Amid a tougher liquid market, November still brought forth a wave of developments across tokenization, stablecoins, prediction markets, and institutional infrastructure. Alongside this there were several high profile exploits that reignited debates on infrastructure reliability.
On the protocol and infrastructure side, the month was unfortunately stained by several exploits. The most high profile one that took place was an exploit on Balancer, which led to a multi chain vulnerability that affected several pools, leading to an almost $100 million loss of funds. This led to Berachain halting its network to conduct an emergency hard fork after assets on their chain were exposed to the Balancer exploit, causing debate around their choice to proactively interfere in what otherwise should’ve been a decentralized system. More importantly, the Balancer exploit showcased that even time- and battle-tested smart contracts, which were considered extremely secure, still have latent attack vectors. A more significant exploit came through Stream Finance, which suspended withdrawals after an external fund manager disclosed a $93 million loss, creating turbulence in the highly leveraged CeDeFi side of the industry. Fearing further cascade-driven fallouts, asset managers (with undisclosed off-chain liabilities) withdrew most of their capital from the chain. As a result, many lending market pools experienced high borrowing fees, creating additional pressure on individuals still allocated within those pools. The pressures were two-fold: paying high interest rates, while lacking enough liquidity to unwind leveraged positions. This situation collectively resurfaced concerns regarding the lack of verifiability and transparency within the space. Finally, Korean crypto exchange, Upbit, suffered a $37 million Solana wallet hack and temporarily halted withdrawals, showcasing the vulnerability of even centralized systems.
Moving away from the exploits onto more positive developments, Uniswap published a major governance proposal. One of the most important changes was the introduction of protocol fees and the rerouting of sequencer fees from Unichain, which will be used to burn the UNI token. A major moment for the Uniswap team and its token holders, as a similar proposal has been previously put forward in governance votes in the past years. However, mostly due to legal reasons, these votes historically never found majority consensus due to major token holders such as a16z fearing the classification of UNI as a security under prior regulatory regimes. Besides the hopeful news for existing tokens, new token launches have continued. One of the most anticipated launches, Monad, initiated its token sale on Coinbase's platform. The Monad token sale ended up oversubscribed, leading to a total raise of $269 million. Recently, token sales in general have taken a resurgence, where it is becoming almost the norm before TGEs. The token sale launchpad getting more publicity has been MetaDAO. It is a public token sale platform which is employing a novel futarchy-based governance model for all the tokens that launch there; the system turns each governance action into two conditional markets on which users can speculate on the expected value of each outcome using the project's native tokens. The outcome with the most speculation and highest expected value is then automatically executed, ostensibly leading to the best outcomes for the business.
On the institutional front, Europe’s largest asset manager Amundi launched the first tokenized share class of one of its money market funds on Ethereum, supported with CACEIS as the technology partner and custody partner. Furthermore on the EU front, Securitize has received authorization under the EU DLT Pilot Regime to operate a regulated trading and settlement system on Avalanche. This makes Securitize the first firm ever to be licensed for tokenization infrastructure in both the EU and the US, which represents good progress for a company that has been rumored to be considering an IPO. Tokenized funds also expanded in Asia as Franklin Templeton debuted Hong Kong’s first tokenized investment product which is also part of the city's AI/fintech plan.
Stablecoins have consistently been a key focus in our newsletters for the past few months, and they remain one of the most important segments this month. Canada and Australia have been introducing their new regulatory frameworks aimed at stablecoin oversight and digital asset custody. Similarly to other major jurisdiction regulations, such as the EU and US, Canadian and Australian frameworks have outlined the importance of maintaining highly-liquid stablecoin reserve funds. Hong Kong has also established a real-time cross border CBDC trade settlement pilot with Brazil’s Banco Inter using Chainlink’s technology. Shortly after this, Chainlink unveiled its Chainlink Runtime Environment, a new platform designed to let institutions deploy compliant and interoperable smart contracts across public and private blockchains. Stellar has also begun live testing of a bank-issued stablecoin with U.S. Bancorp, with the bank citing operational control and security as the primary drivers of this partnership. Similarly, DBS and JPMorgan announced a collaboration to develop an interoperability framework for their tokenized bank deposits which will span across their respective on-chain systems to enable cross-network settlement. Even more geographically distributed banks have started pushing their own solutions. For example, KakaoBank in South Korea advanced its own stablecoin initiative into the development phase, while in Europe, French bank ODDO BHF launched its own euro stablecoin for institutional settlement. Despite this global progress on stablecoin adoption, China is notably keeping its hand steady by reaffirming its existing crypto trading ban, and still warning of stablecoin risks following a multi agency meeting.
Adoption from more commercially focused enterprises continues. Visa expanded its stablecoin settlement footprint through partnership with Aquanow. This will enable partner issuers, such as the initial partner Circle, to settle transactions across Central and Eastern Europe, the Middle East, and Africa with 365-day settlement, a positive change from the traditional payment rail workflows. Klarna has also introduced KlarnaUSD, a USD-backed stablecoin which will be issued on Stripe’s Tempo blockchain using Bridge’s Open Issuance system. To add onto Open Issuance’s progress, Sui is also preparing USDsui in a similar manner. Interestingly, against Christine Lagarde’s preferences, Czech National Bank became the first central bank to purchase Bitcoin for a test portfolio which includes Bitcoin a USD stablecoin and a tokenized deposit. The main intention being to monitor and get more comfortable with these technologies. On the issuer side, Circle expanded its own infrastructure with the launch of StableFX, on-chain currency exchange engine on their anticipated Arc network, as well as Circle Partner Stablecoins which supports non-USD stablecoin issuers for global settlement. Interestingly, Tether, the stablecoin leader, was put in the spotlight by S&P as they downgraded USDT’s stability score to ‘weak’ due to reserve risk and increased exposure to Bitcoin and other volatile assets. Tether has historically maintained backing for USDT in dollars or dollar-equivalents like short-dated treasuries, though they’ve also always transparently held risk-exposed assets as part of its reserves. It is clear that Tether intends to run a fractional reserve model for some time for USDT while interest rates allow for it, though at the same time Tether continues to work on USAT, their newest GENIUS-compliant stablecoin.
Prediction markets saw another leap in mainstream integration. Polymarket received the necessary CFTC approval for regulated US access through futures commission merchants and broker channels. Alongside this, Polymarket signed a multi-year partnership with UFC and Zuffa boxing to embed real time prediction data into live broadcasts. Kalshi, a major rival, has announced a $1 billion fundraise at an $11 billion valuation led by existing investor Paradigm. Interestingly, Kalshi’s distribution partner, Robinhood, has acquired a majority stake in LedgerX to strengthen its derivatives and prediction market capabilities. This acquisition hints that Robinhood may soon step in as a prominent and independent player in the prediction market space.
Slowly becoming the placeholder segment for our newsletter, centralized platforms saw major activity in M&A. Dunamu, the parent of Upbit and before the aforementioned hack had happened, has announced the completion of its merger with Naver Financial through a stock swap valued at around $7 billion. With this, the combined entity announced an $8 billion investment plan focusing on AI and blockchain. Coinbase acquired the Solana-native team from the social trading app Vector. This move is intended to improve on-chain execution for Solana users. Coinbase exclusively acquired the team, leaving Vector to continue as a separate project. However, there were quite some blemishes on the deal structure and process: the TNSR token price increased by almost eight-fold leading up to the announcement, and importantly neither Tensor’s NFT marketplace nor their tokens were part of the acquisition, meaning TNSR token holders ended up being stripped of their most valuable asset while not sharing in the upside of the acquisition. This unfortunately highlights the continued friction between the rights of equity and token holders. Coinbase’s competitor, Kraken, is moving forward with their IPO roadmap. Kraken has confidentially filed its S-1 registration for an upcoming IPO, shortly after raising $800 million at a $20 billion valuation, which saw participation from Jane Street and Citadel amongst others. Ripple also had a successful fundraise at $500 million at a $40 billion valuation with participation from a similar list of names. Alongside this, Ripple has launched a new prime brokerage offering in the US while also acquiring custodian Palisade to support its expansion into institutional payment infrastructure. Michael Saylor’s Strategy has had another successful fundraise where he raised $715 million in Europe through a preferred stock structure. This move is designed to increase its Bitcoin holdings and its USD reserve. The USD reserve's focus will be on paying out any outstanding obligations. If this is not enough to support the payables, Strategy has updated its mandate to accommodate. From now on, if the MSTR stock trades below the market Net Asset Value (mNAV) relative to its Bitcoin holdings, Strategy may resort to selling Bitcoin for the benefit of its shareholders. This is quite a contrarian stance compared to Saylor's previous preachings of never selling Bitcoin.
GTE has announced V2, which focuses on high throughput and low latency blockchain with sequencers located at the most optimal geolocations for trading. For example, if a user wants to trade equities they will be rerouted to New Jersey’s sequencer to get the most optimal price execution. Alongside this, GTE has announced a partnership with Polymarket to bring prediction markets to GTE, as GTE looks to become a super-app for decentralized finance. Maple passed a new governance proposal MIP-019, which sunsets SYRUP staking and activates the Syrup Strategic Fund that allocates a portion of protocol revenue for buybacks and balance sheet strengthening. This fits a broader trend of protocols dedicating a portion of their revenue to buybacks of the native token. On the more unfortunate end, Maple has encountered a setback with one of its previous partners, CORE, which is claiming that Maple broke a non-compete clause. This has led to the temporary stunting of Maple’s BTC product and any related growth efforts. Depending on the length of this lawsuit, Maple’s growth will be hindered in one of its avenues for the time being. Alongside aforementioned Monad’s mainnet launch, LEVR has launched their pre-deposit vaults which will act as ‘the house’ sharing losses and profits with the user once LEVR officially launches. On the Hyperliquid end, Kinetiq has undergone TGE, launching their token KNTQ which is anticipated to have utility across future products Kinetiq provides. Swell has reformed themselves as Voyager, an AI-powered trading platform built on Hyperliquid. It aims to bring together research, analysis, and execution in a single mobile and desktop experience. Lastly, SpaceComputer has announced their $10 million fundraise. With these funds, SpaceComputer will focus on developing satellite infrastructure to deliver a tamper-resistant on-chain environment.
