t exactly a focus of the businesses running them, and that showed in the user experience.

The numbers behind EtherFi’s Cash offering show how in this new environment, good products can generate real volume. They now stand at more than 300,000 accounts, with over 70,000 active cards, and daily spend hitting a record $3.7 million in mid-May. Their Cash product now accounts for around half of EtherFi’s protocol revenue.

Another product seeing strong growth and recently closing out its highest-volume week is Avici. Avici feels more like a neobank than many others, with access provided through its mobile app and self-custody hidden behind passkeys and account abstraction, making login feel seamless as retail would expect. Its Visa credit cards are issued by Rain, with users spending against their own crypto collateral rather than topping up a debit card balance.

The last one worth a mention is Plasma One. They are currently in private beta but have been ramping up access of late, with $765K volume in April and $3.1M in May (+305% in one month). Full launch is due this month, so expect this to increase even more sharply, especially when the Android version comes out.

All of these providers have obviously got their spending features locked down. But what about savings?

Osero, which grew out of the stablecoin-yield platform Stablewatch, claims that offering stablecoin yield means a neobank effectively has to start “becoming a DeFi asset manager,” taking on custody, risk assessment and ongoing management of where deposits sit. Not all neobanks offer yield on deposits, and if they do, it’s often through token emissions. Osero have recently entered the fray with a savings product built on top of the Sky Savings Rate. They point out that most large neobanks already use stablecoin rails internally for treasury, but “haven’t turned this into a user-facing yield feature.”

What we are beginning to watch closely is the battle for control of the infrastructure underneath these banks. White-label stablecoins are one route, with neobanks and applications starting to explore issuing their own branded dollar. Mars gave some insight into why: neobanks already own users and distribution; “what they’re missing is the rail.” MoonPay aims to provide them with issuance, ramps, and settlement as a single piece, looking to become the infrastructure layer that consumer apps run on in the background. He goes so far as to claim the market cap of white-label stablecoins will increase 10x in the next year.

The downside is that onchain banks trade one risk for another. You remove exposure to the bank’s balance sheet, so your money can’t be frozen, rehypothecated, or lost in a bank run, but you take on smart contract risk, oracle failure, exploits, and your own mistakes.

For someone who understands DeFi, that’s arguably the better deal. But for the average consumer who expects someone to pick up the phone when it goes wrong, it isn’t - yet at least. Gnosis Pay’s exploit yesterday, in which a shared module drained user funds without a single key vulnerability, showed how real this risk is.

This week, we began to see where this industry goes next, with Base releasing its MCP and Liquid shipping a chat interface to move and control a user’s capital through agent workflows.

Every one of these products is converging on the same four functions: save, spend, earn, borrow, but this time, owned by the user rather than the bank, with onchain rails and DeFi supercharging the possibilities.

• Who clears the CFTC next: With Kalshi securing itself as the first out of the gate, which exchanges will be next, and when will the first DEX get authorisation? Other CFTC-regulated crypto exchanges include Bitnomial (recently acquired by Kraken) and Gemini, plus Kalshi’s prediction-market rival Polymarket.

• Whether fixed-rate lending finds its demand: Fixed-rate lending is commonplace in traditional finance, where rate assurance enables players of massive size to lock in long-term yield strategies, something that has always been lacking onchain.

• Whether the agentic layer gets adoption: Despite Base releasing their MCP and new teams like Liquid bringing agentic products to market, we are still waiting for a breakout app to drive volumes in agentic finance. Read more here: https://research.castlelabs.io/p/the-beginning-of-agentic-finance

• When will Saylor sell again: This week, Saylor’s Strategy sold 32 BTC, framing it as a one-off for STRC dividends, but now the door is open, it is surely just a matter of time before the next batch.

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.

While most metrics are down across the board, the RWA sector is the only one showing consistent growth, with tokenised stocks among the fastest-growing RWA categories right now.

The sector has $1.6 billion in distributed value, up ~40% in the past 30 days.

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.

written by @francescoweb3 ✍️

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A new wave of positivity hits the markets, with HYPE at new all-time highs, privacy coins like NEAR, RAIL and ZEC owning the narrative and a growing appetite for onchain tokens despite BTC sweeping the lows of its recent range just above $74k.

All this during one of the longer consolidation periods of our industry, with DeFi protocol wind-downs being announced every month, whilst a handful of success stories are generating revenue and finding product-market fit.

With this consolidation comes a ripple effect of changes in behaviour, from key foundational players like the Ethereum Foundation and Solana rethinking their strategies to the narratives and ideologies the market finds important, such as privacy, compliance, and institutional alignment.

In this 173rd Edition, we recap our time at ETH Milan and sit down with Davide and Mattdotfi to understand what changed this year. Then we’ll look at why HYPE flipped SOL, what Polymarket is cooking with Nasdaq, how DeFi lending is a great fit for institutions, and what Vitalik’s latest statement means for Ethereum.

ETH Milan does it again

We had the pleasure of supporting ETH Milan last week as media partners and speakers, but most importantly, as friends. Castle has been with ETH Milan since the first event back in 2023 and has witnessed firsthand their growth into one of the highest value conferences to date, and they aren’t stopping there.

The attendance, speakers, and sponsorship were all high quality, with MoonPay presenting the conference following its recent acquisition spree and Italy’s largest bank, Intesa Sanpaolo, sponsoring the event.

Topics ranged from:

• DeFi trends ahead with Rysk, Bitfinex, LFJ, Keyrock and Enso

• The State of derivatives with Pear Protocol, Perps.fun, Raven, and Ostium

• The direction of stablecoins with Dune, OpenFX, Kast, and Hercle

• How institutions are entering onchain with 21shares, Ledger Enterprise, Lido, and Axis Group

• And many more

Not to mention the great attendance from Italian institutions on Day 2. Small but high-value attendee conferences are fantastic. They allow easy access to the connections you want to make, and have a super high signal-to-noise ratio, ensuring great conversations and fewer interruptions.

With the changing market across the industry, all businesses must adapt or die. Conferences are no different. ETH Milan has been at the top of the list because it understands its audience. First and foremost, it has been “an event for the community… that is made for people like them. By conferencoors for conferencoors.” said DavideFi, ETH Milan Co-Founder. “An excuse for all our friends to come to Italy.”

But this year was different. Not only did the event stay true to its community roots, but it also opened the door to institutional appetite. Intesa Sanpaolo, Italy’s largest bank, which holds almost $300m in crypto, sponsored ETH Milan this year, and the Italian-speaking “Institutional Day was so successful that people flooded the stage, and there were dozens of people forced to attend speeches and panels standing,” Mattdotfi told us.

These two worlds are now coexisting, and we see this in our own audience of late, with institutions, banks, hedge funds, and traditional finance media all wanting to learn more and go deeper into what blockchains and onchain finance make possible.

The split was visible on stage across the conference, with speakers from both camps coming to terms with the evolving space we find ourselves in. This was seen particularly across the DeFi Trends panel, and the State of Derivatives Trading panel, where crypto-native builders and institutions coming from different origins were converging on the same technology and use-cases.

We asked both Matt and Davide what they thought might come to pass in 2027, and both landed on the same mark. Davide thought “RWAs will have captured a significant portion of the market, and that the digital Euro will be much more of a reality,” with Matt summing it up perfectly: “an onchain economy that powers TradFi products.” We too believe we’ll see strong growth in euro stablecoins over the next 12 months, with MiCa now fully phased in and more euro stablecoin startups entering the space.

Just last week, in fact, Etherfi added a EURC liquid vault to their Cash product, allowing users to earn yield on their euros with zero-fee FX spending.

Next year, the team is taking it one step further. ETH Milan will become Milan Blockchain Week, and a third vertical focused on enterprises will enter the fray. “This new format will provide corporations and institutions in Europe and beyond with an environment that promotes innovation, education and connections,” Matt told us.

But the suits haven’t taken over yet. ETH Milan, a community and culture-focused track, will get its own day still, “ with all the core crypto community of the conference showing up for a day of OG vibes as a day that they’ll remember as an event not to miss,” said Davide.

We already know we’ll be at MBW next year as we continue to write for and service each side of onchain finance.

Will you?

HYPE flips SOL by FDV as ETF flows heat up

Hyperliquid has been on an absolute burner of late: From HIP-3 breaking records and capturing huge TradFi attention, to the phased HIP-4 deployment set to compete with Polymarket and Kalshi.

Off-chain, HYPE ETFs have been picking up steam, with THYP and BHYP launching earlier in the month and cumulatively recording $74.91M in inflows over just 8 days. That’s around a 5x increase in buy pressure from the Hyperliquid Assistance Fund (AF), which repurchases HYPE with revenue.

HYPE is now up ~50% this month alone, flipping SOL by FDV as Solana fights a different battle altogether. SOL is down 73% from its one-year high, and despite every onchain ecosystem bleeding perp mindshare to Hyperliquid, it has recently decided to take them on with a marketing campaign. Solana Labs CEO, Toly, has himself been across X, tagging Hyperliquid traders to ‘Try Phoenix Trade’, with pitches for lower fees and greater decentralisation.

Vibnu, now interim CMO at Solana, further drove the campaign, almost losing his entire $10k deposit in a trading competition on Phoenix against a Hyperliquid trader but bringing valuable attention to the platform. This kind of favouritism, however, risks alienating long-term builders on the chain, as they see the ecosystem leadership picking winners and losing its neutrality. It certainly doesn’t help that the chain’s previous perp poster boy was exploited for $285M six weeks ago.

Onchain researcher Tulip King made a sharp critique of the situation: “You need to bridge businesses to Solana, not tokens.” He stresses that Solana’s response to the Hyperliquid growth has been an old marketing playbook, not something fundamentally different. He argues the Foundation’s treasury would be better spent on poaching Polymarket, Rollbit, or the AI projects on Base than promoting a perps DEX that isn’t even the biggest one already running on Solana.

To be honest, when laid out like that, it’s hard to argue with.

The wisdom to zoom out of the weekly timeline came from Bitwise CEO Hunter Horsley, who positioned the two giants as “a new class in crypto: the revenue chains.” Last week, Hyperliquid led with $790M in revenue; Solana sat second at $532M; Tron third at $471M; and Ethereum fourth at $425M. These two have great opportunities to grow and thrive in ways Ethereum cannot, due to their centralised operations and agility (though Solana may be losing some of this).

Vitalik weighs in on the Ethereum Foundation’s purpose

Ethereum is living a crisis of its own.

The Ethereum Foundation (EF) has been losing leaders thick and fast in recent weeks. Eight senior departures in 2026, and five in May alone:

• Carl Beek (Beacon Chain, 7 years)

• Julian Ma (FOCIL, 4 years)

• Protocol Cluster leads Barnabé Monnot and Tim Beiko

• Alex Stokes on sabbatical

• Co-executive director Tomasz Stańczak, who resigned 11 months in to focus on AI

This crisis at the very top, likely arising from differences in vision and purpose, is coming at a time when the industry is reshaping around institutions coming onchain and the application layer is sorting its winners and losers. That timing is probably not a coincidence.

Last week, Vitalik posted his clearest perspective on the EF in some time. “The EF is not the centre of Ethereum,” he said. It is “one node, with a defined purpose, alongside other nodes.” EF is choosing longevity over breadth, specialising in censorship resistance, capture resistance, open-source, privacy, and security (CROPS). He highlights a number of technical priorities that align with the strive to be deeply impressive in the CROPS domain:

1. A provably bug-free Ethereum via AI-assisted formal verification - something thought impossible just months ago

2. Available chain consensus through lean consensus - engineering Ethereum to be safe both when half the nodes are offline AND when up to 49% are actively attacking

3. Intermediary minimisation via FOCIL, EIP-8141, and the Kohaku wallet stack - Today, smart wallets and privacy protocols route transactions through third-party relays before they hit Ethereum, and these protocols can remove the intermediaries so transactions go straight to the chain.

Moving forward, we will see a smaller, more focused ship leading the protocol, with clear vacuums available to be filled across BD, asset narratives, and application-layer growth. The foundation has already delivered on its mandate, and as always, Ethereum is open to all who wish to drive it forward. Right on cue, Dankrad Feist, a former Ethereum Foundation researcher, has proposed a new ETH-aligned organization seeking at least $1 billion in funding, in order to redirect Ethereum back on a winning trajectory.

Polymarket partners with Nasdaq Private Market

On 19 May, Polymarket and Nasdaq Private Market (NPM) launched a partnership that added IPO-related markets for OpenAI, SpaceX, Anthropic, Stripe, Kraken, Anduril, and Databricks to Polymarket.

Early contracts include OpenAI hitting a $1T IPO valuation before 2027 (currently priced at ~66%), Anthropic IPO valuation over $1.8T (51%), and SpaceX, currently given a 79% chance of being the “largest IPO by market cap in 2026”.

This is the first time a regulated US secondary-market platform has integrated prediction markets as a price-discovery instrument for its own pipeline. The structural shift is that retail traders now gain synthetic exposure to private-company milestones without the accredited-investor requirements imposed by others.

We have been covering Pre-IPO equity speculation at length and believe that synthetic exposure will continue to see strong demand due to its ease of access and lack of legal risks compared with other secondary vehicles. Last week, we focused on the data behind the onchain IPOP markets for CBRS and SpaceX on TradeXYZ, and published a full article covering Pre-IPO Perpetuals here:

Observations after a month: Aave’s Chief Commercial Officer

Speaking of institutional appetite, Luigi D’Onorio DeMeo, Aave’s new Chief Commercial Officer, one month into the role from Ava Labs, published his top observations:

1. DeFi is more widely welcomed by institutions and fintechs than he even expected: This aligns with what we have been seeing on the ground as well. TradFi is moving past asking if they should engage, but studying how to.

2. Qualified-custodian-backed lending is the next growth spurt: a huge opportunity, with $100B+ in institutional crypto held by qualified custodians like Anchorage, Coinbase Institutional, Fidelity Digital Assets, and BitGo.

3. Receivables financing onchain is a tangible institutional use case for DeFi: companies sell their outstanding invoices to financiers at a discount for immediate cash. Whilst it doesn’t set the world alight, this is ripe for disruption, as blockchains unlock verifiability, lower friction, and real-time settlement.

4. DeFi lending will essentially redefine how prime brokerage works: a function traditionally where banks like Goldman lend cash and assets to hedge funds against their collateral, letting them run leveraged strategies without selling positions. Now think about the funds with billions parked at qualified custodians that can now borrow against their locked collateral onchain through protocols like Aave, lowering costs with programmable rails.

Onchain businesses and protocols are evolving, not just in their architecture but in their business development activities. Aave clearly has a big vision here, but has a lot of work to do to bring it to life. The next 12 months will be incredibly important.

Wind-downs make room for new eras to arrive

Last week saw four DeFi protocols announce wind-downs:

• Zero Network: Zerion’s gasless L2 at only 18 months old)

• Everclear / Connext: the cross-chain settlement clearing house with $1.5B+ cleared and a ~$500M monthly volume peak

• Syndicate Labs: an a16z-backed Ethereum infrastructure team after five years, which has raised >$25M

• Fantasy.top: Fantasy sports cards based on CT characters

Unsurprisingly, the Crypto Times’ running tally is now at 40+ DeFi protocols that have shut down in 2026 to date. These are the teams and projects that could not generate meaningful revenue or create a commercial moat, and we will continue to see much more of this in 2026.

But with all things that perish comes new life. Following the rotation of attention and capital brings us to privacy. This week, Barry Silbert posted what could be taken as the institutional starting gun: “the privacy era in crypto has officially begun,” he said.

This follows a sustained rally in May across the privacy stack:

• ZEC hit a 2026 high above $585 on 6 May after Multicoin Capital partner Tushar Jain disclosed the firm’s position, with a record ~30% of ZEC supply now sitting in shielded addresses

• XMR took out its 2021 ATH earlier in the month before pulling back above $300

• The mid-cap rotation of RAIL, ZAMA, and ORE has been moving in unison as well.

We have been tracking a shift from “privacy is ideology” to “privacy is utility”, and that’s now landing with institutions. We wrote about privacy in a recent report, and intend to cover it much more deeply in the coming weeks across the newsletter and with a potential flagship report.

A few things we’re watching closely as the weeks ahead unfold:

• CLARITY Act reconciliation: targeting a 4 July signing, conference committee announcement expected

• SpaceX’s IPO: Onchain price action evolution for IPO on 12th of June

• HYPE ETF flows: whether the $10M+ daily pace sustains or fades back to early-launch levels

• Solana’s response: whether the Phoenix push converts to perp volume or the builder backlash hardens

• EF Roadmap Execution: Can the Ethereum Foundation continue to deliver with a smaller ship, with Glamsterdam set for next month?

Plus: ICYMI, our flagship on the Vaultification of Finance landed last week!

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.

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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

written by @francescoweb3 and @noveleader ✍️

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Castle Labs

Research and Advisory for Digital Assets

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Link to the report: https://docsend.com/view/r3278hmn8d6tqyqn

Table of Contents:

Castle Labs

Research and Advisory for Digital Assets

We have a bunch of good news this week… it feels like a while.

It’s IPOP time… with the biggest IPO calendar in a generation.
CBRS rang the bell as the first IPOP traded on Tradexyz. Now, SpaceX promises to be the biggest IPO yet.

DC is also busy: the Senate also cleared the CLARITY Act, and incumbents noticed Hyperliquid.

Last but not least, trenches seem to be alive again.
Solana and Base are both back, promoting their ecosystem.
This time, it seems they have switched their GTMs.

Solana is pushing Phoenix, an onchain perp which burns SOL from fees, while Base is now trying to position itself as the meme chain.

We start with the deep cut on pre-IPO perpetuals, then turn to the Clarity clearing committee, the unfreezing of rsETH and the saga’s resulting $4B LayerZero exodus, and Hyperliquid on Wall Street’s mind.

Let’s dive into another Castle Chronicle!

State of Pre-IPO Perpetuals in Charts

On Thursday of last week, Cerebras ($CBRS), the first Pre-IPO Perpetual Market (IPOP) from TradeXYZ, opened on Nasdaq at $350, following a repriced IPO offering of $185.

An IPOP is a synthetic perpetual that reflects the implied value of a private company before it goes public.

Compared to traditional IPOs, which often both accredited and retail investors unable to secure exposure, IPOPs have no accessibility constraints, guaranteeing broader accessibility to these assets.

In addition, they provide an additional venue for price discovery, as they trade 24/7.

On the morning of the IPO, 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.

On May 1, TradeXYZ launched xyz:CBRS at a reference price of $175, at an implied valuation of $48.9 billion. 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 to gain exposure, potentially yielding over 90% profit if held until the Nasdaq opened at $350, just 14 days later.

Daily volume sat between $1.5 million and $9.5 million over the first 13 days, before 14 May printed over $207 million, 80% of the market’s lifetime volume.

Now there are over 4 venues where users can trade IPOPs: TradeXYZ, Ventuals, Lighter, and OKX, each with different models for pricing pre-IPO markets.

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. TradeXYZ 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.

What’s next?

On May 18th, 2026, TradeXYZ 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.

IPOP season is just starting.

Read our full article on IPOPs:

Clarity for stablecoin intermediaries?

We’ve been flagging the Clarity Act for a few weeks now, but that’s just because of how important it is. The successful GENIUS Act last year set rules around what stablecoin issuers could or couldn’t do. The importance was because they let issuers do a lot of things they might have wanted (they didn’t), but the regulatory clarity was there in the first place. The same is now happening with stablecoin intermediaries through the Clarity Act, bringing them under a clear regulated landscape, allowing them to put down roots and expand in the US.

Since January, there have been deadlocks in the text, and there were strong fears the legislation would not make it into law this year, or worse, be delayed until a new President. However, on 14 May, the Digital Asset Market Clarity Act passed the Senate Banking Committee 15-9, with two Democrats voting in support.

The main friction point was around yield from stablecoins, with the committee settling on payment stablecoin issuers not being able to pay interest economically equivalent to a bank deposit, but allowing activity-based rewards tied to usage. Crypto-linked equities surged on the news, with Coinbase, MicroStrategy, and Robinhood up 9%, 8%, and 6%, respectively. The bill still has to be merged with the Agriculture Committee version and survive a floor vote, estimated at about a month out.

rsETH markets are unpaused, unlocking millions of frozen funds

After nearly a month, Aave’s rsETH markets were finally unpaused last week, with Kelp restarting withdrawals, bridging and EigenLayer claims. DeFi United raised over $300M in ETH commitments, enough to avoid socialising losses amongst Aave users after rsETH was falsely minted due to a vulnerability in LayerZero’s Distributed Verifier Network (DVN), causing roughly $200M of bad debt on Aave.

It cannot be overstated how much coordination must have been required to ensure such a result, which could have shaken DeFi to the core if left to resolve through liquidations or losses. Whilst many drew parallels of this initiative to bank bailouts in 2008, those were led by governments propping up a too-big-to-fail industry with taxpayers’ money, in this instance, DeFi United was led and funded by the industry itself from within.

Kudos to Aave for leading such a charge despite being somewhat of a victim in this case.

$4B exits LayerZero for Chainlink CCIP post Kelp hack

The rsETH hack has led to a redefinition of the landscape.

On 15 May, Lombard migrated $1B+ in BTC-backed assets (LBTC and BTC.b) off LayerZero and onto Chainlink CCIP. The total asset migration since the Kelp exploit now stands at $4B+ across KelpDAO ($1.5B), Lombard ($1B), Solv ($700M), Re ($475M), and Kraken ($330M).

LayerZero removed 1-of-1 DVN support entirely and is pushing routes toward 5-of-5 verifier setups, but this has not managed to stop the outflows.

How will this trend continue to evolve?

Will this migration concentrate risks into CCIP?

And moreover, will our industry come out of it more secure?

One thing is for sure: this event is making everyone revisit their security practices from top to bottom.

Is Hyperliquid going to be regulated?

Great power comes with great responsibility, and scrutiny.

As the main representative of onchain and 24/7 trading of commodities, Hyperliquid has increasingly attracted attention from regulators, as we highlighted in our previous report.

Just recently, the CME and ICE urged US regulators to scrutinise Hyperliquid over oil benchmark manipulation and possible risks around international sanctions evasion.

This comes a week after 21Shares launched Hyperliquid ETF (THYP) on 12 May: the first regulated HYPE exposure for US investors.

The oil market on Tradexyz has averaged $700M daily turnover in April during the Iran conflict, after just a couple of months of being operational.

Issues revolve around the fact that Hyperliquid “could end up influencing the spot market price or the futures market price on our registered platform“, said CFTC Chairman Michael Selig.

The Hyperliquid Policy Centre is engaging the CFTC directly, arguing that onchain transparency is a deterrent to manipulation rather than a risk, and supporting regulators in their legislative process. Interestingly enough, the ICE recently invested in OKX with the objective of pushing 24/7 trading equities on the platform.

To support the Hyperliquid Policy Center, Jeff spent a few days in Washington D.C. last week, meeting with policymakers and discussing the benefits that Hyperliquid offers to American consumers, and the regulatory path to bring onchain derivatives markets into the United States.

Hyperliquid Policy Center’s efforts in the US are definitely one to keep an eye on!

Ambire Wallet Upgrades Safe Experience

This week, we have a small section presented by our friends at Ambire Wallet.

If you’ve been using Safe but wished the experience felt smoother, Ambire has you covered.

Ambire now supports importing Safe accounts directly in the app, unlocking operational efficiency and new ways for users to leverage these accounts:

• Connect to any app: Just like connecting accounts in any wallet’s browser extension, you can connect your Safe to apps in exactly the same way with no additional steps.

• Approve & Swap: On your favourite apps like LlamaSwap or Jumper, users can approve and swap in a single flow, reducing the friction of Safe transactions with multiple signers. This is compounded further when executing even more complex multi-step transactions.

• Onchain transaction simulation & clear signing: The Transaction Builder in Ambire performs security checks and uses clear signing to always display what is being signed in the transaction.

• Transaction batching: Executing complex transactions becomes much easier. Multi-send, multi-swap, batch revoke, or any combination of transactions can be signed all in one go.

• Flexible signing: Users can choose their signing path, with Ambire supporting complete transactions within Ambire or broadcasting to Safe Global to finish signing there.

See it in action here, with an example of connecting and swapping on Defillama:

We know that switching wallets is a huge deal, and not something to be taken lightly. But if we can’t convince you, maybe Marc Zeller can, as he named Ambire as his wallet of choice in the Golden trio of onchain safety.

Try out the wallet here: https://www.ambire.com/get-extension

What else to expect this week

It’s a big week in the Castle, with a new flagship report shipping tomorrow on the Vaultification of DeFi. Everything you need to know about vaults, their history and evolution, the current landscape, and what is coming next as DeFi and TradFi continue to merge.

Then on Thursday and Friday, you’ll find our founders at EthMilan, so if you are there, go and hunt them down! We are media partners for the event and you’ll be able to hear Atomist give you the rundown on the State of Onchain Neobanks.

Ciao!

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.

2026 is one of the most eventful years for IPOs, with the biggest IPO calendar in a generation.

On Thursday of last week, Cerebras ($CBRS), the first Pre-IPO Perpetual Market (IPOP) from TradeXYZ, opened on Nasdaq at $350, following a repriced IPO offering of $185.

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.

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Welcome back to another week!

We’ll start this 171st Edition with a tokenised equity story, then cover the CLARITY Act stablecoin compromise heading to markup, the Coinbase outage and Q1 loss, and Drift’s recovery token plan, before visiting Aave’s new asset listing standards.

Tokenised equity becomes regulated and US-accessible

“Tokenisation is … the defining infrastructure trend of the next 25 years.”

This was Bullish CEO Tom Farley’s statement after digital asset platform Bullish acquired global transfer agent Equiniti for $4.2 billion. In the same week, Securitize, Jump Trading, and Jupiter launched fully onchain regulated trading for tokenised equities, and Republic launched tokenised Animoca Brands equity on Solana, custodied by BitGo and facilitated through INX Securities.

Each of these creates a new route to access tokenised equity onchain that was previously unavailable. We all know tokenisation is coming, and that RWA charts have been up and to the right, but tokenised equity has been lagging behind.

These three announcements show that the infrastructure required for mass growth is being put in place at several layers, particularly in the US, a critical region that current implementations have avoided. To date, xStocks, whilst crossing $25B in total transaction volume, has avoided US access.

Bullish’s acquisition of Equiniti is designed to create a transfer agent for tokenised securities and “position Bullish to lead the shift toward blockchain-native capital markets infrastructure.” Transfer agents maintain records of security owners, track stock ownership, and facilitate dividends, serving as intermediaries between companies and their shareholders.

The Securitize / Jump / Jupiter partnership brings together Securitize’s regulatory infrastructure, Jump’s liquidity through its prop AMM, and Jupiter’s distribution via its interfaces to offer an equity trading experience that rivals tradtional brokers. “The question is no longer whether assets can be issued onchain, but whether they can trade at scale in a way that meets the standards of public markets,” said Carlos Domingo, CEO and Co-Founder of Securitize. Securitize is itself the SEC-registered transfer agent, so the onchain token serves as the legal record of ownership where owners receive voting rights and dividends, unlike existing offerings.

The launch of Animoca Brands tokenised equity is through Republic’s secondary marketplace, using regulated securities-market infrastructure rather than a simple blockchain issuance layer. The move aims to broaden investor access and open secondary trading for existing Animoca Brands shareholders.

It should be noted that both of these offerings will likely require KYC and whitelisting, ensuring regulated execution and legally recognised ownership. However, these steps are necessary to ensure these offerings are fully regulated and compliant with the SEC.

But why does each matter?

• Securitize / Jump / Jupiter: Until this week, every credible onchain equity venue excluded US users by design, so this is the first US-accessible path where the onchain token is the legal share rather than a wrapper or derivative claim

• Bullish / Equiniti: Bullish controlling Equiniti means tokenised representations of companies can be wired directly into the official register without friction, paving the way for representations that are the legal share, rather than wrappers or derivative claims.

• Republic / Animoca: The majority of the focus on bringing equity onchain to date has been on public stocks, but this targets shares that never had a public market in the first place, closing a different access gap and targeting a different audience.

These three join two embedded players in the tokenised equity arena:

• Ondo Global Markets is the dominant offshore platform crossing $1B TVL yesterday, with 260+ tokenised US stocks and ETFs across Solana, Ethereum, and BNB Chain, with bridges to HyperEVM (where Felix Protocol is the primary distribution route). Each token is a senior secured structured note issued by Ondo Global Markets (BVI) Limited, with underlying shares custodied at Alpaca.

• xStocks (Backed Finance, now Kraken-owned) has been live since June 2025 and is now multi-chain across six networks, including Ethereum, BNB Chain, Solana, Ink, TON, and Mantle. $424M in AUM and 120,743 onchain holders, and accounts for 8 of the top 11 tokenised equities by unique holders. Each xStock is a bearer debt instrument issued by Backed Assets (JE) Limited, a Jersey SPV, under a prospectus approved by the Liechtenstein FMA. Holders are creditors with a bankruptcy-remote claim to the fair market value of the underlying shares, which are custodied at Alpaca and InCore Bank.

Each of these has been driving equity tokenisation on the chain over the last year, with an acceleration in recent months.

We wrote about these and the wider tokenisation landscape in a recent report. Check out our coverage here:

The main thing to watch will be whether US access proves to be a catalyst for growth, which the offshore issuers were missing.

Stablecoin rewards decision heads to a Senate vote

Months since the original stablecoin yield question of the CLARITY Act was derailed in January, Senators released a compromise text. As a reminder, the GENIUS Act restricted issuers from paying yields or interest to holders. The CLARITY Act is being implemented for intermediaries.

The text bans yield “economically or functionally equivalent to” interest on bank deposits, but allows rewards tied to “bona fide activities or bona fide transactions.” Several activity-based rewards were explicitly carved out, including payments, transfers, trading, governance, and staking, with token balances and durations still allowed to factor into reward calculations.

Despite the Act potentially moving forward, there remains significant ambiguity in the text. For crypto companies, there should be plenty of room to create workarounds to pass on yield to users as rewards, especially through incentives for activities that may be positive for the industry and drive onchain activity. However, it will certainly impact the simple way that interest is currently passed on from asset issuers to alternative platforms, such as Coinbase passing on Circle’s USDC yield to users. Stablecoin revenue was Coinbase’s second-largest revenue line in 2025 at $1.35B vs $910M in 2024.

“Crypto’s unhappy, banks are unhappy, but they’re both about equally unhappy, and so we know that we got the right compromise,” said White House crypto adviser Patrick Witt.

The Senate Banking Committee has scheduled a CLARITY Act markup hearing for Thursday, May 14.

Odds that the Clarity Act would be signed into law in 2026 spiked from 45% to 74% in May after the compromise text was released, and now sit at 64%.

Coinbase outage and Q1 loss in the same week

Coinbase went offline for trading for around 7 hours last week after a thermal event at an AWS data centre, disrupting spot trading, Prime, International, and the derivatives exchange. This came as Coinbase reported a $394M net loss in Q1, along with layoffs that cut 14% of the workforce.

Events like this emphasise the importance of distributing a network’s core operations across multiple locations and mitigating single points of failure. Whilst decentralised trading venues are often not perfect and so too rely on cloud infrastructure, in this instance, they stayed online.

This chart from The Block plots Hyperliquid’s perpetual trading volumes against those of major centralised exchanges, showing consistent market share capture since launch.

Last week, we wrote about four new product offerings across onchain derivatives venues. Check out our coverage of them here:

Drift’s recovery plan could take eight years

Last week, Drift proposed a recovery plan following its $295 million exploit. If successful, they would issue a ‘recovery token’, each representing $1 of verified loss, to those affected, giving them a proportional claim on a ‘recovery pool’.

The recovery pool will be seeded with the protocol’s remaining assets ($3.8M). From there, the pool would grow through three distinct capital streams:

• Revenue generated directly from Drift

• Tether’s matched deployment, which has committed up to $127.5M as a revenue-linked credit facility, based on Drift’s future earnings

• Additional strategic partner capital representing up to $20M

The pool would continue accruing until the total inflows match the exploit losses.

Despite the capital commitments, based on Drift’s 2025 earnings of $19M, the recovery pool could take over eight years to fully replenish, and longer if Drift can’t reclaim its pre-exploit market share (assuming all committed assets are used directly in the recovery pool).

Aave tightens listing rules after the Kelp hack

At Consensus last week, Aave announced that it will fundamentally reshape how it assesses new collateral. Instead of simply relying on historical price volatility, evaluations will now look at cybersecurity, interoperability, and the underlying technical architectures of new assets and protocols. Furthermore, they have committed to publishing a formal asset-issuer playbook with minimum standards that is sure to be adopted and iterated on across the industry, leading to further due diligence by other lenders.

If this industry is to grow and absorb off-chain liquidity, security practises need to be tightened, standardised, and above all demanded. So far, Aave has shown a masterclass in both action and communication across this crisis, compounding this week off the back of the successful motion to vacate, with the judge ruling that the Arbitrum DAO can now transfer the rescued $71M to Defi United. Whilst the amount will still be held in restraint with Aave due to the court order, Arbitrum DAO will be absolved of all liability, and Aave has pledged to cover the $71M with borrowed funds whilst the case is ongoing.

• Cerebras lists Thursday, 14 May: CBRS is the only market on TradeXYZ’s IPOP, so this is the first hard test of how tokenised pre-IPO derivatives price against the real underwriting at the venue. The price range has been bumped from $115-$125 to $150-$160 in the last week.

• CLARITY Act markup, Thursday 14 May: The Senate Banking Committee markup is the next step for the stablecoin compromise we covered above. This likely needs a positive outcome to ensure it is signed into law this year.

• Powell out, Warsh in, Friday 15 May: Powell’s term ends, and Kevin Warsh is expected to succeed him. He’ll arrive with the most crypto exposure of any Fed chair in history.

• Anthropic transfer restrictions: Sunday’s bylaw update declares unauthorised transfers void rather than voidable. Monitor communications from secondary platforms affected by this update, as well as any volume shifts in synthetic versions.

See you next week.

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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.

Bitcoin is going from strength to strength, breaking $80,000 overnight, closing April +12%, and recording the highest monthly ETF inflows this year ($1.98B). Whilst Ethereum is lagging behind, it did achieve its first net positive inflow month since October 2025, drawing in $365M.

After an April that scarred the industry, with the worst month of exploits since 2022 totalling $651M, May has gotten off to a stronger start. In fact, just yesterday, Haun Ventures announced a new $1B fund focused solely on rethinking finance, and a16z announced a new $2.2B crypto fund. This came after the most anticipated TGE of the year in MegaETH and a week when several new derivative products opened for trading, including the long-awaited HIP-4.

We’ll start this edition with these new derivative markets, then move to Aave’s legal battle for Arbitrum DAO, more details on VCs raising funds, a recap on MegaETH’s launch, and a look at RWAs and DeFi.

Onchain derivatives are eating finance

Haun Ventures’ $1B fund’s thesis focuses on three pillars: new financial infrastructure, new assets and markets, and an agentic economy. The first two are rooted in fewer intermediaries, the removal of legacy constraints, and the creation of borderless, always-on, programmable markets. And that’s exactly what got shipped this week:

• Hyperliquid opened HIP-4, its outcome markets in limited form

• Trade XYZ launched pre-ipo perpetuals, adding to their dominating product offering

• Ostium reinvented its liquidity engine, directly accessing tradfi liquidity with decentralised execution.

• Risechain, the gigagas L2 launching their flagship perp DEX, RiseX

Each of these targets the pillars above by removing barriers and enabling access to infrastructure, liquidity, and new markets. Let’s take a deeper look at each.

HIP-4 goes live

Over the weekend, Hyperliquid pushed HIP-4 to mainnet, limited to a single BTC binary event per day.

HIP-4 are Hyperliquid’s outcome markets. They are designed to be a general-purpose primitive, useful for prediction markets and options-like instruments, among others. Outcomes expands the platform, bringing an alternative form of derivatives trading that does not include leverage or liquidation risk, while composing directly with other features, unifying margin across spot and perps accounts, and connecting to the HyperEVM.

Whether this will be seen as a sufficient differentiator from Polymarket and Kalshi, and what kind of user it will attract, remains to be seen. We expect Hyperliquid’s core user base to remain loyal and a portion of Polymarket users to migrate, given that 14% of Polymarket’s top traders are already on Hyperliquid, with those overlapping wallets generating $1.43 billion in Polymarket volume and running $189 million in perp notional on Hyperliquid.

We expect to see more markets listed soon, potentially around the price of hype and later multi-outcome markets, before full permissionless deployment. Potential deployers include TradeXYZ, Kinetiq x MarketsXYZ, OutcomeXYZ, and Nova Markets.

Find all resources surrounding HIP-4 in this thread, along with our previous report.

TradeXYZ launches IPOPs

After dominating perpetual equities and commodities, Trade XYZ are going after pre-IPOs. This time, instead of unlocking 24/7 trading for users, they are opening up a market that was gated, slow and inaccessible on private secondaries. Their first IPOP market is Cerebras (CBRS), the AI chip maker that just filed its S-1 with the SEC, targeting a mid-May IPO.

We’ve seen the first iterations of this onchain from Ventuals and others, but Trade XYZ’s release introduces a new pricing mechanism derived from the internal market itself, enabling price discovery on the platform that is uncorrelated with the stock’s estimated valuation. This is an update on current Pre-IPO perps, which anchor the market price to the underlying using a fair value estimation.

This new market from TradeXYZ is due to make some waves, just like they did with perpetual equities and commodities. We predict this will bring real attention from those outside crypto, as these companies are among the most-watched by investors, allocators, and traders worldwide, and Trade XYZ already has the distribution to target them. In the first week alone, TradeXYZ has been dwarfing the volume at Ventuals. Although Ventuals appears to be in a much steadier state, with lower volumes and a stable OI, suggesting users are sitting on their positions waiting for the IPO.

Later this week, we will release a full report on Pre-IPO perps: the evolution, the venues, the mechanisms, the trade-offs, and what this means for the broader offering of onchain derivatives. Be sure to subscribe and follow on X ahead of time, and follow Atomist for teasers.

Ostium as the gateway to liquid markets

Last week, Ostium had its largest protocol upgrade to date and the first of its kind for onchain trading infrastructure. Previously a self-contained system, Ostium now connects to the deepest pricing and liquidity at some of the world’s most liquid traditional markets. They achieved this by working with a hedging network of market makers, prime brokers, and other major institutions.

Traders can expect larger trades, tighter execution, predictable fees that reflect those of these liquid markets, and access to more markets and assets. LPs, on the other hand, are no longer directly exposed to trader PNL. Instead, the directional risk is hedged offchain. Whilst OLP, Ostium’s onchain liquidity provider vault, becomes the senior tranche, with a dedicated junior buffer sitting below, programmatically hedging and absorbing any gains or losses first.

To demonstrate the impact this upgrade is already having, a single $2.2 million trade longing the US100 at 100x leverage had a price impact of 0.0038% last week, and traders are making eight-digit trades with very little slippage.

Instead of creating onchain markets, Ostium has chosen to build a layer that allows access to traditional exchanges worldwide directly onchain. Despite allowing deep liquidity access at competitive pricing and low slippage, it is bound by the restrictions of these traditional markets. As such, Ostium is not open 24/7 for commodities, FX, and equities.

RISEx posts $100M volume in its first week

Despite launching on an invite-only basis, weekly volume at RISEx has hit $100M, with cumulative volume exceeding $150 M since launch and a peak open interest of $2.1M. The order book for the DEX lives entirely onchain, with the same execution environment as every other contract across RISE (more on that below). In pre-launch testing, the team achieved 5 Ggas/s, 50k TPS, and a 1ms order book update. From looking at rollups.wtf, we can see the actual live data with RISE burning more gas than Ethereum and all other L2s combined, all originating from one app.

Whilst this speed and gas consumption are astonishing, it’s what the shared state unlocks that can truly be a game-changer here. Through this shared state, AutoYield allows idle margin to earn yield via Yearn-managed vaults, and LP positions and lending deposits can be used as margin.

We’ll be watching to see how RISE grows over the coming weeks as they come out of invite-only, iterate on their product, activate their wider ecosystem, and polish the user experience. See their full launch philosophy here.

Get access now with code: ATOMIST1 at https://rise.trade

Castle’s derivatives thesis

It’s clear that onchain derivatives are becoming critical infrastructure for finance worldwide, removing intermediaries, breaking down borders, and allowing people to access always-on, programmable markets wherever they are.

We’ve been writing about derivatives for years, ever since we published our flagship piece on GMX V2, which at the time was a groundbreaking new architecture for perp DEXs onchain. Much has changed since then with the arrival of Hyperliquid and the emergence of new L2s, opening up the possibilities for what can be achieved completely onchain. You can find some of our derivative pieces throughout the years below:

• 3 July 2023 — Deciphering GMX v2: The Next Wave of Decentralised Perps: Oracle-priced AMM mechanics, GLP to GM/GLV transition, fee restructure, CLOB versus AMM models.

• 10 November 2023 — Demystifying Options: A 0 to 1 Guide about DeFi Options: DeFi options primer covering Lyra, Aevo, Panoptic, Synthetix-as-hedge, options AMM landscape.

• 23 February 2024 – Unlocking Hyperliquid: A Deep Dive into its Future and Fair Valuation: Hyperliquid as dApp-chain, $1.1B FDV thesis, valuation against dYdX and GMX comparables.

• 19 September 2024 – The Evolution of Prediction Markets: Polymarket and Azuro deep dive, history from Augur onwards, sector growth and PMF.

• 28 April 2025 – The Ultimate Guide to Farm the Hyperliquid Ecosystem: HyperEVM farming meta, KittenSwap, post-airdrop positioning across the Hyperliquid ecosystem.

• 10 September 2025 — USDH: A Hyperliquid Aligned Stablecoin: Native Hyperliquid stablecoin design and perp collateral implications.

• 2 October 2025 — Prediction Markets: A Differentiated Hedging Tool: Prediction markets as hedging instruments, low-risk DeFi framing, Limitless and the broader landscape.

• 23 December 2025 — Secrecy and Grand Designs: Variational deep dive (RFQ perp DEX with Omni as internal market maker), CLOB versus RFQ structures across Hyperliquid, Lighter, Aster.

• 12 January 2026 — Prediction Markets Have Never Been This Strong: Sector volume and trajectory thesis.

• 3 February 2026 — Making All Markets Hyperliquid: HIP-4 binary outcome markets, Hyperliquid as universal market layer.

• 6 February 2026 — Don’t Trade Cryptos, Trade Rates: Pendle Boros, yield-rate derivatives, funding-rate trading.

• 19 February 2026 — Hyperliquid is Not a Company: Jeff Yan EthCC interview, protocol-not-company framing.

• 25 March 2026 — The Evolution of Commodities: Onchain commodities, gold and silver perps, the oil markets thesis.

• 1 April 2026 — 432 Hours of Hyperliquid Oil Market Data: Empirical analysis of Hyperliquid oil perpetual data.

Aave files emergency motion to vacate restraining notice on Arbitrum DAO

Aave Labs has hit back at a restraining notice issued by Gerstein Harrow (a law firm representing victims of previous DPRK thefts) against the Arbitrum DAO, filing an emergency motion to vacate. The notice has effectively put Arbitrum DAO and its delegates in a tight spot on whether to approve the release of frozen funds back to DeFi United, the contributor coalition working to make rsETH holders whole, bring rsETH back to peg, and remove the risk of bad debt across Aave.

The Arbitrum DAO currently has an offchain temperature check live, which is due to pass. However, we know firsthand that many delegates are wary of voting due to legal concerns around liability. This extends even to abstaining on such a proposal, especially for the onchain execution vote that follows.

Aave Labs’ filing here is a great step towards working with the courts and, hopefully, can lead to clarity before the onchain vote in the coming week.

a16z & Haun Ventures raise billions as crypto VC funding hits a new monthly low

Deployed VC capital in crypto hit its lowest monthly point since July 2024, with $659M in funding across 63 rounds. Despite this, Haun Ventures’ new fund may signal a brighter future. They’re focusing on new financial infrastructure, new assets and markets, and the agentic economy, particularly mentioning prediction markets and perpetual futures. These are all theses we deeply believe in at Castle. To add fuel to the fire, a16z also announced a $2.2B crypto fund today.

Could this signal a bottoming in the market and in the industry? Or do we have longer to wait yet? We expect this transition to continue, as crypto VCs of the past fail, fold, or pivot, and newer, more finance-oriented VCs enter crypto, seeing huge opportunity for disruption, as the financial rails, markets, and assets of tomorrow are built onchain.

MegaETH after the dust has settled

Just five days after TGE, MegaETH has flipped Ink, Monad, OP Mainnet, Plasma, Sui, and Avalanche in terms of TVL surpassing $700M. Despite this, the token fell from an open of $0.18 to $0.12, a 38% drop. MegaETH has been pushing to differentiate itself, both in its architecture with real-time sequencing and in its launch and token unlock strategy, utilising a new approach with KPIs linked to emissions for both users and the team.

Feedback from the market has been mixed on the quality of the apps, but one thing is for sure: USDM, MegaETH’s native stablecoin, has been growing rapidly, surpassing $500M over the weekend and ticking off one of the first KPIs in Flux. With Flux, users can stake their MEGA tokens in reward contracts that unlock as KPIs are met. There are currently 677 million MEGA committed to this effort from users, with 5.3 billion tokens up for grabs as KPIs get ticked off.

The eight-week incentive campaign across the apps in the terminal has kicked off. Usage across these apps, alongside ecosystem-wide metrics such as USDM supply and collateral in lending markets, is worth tracking. Remember, no incentive campaign tokens are released until the end of the eight-week period, so no fresh supply enters the market during this period. Whether this will lead to an upward price movement back to the opening valuation remains to be seen.

What's happening in RWAs?

Real-World Assets (RWA) currently sits at an onchain value of $30.92 billion and is one of the categories that have seen only an uptick in value over time, unlike other crypto categories. This growth reflects a consistent interest in growing RWA onchain. There are multiple players involved in this significant value, including BlackRock, Franklin Templeton, and many other TradFi institutions.

RWAs or tokenised assets are just a way to bring exposure to certain assets onchain like U.S. Treasury Debt, Private Equity, Commodities, Private Credit, Real Estate, and more, basically everything which cannot be produced onchain.

Ultimately, RWAs bring new yield sources onchain. Onchain yield sources are fairly limited, with the core being staking rewards, lending markets, perpetual vaults, and funding rate arbitrage, all of which are net crypto exposure, but RWAs change this.

Offchain yield sources are mature and offer a better risk-to-reward ratio than onchain yield because, with the latter, a user is exposed to hacks, contagion risk, smart contract risk, and many other risk profiles at once, whereas with RWAs, this risk exposure is reduced. Now, RWAs are not risk-free either, but if we consider lower-risk assets like U.S. Treasury Debt, they perform better, especially given that the onchain yields have declined over time and are highly seasonal.

But the real edge is in leveraging RWA yields, which isn’t possible offchain at scale, but DeFi unlocks it through lending protocols.

RWA looping is harder to scale because it can’t be redeemed instantly due to liquidity constraints. To get value out of it, it must go through the full redemption process, which can take a lot of time, making liquidations harder in lending protocols.

This poses a huge challenge and is also why DeFi TVL didn’t follow the RWA trajectory.

But things are changing as protocols like Redstone have built out a reliable liquidation flow enabling RWA looping at scale. They do this by introducing auction-based liquidations and connecting positions to KYC-verified solvers, who take on the underlying asset offchain and close the position onchain.

RWA growth in DeFi and its scale have been limited, as only $2 billion of tokenised assets are currently used across DeFi, which is ~6-7% of the total RWA value. This equation appears to be evolving as the industry focuses on improving the liquidation flow for these assets.

The recent drop in active RWA DeFi TVL, as seen in the chart above, is due to Kelp’s rsETH hack, which prompted users to withdraw assets from lending protocols.

• Arbitrum DAO onchain vote on DeFi United disbursement: Snapshot closes May 7, with onchain opening shortly after.

• HIP-4 weekly volume and OI: Day 1 cleared ~$6m notional on BTC daily binaries, around 0.7% of daily prediction market activity.

• MegaETH’s Growth and KPI targets: First KPI ($500m USDM) ticked. ~677m MEGA committed, 5.3b up for grabs across the eight-week campaign on DefiLlama.

• TradeXYZ CBRS-PRE and the second IPOP.Cerebras IPO is set for May 30. We’ll be watching for IPO pricing, CBRS-PRE conversion at listing, and the second IPOP market.

A much stronger close this week, and a positive start to the new month. See you next week.

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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.

For the last cycle, crypto has been strengthening its infrastructure, but the core audience remained the same.

MegaETH looks to be the first serious bet against this pattern.

Today is TGE day, coming 80 days after mainnet went live.

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.

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BTC has continued to grind higher over the week, whilst ETF inflows top $750M for the third week in a row, logging their first eight-day inflow streak since October. Then, on Friday, BlackRock’s IBIT options open interest ($27.6B) overtook Deribit’s ($26.9B) for the first time, indicating growing institutional appetite for accessing regulated crypto derivatives directly in the U.S.

Life onchain has not been the same story. DeFi fought back after a month of exploits that culminated in the $292M Kelp hack last weekend, leaving Aave with $200M+ of bad debt. In just five days, DeFi United, led by Aave, raised more than 132,000 ETH to backstop the hole. 14 core ecosystem participants got involved, donating or lending large sums, with a sea of smaller donors, too. The relief fund can easily cover the bad debt with defiunited.eth sitting at over $300 million. DeFi will survive. This time, at least.

In this week’s edition, we’ll look more closely at DeFi United, its contributors and their own exposure, along with what would have happened had this not come together. Then we’re on to big growth figures on Solana across ETF flows, and its onchain RWAs. We’ll dive into three major centralised exchanges forging towards an agentic future and what we at Castle see playing out here, before preparing for one of the most anticipated events of the year: the MegaETH TGE, due in two days. All this and lots more, with our analyst also highlighting what Polygon might look like if Polymarket were to depart.

DeFi United crosses $300M

On Sunday, Consensys and Joseph Lubin pledged up to 30,000 ETH, pushing the total relief over 300 million. Contributors surfaced from across DeFi, with Aave DAO (25k ETH), Ether.fi (5k ETH), Stani personally (5k ETH), Lido (2.5k ETH), Kelp DAO (2k ETH), and Golem Foundation (1k ETH) all contributing alongside a 30k ETH 3-year loan from Mantle. These, combined with the 30,000+ ETH held by the Arbitrum DAO after the Security Council’s freezing last week, along with personal donations from Emilio Frangella (500 ETH), VP of Engineering at Aave and Ernesto & BGD Labs (350 ETH). We even saw the Ethereum Foundation cooperating in such a moment, swapping 21,269 aWETH for wstETH as part of Lido’s deleveraging work.

The real question to ask is: How did this happen? How did such a Herculean effort of recovery succeed? The awkward answer is that Aave is too big to fail. It’s too important to too many people that market participants do not lose faith and trust in Aave. This is highlighted by Aave’s Umbrella module, which, while sitting at $54 million in WETH, will not be activated in this recovery effort. In fact, throughout its history, Aave’s insurance protocol has never been used, and, most likely, in order for Aave to remain a beacon of safety and trust, it never will be.

The contributor map also provides some flavour. Below, we look at each contributor, whether they donated or loaned ETH, and what general exposure or alignment they might have to this bad debt.

From top to bottom:

• Consensys and Joe Lubin (30k ETH): whilst Linea and MetaMask were not directly affected. Consensys is deeply rooted within Ethereum, and allowing this contagion and cascade to play out would have hit the ETH market cap heavily and negatively impacted onchain activity for some time

• Mantle (30,000 ETH, 36-month loan): mETH sits in the LRT category on Aave, and Mantle was facing a 71.45% WETH shortfall under the scenario where losses were confined to L2s. In this set-up, they’ve managed to engineer a commercial outcome. The loan interest is Lido APR + 1%, with $11M of AAVE tokens and 5% of Aave revenue as collateral, and 130k AAVE delegated to the ecosystem for participation in governance.

• Aave DAO Treasury (25,000 ETH, pending vote): obviously, Aave is the protocol with the bad debt, and as such, would be expected to be one of the largest contributors. It has chosen to backstop itself, whilst leaving Aave’s Umbrella module intact. In addition to this, Aave now has an active proposal to pause token buybacks, after only just implementing them last year.

• EtherFi (5,000 ETH, pending vote): weETH alone accounts for 57.9% of Aave’s WETH borrowing. If the LRT loop trade on Aave dies, EtherFi’s central venue falls with it.

• Stani Kulechov (5,000 ETH, personal): As the face of Aave Labs, Stani’s reputation depends on a positive outcome here.

• Lido (2,500 stETH conditional + up to $3M EarnETH vault burn): Lido’s EarnETH vault held 9% rsETH exposure, and EarnETH depositors faced up to 9,000 ETH in losses if the relief vehicle didn’t close. The 2,500 stETH is conditional on the full deficit being covered.

• Kelp DAO (2,000 ETH): The protocol central to the exploit and that minted the unbacked token.

• Golem Foundation & Project (1,000 ETH): No direct LRT exposure. The closest thing to a true ecosystem-solidarity donor on the list.

• Emilio Frangella (500 ETH, personal): Aave Labs’ VP of Engineering. Personal donation. Team-aligned, reputational.

• Ernesto Boado & BGD Labs (350 ETH): Ernesto is CEO of BGD Labs, the protocol’s previous service provider. Despite BGD Labs leaving Aave, they still showed up to donate here.

• LayerZero (amount TBD): The compromised bridge.

• Ethena (amount TBD): USDe and sUSDe loopers on Aave were directly affected by the WETH liquidity freeze, and USDe’s collateral basket holds LSTs and LRTs.

• Ink Foundation & Tydro (amount TBD): Tydro is a friendly Aave fork on Ink.

Solana captures both ETF and RWA flows

Whilst Ethereum was scrambling to save its DeFi ecosystem from catastrophe, Solana has been hitting positive headlines since the Drift exploit earlier in the month. In the past 12 months, RWAs on Solana have grown from $170M to $2B (excl. stablecoins) as holders on the chain crossed 192,000. Meanwhile, SOL ETFs cleared $1B in cumulative total net inflow in the last two weeks, with large positions held by Goldman Sachs, Morgan Stanley, VanEck, and market makers such as Jane Street.

Despite Solana being on top this week, the Solana Foundation showed its class by lending USDT into Aave for the first time ever in support of the recovery efforts and brought $AAVE onto Solana for trading.

DeFi United.

CEXs going Agentic

Three major exchanges last week deployed products that enable agents to access their platforms, signalling a clear trend towards a change in the user experience on trading platforms. Coinbase shipped Agentic Market on Monday, April 20; Bybit MCP followed on Wednesday, and Binance Agentic Wallet shipped on Friday. Whilst each enables a different level of access for agents and payments, the direction is clear. Agentic Market in particular embraces x402 to provide live pricing, volume data, and integration guides for thousands of services, completely without API keys, accounts, or logins.

We unpacked the broader thesis and why this is just the beginning of agentic finance in a report last week.

MegaETH TGE in 2 days

With the launch of Brix last week, KPI 1 on the road to TGE was completed, requiring 10 apps from the Mega Mafia incubator programme to go live.

TGE is now just two days away, with speculation rife around opening valuations. The circulating supply is reported to be 6-7%. 1% from the Echo round, 1.25% from Fluffles, around 2% from the public ICO, plus whatever market makers and exchanges may receive. At pre-market, $MEGA is trading around $0.18, putting it at roughly a $1.8B FDV; meanwhile, Polymarket is pricing a 90% chance of launching with an FDV over $1B, matching the ICO price.

Polygon without Polymarket

Polygon made $5.65 million in chain fees in 2025. In 2026, they have already surpassed this number, making $13.5 million since the beginning of the year. A large share of the fees comes from Polymarket after they enabled fees through additional contracts on their platform in early January, clubbed with their rising volumes. This is also reflected in the fee spike below in the first week of the year.

To manage this spike in gas usage on the chain, Polygon went live with the Dandeli hard fork on January 9th, 2026, increasing the chain’s throughput to 20 mgas/s. This managed the sudden surge, and fees stabilised for users across the network.

But recently, Josh, VP of Engineering at Polymarket, highlighted that they are considering a chain migration, which could enable cheaper block space, faster transactions, and lower block times for instant settlement. This has sparked a long-overdue conversation around Polygon’s overdependence on the app.

Over the last 30 days, apps on Polygon generated ~$30M in revenue, with Polymarket accounting for 71% of that total. The top three apps account for ~95% of total app revenue, indicating a high concentration of revenue among a few apps. Additionally, this concentration has increased over time.

In comparison, the top three apps account for 42% on Ethereum, 57% on Base, and 46% on Arbitrum, indicating a more distributed revenue profile across those ecosystems. While app revenue concentration alone isn’t sufficient to evaluate a chain’s performance, it provides useful context for understanding where economic activity originates and how dependent the ecosystem is on a small set of applications.

In terms of gas usage, over the last 24 hours, two of the largest gas spenders on the chain were the Polymarket fee contracts, followed by Quickswap, reflecting the activity concentration.

If Polymarket leaves, this revenue leaves Polygon.

The estimated decline in fees is around 60-70% and would leave Polygon with ~$40k in daily fee losses. In the last 30 days, the chain made ~$2m. Removing Polymarket, this number comes down to around $800k, bringing the annualised fees generated to ~$10 million instead of ~$25 million with Polymarket.

On the other hand, Polygon is positioning itself more as a payment network, with a current stablecoin supply of $3.57 billion. Last month, payment apps on Polygon did $2 billion in volume, led by Tazapay, Paxos, Coinflow, and others. Polygon also has a great representation in P2P transfers for micro, small, and medium-sized payments, often competing with Ethereum and Solana.

Given these numbers and the different sources of activity and revenue on the chain, Polygon is performing well. But nonetheless, losing the most revenue-generating app on the chain has a significant impact.

What we can speculate on next is where Polymarket may move to, and whether they want their own sovereign chain to control, such as through the Arbitrum, Elastic (ZkSync), Polygon CDK stacks, or simply migrate to a faster chain like MegaETH or Monad. If they’re going to move, they’ll move to their own stack, in our opinion.

• MegaETH TGE on Thursday, April 30, the first real test of KPI-gated tokenomics at launch

• Aave DAO, Mantle, EtherFi, Arbitrum DAO, and others have governance votes, confirming whether DeFi United’s pledges deploy as expected

• Consensus Miami opens May 5, where crypto, finance, tech, and policy announcements are to be expected

This time DeFi was united, next time it won’t be so easy. See you next Tuesday.

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.

Chapter 1: Everything is going Agentic

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.

written by @TradFiHater and @noveleader ✍️

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