Remembering FTX

Today marks two years since the eventful day FTX filed for bankruptcy. Sam Bankman-Fried is in jail for 25 years, Ryan Salame likewise for 7.5 years, Caroline Ellison just commenced a two-year jail term and the FTX bankruptcy estate is making progress.

Though the story was widely publicized across mainstream media as a colossal failure of crypto writ large, that was never actually true. The specific areas of failure in the FTX debacle were in fact the kinds of centralized institutions that cryptocurrency was designed to upend.

Recall the commingling of funds — about $14.6 billion of FTX's native FTT token — between FTX and its trading arm, Alameda Research. When the value of FTT plummeted, Alameda's loans that were borrowed against FTT effectively fell underwater.

At the same time, Alameda also held an outstanding loan of 20 million MIM (the stablecoin of Abracadabra protocol) against $5 million FTT.

Source: Abracadabra

Alameda fully paid that debt as FTT cratered on Nov. 9 — two days before FTX filed bankruptcy — to avoid automatic smart contract liquidations. In sum, DeFi worked.

Today, Abracadabra seems to be pretty much dead. Its MIM stablecoin still has a market cap of about $44 million, but hasn't seen any growth since FTX's collapse.

Abracadabra's founder, the infamous Daniele Sesta, has apparently moved on from his once popular "Frog Nation" cult to…memecoins on the Sonic (previously Fantom) chain. The Abracadabra-affiliated project Wonderland, which at one point passed more than $2 billion in TVL, was also stealth-rebranded into a lending protocol, Volta, in late 2023. The move occurred after the project was scandalized with news that its pseudonymous treasury manager turned out to be Michael Patryn, the previously convicted co-founder of the failed Canadian crypto exchange QuadrigaCX.

Today, Abracadabra and Wonderland have turned out to be just another series of ghost projects in the ethereal graveyard of crypto's history.

When FTX collapsed, there were concerns that Binance would effectively monopolize the centralized crypto exchange market. At that time, its BUSD stablecoin was the third largest, and BNB Chain was also the second biggest L1 by TVL.

Today, Binance retains its position as the largest global cryptocurrency exchange, but fears of a "monopoly" haven't come to pass.

The BUSD stablecoin was deprecated after the New York Department of Financial Services (NYDFS) ordered its closure in February 2023. Binance then switched to a little known stablecoin, FDUSD, for stablecoin liquidity on its exchange, which has seen growth from $350 million to about $2.3 billion today.

As for BNB Chain, it's still fourth by TVL, overtaken only by Solana's meteoric rise in the past year.

Under FTX Ventures, SBF was also a major investor in dozens of crypto projects. Some of these included LayerZero, Yuga Labs, Near, as well as MoveVM chains like Aptos and Sui — whose mainnets weren't yet launched — and of course, Solana.

FTX's large token holdings cast a looming shadow over the future of these projects. Today, most of these projects seem to be doing just fine.

Finally, a post-FTX crypto industry quickly consolidated around the standard of "proof of reserves" as a minimum security standard for centralized crypto product offerings, as seen in newer efforts like Coinbase's cbBTC or Kraken's annual audits.

The failure of FTX undoubtedly set the industry back. But two years out, it seems like crypto has at least learned a few lessons.

— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)

P.S. We're looking to improve the 0xResearch newsletter and make it more relevant to your interests. Help us out by giving us your feedback in this 2-minute survey.

Solana tops L1 revenue:

Real Economic Value, or REV, refers to the sum of fees and tips paid to facilitate transactions on a blockchain. It serves as an indicator of demand and onchain activity. Weekly revenue data offers insights into the platforms driving the most activity.

Today's update reveals Solana leading for the third consecutive week with $48.7 million, followed by Ethereum at $39 million, and Base, which generated $1.38 million.

Base is the only Ethereum L2 with revenues in the seven-digits. All other Ethereum L2 solutions combined recorded $1.35 million.

— Macauley Peterson (X: @yeluacaM | Farcaster: @Macauley)

The Avalanche network stands at a pivotal juncture with the proposal of ACP-125, which aims to reduce base transaction fees from 25 nAVAX to 1 nAVAX on the C-Chain—a 96% reduction. This research leverages recent fee reduction events across major blockchain networks, particularly focusing on Base and Optimism, to predict ACP-125's potential impact on Avalanche.

Access the report

Avalanche fee analysis

Avalanche's governance proposal, ACP-125, aims to reduce the C-Chain base fee by 96%, from 25 nAVAX to 1 nAVAX, and target increased transaction volumes and wallet activity. Similar fee reductions on Ethereum L2s like EIP-4844 spurred significant transaction growth, providing a precedent for ACP-125's potential.

Blockworks Advisory's analysis indicates that ACP-125 could increase daily transactions by up to 80.9%, as well as active addresses, particularly in high-frequency sectors like memecoins, gaming and finance. However, despite growth projections, fee revenue might decline by 94-95%, highlighting a balance between adoption and economic sustainability.

In comparing Avalanche to Optimism, differences in wallet composition reveal Avalanche's direct transaction focus, whereas Optimism's diverse infrastructure and social segments suggest broader application use. The analysis underscores cost-sensitive sectors will likely drive initial growth, but maintaining sustainable revenue amid reduced fees will require strategic adjustments. ACP-125 is anticipated to make Avalanche more accessible, catalyzing network expansion while necessitating additional activity to offset the revenue shortfall. This shift aligns with Avalanche's growth strategy, emphasizing network effects over immediate value accrual and signaling a potential phase of dynamic, sector-specific adoption across its ecosystem.

For details, see the full report by Blockworks Research.

Polymer Labs today launched Polymer Hub mainnet, a real-time interoperability protocol for Ethereum rollups that uses IBC for efficient cross-rollup communication. This new protocol aims to reduce latency, bandwidth and costs, enabling Ethereum applications to scale and support complex, high-throughput applications for mainstream adoption. Polymer Labs raised $23 million in funding last January.
Espresso Network also unveiled its mainnet today. Billed as a fast, secure confirmation layer that enables real-time, cross-chain state verification, Espresso provides modular infrastructure for cross-chain applications, such as decentralized sequencing using multiple data availability options.
In May, signals indicated ETH ETFs might underperform expectations, argued @leptokurtic_ on Twitter, the pseudonymous founder of Ethena Labs. But now, parabolic growth in ETH CME open interest and a 14% CME basis (+300bps vs. BTC), may indicate a shift.
Avara launched Family, a secure, user-friendly non-custodial crypto wallet with built-in messaging, advanced transaction simulations and rich media support. Available on iOS, Family includes Pocket, an optional self-custody service using email or phone authentication. The app enables users to manage Ethereum assets, swap tokens, access dapps and chat securely.