Founder Hart Lambur explained the rationale succinctly on social media on Wednesday.

“Having a token generally hurts more than it helps,” he wrote.

The proposal concerns Across Protocol, a so-called bridge that allows users to move crypto between otherwise siloed blockchains. Across was the fourth-largest bridge when measured by user deposits on Wednesday.

Across is governed by investors who hold the ACX token. Risk Labs has proposed creating a private company, and converting current investors’ tokens into shares in that company. Alternatively, Risk Labs could buy out ACX holders who are uninterested in shares in the new company, according to the proposal.

The proposal comes amid a crisis of confidence for proponents of DAOs. The digital cooperatives were meant to provide a more democratic way to structure businesses, offering token-gated membership that empowered investors to suggest and vote on ways to improve a protocol.

But many of these so-called governance tokens have languished, and the DAO model has proven controversial, suffering low engagement and claims of “decentralisation theatre.”

Most recently, the DAO that manages Aave, the world’s largest decentralised financial protocol, saw months of bitter infighting that culminated in the planned departure of two prominent service providers.

In its proposal, Risk Labs said its token-centric management model has prevented it from striking deals with other companies.

“Transitioning to a traditional legal entity would meaningfully improve our ability to enter enforceable contracts, structure revenue agreements, and deliver more value to Across stakeholders,” the proposal reads.

The value of ACX doubled after Risk Labs’ proposal was published on Wednesday, jumping to more than six cents per token. That suggested many investors also saw the DAO model as a drag on Across’ fortunes.

Lambur said transitioning to a private company would allow Across to focus on stablecoins and artificial intelligence, two sectors that are expected to boom in the coming years.

According to the proposal, tokenholders could exchange their tokens for shares in the new company on a one-to-one basis.

“All token holders—institutional investors, employees, everyday token holders—are treated the same,” the proposal reads.

But there’s a catch: that option would be limited to ACX holders with more than 5 million tokens, a quantity worth about $30,000 as of Wednesday evening.

Another 100 US-based investors and roughly 500 international investors would be able to swap tokens for shares through a special-purpose vehicle. But that option would also be limited to investors with a certain number of ACX tokens, according to the proposal.

ACX holders who don’t meet that criteria or who aren’t interested in shares would be able to sell their tokens for four cents apiece — a 25% premium on the token’s pre-proposal price.

Risk Labs has also built the Uma protocol, which helps to settle disputes on Polymarket.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Those prosecutors called privacy a “cover story” and a “distraction” during their closing argument in Storm’s first criminal trial last July.

“The real money wasn’t in so-called ‘privacy’ for normal people,” prosecutor Benjamin Gianforti said. “It was in hiding dirty money for criminals.”

But it didn’t quite convince the jurors, who were split on the two most severe charges: conspiracy to launder money and conspiracy to evade sanctions, each of which comes with a maximum prison sentence of 20 years.

Jurors did convict on the third, lesser charge of operating an unlicensed money-transmitting business, which comes with a max sentence of five years.

Storm decried prosecutors’ decision on X on Monday night. He said he was being pursued “for writing open-source code. For a protocol I don’t control. For transactions I never touched.”

“A jury already couldn’t agree this was criminal,” he continued. “But the SDNY prosecutors want to keep trying with the hope of getting a different answer.”

In a two-page letter to Judge Katherine Polk Failla, prosecutors said they were ready to begin a retrial “this spring,” but were told the defence wouldn’t be ready before September.

Prosecutors requested that the new trial begin on October 5 or 12, “to avoid the emergence of further scheduling conflicts and any additional delays.” They expect it to last three weeks.

But the feds’ request doesn’t necessarily mean there will be a second trial.

After the first one ended, Storm asked Failla to toss all three charges. Prosecutors’ evidence did not prove he had acted with criminal intent and that the case should never have been tried in New York, he argued.

Storm has a hearing on that motion scheduled for April 9. And a recent decision from Failla suggests she’s sympathetic to some of the arguments he and his supporters have made in his defence.

This month, Failla dismissed a class-action lawsuit targeting the creators of Uniswap, the world’s largest decentralised exchange.

That lawsuit was filed by traders who lost money on “scam tokens” they found on Uniswap.

Here’s the judge’s take, summed up in a single sentence: “Plaintiffs cannot hold defendants liable for the misconduct of the unidentified third-party issuers.”

And that sounds a lot like the argument one of Storm’s attorneys, David Patton, made during the first trial’s closing arguments.

Tornado Cash makes it difficult, if not impossible, to trace crypto transactions on Ethereum and several other blockchains.

“Did that make it very useful to criminals? Of course it did,” Patton said. But that was true of many other everyday items.

“Probably the most obvious example is something you check in at the courthouse every day: your phone.”

Top DeFi stories of the week

This week in DeFi governance

VOTE: Sky votes to reduce buybacks for three months

VOTE: World Liberty Financial votes to introduce staking system

VOTE: Uniswap DAO votes to extend incentives campaign

Post of the week

Wise words. Remember this every time you stumble upon a new Twitter beef.

A few personal thoughts on competition.

First, and most importantly, life’s way too short to have real enemies. So don’t ever take competition too seriously. Their job is to beat you and your job is to beat them. Everything else is tactics. Some of which can be very annoying,…

— Michael Bentley (@euler_mab) March 4, 2026

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Hyperliquid’s HYPE token is now the fund’s largest non-Bitcoin position, Hayes said in a lengthy newsletter post on Monday.

It would pay off handsomely if Hayes’ forecast comes to pass: He predicts that HYPE tokens will hit $150 by August, a fivefold increase from their Monday price. He cited Hyperliquid’s aggressive buyback programme, the rapid growth of its permissionless markets, and the end of competitors’ incentive campaigns.

HYPE has soared more than 9% since Hayes’ comments were published.

The surge can also be attributed to traders rushing in to trade tokenised oil perpetuals on the decentralised exchange over the weekend amid the escalating conflict in the Middle East.

More than $160 million in oil contract volume changed hands on Hyperliquid in the past 24 hours.

“Pandora’s box is open,” Hyunsu Jung, CEO of Hyperliquid treasury firm Hyperion DeFi, told DL News. “The narrative around onchain financial services is changing.”

History of predictions

Hayes is and influential trader. But the BitMEX founder is known for making bold predictions, only to quickly reverse course.

Last year, he predicted Hyperliquid’s annualised fees would grow more than 100-fold by 2028, to $258 billion. A month later, a Maelstrom colleague published a report arguing HYPE would take a hit as its creators began selling previously locked tokens, and the fund sold some $5 million in HYPE.

Since then, HYPE has fallen from about $45 per token. It hit an eight-month low of $20 at the end of January, but has since recovered to about $34.

While Bitcoin continues to trade below $70,000 — far from the all-time high it hit last year — exchanges such as Hyperliquid can see profits rise even during downturns, Hayes argued. That’s because a downswing in prices can lead to increased trading and, in turn, exchange revenue.

Moreover, Hyperliquid spends roughly 97% of its revenue on buying back its token.

“No other project in all of crypto hands as much money back to token holders as Hyperliquid,” Hayes wrote.

His $150 price target requires Hyperliquid to grow its 30-day, annualised revenue to $1.4 billion, a figure it hit last August. Hayes says that is possible if the outsize growth of Hyperliquid’s permissionless markets, introduced in October, continues over the next several months.

“Hyperliquid must give traders something new and shiny to trade on-chain,” he wrote.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Analysts at Kaiko measured revenue for various blockchain networks, including Solana and Ethereum, using 2025 data and found that all but one network posted annual losses.

More importantly, a new institutional demographic is taking a much harder look at these numbers, thanks in part to the arrival of spot crypto exchange-traded funds.

“This exposes an uncomfortable reality the market has largely ignored,” wrote Laurens Fraussen, a research analyst at Kaiko, on Tuesday.

“While these protocols were never designed to run as traditional businesses, this matters increasingly for the investors, institutions, and retail traders who now hold these tokens.

Blockchain business

Blockchain revenue, unlike revenue ginned up by a traditional company, follows a slightly different arithmetic.

Networks like Ethereum, Solana, and Tron are constantly issuing new native tokens to pay validators for securing the network.

This constant issuance, not unlike equity issuance from a traditional company, dilutes the value of existing token holders and should be understood as a cost on the network.

That doesn’t mean that these networks aren’t generating revenues. Last year, Ethereum raked in over $260 million while Solana generated $170 million.

It’s just that this revenue is being outpaced by inflationary pressures on the token’s price due to constant dilution.

“Ethereum and Solana generate meaningful revenue, $260 million and $170 million, respectively,” Fraussen said. “But inflation costs of $1.88 billion and $4.32 billion make both deeply unprofitable to holders.”

What’s driving Tron?

Meanwhile, Tron raked in $624 million last year while incurring very little inflationary costs.

In fact, in 2025, the Tron network was destroying more of its native TRX token than it was issuing, creating a deflationary supply dynamic, according to Fraussen.

The latest date paints a similar picture. Tron continues to lead blockchain revenue by chain, according to DefiLlama.

The Tron network has established itself as the primary blockchain for stablecoin transactions, providing it with a steady revenue stream.

“The result is a revenue floor that Ethereum and Solana lack,” said Fraussens, “where fee income tracks speculation rather than utility.

Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at liam@dlnews.com.

Court victories come hard and fast for Uniswap right now.

Last month, a judge dismissed a patent infringement lawsuit brought against Uniswap by Bancor, a competing decentralised exchange.

Now, another federal judge has dismissed the final element of a class action lawsuit that targeted Uniswap’s creators.

Unlike the patent infringement case, this one is a win for decentralised finance writ large.

Here’s why.

The lawsuit was brought in 2022 by traders who lost money on “scam tokens” they found on Uniswap. But those scammy tokens weren’t created by Uniswap. In fact, their issuers have never been identified.

Here’s the judge’s take, summed up in a single sentence: “Plaintiffs cannot hold defendants liable for the misconduct of the unidentified third-party issuers.”

This is a recurring theme in crypto litigation. Victims of a purported crime looking for someone to blame often turn to the platform where the crime occurred, rather than the anonymous perpetrators of said crime.

The reason is obvious. True DeFi protocols are permissionless and immutable. That first term means that anybody can use the protocol, no questions asked. The second means that nobody, not even the protocols’ creators, can change the protocols to, say, limit access to “good guys.”

This freedom is a double-edged sword, allowing all kinds of malfeasance in the world of DeFi.

Take, for example, the criminal trial of Roman Storm. The software engineer was charged with conspiracy to launder money and evade sanctions after he released Tornado Cash, a protocol that helps users obfuscate their onchain crypto movements.

One of those users was North Korea, which used the crypto mixer to launder some $500 million in stolen crypto.

Jurors were deadlocked on the money laundering and sanctions evasion charges. But they convicted him of a lesser ofense, operating an unlicensed money transmitting business. He faces up to five years in prison.

In Uniswap’s case, traders from North Carolina, Idaho, New York, and Australia alleged they used a website built by Uniswap Labs to access the Uniswap protocol. There, they found and purchased 38 tokens that turned out to be rug pulls or pump-and-dump schemes.

The traders sued Uniswap, alleging it was functionally an unregistered broker-dealer and that it had aided and abetted fraud.

In 2023, a federal court dismissed the claims, arguing their concerns were “better addressed to Congress than to this Court,” as Judge Katherine Polk Failla put it in her Monday ruling, which included a brief history of the case.

“After all, no plaintiff would sue the New York Stock Exchange or NASDAQ for tweeting that its exchange was a safe place to trade after that plaintiff had lost money due to an issuer’s fraudulent schemes,” the judge’s 2022 ruling read.

Last year, an appellate court dismissed the traders’ appeal. But it asked the lower court to reconsider the allegations made under state law. The traders filed an amended complaint that added fresh state-level charges.

On Monday, Failla said the complaint suffers the same flaw as its predecessors.

“Despite three chances to get it right, Plaintiffs remain unable to allege plausible claims,” she wrote. “Plaintiffs’ theories of liability are still predicated on Defendants having ‘facilitated’ the scam trades ‘by providing a marketplace and facilities for bringing together buyers and sellers of Tokens[.]’”

Uniswap founder Hayden Adams took a victory lap on social media.

“If you write open source smart contract code, and the code is used by scammers, the scammers are liable, not the open source devs,” he wrote. “Good, sensible outcome.”

Top DeFi stories of the week

This week in DeFi governance

VOTE: Aave DAO votes to deploy on Monad

VOTE: Lido DAO votes to establish auto-renewing delegate incentive program

VOTE: Arbitrum DAO votes to use new quorum model

Post of the week

As my colleague Liam Kelly just reported, Aave DAO service provider and delegate Aave Chain Initiative is rage-quitting. It’s a profound development in a long-running civil war over the fate of the largest DeFi protocol, so I’m giving you three standout posts this week.

https://t.co/74E9xB7jj8 pic.twitter.com/lRrv4AkVG7

— Marc ”七十 Billy” Zeller (@Marczeller) March 3, 2026

GG, one of the few remaining functioning DAOs is folding back under founder control - similar happened to Maker / SKY

FWIW I think its safe to conclude DAOs in this form are dysfunctional and not competitive with traditional org structures, they only work to a point

I hope… https://t.co/wl908Mnotu

— daddy fiskantes ⭐️🩸 (@Fiskantes) March 3, 2026

Most DAOs were never about distributing power. They've just been LARPing to pass the "Howey Test" and avoid security laws.

Under current administration you no longer have to pretend. Not worth it to participate when you realize it's just a plutocracy with extra steps.. https://t.co/dbwIKVEvaZ

— Wesley— oss/acc (@wslyvh) March 3, 2026

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Marc Zeller, the founder of ACI, announced the move on Wednesday via a governance post.

In the post, he outlined that his firm, which conducts business development and manages governance for the wider Aave community, will wind down its operations over the next four months.

Zeller pointed to a crucial governance vote that passed on Saturday, which moved forward a proposal to grant Aave Labs, the core development firm behind the protocol, “the largest budget in DAO history.”

Stani Kulechov, the Finnish founder of Aave and CEO of Aave Labs, said the protocol will continue to operate as normal during the transition.

“We thank Marc for everything he has contributed and wish him well,“ Kulechov said on Tuesday.

A decentralised autonomous organisation is a community of token holders who can vote and propose amendments to a specific DeFi protocol to enhance it.

Zeller alleged that the vote was backed almost entirely by crypto addresses linked to the Labs entity.

“There is no role for an independent service provider in an environment where the largest budget recipient holds undisclosed voting power and uses it on its own proposals,” the post reads.

ACI’s exit from the largest protocol in decentralised finance is just the latest salvo in what has been a tumultuous passage for Aave.

Aave’s bumpy ride

Last month, BGD Labs, the developer team that deployed major updates to the latest iteration of the Aave Labs-built codebase, called V3, also exited the ecosystem.

The project’s native AAVE token plummeted 6% on February 20 after “the most productive engineering team” called it quits.

Zeller told DL News today that this event was the final straw.

“Everything was entirely preventable,” he said.

The primary contention revolves around a protracted conflict between Aave Labs and the purported agency that its DAO actually enjoys.

This could include hiring – or firing – a new auditor to revise the code or whether a protocol should launch on a new blockchain network.

In December, the community issued a proposal to transfer all of the project’s intellectual property, including social media accounts and the aave.com website, to the DAO. That proposal failed on Christmas Day.

To defuse the conflict, Labs proposed directing all revenue from Aave-branded products, including the Aave website, to the DAO.

But that proposal also included language “ratifying” Aave V4 as the “core technical foundation for future development.”

That would mean pausing work on Aave V3 and even changing its lending and borrowing parameters to compel users to migrate to V4 — a red line for BDG Labs.

The organisation viewed pausing work on a robust, lucrative version of the protocol’s codebase to move users to an unproven version as reckless.

As for what’s next, Zeller said he’s keeping an eye on what BDG Labs will do next.

“If they build a protocol, I’ll join,” he told DL News. “But now, I need time to wind down gracefully.”

Update: This story was updated on March 3, 2026, at 5 pm CET to include a comment from Aave Labs CEO, Stani Kulechov.

Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at liam@dlnews.com.

The proposal passed a so-called snapshot vote with more than 52% of votes cast in its favour and 42% in opposition.

Kulechov’s company, Aave Labs, has already amended the proposal in response to DAO feedback. Last week, Labs relaxed its aggressive timeline for moving Aave users to a newer version of the Aave protocol, v4.

The initial timeline frightened some members of the DAO, who said it was a risk the digital cooperative could not afford. More three-quarters of the DAO’s $286 million in lifetime revenue has come from the current version of the protocol, v3, according to data from TokenLogic.

V4 is currently undergoing security audits and is expected to be released later this year.

The controversial, wide-ranging proposal would have Aave Labs direct all revenue from Aave-branded products to the DAO. Such products include aave.com and the Aave mobile application.

But it would also have the DAO pay Labs $25 million for ongoing product development, another $17.5 million “payable upon specific product launches,” and 75,000 Aave tokens, worth about $9 million at Monday’s prices.

Critics have said that request is too steep, given the size of Aave’s treasury.

“We recognise there are many improvements based on feedback to be made to get the proposal to its final stage,” Aave Labs said on the DAO’s forum on Sunday.

“The goal is a token-centric model that positions Aave for the next decade of growth.”

Margin of Victory

The vote comes amid a heated debate over the future of the DAO and the Aave protocol.

Aave v3 is the largest protocol in DeFi, with nearly $27 billion in user deposits. But Labs has pushed for the DAO to turn its attention to v4, arguing it could dramatically boost protocol revenue.

“Aave V3 has served the protocol well, but it is approaching its architectural limits,” Labs wrote in the proposal. “V4’s architecture expands the range of revenue models the protocol can support.”

But prominent members of the cooperative have criticised Labs over its growing influence in DAO affairs. Marc Zeller, the head of Aave Chan Initiative, an Aave DAO delegate and service provider, previously referred to it as a “slow-motion coup.”

On Monday, Zeller said ACI would not continue debating the proposal, citing Kulechov’s use of Aave tokens to sway the outcome of the vote.

“The dice are loaded,” Zeller wrote in the Aave DAO governance forum.

“Continuing to negotiate inside a process where the outcome is predetermined does one thing: it gives that process legitimacy it hasn’t earned. We won’t do that.”

But Blockchain Capital General Partner Aleks Larsen said the proposal’s margin of victory would have been higher if his firm could participate in snapshot votes.

“A number of funds with material AAVE positions, Blockchain Capital included, hold tokens at a custodian that had deprecated Snapshot support,” he wrote.

“We were planning on signaling Yae in support of moving the Aave Labs proposal forward in the governance process, and had we and other institutional investors at this custodian had not been limited, we believe the proposal would have succeeded by a materially larger margin.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

That’s frightened delegates who say it’s a risk the DAO cannot afford — the current version of Aave, v3, is a smash hit, and its would-be replacement, v4, has yet to see the light of day.

This week, the critics notched a small victory. Before voting began on Wednesday, Aave Labs, the company behind the proposal, relaxed its aggressive timeline for moving Aave users to v4.

“While we think it is important for the DAO to align strategically behind V4 as part of this proposal, the timeline is up for discussion,” Labs, the company that built the protocol, wrote in the Aave governance forum earlier this week.

“Aave V3 is a battle-tested protocol, and it will continue to operate as a core part of the ecosystem for as long as the DAO decides it should.”

Voting is set to end on Saturday. As of Friday evening, “aye” votes held a narrow lead, with 52%.

Contractor departure

With more than $26.3 billion in user deposits, Aave is the largest protocol in decentralised finance. V3 accounts for more than 97% of Aave’s deposits, according to DefiLlama data. It has generated $184 million in revenue since its launch in 2022.

Before Labs’ about-face this week, it had proposed pausing work to improve v3 and even changing its lending and borrowing parameters in order to compel users to migrate to v4.

That didn’t just anger delegates. Bored Ghosts Developing, a major Aave DAO contractor founded by a former Labs executive, said it would not seek renewal of its contract this year.

“We believe even proposing this on the main revenue-maker & fully functional engine of Aave, is borderline outrageous,” Bored Ghosts wrote.

On Monday, Labs said it would not seek to force users to move to v4 after all.

“If a V3 market serves a particular chain or ecosystem well, the DAO has the authority to keep it running indefinitely,” the company wrote. “V4 also brings new use cases and opportunities that do not exist on V3, which we expect will drive adoption on its own terms … There will be no forced migration.”

Funding request

The proposal went well beyond cementing v4’s status as the future of the Aave protocol, however.

Labs has proposed directing all of its revenue from Aave-branded products to Aave DAO. It is a concession to critics who were furious to learn in December that Labs had ended its practice of sending the DAO certain revenue from aave.com, a website the company built.

The company has also proposed creating a foundation that would own and defend Aave trademarks, as well as a service provider agreement with the DAO that would see the cooperative pay Labs $25 million for ongoing product development and another $17.5 million “payable upon specific product launches.”

The proposal garnered several prominent supporters. But it also drew scepticism from major delegates, including Marc Zeller, one of Labs’ fiercest critics in recent months.

Zeller said the requested payment was far too high, amounting to 31% of the DAO’s war chest. Among other things, he requested that Labs break up its asks into multiple votes.

“Each stands on its own merits,” he wrote. “The community can support what it agrees with and refine what it doesn’t.”

Instead, Labs advanced the proposal to an initial vote.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The price of the Uniswap token, UNI, has outperformed major cryptocurrencies over the past seven days, rising 9% in that span as of Friday afternoon New York time. Bitcoin and Ethereum, meanwhile, fell 3.5% and 2.4%, respectively.

The proposals would activate Uniswap’s so-called fee switch on two versions of the Uniswap protocol deployed across eight layer 2 blockchains: Base, Arbitrum, OP Mainnet, World Chain, X Layer, Celo, Soneium, and Zora.

Activation of the fee switch would direct at least one-sixth of the fees collected on those blockchains from liquidity providers to a so-called token jar, where they can be claimed by investors who burn, or destroy, Uniswap tokens of equal value.

The fee switch has been active on v2 and the largest v3 trading pools on Ethereum since late December. It has generated a cumulative $3.3 million since then, according to DefiLlama data.

The proposal — which also seeks to flip the fee switch on all remaining v3 pools on Ethereum — would likely double that revenue. Base has overtaken Ethereum as the top fee-generating blockchain for Uniswap in 2026, with traders there paying $55 million across all four versions of Uniswap since January 1. Traders using Uniswap on Ethereum have paid just $37 million in fees in that span.

Uniswap is the largest decentralised exchange. It processed transactions worth more than $1.7 billion over the past 24 hours and more than $69 billion over the past month.

Founder Hayden Adams said the rollout of the fee switch on Ethereum had been a success, citing the growth in user deposits in crypto terms. (Deposits fell in dollar terms due to the collapse in the value of Ether over the past month.)

“Since UNIfication, we’ve monitored the first wave of fees on v2 and a large subset of v3 pools on mainnet,” Adams wrote on X, referring to the title of the November proposal that flipped the fee switch on Ethereum.

“Rollout went very well, with market adjusted [user deposits] up and burn working efficiently.”

After years of debate, Uniswap leadership proposed a fee switch in November. By encouraging Uniswap investors to destroy their tokens in exchange for protocol-generated fees, it reduces the UNI supply and, in theory, boosts its value.

But UNI has plummeted along with the rest of the crypto market since UNIfication was proposed, falling 59% to $3.74.

The wide-ranging proposal did more than flip the fee switch on Ethereum. It also burned almost 100 million UNI, the amount of tokens that would have been removed from circulation had the fee switch been implemented since Uniswap’s inception several years ago.

UNIfication also approved the development of a new mechanism to boost liquidity provider earnings, the eventual disbandment of the Uniswap Foundation, and the end of Uniswap Labs’ collection of additional fees from interfaces that allow non-technical traders to use the Uniswap protocol, including a Labs-built website and crypto wallet.

The proposal to expand the fee switch passed an initial vote unanimously. A final pair of votes ends on March 4.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The Lightning Network has been promoted by Bitcoin maxis like Twitter co-founder Jack Dorsey, who last year integrated the layer 2 into his payments platform, Cash App.

Bitcoiners argue that Lightning will help the big orange coin become — in the words of Dorsey — “everyday money”: skirting transactions around the main chain cuts costs and increases speed, allowing people to use Bitcoin for daily purchases.

And the data would have you believe that it is working. Bitcoin brokerage River this month posted figures showing that transactions on the second-layer solution in November hit $1.1 billion, much to the delight of Bitcoiners on Crypto Twitter. In the same period in 2024, volume stood at $286.5 million.

Bitcoin's Lightning Network exceeds $1B in monthly transaction volume. pic.twitter.com/USmosCQ1gM

— River (@River) February 19, 2026

Though the picture appears to be more complicated, experts told DL News.

What’s it really for?

Despite in the past being pushed for smaller transactions, Lightning, which debuted in 2018, isn’t just being used for microtransactions like tipping or buying a cup of coffee.

“We are seeing larger transactions go through right on a regular basis,” Jesse Shrader, co-founder of Bitcoin infrastructure firm Amboss, said.

He added that his company had seen Lightning transactions surge by 300% since January, and the average size of a Bitcoin transaction now stands at 74,000 sats — worth $50 at today’s price of $67,714 per coin.

Lightning made headlines this month when American crypto exchange Kraken helped facilitate a $1 million transaction on the network.

“By dramatically reducing settlement times, the Lightning Network unlocks Bitcoin’s potential at global scale, and we’re proud to help bring that future into reality,” Kraken’s head of onchain, Calvin Leyon, said of the transaction.

Indeed, exchanges using Lightning to move money may be the reason why transaction volume has spiked.

“The average transaction value on the Lightning Network has actually increased and it goes to show that it’s not so much peer-to-peer payments for coffee or whatever — it’s more like a settlement between exchanges or between businesses,” Spencer Yang, a managing partner of crypto investment firm, BlockSpaceForce, told DL News.

He added that Jack Dorsey integrating Lightning into Square’s payment terminals could also be playing a part.

Payments company Block, the parent company of Square, last year debuted a new Bitcoin payments system, allowing merchants to accept the cryptocurrency over the Lightning Network.

It isn’t clear how many merchants are using the Lightning network to accept payments. Block did not respond to questions from DL News.

Bobby Shell, VP of marketing at Lightning infrastructure company Voltage, told DL News that nearly 29% of Bitcoin transfers pass through the layer 2, with Coinbase routing around 15% of its transactions on the network.

“This isn’t a niche anymore,” he said.

Privacy and price matters

But transaction volume may also be surging due to rising costs on other blockchains, Shrader said.

“Tether on Tron is probably one of the best examples,” he noted.

The cost of sending USDT on the Tron network has risen in recent years to nearly $4 per transaction. The network was once the go-to for small-dollar transactions because of its low costs. Cheaper blockchains, though, now exist.

Using Lightning, in comparison, can cost less than a fraction of a cent.

But another reason transaction volume has shot up may be down to its privacy-centric nature: Sending coins via Lightning is harder to trace compared to a standard Bitcoin network transaction.

“But at the end of the day, lightning is incredibly private,” said Shrader. “From a practical and a data analytics perspective, there’s not a lot that you can do to track it.”

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at mdisalvo@dlnews.com.

That roadmap features several changes to parts of the blockchain that are vulnerable to quantum computers. It does not include a proposed timeline for those changes, though at least one proposed change is currently being considered for inclusion in an Ethereum upgrade expected to arrive in the latter half of 2026.

Quantum computers are still theoretical, but researchers’ rapid progress building them has frightened some blockchain engineers and even pro-crypto Wall Street executives.

It has roiled the Bitcoin community, which is divided over the urgency of the issue. Ethereum developers, however, have signalled they want to take a more proactive approach to the looming threat.

Buterin is among the most concerned. He warned in November that quantum computers could break Ethereum’s underlying security model before the next US presidential election in 2028.

His solutions to the quantum threat, all explained in highly technical jargon, include certain hash-based signatures, recursive STARKs, native account abstraction, and protocol-layer recursive signature and proof aggregation.

Put simply, they would update the cryptography that currently secures the blockchain. And at least one of those changes could arrive by the end of the year.

Hegota

Ethereum developers are currently debating which improvements should be included in a forthcoming upgrade dubbed Hegota.

Several weeks ago, Ethereum Foundation developer Felix Lange suggested that Hegota include frame transactions — a new type of transaction that would offer a more robust version of account abstraction.

“It’s also for us the most important one, because of the readiness for the post-quantum world,” Lange said.

“We feel like we have to get started with the off-ramp from ECDSA, and in order to do that, we need a comprehensive system that can deal with whatever signature algorithms we want to use.”

ECDSA is the acronym for the quantum-vulnerable cryptography that undergirds Ethereum currently.

Buterin previously suggested he supported including frame transactions in Hegota. On Thursday, he appeared to renew his push for the feature.

Adding frame transactions would give Ethereum users “first-class accounts that can use any signature algorithm,” including those that cannot be broken by quantum computers, Buterin wrote.

Other proposals in Buterin’s quantum roadmap require advances in computer science.

“It’s manageable, but there’s a lot of engineering work to do,” he wrote.

Quantum focus

Last month, the Ethereum Foundation said it had established a post-quantum team following “years of quiet R&D.”

The Swiss nonprofit would also host new, bi-weekly calls in which Ethereum developers would discuss quantum security and offer a new $1 million prize to anyone who can help harden quantum-resistant cryptography.

Foundation employees are also working on a website that will detail a post-quantum strategy for Ethereum that “targets a full transition in coming years with zero loss of funds and zero downtime,” according to researcher Justin Drake.

But support from Buterin and the Ethereum Foundation doesn’t necessarily mean Ethereum developers will go along, a point that Drake emphasised earlier this week when he released a “strawman roadmap” for the blockchain.

The “strawmap” it was named due to “the limits of drafting a roadmap in a highly decentralised ecosystem.”

“An ‘official’ roadmap reflecting all Ethereum stakeholders is effectively impossible,” Drake wrote, calling it “one reasonably coherent path among millions of possible outcomes.”

It details potential Ethereum upgrades through the end of the decade and features five focus areas, including quantum resistance.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.

The foundation would allow Fluid’s developers to comply with anti-money laundering and know-your-customer rules as they seek to strike deals with traditional financial institutions.

“Establishing the Fluid Foundation allows the protocol to meet AML, KYC, banking, and regulatory requirements when interacting with off-chain counterparties, without compromising the decentralised governance that token holders have today,” DeFi Made Here, the new foundation’s pseudonymous director, wrote on X this week.

“The Foundation cannot be owned; it is governed by its constitutional documents, which give $FLUID token holders ultimate authority.”

DeFi Made Here, or DMH, was previously the chief operating officer at Fluid developer InstaDapp.

Fluid, a decentralised financial protocol with more than $1 billion in user deposits, features a decentralised exchange and a lending-and-borrowing platform, putting it in competition with Aave and Morpho.

All eyes on Aave

The proposal comes as stakeholders in Aave, the world’s largest decentralised financial protocol, clash over ownership of brand assets, including aave.com and related social media accounts.

Aave’s fight has seen its token plummet relative to rival protocol Morpho’s over the past 90 days, though its share of the crypto lending market has remained largely unchanged.

But DMH said the proposal was not motivated by the trouble at Aave.

“Regarding allegations that this is done because of Aave governance drama - this is not true,” they wrote on X this week.

“We’ve been actively working on setting up the foundation for the past 6 months - much earlier than things escalated at Aave.”

Aave Labs, the company that built the Aave protocol, has clashed with members of Aave DAO, the digital cooperative that controls the protocol. DAO members have chafed at Labs’ growing influence, and some have demanded that Labs relinquish brand assets, such as the Aave website.

In a bid to settle the fight, Labs recently proposed creating a foundation to own and defend Aave trademarks and “operate in alignment with DAO-approved parameters,” among other things.

Labs did not detail the proposed foundation’s structure, and DAO members have expressed displeasure with other elements of the proposal.

Token holders remain in charge

DMH said the new foundation has already been incorporated in the Cayman Islands, and its funding would come exclusively from the DAO that governs the Fluid protocol.

“Token holders will continue to retain oversight over objectives, budgets, and major decisions as they do now.”

Significantly, InstaDapp would relinquish all intellectual property, including websites and the protocol’s smart contracts.

“Instead of these assets remaining with the team or early contributors, they will transition into a neutral, mission-aligned entity: the Fluid Foundation,” DMH wrote. “This gives token holders real, enforceable control over Fluid’s IP for the first time.”

InstaDapp employees will hold director seats at the foundation and manage its day-to-day operations, though they will be bound by DAO votes, according to DMH.

The DAO controls the revenue generated by the protocol, and DMH has requested that it approve a $250,000-per-month grant to the foundation “to fund the team responsible for maintaining and growing the protocol.”

DMH and InstaDapp did not immediately respond to requests for comment sent over X.

The transfer of IP and the monthly grant are both subject to DAO approval. In the Fluid governance forum, one commenter said the grant took up too great a share of protocol revenue and questioned the need to transfer IP ownership to a DAO-controlled foundation.

But others were supportive.

“Doing this before a potential equity+token ownership conflict arises is smart,” Ignas, a delegate in several DAOs, wrote. “Aave is going through similar discussions now but under tension. Fluid is getting ahead of it.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

An investigation released by pseudonymous crypto sleuth ZachXBT on Thursday pinned the schemes on Broox Bauer, an employee who handled business development for the platform.

Bauer, along with several associates, allegedly used Axiom’s internal tools to look up customers’ crypto wallets and track their activity, giving the group a significant advantage over other traders.

“There was little to no monitoring or access controls in place to mitigate this abuse from happening in the first place,” ZachXBT said. “The extent of data granted to employees in an easily accessible dashboard is unusual for business development roles.”

It’s not clear how much Bauer and his associates made through the schemes, which allegedly started just months after the platform launched in January 2025.

In a recorded call that took place in early February, Broox allegedly outlined a plan to help one of his associates profit $200,000 by abusing his privileged access, ZachXBT said.

Bauer did not immediately respond to DL News’ request for comment.

Insider trading concerns

The accusations come as concerns over insider trading of crypto assets and on prediction markets like Polymarket and Kalshi reach a fever pitch.

On Tuesday, the administrator overseeing Terraform Labs’ winding down filed a lawsuit against Jane Street, alleging that the high-frequency trading firm used nonpublic information to profit from Terraform’s collapse.

Last month, several Democratic politicians in the US co-sponsored the Public Integrity in Financial Prediction Markets Act of 2026, a bill that prohibits elected officials from buying, selling or exchanging prediction market contracts tied to the administration’s policies.

On February 23, ZachXBT teased that he planned to release an exposé on alleged insider trading, leading to the creation of a Polymarket prediction market that let bettors gamble on the named project.

Before the investigation was posted, bettors gave Axiom around a 30% chance of being named, the highest out of all available options.

Profitable company

Axiom is a crypto trading platform founded in 2024 by Henry Zhang, otherwise known as Mist, and Preston Ellis, who also goes by Cal — both recent college graduates at the time.

The platform went through Y Combinator’s Winter 2025 batch and launched in early-access shortly after. It quickly became one of the most profitable companies in the crypto industry, generating over $390 million in revenue to date, according to DefiLlama data.

ZachXBT is a prolific crypto sleuth who has conducted dozens of investigations across the industry. He said he was retained by Axiom to investigate allegations of misconduct.

“We are surprised and disappointed to hear that someone on our team abused internal customer support tools to look up user wallets,” Axiom said in response to the investigation.

“We have removed access to these tools and will continue to investigate and hold the offending parties responsible.”

Wallet spreadsheet

According to ZachXBT’s investigation, Bauer and his associates created a spreadsheet compiling the wallet addresses of potential targets obtained by abusing Axiom’s tools.

Multiple people named on the spreadsheet or in leaked screenshots were contacted and independently confirmed the accuracy of wallet data attributed to them, ZachXBT said.

It wasn’t just wallet addresses that the group had access to. Axiom’s tools allow Bauer to look up a user’s entire wallet list, the wallets that user is tracking, their transaction history, nicknames of wallets, and linked accounts.

“Given Broox is based in NYC I think the case presents itself as a good opportunity for SDNY since it may fall within their jurisdiction,” ZachXBT said.

The US Attorney’s Office for the Southern District of New York — SDNY — is one of the most active federal prosecutors in pursuing crypto-related fraud, manipulation, Ponzi schemes, insider trading, and money laundering cases.

The federal trial court has litigated some of the most high-profile crypto cases, including those against FTX founder Sam Bankman-Fried, Terraform Labs founder Do Kwon, and Mango Markets exploiter Avraham Eisenberg.

“Whether or not criminal charges are filed, I hope the Axiom co-founders further investigate the abuse and consider taking legal action against the employees involved,” ZachXBT said.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

According to the February 25 proposal, those who hold and stake 10 million WLFI tokens — dubbed Node stakers — will receive the right to convert USD1 directly to other stablecoins through the project’s partner market makers. This will allow Node stakers to profit from small price differences that emerge between USD1 and other dollar-pegged tokens.

“WLFI subsidises the market makers to maintain one-to-one parity, effectively passing the arbitrage opportunity — which today is captured exclusively by institutional market makers at ~10–15 bps — to Node stakers,” the project said in the proposal. Bps, or basis points, is a common financial term referring to one hundredth of a percentage point.

At current WLFI token prices, governance participants need to spend around $1 million to become Node stakers.

Since the start of the year, World Liberty Financial’s USD1 stablecoin has swelled to a circulating supply of over 4.7 billion, becoming the fifth-largest stablecoin on the market.

Although USD1 and many of its rivals are backed one-to-one by dollars, they are not hardcoded to trade at that price, and instead rely on market forces to keep them close to their targeted value.

This creates a lucrative opportunity for market makers — financial firms or individuals who continuously offer to both buy and sell various stablecoins and profit when they deviate from their targeted value.

World Liberty Financial’s new proposal ensures that firms that want to take advantage of market-making opportunities for USD1 also give something back to the project.

WLFI lock-ups

The proposal comes just days after World Liberty Financial said it suffered a “coordinated attack” that briefly knocked USD1 off its target dollar value.

“Attackers hacked several WLFI co-founder accounts, paid influencers to spread FUD, and opened massive WLFI shorts to profit from the manufactured chaos,” a Monday post from the official World Liberty Financial X account said.

USD1 returned to its targeted dollar value the same day it broke its peg. Yet, spooked investors have pulled out over $290 million from the Trump-linked stablecoin since the incident, according to DefiLlama data.

World Liberty Financial’s proposed staking system also overhauls how the project’s governance operates more generally.

Those who wish to vote on proposals must lock up their tokens for a minimum of 180 days.

According to the proposal, governance power will be weighted by the amount of tokens staked and the remaining lock-up duration using a non-linear formula to prevent excessive concentration of voting power.

“This ensures that voting power is held by participants with long-term alignment to the protocol who elect to participate in the governance consensus mechanism, not short-term holders or speculators,” the project said.

In addition to the $1 million Node staker requirement, those who stake over $5 million worth of WLFI will receive additional benefits, including guaranteed direct access to the project’s team for partnership discussions and eligibility for any future economic incentives.

Stakers will receive additional WLFI tokens as rewards at an annual rate of around 2%, as long as they participate in governance votes. WLFI staking rewards will be funded by the project’s treasury.

The WLFI token has traded down around 1.6% since the proposal was posted to the World Liberty Financial governance forum.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Octane Security, a self-described “AI-native security firm,” said on Wednesday its AI tool found a high-severity bug in Nethermind, software that runs the Ethereum blockchain.

Nethermind fixed the bug before it could be exploited, Octane said. Nearly 40% of Ethereum validators use Nethermind, and an exploit could have caused them to miss blocks, affecting Ethereum’s liveness and availability.

“This is one of the highest-stakes demonstrations yet of AI-led vulnerability research,” Giovanni Vignone, founder and CEO of Octane Security, said in a statement.

“AI has dramatically accelerated vulnerability research. Bug hypotheses, exploit verification, and production-grade reports can now happen 10× faster, which rewrites the threat model for every organisation putting code onchain.”

Octane’s announcement comes just five days after AI firm Anthropic rattled cybersecurity stocks with a new security tool that “scans codebases for security vulnerabilities and suggests targeted software patches for human review.”

Moonwell

AI has taken the tech world by storm, enabling experienced software engineers to write code faster than ever before. In crypto, it has fuelled the idea of agentic AI where programmes conduct trades independent of human beings.

But it has also fanned concerns.

This week, a report from Citrini Research rattled Wall Street by envisioning a future where AI has replaced human workers and nuked the world economy. The S&P dropped more than 1% on Monday as a result.

Even AI developers are worried about the potential military applications of their creations, as Anthropic’s clash with the White House shows.

And AI has triggered fears that the technology can be used to break cybersecurity.

Some have worried it could empower hackers. Others are concerned engineers could become over-reliant on AI-written code and release buggy software.

That concern came to life earlier this month, when a bug in AI-generated code cost users of crypto protocol Moonwell nearly $2.7 million in crypto. One Moonwell software engineer said the code in question had passed an audit from crypto security firm Halborn.

“AI coding will become more and more prevalent, and the increasing adoption of vibe coding remains one reason why more investment in design, threat modelling, formal methods, fuzzing, and 24/7 monitoring are critical steps for every web3 team to take,” Seth Hallem, CEO at crypto security firm Certora, told DL News after the Moonwell incident.

Octane’s experience suggests that investment might increasingly flow toward AI.

In the run-up to the launch of Ethereum upgrade Fusaka last year, Octane joined an audit contest sponsored by Gnosis and Lido. The contest rewarded security researchers for finding bugs in Nethermind and the other so-called clients that run Ethereum.

Octane partnered with pseudonymous security researcher Guhu, who reviewed potential bugs flagged by the company’s AI.

Octane and Guhu submitted 17 issues, 16 of which were fixed by client teams. Nine were considered severe, and, of those, “six are believed to be unique,” the company said. They ultimately placed fourth in the contest, earning $70,633 in rewards.

They also submitted the Nethermind bug to a bug bounty program run by the Ethereum Foundation.

According to Octane, a hacker could sabotage validators running Nethermind by submitting a “malformed transaction.”

“This could have caused sustained missed slots across all Nethermind-based proposers for as long as the malformed transaction remained in the pool,” the company said.

“Exploitation would have removed that capacity from the network, causing affected validators to miss block rewards, incur inactivity leak penalties, and degrade overall network liveness and availability.”

The bug was never exploited and was promptly patched. The Ethereum Foundation awarded Octane a $50,000 bug bounty, the company said.

“If you are not using AI to find and fix flaws continuously, you are competing against the blackhats who are,” Vignone said.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

As my colleague Tim Craig noted last week, US Treasury Secretary Scott Bessent recently forecast US dollar stablecoins would swell to $3 trillion by 2030. Citibank predicted $4 trillion. S&P Global gave euro stablecoins a range of $250 billion to $1.1 trillion.

Put another way: it’s critical that investors and policymakers know whether their stablecoins are, well, stable. And new research from MIT suggests there are risks lurking in plain sight, and that last year’s Genius Act did nothing to address these risks.

Even when stablecoins are fully-backed by highly liquid assets, they can break their peg in times of market stress as underlying infrastructure buckles, the researchers found.

“A stablecoin’s ability to trade at par under stress depends not only on its asset quality, but on the functioning of redemption mechanisms, markets, and operational infrastructure,” they write. “The Genius framework leaves these stress-contingent dynamics largely unspecified.”

Stablecoins need to keep their peg. And virtually every conversation about stablecoin resilience centers on the issuer’s reserve assets.

“It implicitly treats stablecoin stability as a balance-sheet problem, resolvable through conservative asset holdings and supervision,” the researchers note.

It’s why Tether got a rather poor grade from S&P last year. S&P cited Tether’s reliance on supposedly high-risk reserves, such as gold and Bitcoin, when it said the issuer was vulnerable to a market downturn.

Even if Tether were invested entirely in short-duration US Treasuries, as money market funds are, a “run on the bank” could challenge its ability to quickly sell those treasuries.

Broker-dealers stand between buyers and sellers of treasuries. And they can be a bottleneck that limits stablecoin issuers’ ability to honour mass redemption requests, according to the researchers.

For example, when the coronavirus hammered markets in March 2020, bid-ask spreads on treasuries widened. If that were to happen again, a run on a stablecoin could knock it off its peg, setting off a doom loop.

There is an easy fix: let stablecoin issuers borrow directly from the Federal Reserve, and address the bottleneck issue. But then they would be subject to stringent bank-like regulations, which could make them unprofitable in a low-interest rate environment.

Traditional markets aren’t the only threat to stablecoin stability.

Issues with blockchains and smart contracts could also knock a stablecoin off its peg, according to the researchers.

On a matrix that ranks such risks by severity and likelihood, they identify two that are most worrisome: Smart contract logic flaws and bridge failures.

Then there are more quotidian problems. Last year, Paxos accidentally minted $300 trillion PYUSD. Though it corrected the problem minutes later, Aave had to pause PYUSD activity and the stablecoin briefly traded below par.

In the US, banks are attempting to re-litigate the Genius Act, annoyed that crypto companies seem to have found a loophole allowing them to pay customers yield on their holdings. The debate has held up landmark legislation that would bring the rest of the crypto industry out of its legal grey area.

If there are additional risks the law never considered, this might not be Congress’ last stablecoin battle.

Top DeFi stories of the week

This week in DeFi governance

VOTE: GMX DAO votes to fund GMX Labs for two years

PROPOSAL: Fluid DAO considers creation on nonprofit foundation

VOTE: Stablecoin issuer Angle Protocol votes on incentive program

Post of the week

Crypto sleuth ZachXBT made waves when he recently said he would soon provide evidence that employees at one of crypto’s most profitable companies were engaging in insider trading. That has led to speculation as to the company’s identity, a prediction market, and many, many jokes.

Imagine the team being investigated knows that it will be exposed and decides to do one last act of insider trading by betting on themselves. pic.twitter.com/mC5Y4NwNse

— Tom Wan (@tomwanhh) February 24, 2026

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.

At around 1 pm London time on Monday, posts mentioning World Liberty Financial started disappearing from the project’s co-founder Eric Trump’s X account.

At the same time, USD1 holders began dumping their tokens en masse, pushing the stablecoin down to just over $0.99 in their haste to exit.

“Attackers hacked several WLFI cofounder accounts, paid influencers to spread FUD, and opened massive WLFI shorts to profit from the manufactured chaos,” a Monday post from the official World Liberty Financial X account said.

“It didn’t work.”

Sharp turnaround

The USD1 stablecoin has since returned to its targeted dollar value. Yet that’s done little to reassure fans of the $3 billion crypto project.

Investors have already pulled out over $270 million from the Trump stablecoin since the incident, according to DefiLlama data.

The project’s governance token, WLFI, shed more than 8% of its value in the aftermath.

It’s a sharp turnaround for World Liberty Financial, which just courted some of the crypto industry’s most high-profile and influential figures at its splashy Mar-a-Lago event dubbed the World Liberty Forum.

Binance founder Changpeng Zhao and Coinbase CEO Brian Armstrong were joined at the gathering by financial heavyweights, including Goldman Sachs CEO David Solomon and Nasdaq CEO Adena Friedman.

World Liberty Financial and the Trump Organization did not immediately respond to requests for comment.

USD1 fears

Founded in 2024, World Liberty Financial’s stated mission is to “democratise access to financial opportunities while fortifying the global status of the US dollar.”

The project’s nine co-founders include President Trump, his sons Eric, Donald Jr, and Barron, US Special Envoy to the Middle East Steven Witkoff and his sons Zach and Alex, and Trump allies Zak Folkman and Chase Herro.

Herro, a former “get-rich-quick” class instructor, has previously referred to himself as the “dirtbag of the internet.”

In a since-deleted YouTube video, Herro said: “You can literally sell shit in a can, wrapped in piss, covered in human skin, for a billion dollars if the story’s right, because people will buy it.”

World Liberty Financial’s biggest success is its USD1 stablecoin.

The token, which the project says is fully backed by US dollars and dollar equivalents, has grown to a market capitalisation of more than $4.7 billion, making it the fifth-largest stablecoin.

So when USD1 fell below its target on Monday, holders were understandably rattled.

“All USD1 funds remain completely safe, secure, and fully backed. Our infrastructure and team operated exactly as designed,” World Liberty Financial said on X.

Unusual activity on Eric Trump’s X account added to investor anxiety.

The World Liberty Financial co-founder deleted several recent posts that mentioned the project around the time USD1 started falling in value.

It’s not clear why the posts were deleted, or if the activity was the result of Eric Trump’s account being hacked. Older posts mentioning the project were not deleted.

Insider dealing?

The alleged attack on World Liberty Financial comes as the project fights off critics and allegations of insider dealing.

Last month, a Wall Street Journal investigation alleged that Abu Dhabi royal Sheikh Tahnoon bin Zayed Al Nahyan secretly signed a deal with the Trump family to purchase a 49% stake in World Liberty Financial for $500 million.

Critics have tied the transaction to a landmark artificial intelligence deal in which the US agreed to grant the Abu Dhabi–based firm G42 access to advanced AI chips.

A spokesperson for World Liberty Financial has confirmed the transaction’s existence to multiple news outlets.

Earlier in November, a 60 Minutes investigation tied a $2 billion investment deal between Binance and Abu Dhabi’s MGX to a presidential pardon given to the crypto exchange’s founder, Changpeng Zhao.

Critics say the deal, which was conducted with USD1, was done as a favour in exchange for the pardon.

Binance CEO Richard Teng and Zhao’s lawyer Teresa Goody Guillen have both dismissed claims that the exchange helped boost USD1 before Zhao received the pardon.

The White House has repeatedly refuted allegations of insider dealing.

“President Trump’s assets are in a trust managed by his children. There are no conflicts of interest,” Anna Kelly, the deputy press secretary, previously told DL News.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Bored Ghosts Developing, a company hired by digital cooperative Aave DAO to provide software development services for the world’s largest decentralised finance protocol, said on Friday it would not seek renewal of its contract in April.

And it blamed Aave Labs, the creator of the that protocol.

In a lengthy post on Aave’s governance forum, Bored Ghosts said it could not continue to work on the latest version of the protocol while Labs attempts to push users to a newer one, dubbed “v4.”

“We believe even proposing this on the main revenue-maker & fully functional engine of Aave, is borderline outrageous,” Bored Ghosts wrote.

The Aave token fell more than 6% on the news on Friday.

In a statement on social media, Aave Labs CEO Stani Kulechov, the protocol’s founder, lamented Bored Ghosts’ departure. Bored Ghosts co-founder Ernesto Boado was previously the chief technology officer at Aave Labs.

“For four years, BGD has played an important role in Aave V3’s technical development, and it is fair to say that Aave V3 would not be what it is today without their contributions,” Kulechov wrote.

Marc Zeller, head of Aave DAO delegate Aave Chan Initiative and one of Labs’ fiercest critics in recent months, called Bored Ghosts’ departure “devastating.”

“Most of the revenue V3 generates today is driven by their code and innovations,” he wrote. “They saved Aave more than once. They’ve been the most productive engineering team this ecosystem has ever had.”

Aave’s ‘crown jewel’

Aave’s stakeholders are caught in a long-running dispute over control of the protocol and the Aave brand. And it could have massive implications for the world of decentralised finance.

Aave is the largest DeFi protocol, with more than $26 billion in user deposits. It has long been managed by the DAO, investors who hold the Aave token and their representatives, known as “delegates.”

Over the past year, however, major delegates began to chafe at Aave Labs’ growing role in DAO affairs.

That culminated in a recent push to demand that Labs transfer brand assets — such as naming rights, social media accounts, and the aave.com website — to the DAO. That proposal narrowly failed in a Christmas Day vote.

In an attempt to settle the dispute, Labs recently proposed directing all of its revenue from Aave-branded products, such as the Aave website, to the DAO.

But that proposal also included language “ratifying” Aave v4 as the “core technical foundation for future development.” That would mean pausing work to improve Aave v3 and even changing its lending and borrowing parameters in order to compel users to migrate to v4.

Bored Ghosts called it an unacceptable attack on the “crown jewel” of the Aave empire.

Aave Labs has said it is willing to slow-walk any efforts to move users to v4.

“At launch, [v4] will serve V3 users with higher capital efficiency and more advanced features,” the company wrote in the governance forum last week.

“That said, there is zero rush. V3 is stable, battle-tested, and will continue to be actively maintained and serviced until users are comfortable migrating to V4 at their own pace.”

A model DAO

The company was founded four years ago, and has almost exclusively worked on Aave since then.

“Any technical sub-system of Aave that the community knows about, BGD Labs was leading its development, or at least participating/collaborating with other entities in it,” the company wrote in its farewell notice.

“Unfortunately, the organisational scenario of the DAO has, during recent times, started to change radically.”

Aave DAO was once a model cooperative. Where other DAOs saw software development priorities turn on the whims of their founders, Aave appeared to be run by tokenholders, just as the first proponents of DeFi had envisioned. Aave Labs was just another service provider, albeit one that controlled the aave.com website and the Aave brand.

That began to change last year as Labs neared completion of Aave v4, according to Bored Ghosts.

“While this pivot is totally legitimate and potentially positive to overall Aave, we believe the way of addressing it has been badly executed,” the company wrote.

“Aave Labs believes that the whole Aave DAO and contributors should pivot in the direction they believe in, without sufficient consideration of existing contributors’ expertise.”

While the DAO controls the direction of the Aave protocol, recent votes suggest Kulechov and other Labs employees retain enough voting power to overwhelm their opponents, according to the company’s critics.

Bored Ghosts is currently serving out a six-month contract for $2.2 million in stablecoins and another 3,000 in Aave tokens, valued at more than $300,000 as of Friday.

That contract ends on April 1. Bored Ghosts said it would request a $200,000, two-month retainer in order to help the DAO transition to a new service provider.

Kulechov said Labs would be willing and able to assume any work as needed.

“Aave V3, and every other part of the Aave protocol stack, will continue to operate as normal,” he wrote.

“We built V3 and will be happy to take on all maintenance work until a time that the DAO votes otherwise.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Alex Stokes, an Ethereum Foundation researcher, confirmed the inclusion in the most recent All Core Devs meeting on Thursday.

FOCIL introduces changes that force Ethereum validators to include each and every transaction submitted to the network — even those sent by Office of Foreign Assets Control-sanctioned addresses.

Proponents say FOCIL is necessary because it guarantees censorship resistance at the protocol level, rather than relying on the decisions of those who build blocks and run validators.

“As we keep scaling, the centralisation force towards sophisticated actors is increasing, and FOCIL prevents these actors from censoring transactions,” Jihoon Song, an Ethereum Foundation researcher, said on the Ready to Merge podcast on February 19.

Ensuring that Ethereum is resistant to censorship, and cannot be controlled by outside forces, is incredibly important to its supporters. It is one of the blockchain’s most fundamental and defining features, and legitimises it as a decentralised, permissionless settlement layer.

Controversial upgrade

The Hegota upgrade, named by blending the Bogotá Devcon venue and Heze, a star, is scheduled for the second half of 2026.

It will succeed Glamsterdam, Ethereum’s next upgrade, which will headline two proposals: Enshrined Proposer-Builder Separation and Block-Level Access Lists.

Of all the proposals earmarked for Hegota, FOCIL is the most controversial. It was previously pushed back from inclusion in Glamsterdam as developers debated it.

Privacy Pools founder Ameen Soleimani has argued that the benefits of FOCIL are overstated, and it creates legal risks for US-based validators.

When Tornado Cash was placed on the OFAC sanctions list, some 90% of validators declined to include transactions that touched smart contracts linked to the privacy protocol, he said.

As long as a single validator was willing to include those transactions, however, they would eventually settle on Ethereum.

Had US validators been forced to include those transactions, they could have faced the wrath of the US government, Soleimani argued.

Yet many more Ethereum developers argue FOCIL brings more benefits than downsides.

In response to FOCIL’s inclusion in Hegota, Ethereum co-founder Vitalik Buterin said it will help boost privacy protocols in combination with another proposal called Frame Transactions.

Ethereum layer 2 developer Tim Clancy previously called FOCIL the “single most important [proposal] for Ethereum.”

“It delivers a capability that Ethereum must have to continue delivering on its mission of being the most neutral blockspace,” he wrote on X last year.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The US’ top crypto exchange is overhauling its nearly three-year partnership with the layer 2 software developer, saying that Coinbase’s Base blockchain will use in-house code moving forward, rather than Optimism’s OP Stack.

A spokesperson for Optimism confirmed that Coinbase will stop sharing Base revenue with the Optimism Collective. That revenue has topped $16 million over the course of the partnership.

“This is a hit to near-term onchain revenues,” OP Labs CEO Jing Wang said on X. “But as cryptotwitter has been saying for ages, we needed to evolve our biz model.”

Coinbase will instead remain as a customer of OP Labs’ “OP Enterprise” service, Wang added.

Base’s withdrawal hammered the price of Optimism’s token, OP. It has lost a quarter of its value since Wednesday, and was trading just under $0.14 as of this writing, down from its all-time high of $4.84 in 2024.

Coinbase has long shared 15% of Base revenue with the Optimism Collective, the digital cooperative that manages the OP Stack. To date, Base has contributed 8,387 Ether, worth about $16.4 million at Wednesday’s prices.

That’s 41% of the Optimism Collective’s lifetime revenue. But Base’s share of that revenue has shot up in recent months. In January, it hit 90%.

The move could, therefore, have significant ramifications for the Superchain, the collection of blockchains using the OP Stack. That list includes Sony’s Soneium, Uniswap’s Unichain, Kraken’s Ink, Worldcoin’s World Chain, and Optimism’s own OP Mainnet.

Wang and Coinbase didn’t return DL News’ requests for comment.

“We’re grateful for our three-year partnership with Base and proud to have helped it become one of the most successful Layer 2 deployments in history,” an Optimism spokesperson said in a statement shared with DL News.

“Our focus remains on delivering enterprise-grade blockchain infrastructure to our ecosystem, and we will continue to serve Base as an OP Enterprise customer while they build out their independent infrastructure.”

‘Disappointing’

OP Labs, a privately held company, has raised more than $175 million from the likes of Andreessen Horowitz and Paradigm. Its software engineers are responsible for maintaining and improving the OP Stack, though any changes they propose must be approved by the Optimism Collective.

A related entity, the Optimism Foundation, recently said it would seek to shift to the Collective at least some responsibility for funding Labs’ operations.

Superchain members’ tithe is denominated in Ether. That multimillion-dollar pot of crypto initially sat dormant, with the Collective instead issuing grants denominated in OP.

Those grants are intended to lure software developers to the Superchain — more developers means more applications, and more applications means more users.

But Optimism recently began putting that Ether to work.

Last March, The Collective approved staking most of the Ether in order to earn passive yield.

And, just last month, the collective approved a buyback programme meant to tie the value of OP to the Superchain’s success. Half of all the revenue flowing into the Collective is now being used to purchase OP. The Foundation was given permission to actively manage the other half.

Why Superchain?

“It’s disappointing, but in many ways unsurprising,” PaperImperium, a pseudonymous member of Optimism Collective delegate GFX Labs, told DL News. “Base has to answer shareholders and do what is best for them.”

The OP Stack is open-source: that means anyone can use the code for any reason, without seeking permission from Optimism.

“So why do chains like Base, Mode, Worldcoin, Zora, and all others in the Superchain choose to contribute shared revenue?” Optimism wrote in a 2024 blog post. “The answer lies in the network structure designed to benefit the entire Collective.”

Improvements to the OP Stack were supposed to turn the Superchain’s various members from a federation of siloed blockchains into a single, interoperable network.

“That unfortunately has not materialised despite years of technical work,” PaperImperium said.

Coinbase said it was making the move in order to speed its upgrade cadence, simplify its code, and pilot changes that could eventually appear on Ethereum.

“We could not have gotten so far so quickly without the world-class technology underpinning the OP Stack and are grateful for the collaboration over the last three years,” Coinbase said in a blog post.

When Base joined Optimism in 2023, it was given “the opportunity” to earn up to 118 million Optimism tokens over a six year period. It was not immediately clear how many of those tokens Base had earned or what would happen with the remainder.

Optimism did score a victory on Wednesday, when Ether.fi said it would move its crypto-based credit card from layer 2 blockchain Scroll to OP Mainnet.

“Over the coming months, ~70,000 active cards, ~300,000 accounts, and millions in user TVL are moving to Optimism,” Optimism said in a blog post. “For Optimism, this positions OP Mainnet as a leading chain for payments activity.”

As for Coinbase, Wang said it would remain as a customer of OP Labs’ “OP Enterprise: Mission-Critical” service, given Base’s ongoing reliance on Optimism-built code.

“If Base makes so many changes that it’s no longer recognizable as the OP Stack then they will no longer require ‘Mission Critical’ support from us,” she wrote.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The tool, EVMbench, draws from 120 vulnerabilities identified over 40 prior smart contract audits, as well as “vulnerability scenarios” drawn from audits of Paradigm’s forthcoming Tempo blockchain.

The release comes days after a bug in AI-generated code cost users of crypto protocol Moonwell nearly $2.7 million in crypto.

One Moonwell software engineer said the code in question had passed an audit from crypto security firm Halborn.

So-called agents are instances of artificial intelligence that can complete complex tasks in the digital world. They can write software, purchase theatre tickets, and conduct research on behalf of their users.

EVMbench data shows that OpenAI’s latest agentic coding model, GPT-5.3-Codex, more than doubled the effectiveness of an earlier model, GPT-5, in exploiting vulnerabilities in smart contract code. But its success in finding and fixing vulnerabilities “remain below full coverage,” OpenAI said in a news release.

“Agents perform best in the exploit setting, where the objective is explicit: continue iterating until funds are drained,” the company said.

“In contrast, performance is weaker on detect and patch tasks. In ‘detect’, agents sometimes stop after identifying a single issue rather than exhaustively auditing the codebase. In ‘patch’, maintaining full functionality while removing subtle vulnerabilities remains challenging.”

A model from Anthropic, Claude Opus 4.6, scored the highest mean result in detecting software vulnerabilities. GPT-5.3-Codex achieved the highest results in patching and exploiting smart contracts.

OpenAI cautioned that EVMbench doesn’t capture the true challenge of securing smart contracts, given the limited sample of vulnerabilities used to build the tool. And it can’t reliably determine whether agent-found vulnerabilities are, in fact, false positives.

Hacks have long bedevilled the crypto industry. Non-reversible transactions make crypto protocols’ smart contracts an attractive target for cybercriminals.

As of Wednesday evening, protocols suffered more than $108 million in hacks and exploits in 2026, according to DefiLlama data.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Last year, stablecoins added a whopping $103 billion to their total supply, bringing the total to over $300 billion in October.

Yet the same month, the crypto market was struck by its worst-ever leverage wipeout.

Since then, investor appetite for dollar-pegged assets has waned.

Adam Morgan McCarthy, a senior research analyst at Kaiko, sees two key drivers behind the stall: lower trading activity and waning US dollar power.

Stablecoins are a key liquidity vehicle for crypto trading, and with trading volumes down from their October highs, there’s naturally less demand for them as a result, he told DL News.

Additionally, the dollar’s strength relative to other currencies has declined by 9% over the past year.

So holding money in US dollar-denominated stablecoins is less attractive, even with yields around 4%, McCarthy said.

Stablecoins stall

US dollar stablecoins, crypto tokens backed by the US dollar, were supposed to revolutionise how the world moves money by speeding up transfers, lowering costs, and enhancing transparency.

US Treasury Secretary Scott Bessent forecast in November that US dollar stablecoins would swell to $3 trillion by 2030, while Citibank predicted issuance could hit $4 trillion by the same year.

But the technology hasn’t yet achieved the mainstream adoption many hoped it would after the passing of the Genius Act, a key US stablecoin law, in July.

That’s not for a lack of trying.

Dozens of the biggest financial firms are experimenting with stablecoins and incorporating them into their services.

In November, payments giant Visa launched a pilot stablecoin payment scheme for US gig economy workers. Last month, the New York Stock Exchange announced it would launch a tokenised securities trading platform that uses stablecoins for funding.

Wall Street titans BlackRock and JPMorgan have also launched their own stablecoins for institutional investors.

Yet despite those efforts, demand for dollar-pegged assets remains tied to the crypto market’s fluctuations.

Fear factor

With crypto trading as the primary driver of stablecoin demand, a short-term recovery could be difficult.

“The market’s main driver right now is fear. Fear that we’ll go lower,” Danny Nelson, a research analyst at Bitwise Asset Management, told DL News. “In a market like this, good news doesn’t register with investors. If they see an exit ramp, they’re taking it.”

As for the US dollar’s strength, that doesn’t look good either.

The US Dollar Index, a benchmark that measures the dollar’s value against a basket of foreign currencies, has fallen some 11% since January 2025.

“The Trump administration had been pretty explicit in the past about making the dollar weaker to support exports,” McCarthy said, adding that he doesn’t see many opportunities for either factor to change in the near term.

Tokenisation push

On a longer time horizon, the drivers that pushed the stablecoin market to $300 billion are still intact, analysts say.

“What reverses this is renewed activity within the ecosystem or economic use,” Fabian Dori, chief investment officer at Sygnum Bank, told DL News. “The next phase of growth will be driven by stablecoins becoming embedded in financial infrastructure.”

One way that’s already happening is through tokenisation, the process of converting ownership rights in assets like real estate, stocks, or bonds into digital tokens on a blockchain.

Proponents, including BlackRock CEO Larry Fink, argue that doing so will accelerate finance, reduce costs, and provide greater accountability.

“We would be reducing fees, we would do more democratisation,” Fink said while speaking on a World Economic Forum panel in Davos, Switzerland, last month. “[If] we have one common blockchain, we could reduce corruption.”

As tokenisation gains traction and institutions issue stablecoins designed for settlement, collateral, and payments, Dori said, demand becomes tied to real financial activity rather than trading.

Dori isn’t the only one looking to the promise of tokenisation to save the stablecoin market.

“Tokenisation is accelerating regardless of the volatility,” Bitwise’s Nelson said. “Companies like BlackRock aren’t getting phased by fear.”

Crypto market movers

• Bitcoin is down 0.6% over the past 24 hours, trading at $67,435.
• Ethereum is up 0.7% past 24 hours at $1,984.

What we’re reading

• Japan’s top securities firms prepare crypto exchange pivot — DL News
• ZeroLend Shuts Down After Liquidity Dries Up Across Layer 2s — Unchained
• How Ethereum devs will use AI to boost blockchain’s development — DL News
• Inside the Crypto Collapse: Binance Selling, ETF Exhaustion & OG Profit Taking w/ Delphi Digital — Milk Road
• What to expect at Trumps’ World Liberty Forum despite $2tn market meltdown and Democrat probes — DL News

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The revelation came in a document filed with the securities and exchange commission Tuesday.

BlackRock, the world’s largest asset manager, dominates the market for crypto exchange-traded products. Its Ethereum ETF, ETHA, sports more than $9.1 billion in assets under management, according to DefiLlama data. Grayscale’s ETHE sits in a distant second, holding Ether worth $2.3 billion.

ETHB is well-placed to become the largest Ethereum ETF. Unlike its predecessor, it would generate staking yield, which on Tuesday was estimated at 2.8% annualised.

The SEC approved Ethereum ETFs early last year, but those products did not include staking rewards. In May, the SEC issued guidance that clarified that certain staking products aren’t securities, paving the way for staking ETFs.

ETHB will share 82% of its staking rewards with investors. The other 18% will be split between BlackRock, Coinbase — the ETF’s prime execution agent — and

“This arrangement creates a financial incentive for the Sponsor to maximize the amount of Ether staked by the Trust,” the filing reads.

But ETHB will only stake between 70% and 95% of its Ether under management, in order to ensure it can honour investors’ redemption requests.

Staking an “excessive” share of the fund’s Ether could make it difficult to honour those redemption requests, “potentially causing the Shares to trade at significant premiums or discounts to NAV.”

While ETFs give US investors a familiar way to invest in crypto — a fact that fueled Bitcoin’s 2024 rally — some in the industry have been wary of large asset managers’ growing clout.

The same week that BlackRock first detailed its plans for a staked Ethereum ETF, Ethereum co-founder Vitalik Buterin warned that a high concentration of Ethereum ownership on Wall Street could distort the blockchain’s governance and create centralised chokepoints.

BlackRock wouldn’t be the first asset manager to introduce a staked Ethereum ETF.

Grayscale’s Ethereum ETFs, ETHE and ETH, both generate yield via staking. VanEck, like BlackRock, has filed to introduce a staked Ethereum ETF.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

One of the most influential voices in the Ethereum development community wants the $238 billion blockchain to lean hard into artificial intelligence.

Tomasz Stańczak, co-director of the Ethereum Foundation, argues that the large language models that power AI can deliver big efficiency gains by writing, reviewing and editing proposals, moderating meetings, writing code, and even accepting or rejecting network upgrades.

“It is important for Ethereum to be the first chain to be LLM-driven,” Stańczak said on Sunday. “It is an advantage akin to being the first PoW chain.”

PoW, or Proof-of-Work, refers to a consensus mechanism blockchains like Bitcoin use to validate the network.

Ethereum has a big head start, Stańczak said. Much of the blockchain’s development, in the form of written proposals, developer calls, and other technical documentation, is published online. An AI could easily be trained on this trove of information, giving it deep insight into the entire history of Ethereum’s development.

It’s a bold idea, and likely one of Stańczak’s last initiatives before he leaves the Ethereum Foundation at the end of the month.

Software developers outside of the crypto industry increasingly rely on AI.

Last week, Spotify co-CEO Gustav Söderström said in his firm’s fourth-quarter earnings call that the firm’s top developers “have not written a single line of code” in 2026, instead using AI exclusively to design software.

Stańczak’s ideas go beyond using AI to just generate code.

He wants to bring in AI agents, autonomous software programmes designed to achieve specific goals without constant human oversight.

The agents could participate in the submission and editing of Ethereum Improvement Proposals, moderate developer calls in real-time and provide suggestions to participants, and eventually distill and broadcast the entire Ethereum governance process.

Outside of crypto, businesses are pouring resources into developing AI agents, with tech giants Google and Microsoft leading the charge.

The market for AI agents is estimated to surpass $50 billion within the next five years, according to Boston Consulting Group.

It all sounds very futuristic, akin to video game AI companions like Cortana in the Halo franchise.

But the buzzy technology is not without drawbacks.

AI models are prone to hallucinating — a term used for when AI produces false or made up information that it tries to pass off as real.

In April, research conducted by OpenAI found that its two latest and most powerful reasoning models hallucinated 33% and 48% of the time.

These hallucinations can be disastrous for AI agents. Those who have tried getting them to engage in dynamic, fast-paced activities like crypto trading have found they often make simple mistakes.

Ethereum watchers may need to wait a while before they start seeing AI make its way into the blockchain’s development.

Stańczak said he expects the shift to take at least two years.

“We should have the relevant tooling and integrations finished by Q3 (the earlier the better),” he said.

Top DeFi stories of the week

This week in DeFi governance

VOTE: ZKsync Token Assembly to fund bug bounty programme on Immunefi

VOTE: Compound DAO to approve new Ecosystem Protection and Continuity Fund

VOTE: Fluid to use treasury funds to cover user losses caused by ETH borrow rate spikes

Post of the week

Sam Bankman-Fried is trying to convince Crypto X that FTX was never insolvent, despite serving a 25-year prison sentence for defrauding his customers.

It’s not going well.

funny how he revised anthropic up without revising the coins down

you can tell he hasn’t lost his panache for creative accounting https://t.co/e3FnvGJgE8

— krane (@0xkrane) February 13, 2026

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

He will be replaced by Bastian Aue, a member of the Foundation’s leadership team. Hsiao-Wei Wang will remain as the Foundation’s other executive director.

Stańczak’s resignation comes less than a year after he and Wang were appointed as co-executive directors, replacing the organisation’s longtime, embattled leader, Aya Miyaguchi. Miyaguchi remained as a member of the Foundation’s four-person board alongside Ethereum co-founder and figurehead Vitalik Buterin.

In a blog post explaining his departure, Stańczak said he would continue working on Ethereum as a “hands-on product builder” with a focus on artificial intelligence.

“I know now that agentic systems and AI-assisted discovery are reshaping the world,” he wrote. “I am well aware of the impermanence or even uselessness of some of the agentic ideas, but it is the playful experimentation that defined much of the early Ethereum innovation.”

Stańczak also suggested his departure was prompted in part by his shrinking role at the Foundation.

“The leaders at the EF grew more confident about making decisions by themselves and owning more,” he wrote.

“While my ability to execute independently at the EF diminishes over time, my time at the organization in 2026 would feel more and more like just staying around to pass the baton.”

Stańczak said the Foundation would soon publish several major proposals, including the details of a “lean” Ethereum and proposed roadmaps for the blockchain’s ongoing development and for “DeFi coordination.”

Stańczak and Wang were appointed to replace Miyaguchi in March 2025, after Miyaguchi had become a target for Ethereum investors frustrated with the cryptocurrency’s middling performance in the wake of Donald Trump’s reelection in the US.

Among other things, critics had assailed the Foundation for not taking a more muscular approach to Ethereum development.

Miyaguchi and Buterin, concerned the Foundation would become the de facto leader of an ecosystem that was meant to be decentralised, portrayed the Foundation’s role as that of coordinating Ethereum’s disparate developers, rather than leading its development.

Under Stańczak and Wang, the Foundation laid off 19 employees, turned its focus from layer 2 blockchains to scaling Ethereum itself, began promoting the blockchain in a series of videos released on social media, and pushed the pace of Ethereum upgrades.

They also launched initiatives focused on privacy, the threat of quantum computers, and artificial intelligence.

“The ecosystem called out,” Stańczak told DL News in an exclusive interview last year.

“You’re operating too disorganised, you need to operate a bit more centralised and way more accelerated to be there for this critical period.”

Buterin applauded Stańczak on Friday for overhauling the Foundation’s operations.

“In his year at the EF, Tomasz helped to greatly increase the efficiency of many parts of the foundation, and turn the EF into an organization that is much more responsive to the world outside,” Buterin wrote.

Until now, Aue, the incoming co-director, has focused on “illegible but essential work,” Aue said in a post on X: “helping management try to make well-informed decisions, working with EF’s team leads, considering budgets, articulating strategy, setting priorities, and more.”

“The decisions I make will be guided by a principled insistence on the properties of what we’re building,” he continued. “The mandate of the EF is to make sure that real permissionless infrastructure, cypherpunk at its core, is what gets built.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.

Labs also proposed “ratifying” a forthcoming version of the protocol, Aave v4, as the “core technical foundation for future development.”

The proposal is intended to settle a long-running dispute over control of the protocol, the largest in decentralised finance with more than $26 billion in user deposits.

It is meant to be decentralised, with control spread across members of the DAO — the hundreds of thousands of people who own the Aave token — rather than concentrated in its creator, Stani Kulechov, or the company he runs.

But influential members within the DAO chafed at Labs’ influence over the protocol. That tension boiled over in December, when it was revealed that Labs had stopped sharing revenue from the Aave website, which connects users to the protocol.

A very public spat played out in Aave’s governance forum and on social media. Some members of the DAO wanted Labs to relinquish the Aave brand, and one accused it of executing a “slow-motion coup.”

In addition to sharing certain revenue with the DAO and centering v4 as the DAO’s focus moving forward, Thursday’s proposal would have the DAO allocate $25 million to Labs for ongoing product development and authorise the creation of an affiliated foundation that would be responsible for defending Aave trademarks.

“The framework formalizes Aave Labs’ role as a long-term contributor to the Aave DAO under a token-centric model, with 100% of product revenue directed to the DAO,” Kulechov said in a statement.

“As onchain finance enters a decisive new phase, with fintechs and institutions entering DeFi, this framework positions Aave to capture major growth markets and win over the next decade.”

While members of the DAO might welcome the revenue sharing proposal, it is unclear how they might respond to its other components. Some members have resisted Labs’ push to sideline Aave v3, for example.

Marc Zeller, head of Aave Chan Initiative, a delegate within the DAO, criticised the proposal over Labs’ failure to consult with delegates.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Court documents filed on Tuesday show District Judge John Koeltl granted a request from Universal Navigation, the trading name of Uniswap Labs, to dismiss the case on the grounds that the plaintiffs failed to state a claim upon which relief can be granted.

“This case is a win for DeFi by protecting developers’ ability to build on and improve what came before without patent trolls claiming ownership of centuries-old economic concepts,” Jolie Yang, assistant general counsel at Uniswap Labs, said on X.

The suit concerned code used by Uniswap Labs in building the first iteration of the Uniswap protocol in 2018.

Bprotocol Foundation, a nonprofit supporting the development of the Bancor Protocol, and LocalCoin Ltd., Bancor’s original developer, alleged that code was Bancor’s patented infrastructure, and that Uniswap Labs has “profited greatly” by deploying its intellectual property without consent.

Bancor did not immediately respond to a request for comment.

The judge throwing out the case marks the second win for Uniswap this week. The protocol’s UNI token is up 30% after investment giant BlackRock said it planned to bring its Treasury-backed digital token BUIDL onto Uniswap.

BlackRock also said it bought UNI tokens as part of the tie up, though it didn’t disclose how many.

Too abstract

The disputed code powered a mechanism called a constant product automated market maker, or CPAMM.

This mechanism was pioneered by Bancor in 2017 and popularised by Uniswap a year later, helping it become the dominant design for early decentralised exchanges.

Bancor released the code for its CPAMM as open source — meaning that anyone is free to use, modify or enhance it without permission. Despite this, Bancor argued its specific use in blockchain smart contracts gave the protocol the exclusive rights to license or exclude others from using it in commercial implementations.

However, the court ruled Bancor’s patents claimed abstract ideas, such as the exchange of currency, which are ineligible under US patent law.

It’s not the first time a DeFi protocol has faced legal action over a patent dispute.

In October 2022, True Return Systems, often referred to by critics as a patent troll, filed infringement lawsuits against MakerDAO and Compound in the US.

TRS claimed the DeFi protocols infringed on one of its patents through their oracle technology, which links off-chain data to blockchains and is essential for DeFi price feeds and operations.

The suits were ultimately dismissed after the DeFi Education Fund, a nonprofit DeFi lobby group, agreed to purchase the patent from TRS in August 2024.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Uniswap’s Ethereum-based token, UNI, was recently priced at $4.25, according to CoinGecko, up more than 20% over the past day.

UNI soared as high as $4.36 just after 9am in New York. The token is still well below its 2021 record of nearly $45.

Other major coins and tokens like Bitcoin and Ethereum were trading lower on Wednesday.

UNI surged on news that Uniswap is working with Securitize, which works to tokenise assets, to make BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) shares available to trade via UniswapX, the protocol’s meta-aggregator similar to CowSwap.

Uniswap is available across several blockchains and holds about $3 billion in investor deposits, according to data from DefiLlama. As the world’s biggest decentralised exchange, Uniswap allows anyone to start trading without revealing personal details such as their name or address.

BlackRock’s BUIDL is a fund by the asset manager that allows investors to trade tokenised US Treasury bills, cash, and repurchase agreements.

“Our mission at Labs is simple: make exchanging value cheaper, faster and more accessible,” Uniswap Labs Founder and CEO Hayden Adams said.

Uniswap did not immediately respond to DL News’ request for comment.

BlackRock did not respond to questions from DL News.

Wall Street titan BlackRock, which manages $14 trillion in assets, has made moves into the crypto world over the past few years, most notably by debuting Bitcoin and Ethereum exchange-traded funds.

Its CEO, Larry Fink, has also spoken about how assets will increasingly be tokenised in the future.

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at mdisalvo@dlnews.com.

Tension between Aave Labs and the Aave DAO has quieted somewhat, as members of the latter await a promised revenue sharing proposal from Labs CEO and protocol founder Stani Kulechov.

But the two camps still snipe at each other, and it’s becoming hard to imagine a mutually satisfying resolution to their beef, given all the bad blood.

The latest example came last week, when Aave Chan Initiative, one of the most powerful delegates within the DAO, proposed a new conflict-of-interest policy.

That policy would require any recipient of Aave DAO funding to disclose the fact they had received, or plan to seek, such funding, and require abstention in any DAO matter presenting a conflict of interest.

The disclosure would have to include the addresses of any wallets that hold Aave voting power or delegated voting power.

“Without clear, consistent disclosure and COI norms, governance can drift into perceived capture or legitimacy debates that harm the DAO, the protocol, and the $AAVE token,” the proposal reads.

Such rules, it continues, would improve transparency, accountability, and “the perceived legitimacy of outcomes.”

Things get tricky when the proposal turns to enforcement, however. Voting restrictions can’t be “reliably enforced” onchain and would have to rely on peer pressure, according to ACI. The point is to avoid the edge cases that might arise while trying to programmatically enforce such a ban.

But the proposed enforcement mechanism has proven contentious. Any votes cast by someone with a clear conflict of interest wouldn’t count, according to the proposal.

“It must be treated as invalid for legitimacy purposes and excluded from any community-recognised ‘clean’ tally, quorum or outcome assessment, even if excluding it would change the result,” it reads.

Aave Labs employees rushed in to criticise the proposal as introducing a destabilising, subjective element to every vote.

Pseudonymous Labs employee Simo said the proposal would create a “parallel governance system with no rules, no finality, and no clear authority.”

They also highlighted the lack of a process for striking conflicted votes, the lack of a neutral arbiter, and the lack of thresholds that determine when a conflict of interest becomes “material.”

“In a mature DAO, almost every important decision materially affects all service providers,” they wrote. “In practice, this framework implies that, on the most critical decisions for the protocol, only small token holders with no direct involvement, limited context, and no touch with the Aave business would be able to vote.”

Kulechov weighed in yesterday, calling the topic important but the specific proposal “poorly written in all respects.”

“I will vote no on this proposal, in light of hoping to see a more reasonable and well-thought-out COI framework that actually makes sense,” he wrote.

Even some supporters suggested it needs to offer a more objective way of determining whether someone has a conflict of interest and when their vote should be excluded.

But ACI head Marc Zeller said that could all be worked out later.

“We need a quick patch now to mitigate the ‘slow motion coup’ the protocol is currently experiencing,” he wrote, “and it’s worth after this proposal to take time to implement something more future-proof.”

Voting began today and, as of 11 am New York time, “aye” votes were narrowly winning, 489,000 to 485,000.

Top DeFi stories of the week

This week in DeFi governance

VOTE: Arbitrum DAO votes to lower quorum threshold

VOTE: Gnosis DAO votes to run a nine-month futarchy pilot programme

VOTE: Jito DAO votes to revamp liquidity and incentive budget

Post of the week

I was at a Super Bowl watch party on Sunday with about 30 other people. Laurence Day’s description of the Coinbase ad is a slight exaggeration.

i can’t believe i finally got comfortable enough to tell someone on a ferry that i work in crypto the same day that coinbase releases an advert that gets a reaction on par with being named in the epstein files

— laurence (@functi0nZer0) February 9, 2026

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

On Tuesday, Ladislaus von Daniels, a researcher at the Ethereum Foundation, outlined the shift, which relies on a complex cryptographic technique called zero-knowledge proofs.

The cryptography lets Ethereum validators — those running the software that underpins the network — skip much of the computation needed to check the blockchain’s state is correct.

The impact? Validators will have much more bandwidth available, allowing them to process more transactions.

It also means they can get away with using less powerful computers, reducing a key barrier to entry for hobbyist validators.

“The idea is not new. But what is new is that it is now being engineered into Ethereum’s core protocol,” Von Daniels said. “There is a quiet but fundamental transformation taking shape in how Ethereum blocks are validated.”

In recent weeks, Ethereum’s nonprofit foundation has u-turned on a longstanding plan to rely on so-called layer 2 networks to scale, and is now focused on upgrading the main blockchain to handle more transactions.

Ethereum’s developers plan to achieve higher throughput using two main tools: zero-knowledge virtual machines, as outlined by Von Daniels, and Peer Data Availability Sampling, another big data storage and bandwidth-saving technique.

It’s not the first time the potential of scaling Ethereum has been discussed in recent weeks.

Last month, co-founder Vitalik Buterin claimed ZK virtual machines and PeerDAS have helped Ethereum solve the so-called blockchain trilemma.

ZK development ramps up

ZK proofs have been around since the 1980’s.

In recent years, they’ve found fresh use among those building blockchains because they can vastly reduce the amount of data validators required to process, among other things.

Normally, each validator must verify the data underlying thousands of transactions every minute. With ZK virtual machines, a single validator can perform the computation and send a proof that other validators can verify as correct.

Arguably, the biggest benefit of this technique is that it becomes much easier for hobbyists to spin up and run Ethereum validators.

“They no longer need to run a full execution layer and can sync within minutes,” Von Daniels said. “Proof verification replaces re-execution, and the hardware requirements drop accordingly.”

Lowering barriers to running Ethereum validators is an important consideration. A bigger pool of validators spread out across the globe helps decentralise the network, making it more resilient.

The ZK virtual machines are also beneficial to layer 2 blockchains like Arbitrum and Base; those building Ethereum execution clients, like Go Ethereum and Nethermind; and zkVM vendors, such as ZisK and openVM, Von Daniels said.

Development is ramping up. Last month, the Ethereum Foundation published a roadmap for implementing ZK virtual machines.

While there is no plan to include the feature in any upcoming upgrade, ZK virtual machines remain a key priority for the rest of the year.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The asset, which represents loans taken out through Figure against real estate, has grown to more than $15 billion in recent months, making it the 10th-largest crypto token listed on platforms like CoinGecko.

Yet as its supply swells, critics argue it shouldn’t be compared to other crypto assets such as Cardano’s ADA and the $16 billion memecoin, Dogecoin.

They argue that the token’s lack of onchain use and poor liquidity raises questions about whether it should be counted among similar tokens that are used more frequently and widely.

“We’re unsure how $12 billion in assets are being traded when there are so few assets in the chain to trade them against,” 0xngmi, the pseudonymous head of DefiLlama, said in September.

“As it seems that a majority of holders are not transferring these assets with their keys, are they just mirroring their own internal database into the chain?”

The problem is that anyone with a large amount of cash or financial derivatives could spin up a token backed by those assets and claim to have the largest blockchain-based real-world asset, even if those assets aren’t actually being traded and the issuing entity controls the vast majority, if not all, of them.

Figure CEO Mike Cagney has hit back at the criticism, maintaining that Figure Heloc and the other assets his firm issues should be classified as blockchain-based real-world assets.

“Figure loans are on Provenance. They are traded every day,” he said. “They now are used as collateral in Figure Markets. While they aren’t BTC, they are assets on a public chain.”

RWA surge

The growth of Figure’s controversial token comes as interest in tokenising traditional financial assets and putting them on blockchains mounts following a surge in interest from Wall Street.

There’s more than $17 billion worth of these so-called real-world assets in circulation, according to blockchain data provider DefiLlama. RWA.xyz, another data provider, puts that figure at over $23 billion.

Figure, a buzzy fintech firm that uses its Provenance blockchain to streamline its home equity loan service, places itself at the intersection of crypto and traditional finance.

The firm says putting loans on blockchains can reduce costs and increase liquidity and efficiency.

“By taking historically illiquid assets — such as loans — and putting these assets and their performance history onchain, blockchain can bring liquidity to markets that have never had such,” Cagney said in a September letter.

More nuance

One answer to the controversy surrounding Figure Heloc is more nuance from data providers.

Since September, RWA.xyz has changed how it records blockchain-based real-world assets. It has split them into distributed and represented, separating assets that can be bought and sold by investors from those primarily used for recordkeeping and transparency.

The platform has put Figure Heloc into the “represented” category alongside Broadridge DLR, a blockchain-based repo platform that hosts $350 billion in onchain real-world assets.“We’re cooking up new metrics to show the nuance on things like Tradable and Figure,” Adam Lawrence, co-founder of RWA.xyz, said on X.

“They’re legitimate, institutionally-focused companies that will ultimately drive a majority of volume in crypto.”

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The previously unseen attack vector, disclosed by the foundation on Thursday, affected ERC4337, the protocol that powers a feature called account abstraction.

It allowed a malicious actor to intentionally cause certain account-abstraction transactions to revert and pay for gas, even though they were valid and correctly signed.

“Huge thanks to the EF for handling the issue responsibly and granting us a $50k bounty, the maximum high-severity award,” Trust Security, the firm that identified the attack, said in an X post.

“This is a censorship and griefing vector, not a fund-theft vector,” the Ethereum Foundation said in a blog post, adding that the attack had been patched in its latest release.

At the time of discovery, use of the specific vulnerable ERC4337 transaction type was small, so the attack vector’s real-world impact was limited.

Ethereum users sent around 1.7 million vulnerable ERC4337 transactions over the past week, according to crypto data platform BundleBear.

That’s around 9% of all Ethereum transactions made during that period.

The issue was important to address before broader adoption amplifies its effects, the Ethereum Foundation said.

Bug bounties

The code that underpins the vast majority of the $135 billion DeFi sector is open source, meaning that anyone can inspect, modify, or enhance it freely.

This open-source ethos is viewed favourably by most crypto enthusiasts, as it enables community-driven audits, makes it easier for developers to collaborate, and allows users to verify that the code does what it is supposed to do.

But it’s also a double-edged sword.

Any vulnerabilities in open-source code are also visible to attackers, who could exploit them to steal funds or harm users.

That’s why bug bounties — rewards offered to people who identify errors or vulnerabilities in code — are critical to the security of open source code.

Immunefi, the largest crypto bug bounty platform, has paid out over $125 million in total, according to its website.

In addition to the $50,000 bounty from the Ethereum Foundation, Trust Security said it accepted an additional $59,500 in bounties from DeFi apps that rely on ERC4337.

Safe, the multi-signature wallet provider, and Biconomy, a crypto bridge, are among the biggest users of the vulnerable ERC4337 transaction type, though Trust Security has not yet said which apps it accepted bounties from.

Root cause

Account abstraction is a concept in Ethereum that enables programmable transactions, making features like scheduled payments possible.

The root cause of the problem was a hidden assumption in the ERC4337 code.

Developers assumed that all account abstraction transactions would run cleanly, isolated, and uninterrupted, just like normal Ethereum transactions.

In fact, an attacker could frontrun certain pending account abstraction transactions that interact with protocols with reentrancy protection, or that can be reverted through temporary state changes.

“This would cause the inner transaction to revert while paying for the spent gas, griefing account abstraction users,” the Ethereum Foundation’s blog post said.

To fix the issue, developers required that certain contract functions be called only from non-account abstraction wallets.

Protocols that use ERC4337 should upgrade to the newest release as soon as possible, the foundation said.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

For years, Ethereum developers working to improve the blockchain were guided by the belief that it could not reach mass adoption without so-called layer 2 blockchains. On Tuesday, Buterin shocked the Ethereum community when he said that notion “no longer makes sense.”

And just about every layer 2 founder flocked to social media to respond to Buterin’s missive.

“Challenge accepted,” Optimism founder Karl Floersch wrote in all caps on X.

A new path

Buterin’s change of heart does not necessarily mean the path laid out for the largest smart contract blockchain will change. But it does throw that path into serious doubt.

Buterin remains the most influential voice in Ethereum, and he leads the Ethereum Foundation, the blockchain’s most prolific contributor.

‘It’s fine because Ethereum itself is now scaling directly on layer 1.‘

Vitalik Buterin, co-founder of Ethereum.

Buterin cited two reasons for his reversal: the disappointing progress of layer 2 blockchains and the progress developers have made with Ethereum itself.

Years ago, a consensus emerged among Ethereum developers: the fastest path to mass adoption ran through layer 2s, affiliated blockchains that would process and batch transactions before funnelling them to Ethereum for final settlement.

This plan has long guided decision-making among Ethereum developers.

It’sMajor upgrades in recent years have made Ethereum more accommodating of layer 2 blockchains.

But the plan came under fierce criticism over the past year, as Ethereum’s native cryptocurrency, Ether, saw lacklustre price action while Bitcoin soared in the wake of Donald Trump’s reelection in the US.

Many felt that layer 2s had become “parasitic,” processing transactions that would otherwise occur on Ethereum.

And that led to a renewed focus on scaling Ethereum itself.

Able and willing?

Buterin did not claim these networks are parasitic in his post this week.

But he did say that layer 2 blockchains would have to find a new raison d’être.

“[The layer 1] does not need layer 2s to be ‘branded shards,’ because the layer 1 is itself scaling. And layer 2s are not able or willing to satisfy the properties that a true ‘branded shard’ would require,” he wrote.

“But that’s fine! It’s fine because Ethereum itself is now scaling directly on layer 1.”

He suggested layer 2 developers “identify a value add other than ‘scaling,’” such as privacy, or application-specific features.

Many founders said they had already done so.

“We’re already leaning into the kind of differentiation Vitalik is talking about here, and have been supported by the EF in doing so: building the best apps, native account abstraction, privacy, scaling, and more,” Base’s Jesse Pollak wrote.

“We’ve been talking about this for over a year,” Zksync founder Alex Gluchowski wrote. That chain, he said, would double down on transaction privacy and become “the Bank Stack of Ethereum.”

Steven Goldfeder, a co-founder of Arbitrum, cast doubt on the notion that Ethereum would soon be able to handle the transaction volume seen on layer 2 blockchains.

Regardless, layer 2 blockchains would be necessary, he said.

“In 2018, rollups were primarily created for scaling. Today, they’re as much about customisation and dominion as they are about scaling,” he wrote.

“The fact that Ethereum has layer 2s is a superpower that enables it to win institutions that other layer 1s simply have nothing to offer.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The functionality that powers DeFi exchanges and lending protocols, and is a staple of rival blockchains Ethereum and Solana, went live on the Polkadot Hub developer platform on January 27.

One week on, however, and developers have deployed just 19 contracts, per Subscan data.

Ethereum, the largest smart contract-enabled blockchain, hosts tens of millions of contracts and saw over 160,000 new ones deployed last week, according to Token Terminal data.

Solana, the next biggest blockchain, added 545 new contracts.

Polkadot should soon start closing the gap, the development firm behind the $2.4 billion blockchain said.

“Our focus is on a battle-tested foundation,” a Parity Technologies spokesperson told DL News, adding that partnerships and developer programmes tied to smart contracts have not surfaced yet.

“Activity will ramp as the release matures and integrations and initiatives go in the weeks ahead,” they said.

The addition of native smart contracts is the latest attempt to turn around the ailing Polkadot blockchain.

Created in 2016 by Ethereum co-founder Gavin Wood, Polkadot was envisioned to be the “blockchain of blockchains” that would overcome key limitations holding back Bitcoin and Ethereum.

Yet Polkadot has suffered from slow adoption, made worse by multiple strategic pivots over the years.

To add to the blockchain’s woes, Parity has been accused of wasting money by hiring expensive executives with multi-six-figure salaries, and the blockchain itself overspending on marketing.

All the while, the value of Polkadot’s native DOT token has crumbled.

It has plunged 97% from its all-time high, and hit an all-time low of $1.44 on February 3.

Ethereum compatibility

Currently, Ethereum dominates smart contract development.

It has a large developer base, and most tools, such as Hardhat, Foundry, and the Solidity programming language, excel at Ethereum compatibility.

Because of this, many new blockchains aim for Ethereum compatibility to attract developers and make it easier for them to redeploy existing Ethereum DeFi protocols.

Polkadot, however, was previously not Ethereum-compatible. Developers could only deploy smart contracts on so-called Polkadot parachains, which fragmented the ecosystem and added complexity for users.

The new functionality lets developers deploy smart contracts directly on Polkadot, either using Ethereum-compatible tools or using the blockchain’s own architecture.

“If you’re already building with Solidity, the experience will feel familiar,” Parity said in an X post announcing the smart contract upgrade.

The hope is that by making itself Ethereum compatible, Polkadot can encourage Ethereum developers to build on the blockchain.

Solana vs Ethereum

Yet some critics say the push for Ethereum compatibility is misguided.

“If they treated this as a side project and didn’t sacrifice a whole lot of other things like Ink, then it may make sense. But that’s not the case,” Wei Tang, previously a core developer for Ethereum and Polkadot, said on X.

Ink is the primary Rust-based smart contract language for the Polkadot ecosystem. Rust is the main smart contract language used on Solana. Development and maintenance of Ink effectively ended in January due to a lack of funding.

In effect, Polkadot is trading compatibility with Solana for Ethereum.

The problem, Tang said, is that the implementation is built on a misunderstanding of Ethereum compatibility, resulting in slower transactions than anticipated.

“Even if they implement everything to the very end of their roadmap, it wouldn’t be faster than Ethereum layer 2s,” Tang said.

Still, Parity is confident it will be proven right in the end — even if adoption is currently slow.

“Early on-chain metrics mean little at this stage,” the Parity spokesperson said. “Protocol releases are slow to roll out while developers test cautiously in today’s market.”

“We remain patient; our focus doesn’t waver.”

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Even as they work to finalise the dozen-plus improvements that will be included in the blockchain’s next upgrade, Glamsterdam, they’ve begun debating so-called headliners for the one after that, codenamed Hegota.

Headliners are crucial. Those are the improvements that excite the general public (to the extent the general public cares about Ethereum upgrades).

They are usually so significant that they can be felt by the average user, and they are easy to explain, offering developers a simple way of saying, “here’s how Ethereum got better this year.”

Despite a heated debate over the wisdom of implementing fork-choice inclusion lists, or FOCIL, there seems to be a growing consensus that it will be one of the headliners in Hegota.

FOCIL would eliminate block builders’ ability to censor transactions, by forcing inclusion of every valid transaction in an upcoming block. It’s being pitched as the next step in bolstering Ethereum’s claim to cypherpunk preeminence.

But what might join FOCIL in Hegota? Last Thursday, Ethereum developers heard pitches for other proposed headliners.

Developer Jannik Luhn proposed something called the universal enshrined encrypted mempool, which would allow for encrypted transactions on Ethereum, preventing front-running and sandwich attacks.

“Many users already protect themselves by using private RPCs and trusted builders, which I think proves that there’s user demand,” Luhn said.

“But the way this happens, we think, is problematic because it relies on trusted parties, which is bad for decentralisation and censorship resistance.”

And it would make a nice partner to FOCIL.

“We think this fits very well into a theme of improving credibility, neutrality, and censorship resistance of Ethereum,” Luhn added.

Ethereum Foundation developer Felix Lange proposed something called frame transactions — a new type of transaction that would prepare the blockchain for a post-quantum world and offer a more robust version of account abstraction.

“It’s also for us the most important one, because of the readiness for the post-quantum world,” Lange said.

“We feel like we have to get started with the off-ramp from ECDSA, and in order to do that, we need a comprehensive system that can deal with whatever signature algorithms we want to use.”

ECDSA is the acronym for the quantum-vulnerable cryptography that undergirds Ethereum currently.

One sceptic pointed out that earlier upgrades to enable a form of account abstraction are little-used. But Lange said those had been half-measures that “are not adequate to capture what users really want to do.”

Ethereum co-founder Vitalik joined to throw his support behind the proposal, a somewhat rare occurrence that could sway the outcome of these discussions.

“From a use cases perspective, this does basically satisfy everything that, at least I’ve been pushing for — the entire list of goals of account abstraction,” Buterin said.

Though it too would be a nice complement to FOCIL, quantum resistance was the most important aspect of the proposal, he added.

“It’s the reason why account abstraction of some form is ultimately indispensable,” Buterin said.

Top DeFi stories of the week

This week in DeFi governance

Vote: Frax votes one “1 Token, 1 Mission, 1 Vision” proposal to fix FRAX supply and clarify IP ownership

VOTE: GMX DAO votes to use $3.5 million on marketing and incentives targeted at traders

VOTE: Goldfinch votes to add additional $150,000 to legal reserve to resolve legacy loans

Post of the week

Silver’s been trading like a low-mcap cryptocurrency in recent days.

the silver team needs to focus on UTILITY and address the community concerns

down 5% and no response in the discord is unacceptable, where are the devs? this is a DISASTER

the community is strong and behind the project, but we need PROGRESS

— Aporia (@0xaporia) January 29, 2026

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.

Nearly 10 years later, his sleuthing has inspired a proposal to fund initiatives that make Ethereum safer to use. And the funds would come from an enormous amount of idle crypto that was recovered after the hack.

This week, people charged with distributing that crypto said about 75,000 Ether had gone unclaimed by its original owners. As discussed nearly 10 years ago, that Ether, now worth more than $220 million, will be put to use.

“TheDAO Security Fund will activate more than 75,000 ETH (over $220M) to strengthen Ethereum’s security, ensuring it is ready to become the backbone of the world’s financial infrastructure,” crypto entrepreneur Griff Green wrote in a blog post explaining the decision.

The hack

In 2016, TheDAO, a cooperatively-managed venture fund, became one of the largest crowdfunding initiatives in world history, attracting more than $150 million in Ether.

But it was promptly hacked, setting off a contentious debate over whether to “fork” Ethereum, effectively turning the clock back to the point just before the hack. While that would recover the stolen Ether, it would also undermine the notion the blockchain was tamper-proof and fit to serve as a neutral foundation for a new, decentralised internet.

The pro-fork camp won, and the Ether was recovered. While most of that Ether was easily claimed by its original owners, there were “edge cases,” Green wrote. A crypto wallet holding hard-to-claim Ether was created, with control distributed among a select group of people, including Green.

After January 31, 2017, any unclaimed funds would be used to fund a nonprofit “to support smart contract security,” according to a blog post that was published shortly after the hack. Apparently, this commitment was all but forgotten — until now.

Forgotten but not lost

Fade recently found the 10-year-old blog post “while looking through old contracts,” he wrote on X.

“I made the proposal to put these funds to use,” he added, a claim that Green confirmed in the more recent post.

Green said TheDAO, resurrected as a security-focused grant making organisation, would be guided, in part, by the Ethereum Foundation’s Trillion Dollar Security initiative, which identified six priorities for security-focused software developers.

But TheDAO will also be guided by Ethereum users, who will be given opportunities to vote on how to allocate the funding over multiple rounds.

The vast majority of the roughly 75,000 Ether available can still be claimed. Rather than distributing that Ether to fund security work, TheDAO will stake it, with the resulting yield used to fund security initiatives on an ongoing basis.

Ethereum co-founder Vitalik Buterin, Metamask security researcher Taylor Monahan, and four others will lead the TheDAO Security Fund, according to Green.

“TheDAO Security Fund marks the start of a new phase for Ethereum’s security story,” he wrote. “The world is ready for our tech, we want to ensure our tech is ready for the world.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.

Tokens bought for between $0.015 and $0.05 between October 2024 and January 2025 soared to an all-time high of $0.33 when they started trading last September, turning modest purchases into small fortunes overnight — at least on paper.

But there was just one catch.

World Liberty Financial’s creators, which include US President Donald Trump and his sons Eric, Donald Jr., and Barron, granted themselves the sole power to decide who can sell and when.

The project has so far released 20% of the tokens and has promised a vote among holders on when the rest will be made available for trading.

But months have passed, and that vote hasn’t materialised.

Now, dozens of token holders are taking to the World Liberty Financial forum, begging the protocol’s creators to let them cash out as they watch WLFI’s value evaporate.

The token has fallen some 54% over the past five months.

“Nearly 80% of WLFI presale tokens are still locked after almost two years,” said one WLFI holder. “We held through volatility and silence because we believed. But at what point does patience turn into neglect?”

“They are my investments and I want to have access to them,” said another. “We have become hostages.”

The pleas have so far been ignored.

To add to their holders’ woes, World Liberty’s creators pushed through a proposal to distribute WLFI as incentives to encourage more people to use the protocol, potentially putting more pressure on the token’s price.

A World Liberty Financial spokesperson told DL News the project’s team is in frequent and regular contact with its global community.

No guarantees

The situation surrounding the WLFI token echoes that of dozens of other crypto projects.

The industry, which is still largely unregulated, has become a playground for fly-by-night crypto peddlers who promise big, raise millions of dollars, then leave those who bought in out to dry.

Risk-tolerant crypto investors, often lured in by the promise of huge returns, pile into such projects without fully understanding what they are getting into.

It’s a game World Liberty Financial’s co-founders seem to understand well.

Among them is Chase Herro, a former “get-rich-quick” class instructor who has referred to himself as the “dirtbag of the internet.”

In a since-deleted YouTube video, Herro said: “You can literally sell shit in a can, wrapped in piss, covered in human skin, for a billion dollars if the story’s right, because people will buy it.”

When Herro founded World Liberty Financial in 2024 along with an all-star cast of Trump allies — including US Special Envoy to the Middle East Steve Witkoff and his sons, Zach and Alex, and long-time business partner Zachary Folkman — they made no promises.

Buried in the protocol’s so-called gold paper, essentially a long-form marketing pitch, are important details about how the project is set up.

The World Liberty Financial protocol is not directly controlled by WLFI token holders. This has potentially confused token buyers, as other protocols which issue governance tokens do give holders control over the protocol.

The impact is that while token holders can create and propose changes, the protocol’s co-founders screen proposals before voting and reserve the right to block them at their sole discretion.

Additionally, WLFI tokens provide no right to any return, dividend, airdrop or other distribution from the protocol, and there is no guarantee that tokens beyond the initial 20% will ever be made tradable.

This situation leaves unhappy buyers very little recourse.

Even World Liberty Financial’s most high-profile backer, Tron founder Justin Sun, appears to have been shafted.

He bought $75 million worth of WLFI in the project’s token sale. When a portion of that stash was made tradable in September, Sun transferred around $9 million worth to another crypto wallet.

In response, World Liberty’s creators froze the tokens, preventing Sun from selling them.

Sun vowed to buy more WLFI tokens after the incident, which appeared to be a gesture of appeasement toward the protocol’s creators.

His tokens remain frozen and have since plummeted in value.

Democratising finance?

To be sure, not all WLFI holders have buyer’s remorse.

“Most people don’t understand what WLFI will become in the future,” said one token holder on the World Liberty governance forum.

“There will be a transfer of wealth which will make you rich thanks to the blocking of the 80% but you don’t see it yet, it’s a shame.”

Yet even among those who still support World Liberty, there’s a pervasive sense that progress at the protocol, whose token is valued at more than $4 billion, is slower than many had hoped.

The project promises in its gold paper to democratise finance and access to financial opportunities.

Yet so far, the products World Liberty has launched have only enriched its co-founders and done little to benefit token holders.

Its most successful product is the USD1 stablecoin, a competitor to other dollar-pegged assets like Tether’s USDT and Circle’s USDC.

There are currently more than $5 billion USD1 tokens in circulation, making it the fifth-largest stablecoin.

It’s not clear how much money World Liberty makes from USD1. But based on how much Tether makes running a similar product, USD1 likely brings in several hundred million dollars a year.

Per World Liberty’s gold paper, 100% of these profits, plus any other revenue the protocol generates, go straight into the pockets of the Trump family and the Witkoffs, minus $15 million set aside for the protocol’s operating expenses.

Allegations mount

All the while, scrutiny over Trump’s crypto dealings is mounting.

For the president’s political opponents, the issue has become a sticking point in passing the Clarity Act, a broad crypto market-structure bill poised to give the industry a much-needed boost.

Democrats say they can’t support the bill because it allows Trump to continue profiting off crypto.

“The White House has made this infinitely harder,” New Jersey Senator Cory Booker, the bill’s lead Democrat negotiator, said on Thursday.

“I have had private conversations with Republican colleagues and staffers that agree with me. … The fact that Donald Trump is grifting on crypto himself, it’s like me creating a Cory coin,” he added, calling it “ridiculous.”

It’s not a positive development for WLFI token holders caught up in the drama.

At the same time, World Liberty has announced it will hold an in-person forum for the project on February 18 at Mar-a-Lago, Trump’s private luxury club in Palm Beach, Florida.

The invite-only event will “bring together a select group of the smartest people we know and respect from finance and technology,” Donald Trump Jr said in a video message posted on the World Liberty X account.

Whether this will include anyone that represents the interests of WLFI token holders remains to be seen.

Update, January 30: Added a comment from a World Liberty Financial spokesperson.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

It will be among the crypto industry’s most anticipated debuts in 2026. The self-described “real-time” blockchain claims it can achieve “100,000 transactions per second with millisecond-level responsiveness” while maintaining compatibility with Ethereum.

That promise has lured investments from crypto venture firm Dragonfly Capital, as well as Buterin, fellow Ethereum co-founder Joe Lubin, EigenCloud founder Sreeram Kannan, and Helius founder Mert Mumtaz.

It also lured a stampede of retail investors. Last year, MegaETH’s initial coin offering was oversubscribed, drawing 11,534 wallets that had pledged over $300 million.

But only $50 million in tokens had been made available for purchase, leading MegaETH parent company MegaLabs to use investors’ social media history to determine allocations.

MegaETH’s founders have presented the blockchain as a true “world computer.” It’s the same vision that animates Ethereum developers, but it’s been stymied by Ethereum’s high cost and relatively limited throughput.

“Real-time blockchains will blur the line between Web2 servers and blockchains,” a lengthy explainer on the MegaETH website reads. “After a decade of experimentation, we can finally approach Web2-scale applications on-chain.”

Developers have already begun building videogames, prediction markets, and payment applications on a MegaETH test network.

Last year, MegaLabs said the blockchain would have a native stablecoin, USDm, backed by BlackRock’s tokenised treasury fund and issued by Ethena.

MegaETH’s token, MEGA, was trading at $0.18 on Hyperliquid futures markets on Wednesday, a 60% drop from its November high of $0.50.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

There’s a consensus that quantum computers will be able to break the encryption that puts the “crypto” in “cryptocurrency.” The only disagreement is over when, exactly, that will happen.

While that debate is currently raging in Bitcoin land, it has already become a priority in Ethereum land.

Last week, Ethereum Foundation researcher Justin Drake said the Swiss nonprofit had established a post-quantum team led by researcher Thomas Coratger, who earned a PhD in applied maths with a focus on the automotive and aeronautic industries.

The decision follows what Drake called “years of quiet R&D.” That begs the question: If the EF had been studying the threat of quantum computing for years, why create a dedicated team now?

“Timelines are accelerating,” Drake said.

In October, Google released new research which it claims brings quantum computing much closer to being used in real-world applications.

While many believe the threat to blockchains is a decade away, others are more alarmed by the pace of development.

In November, Ethereum co-founder Vitalik Buterin warned that quantum computers could break the blockchain’s encryption before the next US presidential election in 2028.

Given the sway he holds within the EF, his fear may explain its decision to double down on quantum research this year.

In addition to the creation of the post-quantum team, Drake said there would be new, bi-weekly calls in which Ethereum developers would discuss quantum security.

The EF is offering a new $1 million prize to anyone who can help harden quantum-resistant cryptography.

And a soon-to-be-released website will detail a post-quantum strategy for Ethereum that “targets a full transition in coming years with zero loss of funds and zero downtime,” according to Drake.

He also suggested artificial intelligence will play a big role in the coming work. Two weeks ago, a researcher at the foundation ran a maths-focused AI for eight hours, after which it solved “one of the hardest lemmas in the foundations of hash-based snarks,” something he called “mind-blowing.”

“Applied cryptography will never be the same,” he said.

The EF isn’t the only organisation in the Ethereum sphere to announce plans to prepare for a quantum world.

Karl Floersch, co-founder of Ethereum layer 2 blockchain Optimism, said his company, OP Labs, would swap out certain quantum-vulnerable technology within the next 10 years.

“Users don’t need to take any action today,” he wrote. “This announcement is about setting expectations and timelines.”

The exact quantum-resistant technology Optimism chooses will depend in large part on what Ethereum does, Floersch said. To that end, he’s been talking to engineers at the EF.

“The final choice of schemes and timelines will be a community decision, but our position is clear: PQ‑safe consensus is not optional.”

Top DeFi stories of the week

This week in DeFi governance

VOTE: CoW DAO votes to fund developer team

VOTE: GnosisDAO votes to enable ranked-choice voting

VOTE: GMX DAO votes to fund development team

Post of the week

According to L2BEAT, there are more than 100 chains that claim to function as a layer 2 blockchain for Ethereum. Clearly, lots of developers saw a goldmine. It seems they were mistaken.

Apparently Chinese provinces and L2 blockchains have the same economic policies https://t.co/CsgJp1QwXb

— PaperImperium (@ImperiumPaper) January 21, 2026

The acquisition will allow blockchain data aggregator DefiLlama to provide more granular data on the valuation of private crypto companies, the team involved in the deal told DL News.

Patrick Scott, head of revenue and growth at DefiLlama, said Bulletin’s data would complement existing DefiLlama data on the amount of money raised by crypto startups.

“Bringing in OTC deals actually gives some color to what the valuations of private companies are in the secondary market,” Scott told DL News, a DefiLlama sister company.

It is DefiLlama’s first acquisition, said pseudonymous DefiLlama head 0xngmi.

“In terms of total additional data, it’s not that much,” 0xngmi said. “But the big difference will be that this introduces proprietary data, which we didn’t have before.”

It’s a bit like truffle hunting. Even one ask or bid is quite precious for a company that’s new.

Bulletin founder David Mirzadeh

Venture investors can wait years to see a return on their investments. Over-the-counter deals allow those investors to cash out before a company goes public, by allowing them to sell their shares or tokens in one-off deals to other accredited investors.

David Mirzadeh, the chief of staff at the NEAR Foundation, founded Bulletin in 2023 as a platform to connect buyers and sellers of private companies’ shares and tokens. But he realised that most users were more interested in the bids and asks than in closing deals — in other words, they wanted to know what private companies might be worth.

A second version of the platform incorporated data from other OTC brokers — “all the bids, asks, secondary sales I could get my hands on,” he told DL News. “As far as I’m aware [it’s] the only public database that is gathered on this. Of course, brokers have their own, but no one was aggregating, sharing it.”

It’s been a one-man operation. Mirzadeh, a new father, said he began looking for buyers last year so he could better focus on his full-time job and his family.

DefiLlama tracks more than 5,600 protocols spread across 504 blockchains. While most of its data remains free, OTC data from Bulletin, as well as advanced analytics tools such as LlamaAI, are only available to LlamaPro subscribers.

Scott sees the acquisition as furthering DefiLlama’s mission of “taking data that would normally only be available to a small select group of investors and making it more widely available.”

He likened the data to seeing the price history of a house on Zillow, albeit much harder to find than real estate values.

“It is opaque,” Mirzadeh said. “It’s a bit like truffle hunting. Even one ask or bid is quite precious for a company that’s new and doesn’t have that many. Because it gives you something. It’s a light in the darkness.”

That data will become increasingly valuable, he added

“If you look at the growth of private markets in traditional, non-crypto industries, it’s been explosive, [with] companies staying private for longer,” Mirzadeh said. “That kind of trend, there’s no reason why that wouldn’t hold to crypto.”

Mirzadeh said he would stay on as an advisor to DefiLlama as it seeks to expand the data set by partnering with additional OTC brokers.

As to whether DefiLlama would purchase other companies, Scott said it wasn’t the first acquisition DefiLlama had considered — and it wouldn’t necessarily be the last.

“If there [are] features that for some reason we can’t build in-house, or it would be cheaper or faster to acquire, then that’s definitely on the table,” Scott said.

“Hopefully it’s the first of many big moves that we’re making this year. We are really intending to take things to the next level.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The exchange’s Silver to USDC market registered a whopping $1.2 billion in trading volume over the past 24 hours, making it the second most-traded asset after Bitcoin.

Hyperliquid investors view the surge in commodities trading as bullish because it gives the exchange more money to conduct token buybacks through the additional fees collected.

In October, the exchange started letting anyone create perpetual futures markets by locking up HYPE tokens. The fees generated by these markets are split half-and-half between Hyperliquid and the creator.

Hyperliquid is mandated to use the vast majority of the revenue generated through trading fees to buy back HYPE tokens on the open market through the protocol’s Assistance Fund.

The more trading fees Hyperliquid collects, the more money the protocol can allocate to buybacks.

While the impact of such buyback schemes on asset prices is debated, investors typically view them as bullish.

Debasement trade

While silver is the most traded commodity on Hyperliquid, it’s not the only one.

The most popular gold market on Hyperliquid has handled $131 million in trading volume over the same period, while markets for copper and natural gas have also registered tens of millions of dollars in trading volume.

The increased interest in commodities comes as traders bet on the so-called debasement trade: the idea that hard assets like gold and silver will outperform as inflationary monetary policies across the globe erode the value of national currencies such as the US dollar and Japanese yen.

Last year, gold jumped some 67%, marking its strongest annual gain in over 45 years. The yellow metal is off to a strong start this year, too. So far, it’s up approximately 18% and trades at around $5,088 per ounce.

Silver has performed even better. It registered a 145% return in 2025, and has rallied a further 53% this year to an all-time high of $117 per ounce.

Exploiting trends

Hyperliquid’s commodities trading success is another example of the exchange’s ability to capitalise on market trends.

Over the past year, the exchange received a boost from memecoin trading by quickly creating new markets for popular tokens.

Hyperliquid has also become a popular place for traders to speculate on the value of crypto tokens before they’re launched.

The exchange has generated thousands of dollars in fees by listing per-market trading for Plasma’s XPL, Monad’s MON, and Lighter’s LIT tokens.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

That upgrade, codenamed Fusaka, substantially increased the amount of data that layer 2 blockchains can send to Ethereum.

But blocks containing more “blobs” — packets of data submitted by layer 2 blockchains such as Arbitrum and Base — are far likelier to be dropped by the network, according to research from MigaLabs, a research group that has collaborated with Lido DAO and the Cambridge Centre for Alternative Finance.

If it persists or worsens, the issue could threaten the stability of the network, the firm wrote in its report.

“My intention was not to be alarmist, but to raise a signal to the core developers and researchers that’s saying, ‘We need to take a look at this,’” Leonardo Bautista Gomez, founder of MigaLabs, told DL News.

“It’s important to not increase even more [blob] capacity until we fully understand what’s going on.”

Before Fusaka, layer 2 blockchains could only send Ethereum a maximum of nine blobs per block. After the upgrade, Ethereum’s blob capacity jumped eightfold. But increases would be enabled in a series of smaller upgrades.

“We could say here, in just a few minutes, dial this knob up 8x,” Alex Stokes, an executive at the Ethereum Foundation, said in a December livestream celebrating Fusaka’s deployment.

“Given this is a very new technique, and we’re not sure how the network will respond, this is not the wisest decision.”

The first mini-upgrade came less than a week after Fusaka, and increased maximum blob capacity to 15. Developers released a second upgrade on January 7 that increased max capacity to 21 blobs per block.

Curiously, the average blob count per block has decreased since Fusaka. The few blocks that do test the network’s limit, however, are more likely to cause the succeeding block to fail, MigaLabs found.

Research from PandaOps, a team within the Ethereum Foundation, came to a similar conclusion, but found that some of the issue could be attributed to “timing games” — a practice in which validators delay publishing their blocks in order to boost a revenue stream known as maximal extractable value, or MEV.

“I’m not worried about the network at the moment based on the analysis that I did,” Sam Calder-Mason, the engineer who conducted the analysis for PandaOps, told DL News.

“It was certainly worrying on first inspection though.”

There is a “rough consensus” among developers to push a minor update that would allow Ethereum to spread blob data more efficiently and quickly before increasing blob capacity, according to Calder-Mason.

“I’d personally push back on any further BPOs without it,” he said. “We will also need a more holistic round of analysis done before committing to a higher blob count.”

While Calder-Mason believes timing games might account for “~90% of what we’re seeing at high blob counts,” Gomez was more circumspect.

“We do see some correlation there between high blob count and timing games, but I still think that does not explain everything that I have observed,” the MigaLabs founder said.

Another possible explanation is, it’s simply difficult to propagate substantially more data across a distributed network.

“We are really trying to stress the capacity of the network as much as possible, within the limits that will still make the blockchain alive and efficient and working properly,” Gomez said.

“What we’re seeing now is that when we push the amount of data that we publish over the network a little bit too much, we are seeing some issues. We still don’t fully understand why exactly that happens.”

What has worked, he added, is Ethereum developers’ commitment to treading carefully when making changes to the network.

“If there is an issue, we most likely will be able to solve it,” he said. “We are following perfectly the process that we had in mind.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. Have a tip? You can reach him at aleks@dlnews.com.

The attack began at around 5:10pm London time on January 25. Crypto security firm Peckshield, one of several firms to report the incident, characterised it as a security breach.

At 9:47pm, Matcha Meta confirmed the attack in an X post. It said that the incident was due to SwapNet, an exchange aggregator integrated with the protocol.

Users who had their trades routed through SwapNet and turned off One-Time Approvals are at risk, Matcha Meta said, telling users to revoke all approvals to individual aggregators outside of 0x’s One-Time Approval contracts as a precaution.

“The nature of the incident was not associated with 0x’s AllowanceHolder or Settler contracts,” the project said.

Matcha Meta is what’s known in the industry as a meta aggregator. Simply put, it’s a one-stop-shop for traders, searching all the decentralised exchange aggregators out there to find the one that offers the most cost-efficient trades, for a small fee.

DeFi protocol exploits — particularly those targeting older smart contracts — are a huge concern among DeFi developers and crypto security experts.

Last year, hackers swiped over $649 million through code exploits, according to a report from Slowmist, a blockchain security firm.

Unlimited approvals

When DeFi users trade crypto on blockchains like Ethereum, they must first sign a preliminary transaction that lets the exchange they’re using spend the token they want to trade.

Some exchanges and exchange aggregators give users the option to limit this transaction to a one-time approval for just the amount the user wants to sell. But they also let users set unlimited approvals manually that persist after the transaction has been completed.

While doing this can speed up trading and save on transaction fees, it also introduces security risks. In some cases, if the exchange a user has given an unlimited approval to is hacked or exploited, the attacker can use the approval to steal tokens from that user’s wallet.

That appears to be what has happened at SwapNet.

“The root cause appears to be an arbitrary call controlled by the attacker that drains the open allowance to this contract,” Weilin Li, a DeFi security researcher and PhD student at University College London, said on X. “This is the largest approval attack (excluding phishing) I’ve ever seen.”

It’s not clear how a hacker was able to gain access to SwapNet’s smart contracts. SwapNet did not immediately respond to a request for comment.

Correction, January 27: A previous version of this article stated Matcha Meta users lost almost $17 million from the SwapNet exploit. It has been corrected to $13.5 million.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The proposal, if passed, will mandate the Optimism Foundation to use 50% of the revenue generated through the Superchain, a network of blockchains built using Optimism’s software, to buy OP tokens every month.

The vote has split opinions among the DAO’s delegates. While many support the proposal, others argue it’s a poor use of capital.

“Optimism is a net seller of OP (grants, payment-in-kind, etc) and it makes little sense to spend precious hard assets and shorten runway to buy back OP while still net selling,” PaperImperium, a governance liaison for GFX Labs, an Optimism DAO delegate, said on X.

Optimism is a major player in blockchain infrastructure. Its OP stack software framework is used by Coinbase’s Base blockchain, Uniswap’s Unichain, and Kraken’s Ink blockchain, among others.

But the project’s OP token hasn’t benefitted. It’s down more than 93% from its all-time high after hitting an all-time low of $0.25 last month.

The buyback proposal aims to change that. The more revenue Optimism makes, the more OP the nonprofit Optimism Foundation will be required to buy each month, potentially helping shore up the token’s price.

Such buyback programmes have become increasingly popular among crypto projects in recent months. But not everyone agrees that they’re worthwhile.

Researchers at crypto market maker Keyrock and market intelligence platform Messari argue buybacks can be a waste of money as they divert funds from marketing and growth initiatives and do little to impact token prices.

OTC issues

There are several more issues with the proposed buyback programme, according to delegates.

One is that the buybacks will be conducted over-the-counter instead of through the open market, meaning the purchases won’t directly impact market prices.

“A concerning scenario would be that employees or investors are using the OTC buybacks to offload their tokens as they unlock,” Michael Vander Meiden, an Optimism DAO delegate and member of the Optimism grants council, said in a forum post.

In response, the Optimism Foundation said it chose OTC execution as the simplest path to shipping the buyback programme. “All OTC trades will be reported publicly, either via stats.optimism.io or via the governance forum,” the foundation said in a forum post.

Still, not everyone is convinced.

“We would prefer to see more focus on crafting and publishing a business plan to get Optimism to financial sustainability,” GFX Labs said in a forum post. “That’s the real challenge that Optimism Foundation/Labs leadership needs to address, and a buyback does nothing to address this, and may in fact make it worse.”

Several other governance participants said they agree with GFX Labs’ criticisms.

‘A step in the right direction’

Despite the pushback, a large faction of Optimism’s DAO supports the buyback proposal.

“It’s totally fine to have a buyback programme alongside emissions, even if they technically cancel out (partially),” Milo Bowman, an Optimism DAO delegate, said in a forum post. “The meme of the buyback is important. It allows people to clearly project what would happen if the Superchain grows 100x.”

“It’s a step in the right direction,” a spokesperson for PGov, an Optimism DAO delegate, told DL News. “The specifics still need to be discussed and [we] would like to have more dialogue between the community and core teams foundation that propose it.”

The buyback vote will run for six days and ends on January 28.

So far, delegates have cast more than 3.8 million votes in favour of the proposal, with just over 19,000 votes against it.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

That software, a crypto bridge called Nomad, was hacked for nearly $200 million in 2022. While its developers were able to recover millions in stolen crypto, Nomad has failed to gain any traction since it was relaunched in December that year.

Though the project is seemingly defunct, parent company Illusory Systems agreed last year to settle a complaint filed by the FTC.

The agency alleged Illusory Systems had failed to take reasonable steps to secure its software. But its definition of “reasonable and appropriate” has alarmed the crypto industry.

“The company failed to incorporate ‘circuit breakers’ or a ‘kill switch’ that could immediately cease the functioning of the Nomad Token Bridge in the presence of suspicious transactions,” the FTC wrote in the complaint, which it published alongside the proposed settlement in December.

But that technology is far from industry standard and, in some cases, could even make software more vulnerable to hackers, four crypto trade associations wrote in a letter to the agency this week.

Moreover, the presence of a kill switch implies unilateral control — an unacceptable requirement for developers attempting to build decentralised protocols, according to the letter.

The tiff is the latest example of the myriad ways in which regulators charged with protecting consumers can impose requirements limiting developers’ ability to build such software.

The Nomad hack

Crypto bridges allow users to move their crypto between otherwise incompatible blockchains. But they have proven a lucrative target for hackers.

In April 2022, Nomad said it had raised $22 million at a $225 million valuation to build “security-first interoperability.”

Despite Nomad’s assurances, just four months later some 300 hackers exploited a bug in the bridge and made off with $186 million in crypto, something the FTC attributed to “inadequately tested code.”

Last year, crypto forensics firm TRM Labs called it “one of the most remarkable and chaotic hacks in decentralised finance history.”

The company was able to recover roughly $37 million thanks to ethical hackers who joined the plunder in order to prevent thieves from running off with every last dollar. But a relaunched bridge failed to gain any traction — as of Friday, it held just $1 million in user deposits, according to DefiLlama data.

Nomad’s final post on X was more than two years ago.

The FTC has alleged that Nomad employed “unfair security practices” — such as the lack of a kill switch — that harmed its users. As such, it misled those users when it touted its “security first” approach.

The company has agreed to settle the complaint. If the complaint and settlement are finalised, Nomad will have to implement a new information security programme and return any remaining crypto it recovered after the hack, among other things.

Impossible mandate?

But industry groups say the complaint needs to be revised, as it implies a company operates unlawfully by releasing software without certain security features, including the kill switch.

That’s a problematic requirement, as it would “require privileged control or some other centralised authority to execute,” the letter reads.

“Many of these technologies — including technologies that utilise decentralised governance and control of operations — would be stifled if not outright deemed impossible under the expectations in the Proposed Complaint.”

Even MetaMask developer Consensys weighed in.

“Circuit breakers are not industry standard today, and they were not standard at the time of the Nomad incident,” Bill Hughes, senior counsel at Consensys, wrote in a letter to the agency.

Last year, police in Israel arrested dual Russian-Israeli citizen Alexander Gurevich when he attempted to travel to Russia using documents bearing a different name, according to a report from the Jerusalem Post. Gurevich was extradited to the US on suspicion of participating in the Nomad hack.

DL News could not immediately determine Thursday whether Gurevich had ultimately been charged in connection with the hack.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

On January 11, Trove Markets raised $11.5 million from investors through a token sale conducted on Hyperliquid, the buzzy blockchain tied to the $5.4 billion crypto exchange of the same name.

But a last-minute switch from building the exchange on Hyperliquid, coupled with allegations that the project’s team had misused funds and engaged in misleading marketing, obliterated investor confidence.

When Trove launched its token on Monday, it immediately crashed some 98% from a market value of around $21 million to just $330,000.

Now, thousands of investors are looking for answers.

“My $20,000 investment… should have resulted in $14,000 USDC back and $6,000 in $TROVE,” said one investor. “Due to the token giga nuking, they gave me in total $600 back.”

Trove’s anonymous developers said they have refunded just over $2.4 million to early investors, but will keep the remaining $9.4 million raised to continue building a futures exchange on Solana, a rival blockchain.

“Trove is not disappearing,” the developers said in a Monday X post. “We are not ‘taking the money and running.’”

4,000% return

Trove aims to combine two of the most popular trends among crypto investors: collectables investing and leverage trading.

Its stated goal is to create a perpetual futures exchange for trading in-demand collectables, including rare Pokémon trading cards and Counter Strike 2 gun skins. Traders will be able to take on leverage that can juice gains — or exacerbate losses.

With the value of Pokémon cards soaring and investors piling into them at an unprecedented rate, investor interest in a platform based around trading the collectables was high.

Pokémon cards, as measured through the Card Ladder Index, have produced a roughly 4,000% cumulative return since 2004, vastly outperforming the S&P 500, an index of the top 500 US stocks, which is up 513% over the same period.

Over the past three months, Pokémon cards have seen a 20% return.

In comparison, Bitcoin is down some 15% over the same period.

Counter Strike 2 gun skins, cosmetic items in the popular first-person shooter game, hit an all-time high market value of $4.2 billion in March.

The market crashed by some $3 billion in October after the game’s creator, Valve, added new ways to obtain rare skins.

Accusations mount

Even before Trove’s token launched and plummeted in value, critics were raising the alarm over the project’s suspicious behaviour.

They’ve accused Trove of paying influencers to promote the project to their followers without disclosure, while offering them discounts to participate in the token sale.

Several critics have posted screenshots of conversations on social media that appear to show a member of Trove’s team soliciting influencers for paid promotions and offering discounts. DL News could not independently verify the veracity of the screenshots.

On January 17, pseudonymous crypto investigator ZachXBT posted an onchain analysis, which he said shows Trove’s developers sending $45,000 raised from investors to the deposit address of a crypto casino. DL News did not independently confirm his analysis.

Trove has yet to respond to these allegations publicly and didn’t respond to multiple requests for comment.

The project said it has committed portions of the funds it raised to pay for its developer team, operating expenses, and paying influencers to market the project, among other things.

Investors still threw more than $11 million at the project.

Crypto token sales have become increasingly popular in recent months as US President Donald Trump’s administration takes a more lenient approach to crypto regulation.

Such sales give investors the chance to get in on a project very early — usually before it has launched.

Previous early-stage token sales have generated huge returns. It’s for this reason that investors often overlook the risks associated with them.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

GM, Tim here,

Ethereum transactions are soaring — but scams seem to be driving the surge.

On January 16, daily transactions hit an all-time high of more than 2.8 million, according to data from BitInfoCharts. The same day, new Ethereum addresses created in the past 30 days topped 12.6 million, the highest rolling 30-day total ever, according to Etherscan.

The record-breaking transaction bump, however, was mostly caused by a mass address poisoning attack, according to research by Andrey Sergeenkov, an independent journalist. Blockchain security experts reviewed the research.

“Mass address poisoning attacks are a persistent issue, and it’s getting worse,” Gonçalo Magalhães, head of security at Immunefi, a crypto bug bounty and security platform, told me.

Address poisoning attacks are a type of crypto scam where attackers send tiny amounts of crypto from a lookalike address to a victim’s wallet.

The goal is to trick the victim into mistakenly sending funds to that address believing it’s legitimate. It relies on clunky user interfaces, a lack of warnings, and carelessness on the part of the victim.

Such attacks are like spam phishing emails — low cost and low success rate, but if just one or two of the thousands of people targeted fall for them then it’s worth it for the attacker.

The losses inflicted by address poisoning attacks can be enormous. Last month, a crypto user lost $50 million after falling victim to one, according to Scam Sniffer, a crypto security platform.

“Over the past seven days alone, we’ve been detecting more than one million address poisoning preparations per day on Ethereum, underscoring the scale at which these campaigns are currently operating,” Michael Pearl, a vice president at crypto security firm Cyvers, told me.

Ethereum’s December Fusaka upgrade has helped reduce the cost of transactions, scaling the blockchain to more users and opening up new use cases.

But it’s a double-edged sword.

The increased bandwidth also means mass address poisoning attacks have become much cheaper for scammers to pull off.

Additionally, Magalhães said, recent Ethereum user experience upgrades, such as those enabling account abstraction, have made it easier for users to inadvertently sign a transaction they don’t fully understand.

So, what can be done to combat such attacks? Stop Ethereum users falling for them.

Just as services like Google’s Gmail scan email attachments for viruses and warn users of attacks, crypto wallets also need to provide warnings to stop users falling for address poisoning.

“Wallets need to clearly convey intent and surface risk,” Magalhães said. “We also need more adoption of naming systems like ENS, because human-readable identifiers make lookalike address attacks harder.”

Some wallets already include features to help users avoid address poisoning.

Rabby, for example, warns users if they’ve never interacted with an address before when sending funds, assesses potential transactions for suspicious activity, and flags phishing-related transfers in a user’s transaction history.

But until more wallets adopt these features, crypto users will have to remain extra vigilant.

Top DeFi stories of the week

This week in DeFi governance

VOTE: Lido DAO decides whether to reform its Rewards Share Committee

PROPOSAL: Debate on Optimism’s OP buyback plan continues ahead of January 22 vote

VOTE: Aave DAO votes on deploying Aave v3 to the Mantle blockchain

Post of the week

Gold continues to outperform most major crypto assets, hitting an all-time high of over $4,725 on Tuesday.

I think we made some jokes a while back about gold beating eth to 5k and now it's actually happening

— path.eth 🛡️ (@Cryptopathic) January 20, 2026

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

In a January 11 post, Daejun Park, a senior security researcher at the firm, argued that DeFi developers should adopt a more principled approach to security instead of relying on trial and error.

At the core of that shift, Park said, is the use of standardised specifications that constrain what a protocol is allowed to do, and automatically revert any transaction that violates those predefined assumptions about correct behaviour.

“Almost every exploit to date would have tripped one of these checks during execution, potentially halting the hack,” Park said. “So the once-popular idea of ‘code is law’ evolves into ‘spec is law.’”

Such an idea, sometimes referred to as runtime enforcement or invariant checks, isn’t new. But it’s getting a fresh look as DeFi protocols struggle to defend against hackers exploiting bugs in their code.

Last year, hackers swiped over $649 million through code exploits according to a report from Slowmist, a blockchain security firm.

Even battle-tested protocols like Balancer, whose code had been live on the Ethereum blockchain since 2021, were not immune. It lost $128 million in November after a hacker exploited a code bug.

In recent months, DeFi developers fear hackers are increasingly using artificial intelligence to find DeFi protocol vulnerabilities and exploit them.

‘Not the silver bullet’

Park’s suggestions, if widely adopted, could go a long way in preventing exploits. But they’re not without downsides.

DeFi protocols often gain an edge over their competitors by having the cheapest fees. Adding extra checks on transactions would increase gas costs, potentially losing them users, Gonçalo Magalhães, head of security at Immunefi, told DL News.

Magalhães said invariant checks are a great security strategy, but they can’t account for everything — especially exploits that a protocol’s developers can’t reasonably anticipate. “It’s not the silver bullet,” he said.

It’s also tricky to get the checks to work properly, Felix Wilhelm, co-founder of Asymmetric Research, a crypto security firm, told DL News.

“For many vulnerabilities and real-life hacks, it is difficult or even impossible to write an invariant that detects the hack without also triggering under normal circumstances,” he said.

Wilhelm said runtime enforcement is an important part of protocol security. But it is typically used to detect anomalies, like an unusual flow of funds in a short timeframe.

“While helpful, this often serves only to limit impact or alert the team, rather than stopping the attack outright,” he said.

Many protocols are already adopting invariant checks.

Kamino, a Solana-based lending protocol, began checking for critical invariants using Certora Prover in March last year.

The XRP Ledger, the blockchain behind the $120 billion XRP token, has also implemented invariant checking. The blockchain’s developers said the checks are necessary because XRP Ledger is complicated, and there is a high potential for code to execute incorrectly.

“Invariants should not trigger, but they ensure the XRP Ledger’s integrity from bugs yet to be discovered or even created,” XRP Ledger developers said.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Shortly after the platform conducted maintenance at around 4:30am London time, thousands of trades on the platform were liquidated in a matter of seconds, social media reports and videos viewed by DL News showed.

Three hours later, Clement Ho, Paradex’s director of engineering, addressed panicked users in a Discord post.

“We have identified the issue and will be rolling back chain state to block 1604710 (4:27:54 UTC),” he said. “This is the time before the DB maintenance and is the last known correct state.”

“Recovery efforts are ongoing. We can confirm that all user funds are SAFU,” a message on the Paradex website said.

After the publication of this story, Paradex told DL News that “the team was communicating live with users on Discord from the moment the maintenance issue started” and that three-hour-delay makes it “sound like a delayed response.”

DL News could not independently verify the claim due to restrictions on new members joining at the time.

It’s not clear how many users were affected by the error, nor the value of the funds liquidated. Paradex’s block explorer went offline shortly after the mass liquidations occurred.

But the exchange processed almost $1.6 billion worth of trades the day prior, according to DefiLlama data, while CoinGecko reported $652 million worth of open interest over the past 24 hours.

Shaken confidence

Rollbacks are usually a last resort for blockchain projects as they undermine the core purpose of the technology: to provide a single, consistent, and immutable shared ledger of transactions.

This incident has shaken investor confidence in Paradex, which aims to provide a zero-fee perps trading with deep liquidity and privacy.

The platform is incubated by Paradigm, the institutional crypto derivatives liquidity network, not the venture firm of the same name. In 2021, Paradigm raised $35 million at a $400 million valuation from investors including Jump Capital, Alameda Ventures, Genesis, and Nexo.

Paradex is not the first perp exchange to encounter issues in recent months.

Hyperliquid, the biggest perps exchange by 30-day trading volume, has lost tens of millions of dollars over the past year after its markets were attacked by large traders.

In August, a trader inflated the value of futures contracts for the XPL token by 200%, netting $15 million and inflicting heavy losses for other traders.

It’s not yet clear when users with funds trapped on Paradex will be able to access them again.

“Due to the complexity of the recovery process, we do not have a confirmed ETA at this time,” Paradex said. “We will provide further updates as they become available.”

Update, January 22: After publication, Paradex told DL News that its team was communicating with users in real time on Discord. This detail has now been added to the story, with a note that DL News could not independently verify the claim at the time because DL News was unable to join the Discord server. The story has also been updated to include links to several tweets supporting the assertion that investor confidence was shaken. Paradex also said the site was offline for approximately six hours and is now fully operational; that refunds for erroneous liquidations are underway; and that a post-mortem would be published. These claims have not been added to the article because the facts reported were accurate at the time of publication.

Correction, January 22: A previous version of this story incorrectly stated that Paradex “shut down” the explorer. The explorer went offline. This has been corrected.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

“The original drive to build Ethereum was heavily inspired by decentralised autonomous organisations,” Buterin wrote on X. “We need more DAOs — but different and better DAOs.”

DAOs are a kind of crypto collective where owners of a DeFi protocol’s governance token can propose and vote on changes to its code and how best to allocate resources. Proponents of DAOs say they offer a more decentralised and less hierarchical alternative to traditional corporate governance.

Buterin’s pledge comes after trust in the DAO structure has deteriorated in recent years. Major scandals have erupted and put into question the viability of decentralised governance.

Critics argue that the DAOs governing DeFi lender Aave and decentralised exchange Uniswap have little control over major decisions at their respective protocols.

Other DAOs have been accused of mismanaging funds, resulting in hundreds of millions of dollars evaporating with little to show for it.

Elsewhere, inactivity and voter apathy has left many DAOs vulnerable to hostile takeovers.

Overall, DAOs are becoming quieter and less decentralised, according to a joint report by DefiLlama and DL Research. DefiLlama and DL Research are DL News’ sister companies.

Buterin is no stranger to the issues DAOs face. The current interaction of DAOs are inefficient, vulnerable to capture, and fail to mitigate the weaknesses of human politics, he said.

Here are Buterin’s five arguments for more and better DAOs.

Fixing oracle design

Many crypto products rely on oracles — tools that tell the blockchain things like asset prices or other offchain information.

Buterin says the current oracle designs are fundamentally flawed and easy to manipulate. If voting is based on tokens, big holders can push answers their way. If humans control the data, it stops being truly decentralised.

“Today, decentralised stablecoins, prediction markets, and other basic building blocks of DeFi are built on oracle designs that we are not satisfied with,” Buterin said.

Settling disputes onchain

Some apps, like DeFi insurers or prediction markets, need to make judgement calls when things go wrong.

Right now, Ethereum doesn’t handle those disputes well. They often end up offchain, handled by companies or courts.

Buterin says DAOs are the best way to handle these decisions together, onchain, without giving control to one central authority.

Onchain dispute resolution is a “necessary component of many types of more advanced smart contract use cases,” he said.

Keeping lists honest

Ethereum depends on lots of lists of which apps are safe, which smart contracts are real, and which interfaces are standard.

Today, many of these lists are run by small teams or single organisations, creating hidden and opaque power.

DAOs can maintain these lists openly, letting communities decide together instead of trusting one gatekeeper, Buterin argues.

Helping startup projects

DAOs let people come together, raise funds, and build something fast, especially for small or short-term projects.

“If you have a group of people, who all want something done and are willing to contribute some funds (perhaps in exchange for benefits), then how do you manage this, especially if the task is too short-duration for legal entities to be worth it?” Buterin said.

Keeping projects alive

When crypto founders disappear, many projects slowly die.

DAOs solve that by letting communities take over. New people can join, funding can continue, and important tools don’t vanish just because the original team moved on, Buterin said.

“We need DAOs to do long-term project maintenance.”

Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email at lance@dlnews.com.

On January 17, ONDO tokens worth $737 million will be unlocked for trading. Of that amount, $123 million worth will go to private sale investors, which include venture firm Pantera Capital and Peter Thiel’s Founders Fund. The remaining $614 million is earmarked for protocol development and ecosystem growth.

When DeFi protocols such as Ondo launch tokens, they often keep back the majority of the total supply, which is programmed to release on a pre-determined schedule.

They do this to prevent early investors from immediately cashing out all their tokens at once, to ensure the project’s team is motivated to create value for the token beyond its launch, and to reassure potential secondary market investors.

Still, many investors anticipate large unlocks will cause volatility, as those set to receive tokens such as team members, early investors, and nonprofit organisations cash out.

Since Ondo’s previous unlock, which took place in January last year, the price of the ONDO token has collapsed some 68%.

Selling tokens

Ondo is a DeFi protocol that lets users invest in tokens backed by real-world assets, such as stocks and US Treasury bonds.

The protocol holds just over $2 billion worth of deposits, according to DefiLlama data.

The ONDO token acts as the protocol’s governance token, allowing holders to propose and vote on changes to economic parameters and the underlying smart contracts.

Token unlocks don’t always translate into immediate selling, however. Investors may want to hold onto a token if they believe it will increase in value in the future.

Over-the-counter sales, the trading of assets done directly between two parties without the supervision of an exchange, further muddy the waters.

Those set to receive tokens often agree to see them at a discount to a third party ahead of the unlock date. Depending on the negotiated sale price, those who buy the locked tokens may not want to sell them when they unlock.

The trading of locked tokens is popular among venture firms, crypto hedge funds and sophisticated traders, among others.

But it can be risky.

In June, dozens of traders lost millions of dollars after Aza Ventures, an Indian over-the-counter deals broker, revealed it unwittingly helped mediate dozens of fraudulent deals over the course of several months.

Ondo’s next round of token unlocks will take place in January 2027.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The itinerant software engineer has spent the past several weeks posting missives about the importance of decentralisation, prompting debates in the broader crypto community over the proper focus of an industry still trying to find mainstream appeal beyond speculative frenzy.

Buterin’s latest came earlier this week, when he listed three applications that have been built with an eye toward the ideals that motivated him to build Ethereum.

Even more impressive? They work, Buterin said.

“In 2014, decentralised applications were toys, hundreds of times more difficult to use [than] web2,” he wrote on X.

“In 2026, Fileverse is now usable enough that I regularly write documents in it and send them to other people to collaborate,” he added, referring to one of the apps.

When he began working on Ethereum in 2014, Buterin envisioned a platform that could support all manner of apps: finance, social media, ride sharing, governing organisations, and crowdfunding.

Ultimately, one could “potentially create an entire alternative web, all on the backs of a suite of technologies,” Buterin wrote.

As Ethereum becomes faster and cheaper and as other projects mature, that vision is becoming a reality, he said.

Status is a self-custody crypto wallet with a built-in, encrypted messaging app, and Railway Wallet bills itself as a “private DeFi wallet.”

Filverse is a decentralised, encrypted alternative to Google Workspace, offering software in the mould of Google Docs and Google Sheets.

“Fileverse is an excellent example of the right way to do things,” Buterin wrote. “Even if Fileverse disappears, you can still retrieve [the documents] and even keep editing them with the open source UI.”

Buterin contrasted such technology with examples of mass market consumer tech that has become increasingly complicated, expensive, or invasive, such as air fryers that appear to track their owners’ social media activity through a connected smartphone app or a dishwasher that requires an annual subscription to unlock all its features.

“All of the prerequisites for the original web3 vision are here, in full force, and are continuing to get stronger over the next few years,” Buterin wrote. “The decentralized renaissance is coming, and you can be part of making it happen.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The 47-year-old restaurateur based in Australia is one of thousands of investors who backed BlockDAG, a crypto project pitched as an ultra-fast layer 1 blockchain secured by mining machines.

Over 22 transactions between April 2024 and May 2025, reviewed by DL News, Adam — not his real name — sank nearly $25,000 into the project. He was granted anonymity to speak candidly about his experience.

Adam says he was lured by BlockDAG’s flashy sponsorship deals with international football clubs and aggressive promotions — including an appearance at Las Vegas’ famed entertainment arena, the Sphere.

“You just bought into it,” Adam said. “You join these online communities. We’re all excited and talking about BlockDAG and the potential.”

The BlockDAG website says the project has raised over $440 million since launching its presale in December 2023.

In exchange, investors were pitched highly specialised cryptographic mining hardware, a token listing on over 20 crypto exchanges, and a clear allotment of BDAG tokens.

To investors, the project appeared to display many of the signs of potential success.

Now — after many of those pledges have failed to materialise, and both employees and invoices have allegedly remained unpaid, according to documents and interviews seen and conducted by DL News — many investors worry they have been misled.

“Where’s the rest of the fucking money?” Adam said.

‘Risk creating unnecessary noise’

Over the course of 13 interviews with BlockDAG investors and insiders, as well as thousands of documents and internal messages, a DL News investigation found that thousands of distinct crypto addresses from around the world participated in the BlockDAG presale — with little to show for it.

Many say they have yet to receive any mining equipment, saw commitments to list on 20 different crypto exchanges whittle down to just five, and experienced a steady dilution of their token allocation.

At least two football clubs have pulled out of sponsorship deals after BlockDAG failed to pay for multi-million-dollar contracts, according to documents seen by DL News.

Liza Van Den Berg, who worked as an executive assistant to the CEO and managed payroll for BlockDAG, told DL News roughly 24 employees are still owed over $140,000 for their work in December.

Two employees who spoke with DL News indicate that they have not been paid. DL News could not independently verify this information.

‚A blockchain project should be utilising the blockchain with raised funds being stored in an auditable smart contract.‘

Fabrizio Giabardo, founder of the token fundraising platform Legion

As for the $442 million raised?

BlockDAG’s leadership has repeatedly declined to disclose to investors where the funds are being held.

Indeed, several crypto deposit addresses collated from interviews with investors show that at least $110 million in presale funds was sent to accounts on the crypto exchanges Binance and BTSE.

Nearly $7 million was traded through Bridgers, a token-swapping protocol. It‘s unclear exactly where those funds went from there.

Another $5 million was deposited in the decentralised finance protocol Mimic.

This is unusual behaviour, those with blockchain experience say.

“A blockchain project should be utilising the blockchain with raised funds being stored in an auditable smart contract,” Fabrizio Giabardo, founder of the token fundraising platform Legion, told DL News.

“Otherwise, you’re inviting ill intent.”

In a brief phone call with DL News, BlockDAG’s CEO, Nic Van Den Bergh (unrelated to Liza Van Den Berg), said the company had raised more than $200 million. He declined to comment further.

“I’ve decided not to proceed with interviews at this time, as doing so would risk creating unnecessary noise during a critical execution phase,” Van Den Bergh said in another message to DL News, adding that any updates “regarding BlockDAG will be shared through official communications when appropriate.”

BlockDAG’s website also solicits investment via Visa, Mastercard, Google Pay, and Apple Pay, but the project didn’t answer questions about whether any funds were raised through traditional payments and held offchain.

Gurhan Kiziloz, the secretive founder of BlockDAG and the man behind the controversial fintech firm Lanistar, originally agreed to an interview but pulled out at the last minute.

Apart from the above, the project’s leadership did not respond to multiple requests for comment via email, WhatsApp, or phone call.

Spiralling out of control

BlockDAG was first announced in December 2023.

For its first seven months, the project’s team was anonymous.

Although pseudonymity — the use of fictitious names with established online reputations — is widely common and even celebrated in crypto, complete anonymity for project founders is often met with suspicion.

Instead, it relied on technical promises outlined in BlockDAG’s initial white paper, a marketing document intended to project its vision to investors.

A 2024 version of that document, reviewed by DL News, states that “BlockDAG presents an innovative resolution to the blockchain trilemma.” This refers to the trade-offs among security, scalability, and decentralisation inherent to blockchain technology.

The document pledged a fixed listing price of $0.05 on exchanges as well as a $100 million liquidity pool at launch to support early buyers. A deep liquidity pool at the launch of a token allows early investors in a project to sell some of their holdings without dramatically affecting the token’s price.

The white paper also indicates that only 50 billion BDAG tokens would be made available during the presale.

From April 2024, however, BlockDAG began to issue additional tokens on top of those investors purchased, called bonus coins, to encourage continued investment.

“Then they introduced bonuses, and it just spiralled out of control,” Adam told DL News. “Imagine, buy one coin, get 10 for it.”

Investors suspect anywhere from 90 billion to 150 billion tokens have been sold during the presale. The project didn’t respond to questions intended to clarify this issue.

To calm investors, BlockDAG introduced Antony Turner as the project’s founder and CEO in July 2024.

An established founder and C-suite executive with more than 20 years of experience, he soothed investor anxieties about the company’s direction.

For a period, it worked.

“Then the team was doxxed,” Will, a BlockDAG investor based in the US who invested $3,000, told DL News. “And I’m like, ‘Okay, I felt better about it.’”

“But then there were some issues.”

‘This is very embarrassing’

A common theme throughout the BlockDAG saga has been delinquent bills.

This foible persisted throughout Turner’s tenure.

A cease-and-desist order seen by DL News and issued on behalf of Inter Media and Communication, the exclusive manager of all intellectual property rights for the Italian football club Inter Milan, indicates a material breach of contract due to non-payment in June 2025.

Once the agreement was formally terminated, Inter Milan’s legal counsel issued a letter to BlockDAG, instructing it to stop promoting the project as the “official blockchain partner” for Inter on its website.

Mondini Bonora Ginevra, the law firm representing Inter Media, declined to comment. A former employee confirmed the document’s veracity with DL News.

Alpine Racing Limited, the company currently racing as BWT Alpine FT Team, also issued BlockDAG a letter in November 2025 stating that the project was “in breach of its contractual obligations under the agreement” for failing to pay $1.4 million under a sponsorship agreement.

The letter, which DL News has seen, indicates a final deadline of December 3, 2025, after which Alpine reserves the right to terminate the agreement. Alpine Racing Limited declined to comment.

A former employee confirmed the document’s veracity with DL News.

Likewise, mining machines that investors had spent thousands of dollars on also went undelivered for months, despite marketing materials suggesting the contrary.

‚This is very embarrassing for me, as I left this to our director to arrange, and it seems to have been a disaster.‘

Antony Turny, former CEO of BlockDAG

According to an August 2025 custom product sales agreement by Goldshell, BlockDAG’s mining manufacturer, there are currently 2,550 outstanding orders for the X30 miner and 2,250 for the X100 miner.

The X30 miner costs $500, and the X100 costs $1,600, according to the agreement seen by DL News. That’s over $5 million worth of outstanding orders for the mining machines.

Roughly 20 prototypes for these machines have been shipped to the community this month, according to Reid Davis, a US Army veteran who has emerged as one of the most vocal and sceptical leaders of the BlockDAG investor group.

Davis said he’s personally responsible for $100,000 of his friends’ and family’s money invested in the project.

Goldshell did not immediately respond to DL News‘ request for comment.

Just months after signing a sponsorship agreement with the top-tier German football team Borussia Dortmund in August 2024, the partnership ended.

On social media, BlockDAG said the collaboration ended due to European crypto regulations known as Markets in Crypto-Assets, or MiCA.

A letter from the club, reviewed by DL News, paints a different picture.

On September 27, 2024, Borussia Dortmund issued a letter stating that the club had not received an invoice for €2,007,444 under the sponsorship agreement.

“We have not received any payment, and this letter serves as notification that your company is in default of payment,” the letter said.

Borussia Dortmund confirmed to DL News that the club has terminated its agreement with BlockDAG, but declined to say why. A former employee confirmed the document’s veracity with DL News.

When Borussia Dortmund sought payment under their partnership agreement in August 2024 — after the project had raised some $65 million — internal messages seen by DL News show that the then-BlockDAG CEO, Turner, was still heavily reliant on a shadow director to execute payments.

“Regarding the payment, I fully understand,” he wrote. “This is very embarrassing for me, as I left this to our director to arrange, and it seems to have been a disaster.”

Turner confirmed with DL News via email that most salaries, miners, members of BlockDAG’s ambassador programme, third-party service providers, and recipients of BlockDAG grants had all gone largely unpaid.

“When I was CEO, only a deposit was paid towards the X100s,” Turner told DL News. “Nothing towards the X30s.”

Investor hopes that the project’s fate was in Turner’s hands, an experienced fintech executive, were dashed in December 2025.

BlockDAG’s secret boss

After weeks of speculation, Van Den Bergh, BlockDAG’s then-chief marketing officer, finally revealed the project’s long-time founder as Kiziloz.

“Anybody that thinks that we do not want this project to be successful is downright stupid,” Kiziloz declared during an ask-me-anything event on December 29, 2025.

“And I know the marketing has been a little bit rogue. But none of you would be here without my marketing!”

Kiziloz then said that because Turner had breached all of his non-disclosure agreements by slowly leaking details of Kiziloz’s role, he had been fired.

Van Den Bergh was then appointed the new CEO of the project.

“The reason we hired Antony [Turner] was because I had a few failed projects in the past,” he said.

Who is Gurhan Kiziloz?

A dropout from London Metropolitan University, 38-year-old Kiziloz’s first major fintech endeavour was Lanistar in 2019.

The company pitched a “polymorphic” debit card, one that could be linked to many other cards a user owned.

Lanistar hired approximately 3,000 influencers — including former Love Island cast members such as Amber Gill and Chris Hughes, as well as world-famous football players like Karim Benzema and Kevin de Bruyne — to promote the card to their thousands of Instagram followers.

Lord Aleem, a Birmingham-based supercar influencer, agreed to plaster Lanistar stickers on a $3.5 million Bugatti Chiron.

The venture quickly came under intense regulatory scrutiny in the UK.

The Financial Conduct Authority, Britain’s financial regulator, issued a consumer warning that Lanistar was operating without authorisation in November 2020. In 2021, the Advertising Standards Authority also ordered the company to remove “misleading” advertising that claimed the card was “the world’s most secure payments card.”

A purported $20 million raise from Milaya Capital later turned out to be a direct loan from Kiziloz’s family.

BlockDAG’s business strategy mirrors several of these patterns.

In March 2025, the Financial Services Authority of Seychelles issued a formal warning for unauthorised activity. BlockDAG allegedly moved its registration to Samoa, but the country’s business registrar shows no record of the company’s existence.

The Ministry of Commerce, Industry and Labour, which oversees business registrations in Samoa, did not respond to a request for comment. BlockDAG didn’t respond to questions about where it’s currently operating from.

‚Again, anyone that thinks it’s not going to be successful is downright stupid.‘

Gurhan Kiziloz, founder of BlockDAG.

Internal BlockDAG messages seen by DL News that discussed missed payments also reveal Kiziloz offered to make payments via his “family trust account, Kiziloz family office LLC UK,” as well as another entity called TOMOTO Limited.

The High Court of Justice in London ordered Lanistar Limited to liquidate the project in September 2025. Companies House, the UK’s corporate registry, lists Lanistar as in liquidation.

Kiziloz had also dabbled in crypto prior to BlockDAG.

Based on comments from former staff at Kiziloz’s marketing agency, WPRO, and Lanistar, a Financial News report from June 2024 indicates that Kiziloz promoted several controversial memecoins, including one called Big Eyes.

The price of Big Eyes has fallen nearly 98% since its inception, according to data platform CoinGecko. The platform also includes a warning that the creator of the token contract can make changes to the digital asset, such as creating new tokens, transforming tokens, or disabling selling.

Kiziloz didn’t respond to questions about those reported endeavours. Yet he seemed to recognise that his past endeavours might reflect poorly on his reputation during the December AMA.

“I didn’t want to taint [BlockDAG] by not giving it the right chance by having myself on there,” Kiziloz told BlockDAG investors in December, referring to why he’d concealed his identity for so long.

“This project is a matter of honour and pride,” he said. “Again, anyone that thinks it’s not going to be successful is downright stupid.”

Zero hour

During the December AMA, Kiziloz revealed that the presale would conclude for investors on January 26.

A week later, the mainnet would launch, he said. Yet, it seemed like not everyone was onboard with the rollout.

“That’s a little bit aggressive,” Jeremy Harkness, BlockDAG’s chief technical officer, said during the AMA.

Harkness outlined that the development team needed to add the staking component to the project, then conduct full audits. Miners that secure the network still need to be shipped and tested, too, Harkness said.

The project’s GitHub repository shows moderate activity, but it does not reflect a large developer network, as one would expect for a layer 1 blockchain. Several repos have not seen any developer activity for several months.

To be sure, expedited or delayed project timelines, on their own, do not necessarily constitute fraudulent activity.

“But, Jeremy, early February we’ll be listing, right?” Kiziloz insisted.

Listing a project’s token on an exchange is a crucial milestone, as it makes the token available to a much wider investor base and allows early investors to sell their holdings.

“We can do that, but we will have to put off a lot of other things we’ve had planned,” Harkness replied. He didn’t expand on what those other things were. Harkness did not immediately respond to DL News’ request for comment.

Meanwhile, investors have had enough.

In a Facebook group of thousands of BlockDAG investors, Davis, a community lead for the BlockDAG investors, posted on January 14 a how-to guide for filing a financial complaint with VARA, the United Arab Emirates financial regulator, where Kiziloz and Van Den Bergh presumably reside.

Others are sharing details about how to contact authorities in the UK and the US.

“Look, we’re at zero hour,” Davis said.

Update, January 16: This article has been updated to reflect that BWT Alpine F1 declined to comment.

Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at liam@dlnews.com.

Over the past week, layer 1 blockchain Optimism and DeFi lender Morpho have both set their Discord servers to read-only mode, stopping users from posting.

The reason? The messaging platform, once a key tool in galvanising crypto communities, had become overrun with bad actors.

“Discord is actually full of scammers,” Merlin Egalite, a Morpho co-founder, said on X. “People would get phished while actually searching for answers despite heavy monitoring, safeguards, etc.”

Dozens more developers have come out in support of Morpho and Optimism dropping Discord, sharing their own issues with scammers on the messaging platform.

A key tool

At one point, Discord was a key tool in any crypto project’s arsenal.

Servers, which are like open forums where users can post messages and chat across different channels, have become invaluable hubs for communities to gather, share information, and receive support from developers.

Yet Discord’s ease-of-use and popularity proved a double-edged sword. Criminals have swarmed servers, targeting users with elaborate scams that often involve impersonating project founders and other influential figures.

Discord has taken steps to combat the scamming epidemic. The platform expanded its definition of deceptive practices and introduced new features and tools to keep users safe.

Yet for many, it’s not enough. Now, the downsides are outweighing the benefits.

“Discord makes it impossible to protect your users from getting scammed,” 0xngmi, the pseudonymous founder of DefiLlama, said on X. “Even if you ban scammers instantly they still DM users directly to scam them.”

0xngmi said DefiLlama has also been moving away from Discord to other communication channels, such as live support chat and email. DefiLlama is the sister company under the LLama Corp umbrella.

It’s not the only one to do so.

A Morpho spokesperson told DL News that it has shifted to a help page and an intercom system to eliminate the risk of users being scammed.

Less retail, more institutions

Scammers aren’t the only reason crypto projects are looking at Discord alternatives.

“We’re come to realise that Optimism needs to take a different approach to best support our current enterprise strategy,” Lavande, Optimism’s pseudonymous head of governance, said in a Discord post addressing the closure of its Discord.

In crypto’s early days, using Discord made sense because it was where many users already were. But in recent years, DeFi use has shifted sharply towards institutional investors such as trading desks, hedge funds and family offices.

These users typically have a background in the traditional financial world, where communication is handled through more conventional channels such as email, phone, or other forms of direct messaging.

“Most of our enterprise, developer and delegate interactions occur via private channels,” Lavande said.

But as crypto projects increasingly shift away from Discord to other communication platforms, they risk leaving some users behind.

“There’s some users that really want to use Discord, so if you drop Discord they will just not send feedback at all instead of using another channel,” 0xngmi said.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Blockchain security firms flagged the failed transaction on Tuesday, which happened on YO Protocol when someone tried to swap Aave’s stkGHO stablecoin for Circle’s stablecoin USDC.

But YO’s harvesting system, the mechanism in DeFi which dishes out rewards, accidentally traded the vault’s entire stkGHO balance at a very poor price in a case of extreme slippage — when the price you get for a trade is drastically worse than what you expected.

#PeckShieldAlert Yield (@yield) has suffered a major financial hit totaling ~$3.73M.

The loss occurred during a Vault operation involving a swap from $stkGHO to $USDC; due to extreme slippage, 3.84M $GHO was exchanged for a mere 112K $USDC. pic.twitter.com/jB5c1Zjm6m

— PeckShieldAlert (@PeckShieldAlert) January 13, 2026

How did it happen? Basically, slippage protection had not been adequately installed in the protocol to protect the user from the bad trade, according to YO Protocol.

In a statement published Wednesday, YO, which has $61.8 million locked in its project, according to DeFiLlama data, said that “slippage protections were insufficient, and the trade proceeded when it should have been blocked.”

DL News reached out to YO Protocol but did not immediately receive a response.

Speaking to DL News, Yehor Rudytsia, head of forensics and incident response at cybersecurity firm Hacken, said that such an error was common on yield protocols.

“The root cause of the incident is typical for yield farming protocols which do perform capital rotation or re-allocation,” he said.

No user funds were lost, and YO Protocol immediately fixed the error, the project added in its statement.

YO Protocol said that the user was using a system designed for claiming small rewards — so sufficient checks weren’t in place to make sure an error like this wouldn’t happen with such a big transaction.

“While automation is critical for scalability and efficiency, it must be supported by rigorous guardrails,” the protocol added in its statement.

“Additional safeguards have now been implemented to ensure the system operates safely, reliably, and in line with our standards,” YO added.

Correction, January 16: This story has been updated to report that the swap amount was $3.84 million.

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at mdisalvo@dlnews.com.

Burwick Law, a firm with a reputation for suing and trolling crypto companies on behalf of unhappy retail investors, just re-re-filed a lawsuit accusing Pump.fun, Solana Labs, the Solana Foundation, and their executives of creating a “rigged, unlicensed gambling operation.”

And, as promised, it included some juicy information gleaned from private messages exchanged between the Pump.fun founders.

In December, a federal judge gave Burwick permission to file its second amended lawsuit against the same group featuring new information. That included 5,000 private messages that supposedly show Solana Labs and Pump.fun engineers discussing the alleged scheme in real time.

The latest version of the lawsuit reiterates the claim that Pump.fun, while marketed as a game of chance, was, in fact, a “rigged casino” whose leaders “secretly predetermined who would win and who would lose, and extracted enormous profits from retail participants.”

That bombastic claim relies on the fact that Solana enables users to move ahead in the transaction queue by paying “tips.”

That allows people who know a token will launch soon to gobble up a significant portion of its supply the moment it launches, ensuring they can sell at profit into the retail demand that follows, according to the lawsuit.

Some of the new information in the lawsuit is damning. In a private message, for example, co-founder Alon Cohen acknowledged that most investors “lose” when they invest on his platform.

“We democratised trading lowcaps so much that everyone is exposed to the really, really low odds that come with gambling such low mcaps,” he wrote, referring to little-known cryptocurrencies with market capitalisations below $50,000.

If Pump.fun were to better account for investors’ interests and risk tolerances, “people will generally be happier (even though most lose); people will play the game they’re naturally suited to playing.”

Cohen did not immediately respond to a request for comment. And it should be noted that Burwick could’ve cherry-picked the most damning messages and, assuming they’re real, presented them in the least flattering light.

Burwick also presented some serious claims levelled by informants — unnamed crypto influencers, also known as key opinion leaders, or KOLs. They told the law firm they or their peers were paid to promote memecoins to their thousands of followers without disclosing the arrangement.

Their alleged reward? Being told which memecoins to purchase in advance, according to the lawsuit.

When the coordinated promotion campaign went into high-gear, their tokens would appreciate, and they would sell carefully, on a predetermined schedule, in order to avoid cratering the price, according to the lawsuit.

Burwick cites “standard Pump.fun agreements,” one of which was shared by Informant #2, a “prominent KOL.”

That agreement “has terms concerning scripts, script ideas, and project proposals, confirming that purportedly organic promotional content was coordinated with Pump.fun,” the lawsuit reads.

But it isn’t clear whether this was standard practice — how frequently such contracts were used, and whether they always originated with Pump.fun, as opposed to memecoin creators acting independently to pump their own tokens.

Critically, it isn’t clear why Pump.fun executives would do this. The lawsuit doesn’t convincingly show that they personally profited from this sort of front-running.

A third informant allegedly told Burwick that another prominent KOL once said “Pump.fun itself acquires early positions in tokens launched on its platform and sells those positions into retail demand.”

In my limited experience covering criminal trials, that kind of hearsay is usually too weak to admit as evidence.

With limited evidence that Pump.fun coordinated these alleged pump-and-dump campaigns, and with no hard evidence its executives profited directly, what, exactly, made the platform a “rigged casino” purpose-built “to generate illicit profits”?

Failure to level the playing field, according to the lawsuit.

“No defendant created guardrails for retail participation,” it says. “No defendant implemented randomised entry windows that would make it harder for bots or insiders to position first.”

The lawsuit says Pump.fun profited off the “rigged casino” because it took a cut of every transaction.

The logic is shaky. Sure, ensuring creator profits would drive new memecoin generation, but it would also drive away retail investors.

As for Solana’s role in all this, Burwick claims that Pump wouldn’t have been able to pull off its alleged scheme “without Solana’s network speed, priority fee system, and the March 2024 congestion updates that enabled memecoin trading at scale.” Here, it feels as though the plaintiffs are grasping at straws. Burwick didn’t immediately respond to aa request for comment.

Maybe more will come out in discovery, if the judge lets this move forward.

For now, I remain unconvinced that Pump.fun is a “coordinated criminal organisation.” Still, I’d tell my crypto-curious friends to stay clear of memecoins. After all, most lose.

Top DeFi stories of the week

This week in DeFi governance

PROPOSAL: Optimism proposes token buyback program

VOTE: CoW DAO votes on renewing grants program

PROPOSAL: Vitalik Buterin proposes bandwidth-efficient mempool system

Post of the week

Funny, but OP spoke too soon; see: the Senate market structure bill, which bans stablecoin yield — again. Never underestimate the bank lobby.

RIP banking 1118-2026. She is survived by sports gambling and crypto.

— Canderous Ordoliberal 🫥 (@butleriano) January 12, 2026

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.

On January 14, the Binance-affiliated blockchain will undergo its third major upgrade, named Fermi, which will increase the rate at which the network produces new blocks by 40%.

It’s a small change, but it should have a significant impact for both developers and users, Danny Cooper, team lead at Vanguard Vantage, a sub-DAO under BNB Chain lender Venus Protocol, told DL News.

It will “make the network feel more responsive and resilient, especially when activity picks up in high-volatility markets scenarios,” he said.

The upgrade comes as blockchains seek to increase speed and transaction capacity amid Wall Street’s interest in the crypto industry.

For the longest time, blockchains have been constrained by the so-called blockchain trilemma — the notion that a blockchain must sacrifice one of three key features: decentralisation, scalability, or safety.

BNB Chain, launched by top crypto exchange Binance in 2020, has so far focused on speed and scalability while forgoing some decentralisation.

Recent technological advancements may mean the trilemma won’t be an issue for much longer.

On January 3, Ethereum co-founder Vitalik Buterin argued his blockchain had solved the trilemma through a combination of two technical upgrades called peer data availability sampling, or PeerDAS, and zero-knowledge virtual machines.

The Fermi upgrade

Blockchain developers often name upgrades after famous academics. BNB Chain has continued this trend, naming the latest upgrade after Enrico Fermi, an Italian-American physicist, best known for creating the world’s first artificial nuclear reactor.

The two previous BNB Chain upgrades were named after French mathematician and physicist Blaise Pascal and Scottish physicist and mathematician James Clark Maxwell.

The Fermi upgrade doesn’t just increase BNB Chain’s block times. It also includes changes that will reduce the network’s finality to around one second, making transaction confirmations more predictable and reducing risks such as slippage in volatile markets.

“More consistent state updates translate into cleaner execution, lower latency, and better results for the end-user overall,” Cooper said.

Finality is the assurance that a blockchain transaction is irreversible and cannot be altered.

Other smaller changes include adjustments to how BNB Chain validators coordinate, more efficient access to the blockchain’s data, and improvements to transaction execution efficiency.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The token, which is popular with privacy enthusiasts and darknet marketplace users, jumped to $596 on Monday, 10% above its previous high of around $542 set in 2018.

The reason for Monero’s growing adoption? Investors are realising that financial privacy, once an afterthought, is quickly becoming more important than ever, Riccardo Spagni, former lead maintainer of Monero, told DL News.

“There’s a global shift towards a recognition that privacy is instrumental and critical to us as individuals and as a civilisation,” he said. “For an eternity we’ve allowed increasingly dystopian systems to exist, and it’s clear that we need to take that back.”

The privacy fervour can be felt all across the $3.1 trillion crypto industry.

In October, developers behind Ethereum made embedding privacy into the $376 billion blockchain a key focus.

Zcash, a blockchain that gives users the option to conceal their transactions, has seen its ZEC token skyrocket some 700% over the past year. To be sure, ZEC fell roughly 18% over the past week amidst ongoing drama at Electric Coin Company, the organisation behind the privacy project.

The hype even extends to institutional investors, many of whom view blockchain privacy as a prerequisite for mass adoption. Andreessen Horowitz’s crypto arm, Galaxy Digital, and Gemini founders Cameron and Tyler Winklevoss have all made privacy-preserving crypto technologies a chief concern in recent months.

Why Monero?

Launched in 2014, Monero is among the oldest cryptocurrencies to still see significant use today.

The blockchain keeps transactions private and untraceable by default using a cryptographic tool called Ring Signatures. When a user sends Monero, their transaction is mixed with other decoy outputs, forming a ring. Observers see a group of potential senders but can’t tell which one is which.

The ability to conceal transactions has made Monero popular with privacy advocates.

They argue financial privacy offered by Monero and other similar crypto assets should be considered a fundamental human right, similar to using cash or encrypted communication.

“The average person needs to take their privacy seriously sooner rather than later,” Seth, the vice president of operations at Cake, a Monero-enabled crypto wallet, told DL News. He did not give his full name to protect his anonymity.

Seth cited global financial crackdowns, invasive know-your-customer and anti-money laundering requirements, and the prosecution of privacy developers like Tornado Cash’s Roman Storm as reasons blockchains like Monero are seeing increased interest.

Additionally, proponents say the privacy offered by Monero helps protect users against surveillance from criminals and government censorship.

Over the past year, so-called wrench attacks targeting crypto investors have surged. Here, criminals kidnap investors and use threats of violence and torture to force victims into revealing the passworld-like private keys that grant access to their crypto wallets.

The perpetrators of such attacks often use publicly-accessible blockchain records to find crypto rich targets.

Regulatory pushback

Yet at the same time, Monero’s XMR is also the crypto of choice among many criminals.

In October 2024, Japanese authorities arrested 18 people for laundering money using Monero. In 2022, a US nuclear engineer and his wife were caught attempting to sell secret nuclear propulsion technology to a third country. The pair requested payment in XMR.

The XMR token is also used as the primary currency across several darknet marketplaces, where users buy and sell drugs and personal data obtained through hacks and data breaches, among other things.

It’s these uses of Monero that have attracted scrutiny from regulators in multiple jurisdictions.

A ban on privacy tokens like Zcash and Monero from Dubai’s financial regulator came into effect on January 12. The regulator cited anti-money laundering and sanctions compliance risks in the decision.

In 2024, the European Parliament voted through a bill that will ban listing tokens like Zcash and Monero. The argument was that the EU wanted to fight financial crimes such as money-laundering.

The new EU rules are set to snap into action in 2027.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The hacker targeted a bug in the protocol’s code, tricking it into giving away 8,535 Ether tokens at around 4pm London time on Thursday. Shortly after, the protocol was exploited again, with a cybercriminal stealing just under $300,000 worth of the protocol’s TRU token.

The impacted smart contract was deployed in 2021, and there is no public record that it had undergone a third-party audit.

Truebit has since acknowledged the exploits in an X post.

“We are in contact with law enforcement and taking all available measures to address the situation,” the protocol said.

The incident comes after cybercriminals stole over $2.5 billion in raids against crypto projects in 2025, DefiLlama data shows.

Attacks against older protocols

The Truebit attack also highlights a growing trend of hackers targeting smart contracts at older DeFi protocols, Weilin Li, a DeFi security researcher and PhD student at University College London, said in an X post discussing the exploit.

In November, a hacker stole $128 million from DeFi liquidity protocol Balancer. The exploited smart contract had been live on Ethereum since 2021 and had undergone multiple audits.

Other older DeFi protocols to suffer exploits in recent months include, Yearn Finance’s v1 vaults and Rari Capital, both launched in 2020, and Ribbon Finance, launched 2021.

Smart contracts at these protocols were written at a time when fewer developers were aware of critical code vulnerabilities that are now more widely known.

Many older DeFi protocols are not actively maintained but still hold significant amounts of crypto, making them prime targets for hackers.

Some DeFi developers say the trend can be attributed to hackers using artificial intelligence to find and exploit protocols.

Maths problem

The Truebit exploit was the result of an attack vector known among security experts as integer overflow — in other words, a maths problem.

When a smart contract needs to calculate something, a code error can cause it to produce a number bigger than the maximum limit it can store. This causes the value to wrap around to an unexpectedly small or negative number, which attackers can leverage to bypass security checks, manipulate balances, and steal funds.

Integer overflow exploits are not a new phenomenon.

Multiple DeFi protocols have fallen victim to them over the years. The prevalence of the issue means those developing and auditing new smart contracts now rigorously check for integer overflows and similar math problems.

Still, sometimes such bugs slip through the cracks.

In July, Cetus, a decentralised exchange on the Sui blockchain, fell victim to an integer overflow exploit. The bug allowed a hacker to trick the protocol into thinking they had more funds than they did, ultimately leading to the theft of some $220 million worth of crypto.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

On Thursday, Polygon Labs, the firm behind the blockchain, announced the Open Money Stack, a new stablecoin payment framework set to launch later this year.

It aims to let users instantly and reliably move money anywhere across the $162 billion DeFi ecosystem, providing an alternative to restrictive and often costly financial intermediaries like banks.

“Open and interoperable money ensures that it is usable everywhere, by everyone, on their own terms,” Marc Boiron, CEO of Polygon Labs, and Sandeep Nailwal, CEO of the Polygon Foundation, said in a joint post announcing the new technology.

“People don’t need to understand settlement mechanics or lose sleep because they are worried about when money will arrive.”

The POL token, which is used to pay transaction fees on the network, among other things, has risen 13% over the past 24 hours. That adds to a 31% gain for the token over the past week, helped along by a broader crypto market recovery.

Stablecoin rush

Polygon’s announcement comes as both traditional finance firms and crypto upstarts rush to leverage the regulatory clarity surrounding stablecoins following the passing of the Genius Act in July.

But Polygon is far from the only firm hoping to capitalise on the situation.

Fintech giant Stripe is developing its own blockchain-based payments platform called Tempo, planned to launch later this year, which buy-now-pay-later firm Klarna will use to launch its own stablecoin.

Tempo has lured several well-respected crypto researchers, executives, and software engineers, including former Ethereum Foundation researcher Dankrad Feist, former Optimism Labs CEO Liam Horne, and Rice University Professor Mallesh Pai.

Elsewhere, stablecoin issuers Tether and Circle, as well as Visa, BVNK and Ripple are all actively building or expanding stablecoin-based payment networks and infrastructure.

Keeping users onchain

A perennial problem in the crypto industry is that blockchains have had a hard time replicating the same functionality that traditional financial rails provide. Users eventually need to take their money offchain and rely on traditional financial infrastructure.

Polygon Labs’ intent is to create a system where users can do everything while keeping their money in crypto.

The Open Money Stack is designed to work across different blockchains and allows financial institutions and fintech firms to integrate it into their own products.

Individual components include blockchain rails, wallet infrastructure, fiat on-ramps and off-ramps, stablecoin interoperability, compliance, and onchain identity verification, among other things.

The framework will also give users the ability to earn yield on their funds while they’re not in use through DeFi, with different options depending on the user’s risk appetite.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The key safety mechanism became clogged in September after Kiln, a major Ethereum staker, removed its entire validator fleet from the network after hackers exploited a vulnerability in the platform’s staking infrastructure.

The backlog delayed staking withdrawals by several weeks at its peak, causing numerous headaches for Ethereum staking protocols, platforms that offer to stake Ether tokens for users in exchange for a small fee.

Now, those protocols are celebrating the return to normalcy.

Liquid staking tokens, receipt-like claims on staked Ether, are now less likely to trade at a discount, Kirill Kutakov, co-founder of liquid staking protocol Stakewise, told DL News.

Crypto markets price in the so-called duration risk caused by a clogged Ethereum exit queue. Spikes in queue length can amplify discounts to liquid staking tokens because those who buy them must wait longer until they can redeem them for the underlying Ether they represent.

A free flowing exit queue is also a good thing for the broader DeFi ecosystem. It’s now simpler and cheaper for those engaged in leveraged Ethereum staking strategies to unwind their positions, leading to more efficient trading, Kutakov said.

Why is there a queue?

Ethereum’s exit queue is a necessary part of the blockchain’s security.

The mechanism limits the speed at which Ether can leave the network based on the total amount staked. Currently, it’s set to around 57,600 tokens every day.

This helps prevent rapid changes to Ethereum’s validator set — those running the software that stakes Ether and processes transactions on the network. Each validator must lock up at least 32 Ether tokens, up to a maximum of 2,048.

A sudden drop in validators could make the network more vulnerable to attack. The delay also stops validators exiting immediately should they misbehave, disincentivising abuse.

The cleared exit queue also comes as a relief for Rocket Pool, the third largest Ethereum liquid staking protocol which holds $1.8 billion worth of staked Ether.

Rocket Pool’s node operators will have a much easier time redeploying their validators following its upcoming Saturn upgrade planned for February 9, Darren Langley, a general manager at the protocol, told DL News.

Staking inflows surge

As the exit queue rolls off, the queue to spin up new Ethereum validators is also increasing at a rapid pace.

Since December 24, the amount of Ether tokens entering the queue has jumped almost 300% to more than 1.7 million. New validators entering the queue must now wait over 30 days before they are able to join the network, per data from Beaconcha.in.

BitMine, the world’s biggest Ethereum treasury firm, is responsible for a large portion of the new Ether being staked. The firm began staking on December 26 and has since locked up 936,512 Ether worth approximately $2.9 billion, per onchain records.

BitMine chair Tom Lee has repeatedly expressed his intention to purchase and stake 5% of the entire Ether token supply.

The firm currently holds just over 4 million Ether, around 67% of the way towards its goal.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The previously-announced SKR token will launch on January 21 and give users unprecedented control over their smartphones, Solana Mobile said on Wednesday.

Holders who stake SKR can elect so-called Guardians — Solana node operators charged with vetting applications submitted to Solana’s mobile app store. Staked tokens will earn yield, according to Solana Mobile.

Several companies with close ties to Solana Mobile parent company Solana Labs will serve as Guardians in 2026, including Anza, DoubleZero, Helius, and Jito.

“Multiple independent operators means no single company controls approvals or verification, creating the foundation for open mobile,” Solana Mobile said on its blog.

Solana Mobile released the Seeker, its second-generation Solana-themed phone, last August. It was an attempt to offer crypto power-users an alternative to phones that run on software provided by Apple and Google, both of which take a hefty cut from applications on their respective app stores.

“Hopefully, Google and Apple will come to their senses and see what could be possible if they relax some of their fee structures and some of their restrictive policies,” Emmett Hollyer, general manager at Solana Mobile, told DL News in 2024 when the Seeker was first announced.

“Until then, we need to find a way to give builders a reasonable path to distribution.”

SKR will launch with a supply of 10 billion tokens, with more than half available immediately and the remainder locked for up to three years.

A January 21 airdrop will distribute 20% of SKR tokens, with another 10% to be airdropped at a later date. One quarter of all tokens will be set aside for employees of Solana Mobile and Solana Labs. Another quarter will be set aside to fund growth initiatives and partnerships.

The supply of SKR will grow 10% in the first year after the token’s launch. That inflation rate will decrease 25% each year until it hits 2%. New tokens will flow to guardians and to stakers.

The Seeker is the second mobile phone from Solana Mobile. The first, the Saga, sold just 20,000 units after its launch in May 2023.

In October, Solana Mobile said it would stop providing vital software and security updates for the phone just two years after launch.

Correction: An earlier version of this story misstated the amount of SKR tokens that will be airdropped January 21. The figure is 20%, not 30%.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

If successful, prosecutors’ appeal will undo a rare courtroom victory for proponents of the theory that “code is law” — that any activity on blockchain-based software is permissible as long as it follows the logic set out in the underlying code.

Eisenberg currently serves a four-year sentence for possession of child sexual abuse material that was discovered when he was arrested in connection with the exploit of Mango Markets in 2022.

Although he pleaded guilty to possession of child sexual abuse material, Eisenberg fought charges of fraud and market manipulation — and lost.

Eisenberg maintained the $110 million heist in October 2022 was a “successful and legal trading strategy” that exploited a flaw in Mango Markets’ design.

But jurors sided with the prosecutors, who argued that Eisenberg’s actions amounted to old-fashioned fraud and market manipulation, even if they took place on a blockchain. In 2024, they found him guilty of commodities fraud, commodities market manipulation, and wire fraud.

In a remarkable twist last year, federal judge Arun Subramanian vacated Eisenberg’s conviction on the commodities charges and acquitted him of the wire fraud charge.

The judge said Eisenberg couldn’t have defrauded Mango, a self-executing DeFi protocol, because he had merely taken advantage of a flaw in its design, and the service lacked any terms that forbade his behaviour.

The exploit and the judge

Eisenberg exploited a flaw in Mango Markets’ design by trading with himself to inflate the value of the protocol’s token, MNGO.

Prosecutors say he was then able to use MNGO perpetuals as collateral to borrow crypto worth about $110 million from the protocol’s users with “no intention of repaying them.”

“There was no evidence at trial that Mango Markets required any user to promise that they would repay funds as a condition of borrowing against their assets, so this isn’t a case where ‘a contractual promise was made,’” the judge wrote.

Moreover, “there was no evidence that the ‘borrow’ function on Mango Markets entailed an obligation to repay — or any other obligation for that matter — even if that’s how the term is conventionally understood.”

That is, in part, because Mango Market had no terms of service, according to the judge.

“There was just the word ‘borrow.’ That word could have been ‘access collateral,’ ‘utilise assets,’ or anything else for that matter.”

The government argued that by hitting the “borrow” button, Eisenberg created the impression his collateral was valuable.

Subramanian dismissed that argument.

“As Eisenberg points out, the platform automatically measured the actual value of his collateral, so he didn’t represent anything untrue,” the judge wrote.

The appeal

Prosecutors say Subramanian “ignored critical evidence” and used an overly-narrow reading of the law to reach his conclusion.

“To begin, the plain meaning of the word ‘borrow’ itself conveys an intent to repay, typically with interest, prosecutors wrote in a document filed on December 22.

“And the proof at trial went far beyond the word ‘borrow.’ The Mango Markets user guide defined what borrowing entailed, including stating that borrowers must pay interest and ‘maintain a Health Ratio above 0%” until repaying the loan.’”

Subramanian conveniently ignored those requirements, according to prosecutors.

Moreover, no written loan agreement or formal negotiations — in other words, no contract — is needed to find that one party engaged in fraud, the prosecutors argue.

“Indeed, [Subramanian’s] stilted view of the facts in this case would unsettle traditional understandings of fraud,” they wrote.

“This Court routinely upholds convictions when defendants convince others to invest … even when those promises are not in contracts.”

Prosecutors said the judge’s decision was apparently influenced by the “unconventional context” of the alleged fraud having occurred on a self-executing, blockchain-based application.

But there was nothing unusual about Eisenberg’s alleged fraud, they argue.

“The algorithm was just computer code, which was not meaningfully different from software programmes that people use every day across all facets of the modern economy, such as automated computer programmes used by banks to approve loan applications, or traditional brokerage firms that use computer programs to approve transactions,” prosecutors wrote.

“And just like the programmes used by other entities, the Mango Markets algorithm was controlled by humans who could change or pause the platform — as they did in response to Eisenberg’s scheme.”

Aleks Gilbert is a DeFi Correspondent with DL News. Got a tip? Email him at aleks@dlnews.com.

These findings come from research by academics at Cornell Tech. In their research, they examined the fundamental trade-offs between profitability and economic fairness in such systems.

The team of eight researchers who co-authored the January 2 paper found that these Collective Investment Algorithms, or CoinAlgs, posed unavoidable risks, regardless of whether they choose to keep their trading strategies private or opt for full transparency.

“CoinAlgs can either be transparent, and risk losing profits; or be private, and open the door for unfair value extraction by insiders,” the researchers said. “Even in scenarios where a CoinAlg may seem benign, subtle backdoors can be inserted that lead to profits from adversaries.”

Institutional-grade software

Collective Investment Algorithms are not a new phenomenon. They have existed in the traditional financial world for years, and are used at asset management firms like BlackRock and Renaissance Technologies to execute trades across multiple client portfolios.

But in crypto trading circles they’ve surged in popularity in recent years, supercharged by the proliferation of artificial intelligence.

They promise to place institutional-grade investment strategies or specialised trading intelligence within the reach of retail investors, although these tools often lack the investor protections of regulated intermediaries.

Many CoinAlgs operating across DeFi skew heavily towards speculative assets, with a preference for emerging tokens and highly volatile memecoins.

Value extraction on Uniswap

The researchers used historical transaction data from Uniswap, the biggest decentralised exchange, to simulate a profitable CoinAlg that correctly predicts future asset prices.

In this situation, they found that even minimal information leakage from a private CoinAlg

Enabled significant value extraction by arbitrageurs, investors who exploit temporary price differences to make small but consistent profits.

At the same time, those who use private CoinAlgs experience the additional risk of insiders using privileged information to conduct similar arbitrage or frontrunning trades to extract profits.

Transparent CoinAlgs didn’t fare much better.

They avoid issues of insider trading by ensuring all algorithmic trading models and data is open source and public. Yet this makes it even easier for arbitrageurs to extract profits from the CoinAlgs’s trades, with little ability for recourse.

“Even moderate defensive strategies against arbitrage incur a significant cost of transparency and thus [eroding] profits,” the researchers said.

Yet despite the issues, CoinAlgs are likely here to stay. Many investors are drawn to them because they advertise the ability to generate lucrative returns by outsourcing difficult investment decisions to AI algorithms.

The interest in such products is only set to increase as companies like OpenAI, Anthropic and Google continue to pour money and resources into AI development.

“CoinAlgs are an inevitable part of the financial landscape,” the researchers said. “The search for principled guardrails remains an important avenue for future work.”

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The sector reached a peak total market value in December 2024 of $150 billion following US President Donald Trump’s election. It has since fallen 65% and is now worth just over $53 billion, according to CoinGecko data.

So what happened? Well, it’s a wild ride of scandals, controversies and lawsuits.

Let’s dig in.

Trump kicks off 2025

US President Donald Trump started his second term in the White House with a bang. Before the new commander in chief was sworn in, his team dropped a memecoin on January 18.

Official Trump is a token running on the Solana network.

Its value exploded to a record high of $8.7 billion in January before crashing over 90% to trade at just over $1 billion, according to CoinGecko, making it the 96th biggest cryptocurrency.

Trump’s political opponents have spent the bulk of the year pointing at the token as evidence of alleged corruption.

The administration has denied any wrongdoing.

“President Trump’s assets are in a trust managed by his children. There are no conflicts of interest,” Anna Kelly, the deputy press secretary, told DL News in May.

And then Melania, too!

A token dedicated to the president’s wife, Melania Trump, also debuted a Solana-based asset on January 20.

The Melania token surged as much as 12,000% in 24 hours.

The asset then quickly crashed as some investors cashed out. The token is now well below its market cap high of nearly $625 million — having shed 98% of its value.

The team behind the memecoin described it on its website as “intended for collecting and entertainment purposes only” and “not financial instruments or investments.”

Still, the Solana-based exchange behind the controversial Trump and Melania token was hit by a class-action lawsuit in October, with plaintiffs accusing it of orchestrating a pump-and-dump scheme.

The Milei memecoin

In February, Argentina’s president and Trump ally Javier Milei also promoted a Solana-based meme token.

LIBRA, which shouldn’t be confused with the failed Meta-touted project, quickly caused controversy after Milei tweeted that it would “focus on encouraging the growth of the Argentine economy, funding small businesses and Argentina ventures.”

Following the post, the memecoin shot up in value to over $4.5 billion.

But hours later, a massive sell-off saw the token crash by 97% in value.

Milei later deleted the promotional tweet and claimed ignorance of the project’s underpinnings.

The move triggered a federal investigation in the South American country, with lawyers and Milei’s political opponents alleging fraud.

The investigation was dropped months later.

End of memecoins?

The booms and busts of the beginning of the year saw several people declare the end of memecoins.

In February, Matt Hougan, chief investment officer at asset manager Bitwise, was one among them.

He argued that the memecoin controversies combined with the fact that some of the proceeds of the $1.5 billion Bybit hack were reportedly used to launch a memecoin, meant “the death of the memecoin carnival.”

Pump.fun ICO

Memecoins may have been subdued in the second half of the year, but for Pump.fun things only heated up.

The memecoin generator raised $500 million in an initial coin offering in July. While Pump.fun today makes up 80% of the daily new tokens deployed, it faces competition from the likes of new upstart LetsBonk.

Pump.fun’s market cap has slumped 40% to $1.3 billion over the past year.

The company also faces a lawsuit in 2026 where investors claim it collaborated together with Solana Labs, the Solana Foundation, Jito Labs, and the Jito Foundation to create an “insider-rigged casino.”

The accused parties have called on the judge presiding over the case to throw it out, arguing that isn’t specific enough

“It asserts that Pump.fun touted launches as ‘fair,’ ‘safe,’ and ‘rug-pull proof’ but pleads no presales, insider allocations, or rug pulls,” Pump.fun said in its motion to dismiss. “Vague assurances of fairness and safety are, at most, ‘non-actionable puffery.’

Memes hit Wall Street

Memecoins also made their way to the mainstream via investment vehicles.

A slew of applications from fund managers wanting to release exchange-traded funds that give investors exposure to memecoins landed on the SEC’s desk.

But the first fund giving investors exposure to the biggest and oldest memecoin, Dogecoin, quietly hit markets: the REX-Osprey Dogecoin ETF, got off to a big start in September, bringing in $6 million in trading volume in the first hour.

Grayscale then in November got the green light to put its Dogecoin ETF, GDOG, on the market. It brought in a modest $1.4 million in daily trading volume.

Despite a more pro-crypto approach from the SEC this year, and industry observers expecting trading following the roaring success of the US Bitcoin and Ethereum funds, dozens of memecoin ETF applications have not been approved.

Yet, despite the setbacks, the subset of the industry is still here.

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at mdisalvo@dlnews.com.

As my colleague Tim recently explained, 2026 will likely see centralised exchanges cede market share to their decentralised competitors, as well as the emergence of new privacy features and unified stablecoin layers.

Here’s one more big-picture trend we can expect this year: as the US takes a hands-off approach to crypto regulation, I think we’ll see DeFi protocols drop the decentralisation theatre and act more like traditional software companies.

The line between DAOs, labs, and foundations was never clear. I expect it will get blurrier still. See, for example, Uniswap’s recent decision to dissolve its US-based foundation.

Even as these broader trends shape the market, developers are set to make major changes to top DeFi protocols and blockchains. Here’s a high-level look at a select few.

Originally expected to launch at the end of 2025, the latest iteration of the Aave protocol, v4, is now expected to launch early this year.

Aave Labs has already launched a codebase and public test network for v4. Remaining work is focused on security, as the company addresses the results of its multiple audits.

Aave Labs has called it “the most significant architectural evolution of the Aave Protocol since V1.”

Broadly speaking, the new protocol will enable customisable lending markets that do not fragment liquidity, something made possible by what Labs calls “a new Hub and Spoke architecture.”

But there’s already been some disagreement between Labs and the Aave DAO as to how much support v4 should receive upon launch. Aave founder Stani Kulechov has called it the future of the Aave brand. But more cautious players within the DAO are wary of boosting new tech at the expense of v3, a protocol with more than $34 billion in user deposits as of Tuesday morning.

Meanwhile, Lido Labs is on the cusp of launching the latest iteration of its liquid staking protocol.

The new protocol, Lido v3, will let users create tailor-made yield-bearing strategies powered by Ethereum staking. But it’s just one part of Lido Labs’ attempt to recapture the market share it has lost since 2023.

Labs wants to move into new asset classes, integrate with additional exchange-traded fund issuers, expand beyond liquid staking, and explore more “real-business DeFi.”

Lido Labs cited regulatory clarity and the tokenisation of real-world assets as reasons for its newfound ambition.

“These shifts are transforming DeFi from an experimental playground into a real financial layer,” the company wrote in a proposal outlining its plan for the new year.

“The next growth wave will be driven by practical use cases such as treasury management, credit, and investment, where reliability, product flexibility, and capital efficiency become prerequisites for adoption.”

Sky, formerly known as Maker, has several improvements in the pipeline. Perhaps most interesting, however, is the planned launch of artificial intelligence agents that will, among other things, assist delegates in running the DAO.

The two major DeFi ecosystems will also see major changes this year. Ethereum developers are currently finalizing the scope of the forthcoming Glamsterdam upgrade, while Solana approaches the rollout of its hyped Alpenglow upgrade, which promises to reduce Solana’s latency — the time it takes to finalise a block of transactions — from just under 13 seconds to as little as a tenth of a second.

Top DeFi stories of the week

This week in DeFi governance

PROPOSAL: Lido DAO discusses greater fiscal transparency

VOTE: BNB Chain votes to update parameters to accommodate Fermi upgrade

VOTE: Spark votes to increase Spark Savings USDC deposit cap

Post of the week

Vitalik continues his impassioned plea for crypto developers to not lose sight of the industry’s north star.

“Ethereum was not created to make finance efficient or apps convenient. It was created to set people free”

This was an important - and controversial - line from the Trustless Manifesto ( https://t.co/1F1Fe9OQPh ), and it is worth revisiting it and better understanding what it…

— vitalik.eth (@VitalikButerin) January 5, 2026

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.

The protocol has begun using revenues from its exchange product to purchase LIT tokens on the open market at a rate determined by market conditions.

So far, the Lighter treasury account, where protocol fees accumulate and buybacks are conducted, holds more than 181,000 LIT tokens worth about $550,000.

The LIT token was launched on December 30 through an airdrop of 250 million tokens — 25% of the total supply — to the protocol’s early users.

It acts as a governance token, letting holders propose and vote on protocol changes, and can also be staked to grant access to premium exchange features, while potentially accruing value through buybacks.

Following its launch, LIT fell to an all-time low of $2.33 as many airdrop recipients cashed out.

The token has since rebounded some 37%, buoyed by excitement surrounding the protocol’s buyback plans and favourable crypto market conditions.

Since the start of the year, Bitcoin has rallied more than 6% to almost $94,000, its highest price since November.

Whales buy in

Lighter is one of several perpetual futures exchanges that have generated buzz in recent months.

These platforms let users bet on crypto price movements, usually with high leverage that can juice returns and exacerbate losses.

Along with competitors like Hyperliquid, Aster, and edgeX, Lighter is a hit with traders because it marries the speed and usability of centralised exchanges like Binance with the transparency and self-custody of DeFi.

Buybacks aren’t the only thing whetting investors’ appetite for the LIT token.

Over the past week, several wealthy investors — or whales — have bought up large tranches of LIT, onchain records show.

One wallet, widely believed to belong to Tron founder Justin Sun, holds around 13.2 million LIT, worth almost $40 million at current prices.

Sun did not immediately respond to a request for comment.

Several other whale wallets have also bought millions of dollars worth of LIT over the past week.

While some investors view these purchases as bullish, others argue that single entities holding large amounts of the LIT supply is a liability, and can cause volatility should that entity decide to sell the tokens at a later date.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

The upshot? It has solved the notorious blockchain trilemma, Buterin argued.

“The trilemma has been solved — not on paper, but with live running code,” he wrote on X on Saturday.

The trilemma is a purported constraint on blockchain technology that states a blockchain must sacrifice one of three key features: decentralisation, scalability, or safety.

One advancement cited in Buterin’s post was Ethereum’s recent upgrade, codenamed Fusaka, which introduced a concept known as peer data availability sampling, or PeerDAS. That allows for a substantial increase in the amount of data that layer 2 blockchains can send to Ethereum.

The other was the slow improvement of zero-knowledge virtual machines, which dramatically slash the cost of validating blocks of transactions on Ethereum.

“This was a 10-year journey,” Buterin wrote, “but it’s finally here.”

Fusaka and zkVMs

Layer 2s send packets of data known as blobs to Ethereum for settlement. Fusaka’s introduction of PeerDAS allows individual nodes to store a fraction of blob data without compromising their ability to verify the entirety of that data.

With the upgrade, Ethereum’s blob capacity jumped eightfold, though increases will be implemented slowly in a series of smaller upgrades.

Last month, Buterin argued PeerDAS could eventually make it cheaper to transact on Ethereum itself.

“We think of blobs as being for L2s,” he said on a livestream celebrating the upgrade. “In the long term, we want to dump L1 data into blobs as well.”

Zero-knowledge virtual machines, meanwhile, provide a more efficient alternative to Ethereum’s current mechanism for verifying proposed blocks.

Currently, each validator must re-execute every proposed transaction in a block to confirm those transactions are valid. Zero-knowledge technology allows a single participant to generate a proof that shows the entire batch is correct.

This dramatically lowers validators’ computational demands, allowing Ethereum developers to increase the number — or complexity — of transactions that can be included in a block without pushing out smaller participants who cannot afford top-of-the-line hardware.

According to Buterin, zero-knowledge virtual machines for Ethereum are at “production-quality performance,” and “remaining work is safety.”

That said, full realization of these improvements is years away, according to Buterin.

Upcoming network upgrades, which include features like block-level access lists and enshrined proposer-builder separation, will make it easier to operate nodes running zero-knowledge virtual machines.

By 2030, that will become the primary way to validate blocks on Ethereum, Buterin wrote.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.

What was once decried as a key tool for financial criminals has suddenly become a core tenet of the crypto space — thanks to some rather unexpected proponents.

As larger institutions pour into the crypto space, the idea of public ledgers of every client’s transactions is an untenable product offering.

Privacy, according to Paul Brody, the global blockchain leader at consulting giant Ernst & Young, is the next key catalyst for industry growth.

“Large companies don’t want to disclose the details and the nature of their business relationship,” Brody told DL News in August.

“Without privacy, it’s very easy to reverse engineer who’s buying what, from whom and how much they’re spending. That’s considered very sensitive, non-public information.”

The only question left is where to start.

Ethereum co-founder Vitalik Buterin, however, offered some guidance back in November.

That’s when, during the Ethereum Cypherpunk Congress in Buenos Aires, Buterin shared a list of some of his top privacy tools.

The list also includes products and applications that prioritise decentralisation and open source.

More importantly, anyone can start using them in the new year.

Here are some of Buterin’s top apps for staying private, decentralised and open source in 2026.

Operating System: Graphene OS

Graphene OS is a privacy- and security-centric operating system built on the standard Android platform used in many of Google’s products.

For privacy-focused users, it also has several key advantages.

It’s primarily optimised to prevent data leaks among users by removing almost any components that may collect or transmit sensitive information without the user’s approval.

One way it achieves this is through a sandboxed version of popular Android apps like Maps and Gmail. Unlike traditional Android applications, these versions of popular apps operate in an isolated environment that prevents exposure to sensitive data.

The user can, of course, allow the apps to access that data, but the control is in their hands.

It also offers a custom-hardened, open-source kernel available for public audits, as well as letting users decide which networks and sensors to use — and for how long — in each application. Finally, the data within the system is encrypted at all times.

Private Wallet: Railway

Railway is the go-to wallet for decentralised finance users seeking a private alternative to their hot crypto wallet.

The wallet leverages zero-knowledge technology. This allows users to hide the nature of their swaps and even yield-farming activity while interacting with a host of different blockchains, including Polygon, Ethereum, and BNB Smart Chain.

Messenger: Signal

While much of the crypto industry interacts on Telegram, Signal has emerged as a compelling alternative for privacy-seekers.

The messaging app uses end-to-end encryption by default, keeping all chats and calls private except for the people involved. It’s built atop the Signal Protocol, an open-source system that has experienced extensive peer review by cryptographers.

Unlike many other companies behind popular messaging apps, the Signal Foundation is a non-profit that has engineered its servers to collect as little metadata about its users as possible to function.

“Encrypted messaging, like Signal App, is critical for preserving our digital privacy,” Buterin wrote in November.

Public Wallet: Rabby

The Rabby crypto wallet isn’t necessarily optimised for privacy compared to other wallets.

And with the upcoming privacy software development kit that the Ethereum Foundation is developing, called Kohaku Wallet SDK, all wallet providers will offer key privacy features by default.

On October 8, the Ethereum Foundation announced an expanded effort to embed privacy into the blockchain, led by a new “Privacy Cluster” team of 47 engineers, researchers, and cryptographers.

“Privacy is the freedom to choose what you share, when you share it, and who you share it with,” the foundation said. “It’s essential for dignity, security, and digital trust.”

Documents: dDocs

Instead of relying on Google for document-sharing services, Fileverse launched dDocs in August 2024.

* Self-sovereignty: your work life should not depend on the ongoing existence of a third-party corporation; ddocs is working towards fully p2p / client-side incl the collab features
* Privacy: ddocs is e2e encrypted
* Standards compliance: ddocs supports import/export to…

— vitalik.eth (@VitalikButerin) October 22, 2024

The product offers a decentralised alternative to Google Docs, which also uses end-to-end encryption and stores drafts on peer-to-peer networks, such as the InterPlanetary File System and the Graph Universe Node.

What’s more, the service feels almost identical to using Google Docs.

Privacy in 2026

As privacy considerations took centre stage in 2025, next year, the development trajectory suggests it will become the default feature in 2026.

This time, though, the momentum is joined by Wall Street institutions rather than cypherpunks of yore.

Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at liam@dlnews.com.

Early users were also airdropped a quarter of the token’s supply.

The token, LIT, opened above $3.30 but fell to around $2.50 on Wednesday.

With a supply of 1 billion tokens, that places the protocol’s value at just above $2.5 billion — about 66% higher than the $1.5 billion valuation investors reportedly gave the company when it raised $68 million in exchange for tokens and equity in November.

“The token is where the value will accrue,” founder and CEO Vladimir Novakovski said in a X Spaces on Saturday.

“All the investors knew that, they invested with that in mind.”

Perpetual exchanges have been a standout crypto success story in 2025. Several protocols, chief among them Hyperliquid, burst onto the scene this year with meteoric growth.

Developed by Florida-based Elliot Technologies, Lighter is both a layer 2 blockchain on Ethereum and a decentralised exchange for spot and perpetual futures trading.

It launched in January and has since become a top player in the highly competitive perpetual futures category, with more than $201 billion in volume over the past 30 days, according to DefiLlama data.

Inspired by fintech stalwart Robinhood, Lighter doesn’t charge a fee for most of its users. It only began charging a fee for market markets and high-frequency traders in September, and Novakovski has referred to it as “essentially a Robinhood model onchain.”

“If you can make life easy for retail, that’ll grow the pie much higher,” he said on another livestream earlier this month, explaining the company’s business model.

For months, Lighter users accrued points — a reward system that has typically been used by crypto startups to allocate yet-to-be-released tokens and lure users.

Lighter distributed a quarter of its tokens to users who had earned points since the protocol’s January launch. Another quarter has been set aside for future points programmes and other growth initiatives.

Employees and investors received half of the one billion tokens with a one-year lockup and a three-year vesting period.

In a thread on X, Lighter gave a brief summary of the token’s utility.

“Financial data providers and subscribers will use LIT as the fee token and staking will incentivise verifiable data for trading and risk management,” the company said.

Protocol revenue will be split between growth initiatives and token buybacks, it added.

“The value created by all Lighter products and services will fully accrue to LIT holders,” the company said. “We are building in the USA and the token is issued directly from our C-Corp, which will continue to operate the protocol at cost.”

In November, Lighter raised $68 million in a round led by Founders Fund. Other investors included Ribbit Capital, Haun Ventures, and Robinhood, Fortune reported.

That round valued Lighter at $1.5 billion, according to the report, and followed a 2024 round that raised $21 million.

While the protocol just offers spot and perpetual futures trading at the moment, it can support other financial products, including lending, according to the company’s website.

Novakovski has said the company plans to integrate options and fixed income trading in the coming year.

Aleks Gilbert is DL News’ New York-based DeFi reporter. You can reach him at aleks@dlnews.com.

With Ethereum’s Fusaka upgrade in the rearview mirror, developers have turned their attention to future improvements codenamed Glamsterdam and Hegota.

Glamsterdam is expected sometime in 2026, and its headline features have been locked in for months.

Despite all the talk in 2025 about Ethereum developers’ renewed focus on scaling mainnet — making Ethereum itself more capable of quickly and affordably processing transactions at scale — Fusaka’s chief benefit was to reduce the cost of transactions on layer 2 blockchains, which are separate from, but settle on, Ethereum.

Glamsterdam, on the other hand, will reflect that renewed focus through its two major features: block-level access lists and enshrined proposer-builder separation, or ePBS.

Block-level access lists are expected to be particularly beneficial for complex applications, such as DeFi protocols.

At a high level, they’ll enable parallel processing of certain transactions on Ethereum.

This will allow for faster block validation, more predictable transaction fees, and, for certain transactions, dramatically lower fees.

Enshrined proposer-builder separation is also expected to lower the cost of using the chain and to increase throughput.

It could also increase the cost of censorship on Ethereum, according to one of its champions, the pseudonymous developer Potuz.

That said, a more significant anti-censorship feature considered for Glamsterdam has been delayed to the Hegota upgrade.

Hegota has yet to receive a target release date. We don’t even know what the upgrade will include — of the many Ethereum Improvement Proposals floating around online, only that anti-censorship feature has even been marked “considered for inclusion,” meaning it’s no guarantee.

That feature, fork-choice inclusion lists, or FOCIL, guarantees inclusion in a block of any valid transaction. It spurred intense debate among Ethereum developers this year.

“In an effort to shield the Ethereum validator set from centralising forces, the right to build blocks has been auctioned off to specialised entities known as builders,” FOCIL’s authors explained when proposing the feature in 2024.

But the builder market has become concentrated, spurring fears of a choke point that could be easily leveraged by governments and others seeking to censor transactions, the authors continued.

FOCIL addresses this by giving so-called validators — another, more distributed set of players in the Ethereum ecosystem — the power to require that builders include certain transactions.

Privacy Pools founder Ameen Soleimani has argued that the benefits of FOCIL are overstated, and it creates legal risks for US-based validators.

When Tornado Cash was placed on the US sanctions list, some 90% of validators declined to include transactions that touched Tornado Cash smart contracts, he said. As long as a single validator was willing to include those transactions, however, they would eventually settle on Ethereum.

Had US validators been forced to include those transactions, however, they could have faced the wrath of the US government, Soleimani argued.

Rollup developer Tim Clancy, who, like Soleimani, attended the New York trial of Tornado Cash developer Roman Storm in solidarity, called it the “single most important [proposal] for Ethereum.”

“It delivers a capability that Ethereum must have to continue delivering on its mission of being the most neutral blockspace,” he wrote on X earlier this year.

Of course, even if FOCIL makes its way into the Hegota upgrade, it won’t be the only major feature. Ethereum devs will begin debating which features should be included in Hegota on January 8. Headline features will likely be finalised by the end of February.

Top DeFi stories of the week

This week in DeFi governance

VOTE: Aave DAO votes on renewal of delegate incentive program

VOTE: Rocket Pool votes on membership slate for its grants and bounties committee

VOTE: World Liberty Financial votes to use treasury to support growth of USD1

Post of the week

Major cryptocurrencies closed the year well below their all-time highs reached just months earlier.

Still, the industry has had a wildly successful 2025. Unless you’re in the NFT market, that is.

The further we get from 2021 the more it seems like a fever dream pic.twitter.com/6C4cUMgAlX

— bunny 🍌 (@DaBunnyOFFICIAL) December 23, 2025

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Writing on X on Friday, Zhao said that the exchange had a SAFU — secure asset fund for users — to protect client funds.

Hackers targeted Trust Wallet, the official non-custodial mobile wallet of Binance, on Christmas Day, draining $7 million in funds via an update to the Google Chrome browser extension. Trust Wallet has since said that it is in touch with impacted users.

“So far, $7m affected by this hack,” Zhao wrote on Friday. “Trust Wallet will cover.”

So far, $7m affected by this hack. @TrustWallet will cover. User funds are SAFU. Appreciate your understanding for any inconveniences caused. 🙏

The team is still investigating how hackers were able to submit a new version. https://t.co/xdPGwwDU8b

— CZ 🔶 BNB (@cz_binance) December 26, 2025

“Appreciate your understanding for any inconveniences caused,” he added.

Trust Wallet — which is owned by Binance — on Christmas Day told clients that there was a security incident and warned users not to use the old version of the app’s browser extension.

Blockchain sleuth ZachXBT then flagged the incident, saying that he’d been contacted by users who had lost funds.

The crypto wallet has since warned those using Trust Wallet on a computer not to open the application using Google’s old browser extension.

“For users who haven’t already updated to Extension version 2.69, please do not open the Browser Extension until you have updated,” the platform said on X. “This may help to ensure the security of your wallet and prevent further issues.”

Mobile-only Trust Wallet users were not targeted by hackers, according to Trust Wallet.

2025 has been a brutal year for crypto losses, with hackers stealing more funds than ever before. Blockchain intelligence company TRM Labs last week calculated $2.7 billion in crypto losses for the year.

Cyber criminals have become more sophisticated, targeting centralised exchanges over experimental DeFi apps, the firm said.

North Korean state-sponsored crooks in particular have become advanced, with blockchain surveillance company Chainalysis in December reporting a 51% increase in the amount of digital assets stolen by the hermit kingdom’s hackers in 2025.

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at mdisalvo@dlnews.com.

That’s according to “State of DeFi,” a new report from DL News and sister companies DL Research and DefiLlama.

DAOs are the crypto cooperatives that manage some of the largest and most successful blockchain-based applications, such as Aave and Uniswap.

The prior year had been a high-water mark for DAO governance, according to the report. This year, however, the number of proposals and the number of people voting on those proposals both fell sharply across several major DAOs.

The plunge is a troubling sign for crypto purists, who envision a future financial system free of middlemen, where business decisions are made not by fiat handed down by a small cadre of executives, but democratically, by thousands, if not millions of user-owners.

The report analysed the DAOs that govern Aave, Lido, Uniswap, Arbitrum, Balancer, and Frax.

Across all six, the number of proposals fell by at least 60% and as much as 90% year-over-year, the report found.

Median voter participation also fell at every protocol save Lido, which saw a boost in participation after implementing new rules.

DAO apathy is no secret — the cooperatives have been trying to boost tokenholder participation for years.

While the number of voters fell, the number of votes cast increased in all six DAOs, according to the report, suggesting an increasing number of voters are loaning their tokens to delegates — actors akin to elected representatives within the cooperatives.

“This pattern confirms a structural shift in DeFi governance away from broad, retail-style token participation toward a model dominated by a relatively small group of professional delegates, large liquidity providers, protocol-aligned funds, and long-term strategic token holders,” the report notes.

“From an institutional perspective, this transition improves governance predictability and operational coherence, but it also raises persistent questions around capture risk and minority tokenholder relevance.”

Here are some other trends that emerged in 2025, according to the report.

Diversification, but slowly

In decentralised finance, revenue has long been concentrated among a small crop of hyper-profitable businesses. In 2025, crypto wealth began to spread out — but just a little.

“Revenue expanded across nearly all major sectors, but the distribution of that growth revealed a clear structural pattern: a small group of protocols continues to dominate fee capture while a new wave of entrants reshapes competition within key verticals,” the report said.

This year, the top 10 protocols captured 60% of all fees, according to the report. The top 20 captured a whopping 80%.

But that’s actually an improvement from 2024, when the top six protocols captured 70% of all fees.

Stablecoin issuers Tether and Circle remain in a class of their own, capturing 54% and 18% of all fees, respectively.

Behind them, perpetual exchanges such as Hyperliquid surged to become one of the most lucrative businesses in DeFi.

Four perpetual exchanges accounted for 7.5% of all fees captured by DeFi protocols in 2025. More remarkably, their revenue held steady no matter the direction of the broader crypto markets, according to the report.

Decentralised exchanges, on the other hand, saw their fortunes tied to the volatility of crypto writ large, the report said.

Buybacks boom

Governance tokens were caught in a tough spot last year: they let users participate in DAO decision making, but nobody really wanted to immerse themselves in the weeds of protocol management.

That raised an uncomfortable question for investors who had bought those tokens: what were they really worth?

That started to change in 2025. This year, the share of protocols that distribute revenue among tokenholders has tripled, from 5% to 15%, according to the report.

Major protocols like Aave and Lido have approved buyback programmes this year.

“As competition intensifies and tokens increasingly resemble traditional financial assets, more protocols are expected to adopt similar approaches,” the report said.

One reason: the world’s largest economy has become more friend than foe, according to the report.

Under former President Joe Biden, the US’ top financial regulators seemed to think just about every crypto asset was an unregistered security. And making a token more security-like by incorporating dividend-like revenue distribution would only have invited scrutiny, according to crypto attorneys.

Under Biden’s successor, US policy has done a 180-degree turn. Open investigations have been dropped as lawmakers are debating a bill that could categorise most tokens as commodities, which are subject to less onerous regulations.

But there’s another reason for the change, according to the report.

Cheap chains

Blockchains have become cheaper to use. Nowhere is the change more stark than in Ethereum, which has maintained its lead as the home of decentralised finance.

The average transaction cost on Ethereum has fallen 86% since 2021 even as the number of transactions has nearly tripled, according to the report.

In 2021, blockchains captured 54% of all user fees, while applications captured just 34%, the report said. In 2024, applications edged out the platforms on which they’re built, capturing 47% of all fees to blockchains’ 42%.

In 2025, applications rule in fee generation: they captured 66% of all fees. Blockchains, meanwhile, captured just 19%.

“Competition has played a central role in driving costs down,” the report said. “Solana’s rise in 2021 set a clear precedent by demonstrating that high throughput and low fees were achievable, pushing Ethereum and other ecosystems to accelerate their scaling roadmaps.”

That change has left many protocols cash-rich, allowing them to innovate and to direct some of their revenue to tokenholders.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

That means some revenue from the Uniswap protocol will now be used to boost the value of the protocol’s token, UNI.

Investors had long clamoured to activate the so-called fee switch, which could direct a portion of protocol revenue to tokenholders, tying UNI’s value to the success of the Uniswap protocol.

Uniswap is the largest decentralised exchange on Ethereum, and it is also active on 39 other chains, according to DefiLlama. It has processed more than $60 billion in transactions over the past 30 days.

But activation had long been delayed by Uniswap leadership, which feared such a move would draw scrutiny from financial regulators.

That changed earlier this year, when the Uniswap Foundation proposed “UNIfication” — a suite of changes that would activate the fee switch, destroy 100 million UNI tokens, end the collection of fees on a Uniswap interface, set in motion the Foundation’s closure, and more.

The proposal passed with near unanimity — of 125 million votes cast, fewer than 1,000 were in opposition.

Rather than send revenue directly to tokenholders, the fee switch proposed by UNIfication will send that revenue to a “token jar.” UNI holders would be able to destroy their UNI tokens and, in turn, withdraw an equivalent amount of crypto from the token jar.

That would reduce the UNI supply and, in theory, boost the remaining tokens’ value.

The vote will also result in the destruction of 100 million UNI tokens, worth almost $600 million at Friday’s prices. That’s the amount of tokens that would have been burned had the proposed fee switch been implemented since Uniswap’s inception several years ago.

Today, liquidity providers get a cut of every transaction on Uniswap. It’s a lucrative business: users have paid more than $50 million in swap fees over the past 30 days, according to DefiLlama data.

The fee switch will maintain the current swap fees. But it will divert between one quarter and one-sixth of those fees to a smart contract known as the token jar. Anyone who burns UNI tokens — using a smart contract called “fire pit” — would be able to withdraw an equivalent amount of crypto from the token jar.

In order to compensate liquidity providers, the DAO approved development of a new feature, the Protocol Fee Discount Auction. That would “add a new source of protocol fees by internalizing MEV that would otherwise go to searchers or validators,” according to the UNIfication proposal.

The proposal activates the fee switch on pools in Uniswap v2 and Uniswap v3, which comprise as much as 95% of liquidity provider fees collected from Uniswap transactions that settle on Ethereum mainnet.

Votes to activate the fee switch on Uniswap v4 and other blockchains would come at a later date.

Voters also approved on Thursday the eventual closure of the Uniswap Foundation, a nonprofit funded by the DAO and tasked with driving the protocol’s growth.

A majority of Foundation staff will move to Uniswap Labs, a for-profit company. Labs will assume several responsibilities currently under the Foundation’s purview, including ecosystem support and funding, governance support, and developer relations.

Remaining Foundation employees will administer the nonprofit’s $100 million grants program. Afterward, the Foundation will fold.

Uniswap Labs, meanwhile, will cease to collect fees from interfaces that allow non-technical traders to use the Uniswap protocol. Those interfaces include a Labs-built website and crypto wallet.

UNI was flat after the vote ended on Thursday. It was trading just under $6 as of noon New York time on Friday.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The vote concluded a heated row between Aave Labs, the company that built the first version of the Aave protocol, and the Aave DAO, the cooperative that now controls it.

But the detente might be short-lived — Marc Zeller, one of the most influential members within the cooperative, suggested another vote could come after the holiday season.

Aave enables peer-to-peer lending and borrowing on Ethereum and several other blockchains. It is the largest protocol in decentralised finance, with more than $33 billion in user deposits, according to DefiLlama data.

The controversy began earlier this month, when Aave Labs was accused of attempting to profit at the DAO’s expense. The company had decided to keep certain revenue generated by app.aave.com, the website through which most users access the Aave protocol. Previously, that revenue had been directed to the Aave DAO.

That website was created and owned by Aave Labs. Still, critics called it an unacceptable attempt to profit off the Aave brand, which underwent a DAO-funded visual overhaul this year.

The furore culminated with a proposal from software engineer and Aave contributor Ernesto Boado. He wanted the DAO to request that Labs transfer “brand assets,” such as naming rights, social media accounts, and the aave.com domain name, to the DAO, the cooperative that governs the protocol.

It became one of the 10 most commented-on proposals in the DAO’s history.

But it became controversial in its own right on December 21, when Labs put it up for a vote — without consulting Boado.

Stani Kulechov, the protocol’s founder and the CEO of Aave Labs, said the discussion has been extensive and token holders should be ready to vote. But critics saw an attempt to rush the issue through the Christmas holidays, when many DAO members would be unwilling or unable to cast a vote.

Boado called the push for a vote “disgraceful” and urged DAO members to cast an “abstain” vote to convey their displeasure — the DAO equivalent of voting for a write-in candidate.

According to a final tally, 55% of votes cast had been in opposition to the proposal. Another 41% were “abstain,” votes, and just 3.5% were in favour.

Kulechov noted the vote had raised “important questions” about the relationship between Aave Labs and AAVE tokenholders.

“I am committed to making the economic alignment between Aave Labs and $AAVE token holders more clear,” he wrote in the DAO’s governance forum after the vote ended.

“In the future, we’ll be more explicit about how products built by Aave Labs create value for the DAO and $AAVE token holders.”

Zeller, one of Labs’ harshest critics in recent weeks, celebrated the outcome as a moral victory for decentralised governance.

“Despite an unfair timeline and every practical disadvantage stacked against the DAO, participation broke records,” Zeller wrote in the forum. “That is not a defeat for decentralisation. It is the opposite of apathy, and that is exactly what a healthy DAO should look like.”

And he hinted another vote could be coming soon.

“When a mature, legitimate vote is re-run with the author’s consent and a complete discussion cycle, participation should be even higher,” he wrote.

Aave token was trading just under $155 on Friday afternoon, a 22% decrease since the controversy first erupted earlier this month.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The roaring comeback of initial coin offerings, or ICOs, coupled with the rise in airdrop-raiding Sybil attackers, mean giving out tokens isn’t as popular as it used to be.

Yet, at the same time, several multi-billion dollar crypto projects have hinted that colossal token distributions could be just around the corner.

Here are five airdrops on DL News’ radar for 2026.

OpenSea

OpenSea confirmed its associated nonprofit, the OpenSea Foundation, will launch a token as early as February.

But it wasn’t until Devin Finzer, the platform’s CEO, shared more details in October that the excitement really set in.

The SEA token is set to launch in the first quarter of 2026, with 50% of supply going to the community, and more than half awarded via an initial airdrop claim, according to Finzer.

OpenSea crossed $2.6B in trading volume this month, with over 90% from token trading.

This is just the beginning of our transformation, from “NFT marketplace” to “trade everything.”

NFTs were chapter one for us. In 2021, OpenSea brought the first wave of everyday internet users…

— dfinzer.eth | opensea (@dfinzer) October 17, 2025

The token will be integrated with the OpenSea platform, and give holders the ability to stake SEA behind their favourite tokens and NFT collections, although what purpose this will serve isn’t clear.

As for tokenomics, Finzer said OpenSea plans to use 50% of the platform’s revenue to buy back the SEA token on the open market, mimicking a similar initiative pioneered by perpetual futures exchange Hyperliquid.

Polymarket

Prediction market Polymarket has also confirmed a token is coming.

In October, Chief Marketing Officer Matthew Modabber said the launch will include an airdrop, and that the firm planned to make it a focus after its US relaunch.

It’s not yet clear what function the Polymarket token will serve.

Modabber didn’t reveal any specific details, but praised Hyperliquid for its token launch.

“Teams like Hyperliquid who really thought it through will be around forever as a result,” he said at the time.

Hyperliquid launched its HYPE token in November 2024. It distributed 31% of the supply to users, an unusually high percentage compared to other crypto airdrops.

Lighter

There are multiple perpetual futures exchanges running points programmes, which will almost certainly end in token airdrops.

Lighter, currently the biggest decentralised perpetual futures exchange by 30-day volume, is arguably most highly-anticipated.

Its points programme is scheduled to run until the end of 2025, leading many to believe that a token airdrop could come early next year.

Bettors on Polymarket are hoping it will happen even sooner. They currently give a 90% chance of the airdrop happening before the end of 2025.

In addition to Lighter, exchanges EdgeX, Aster, and Paradex, among others, are all also running points programmes at various stages, and could airdrop tokens in 2026.

MetaMask

Crypto users have long speculated that the MetaMask crypto wallet will get its own token.

In September, Consensys CEO Joseph Lubin confirmed to The Block that the long-awaited MASK is coming “sooner than you would expect.”

Later that month, the MetaMask X account posted a picture that also appears to confirm a token is coming.

🦊 pic.twitter.com/JKbI3DcEse

— MetaMask.eth 🦊 (@MetaMask) September 23, 2025

Details on what the MASK token will do, and how it will be launched, are sparse.

MetaMask launched a rewards programme in October, which awards points to those who swap tokens through the MetaMask wallet, among other activities.

These points will convert into Linea tokens, fee discounts — and
future airdrops, per the MetaMask website.

Base

A potential Base token used to be a fairly far-fetched idea — even by crypto standards.

But that charged decisively in September when Base creator Jesse Pollak announced that the team behind Coinbase’s layer 2 blockchain is exploring a token.

What a Base token could look like is anyone’s guess at this point.

If it happens, it will make Coinbase the first major publicly-traded company to launch an associated crypto token.

Pollak’s big reveal came around the same time that Lubin announced MetaMask’s token plans.

Whether this signals the crossing of some regulatory hurdle behind these scenes, or just pure coincidence, isn’t clear.

But we might just find out in 2026.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

We forecast that traditional finance would enter DeFi at an unprecedented pace, more protocols would launch their own blockchains, and financial technology firms would incorporate DeFi into their offerings at scale.

Well, we did quite well.

In 2025, we saw banks launch stablecoins, asset managers allocate billions of dollars to DeFi lenders, and Wall Street firms pile into tokenised assets.

In January, Coinbase kicked off the fintech integrations with its Morpho-powered Bitcoin loans. In June, trading titan Robinhood began using Arbitrum to facilitate tokenised stock trading for European users.

And just two weeks ago, $75 billion neobank Revolut integrated Uniswap, the biggest decentralised exchange, for onramping, swaps and crypto purchases.

As for tailor-made blockchains, it’s not just DeFi protocols launching them now. Fintech firms are also entering the fray, with Stripe’s upcoming Tempo blockchain being the most notable example.

These trends likely aren’t over, and should only grow over the coming year.

But as 2025 draws to a close, we’ll take a shot at predicting three more trends set to shake up DeFi in 2026.

Unified stablecoin layers

If there was one trend that defined DeFi in 2025, it was stablecoins.

Dollar-pegged tokens in circulation soared to more than $300 billion while everyone from family office managers to US Treasury Secretary Scott Bessent issued lofty predictions for exponential growth.

Yet for all the success, stablecoins suffer from a major hurdle to their continued adoption: liquidity fragmentation.

The biggest stablecoins are spread across many different trading venues, blockchains, and exchanges. This dispersion makes it harder for traders to execute large orders efficiently, leading to higher transaction costs, bigger price swings, and reduced market efficiency.

In 2026, we predict stablecoin issuers will make significant progress toward solving this issue by building out and promoting the adoption of unified liquidity layers.

Many stablecoin issuers have already started.

Circle has its Cross-Chain Transfer Protocol. This lets developers transfer USDC across blockchains with native burning and minting.

Similarly, Tether, the biggest stablecoin issuer, has launched USDT0, an omnichain stablecoin that functions as a single asset that works across multiple blockchains.

If those firms are successful, “stablecoin transfers and conversions become more capital efficient, cheaper, and more predictable,” Jascha Samadi, co-founder of Greenfield Capital, a crypto venture firm, told DL News.

DEXs rival CEXs

For the longest time, there was a tradeoff in using decentralised exchanges. While permissionless, DEXs sacrificed liquidity and price competitiveness compared to their centralised counterparts.

In 2025, that changed. Improved user experience, intents-based trading, and dark AMM models on Solana have made some DEXs just as, if not more, competitive than centralised exchanges.

At the same time, traders are growing weary with centralised exchange failures.

In May, Coinbase revealed cybercriminals had bribed and recruited a group of rogue overseas support agents to steal customers’ data to facilitate social engineering attacks.

Then in October, Binance issued an apology and refunded users $283 million after the exchange’s system unfairly closed user’s trades during a period of high volatility.

Others have complained more generally about centralised exchanges suffering from technical glitches, restricting accounts without warning, and difficulties dealing with customer support.

Over the past year, the proportion of crypto trading conducted on DEXs has grown quickly. As of November, DEX’s accounted for just over 21% of all crypto trading, their highest percentage ever, per an analysis by CoinGecko that used DefiLlama data.

We predict this trend will continue. Next year is likely too soon for DEXs to overtake centralised exchange in absolute trading volume. But they could hit 50% of all crypto trading by the end of 2026.

Privacy push fuels adoption

This year, privacy surged to become one of the biggest themes in DeFi.

Privacy-focused blockchain Zcash blew away the rest of the market in the last three months of the year with a 860% nosebleed rally that saw its ZEC token hit $711 in November, its highest price since 2016. It has since slumped back to $395.

Elsewhere, the Ethereum Foundation announced an expanded effort to embed privacy into the $284 billion blockchain.

Advocates argue crypto privacy is important for ensuring the personal security of those who use the technology. Just as people wouldn’t want their traditional bank statements made public, users often don’t want their entire financial lives exposed on blockchains, either.

For the institutions dipping their toes into DeFi, the lack of built-in privacy leaves them with a dilemma, according to those behind Canton Network, a blockchain designed for institutional finance.

Gain the benefits of using blockchains, but at the risk of exposing pricing, strategy, or sensitive investment positions, or stick to slower, less efficient traditional rails.

Canton aren’t the only ones making that case, either.

Privacy compatible security features, like private multi-signature wallets, are a prerequisite for many institutions looking to make the jump onchain, according to Alan Scott, co-founder and contributor to the Railgun privacy protocol, previously told DL News.

Our final prediction is that in 2026, adoption of privacy-focused protocols and blockchains will continue, more blockchains — like Ethereum — will launch their own privacy infrastructure, and these developments will spur a new wave of institutional adoption.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Before a Monday deadline, a majority of Gnosis validators updated their software to accommodate the hard fork, which effectively undid the hack.

Such maneuvers are among the most controversial in crypto. While they can help users who lose money due to hacks or errors, they also undermine one of the core value propositions of blockchain technology — that it is neutral infrastructure that is not subject to the whims of a capricious central authority.

Philippe Schommers, an executive at Gnosis Ltd., hinted at that concern in a December 12 post in which he urged validators to update their software in order for the fork to succeed.

“We believe that in due course, validators should not be able to censor transactions and the underlying network infrastructure should be actually blind,” he wrote in the blockchain’s governance forum.

“We commit to work towards this future, but in the meantime encourage a community discussion on how and when the community should wield this power it still has when acting in concert.”

Gnosis Ltd. is the company that built the blockchain and related products, such as Gnosis Pay.

Gnosis Chain was launched in 2015, making it one of the longest-running blockchains. Its DeFi ecosystem was 39th-largest as of Tuesday, with more than $138 million in user deposits, according to DefiLlama data.

Ethereum underwent a similar move in 2016, after a massive hack threatened the nascent network.

That year, an Ethereum-based investment fund called The DAO was hacked for 3.6 million Ether, which was worth about $50 million at the time.

A month later, a majority of Ethereum miners upgraded their software to undo the hack. It was a controversial move that split the chain in two.

The upgraded chain is still referred to as Ethereum, while miners who refused the upgrade continued running the older version of the blockchain, now known as Ethereum Classic.

Some Gnosis users raised concerns with the decision in a forum for GnosisDAO, the cooperative that governs the blockchain.

Ideally, we wouldn’t have had to take that decision in the first place,” Luca Winter, the co-founder of Serenita, a manager of Gnosis validators, said on December 12.

“In response to the current situation we would like to (help) set some ground rules based on which we can more easily, and quickly, decide what to do if a similar situation should reoccur.”

He wasn’t the only one to call for a gameplan in the event Gnosis users suffer another hack. One observer cited “unequal treatment” as past hacks hadn’t merited a hard fork.

“This hard fork procedure represents a major shift in the philosophy of immutability, and I’m concerned about the potential pitfalls,” they wrote. “Accepting the hard fork could set a dangerous precedent, opening a Pandora’s box and bringing the Gnosis Chain closer to traditional finance.”

Last week, Gnosis Vice President of Technology Sebastian Bürgel asked for input on a framework that could guide the DAO in the event of a future hack.

Bürgel said he would begin drafting the framework in late January and submit it to the DAO for approval “if appropriate.”

In November, DeFi protocol Balancer suffered a hack that totaled $150 million across the several blockchains on which it operates.

Of that figure, about $9 million had been on Gnosis.

Schommers said Gnosis contributors had been working since the hack to provide an update that could recover user funds before Christmas.

That work has delayed a Gnosis update meant to keep its code compatible with that of Ethereum, an affiliated blockchain that saw a major functional upgrade earlier this month.

The Gnosis upgrade is now expected to take place in the new year, Schommers said.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The days of experimenting with new protocols and receiving lumps of valuable tokens are fading away.

Those kinds of airdrops, it turns out, were prime targets for so-called Sybil attackers to game.

Now, more and more crypto projects are tying airdrops directly to metrics like trading volume or deposits to keep Sybil attackers from raiding their airdrops. To put it simply, projects have moved to a system where the more you use a protocol — and pay it in fees — the bigger airdrop you could potentially receive.

Hyperliquid, the biggest decentralised perpetual futures exchange, showed how successful this strategy can be with its November 2024 airdrop. Unsurprisingly, more than half a dozen competitors have copied Hyperliquid’s “play-for-points” approach over the past year, something I predicted could happen at the end of 2024.

Even prediction market Polymarket is looking to Hyperliquid for inspiration as it prepares to launch and airdrop its token.

While that trend is set to continue well into 2026, there’s another big factor that stands to impact airdrops: initial coin offerings, or ICOs.

Selling tokens directly to investors faced a harsh crackdown back in 2018, but has made a roaring comeback this year under US President Donald Trump’s more crypto-lenient administration.

Top US-based crypto exchanges like Coinbase and Kraken have invested in ICO infrastructure this year, and are set to make token sales a prominent part of their offerings.

The return of ICOs doesn’t mean airdrops will go away, but it will significantly change what they look like. Here’s why.

ICO impact

With token sales back on the table, more crypto projects could opt to run ICOs instead of airdrops.

There are some good strategic reasons to do so. Airdrops can be very tricky to get right. Many projects are fearful of giving away too many tokens — or too few — and drawing the wrath of their users. Some may feel it’s better not to try and go the ICO route instead.

Then there’s the financial factor. ICOs generate cold, hard cash, while the financial rewards of incentivising users through an airdrop aren’t as direct. Some projects may feel that only conducting an airdrop when ICOs are also a possibility leaves money on the table.

Matt O’Connor, co-founder of token offering platform Legion, summed the situation up nicely.

“An airdrop attracts people who want to sell your token, while an ICO attracts people who want to buy your token,” he told DL News.

So, what is the impact for investors?

Projects that don’t rely on generating liquidity like perpetual futures exchanges — and especially those investors are excited about — could opt to skip airdrops entirely and launch tokens solely through ICOs, meaning fewer airdrops overall.

Recent ICOs from Plasma and MegaETH show that demand for these early-stage token sales can be incredibly high.

Projects that choose to conduct both an airdrop and ICO will have to find a balance between the amounts of tokens allocated to each. This could result in fewer tokens being distributed through airdrops, upsetting investors who had hoped for more.

One recent example of this is Monad, the blockchain project, which conducted an airdrop ahead of a $188 million token sale. It faced backlash from users after some complained the amount of tokens allocated in the airdrop was too small.

Losing trust

It’s not just competition from ICOs that is weighing on airdrops. Users are also losing trust in them.

Last month, Apriori, a trading infrastructure startup, came under fire after onchain records showed suspicious activity surrounding its token airdrop.

Approximately 80% of the project’s tokens on BNB Chain were claimed by a single clustered group of more than 5,800 wallets in what appeared to be a large-scale Sybil attack that relied on insider knowledge.

Elsewhere, projects like Aster, backed by Binance co-founder Changpeng Zhao, have faced scrutiny as it attempts to draw in users with the promise of multiple token airdrops.

Aster trading data isn’t public, leading some to allege that the exchange has inflated its user metrics.

To be sure, the issues impacting airdrops also apply to ICOs.

Take Edel Finance, for example. Onchain sleuths found that wallets tied to the project had bought up over 30% of its token using bots during its ICO last month.

The good news for investors is that many future ICOs will take place on high-profile platforms with reputations to uphold.

The likes of Coinbase and Kraken should be selective about which projects they pick for ICOs. They likely won’t suffer the kinds of shenanigans that plagued launches like Apriori and Edel Finance, which will hopefully create a more even playing field for investors.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Aave Labs drew fresh scrutiny over the weekend after the company advanced a contentious proposal without consulting its author.

The proposal requests that Labs transfer brand assets — such as naming rights, social media accounts, and the aave.com domain name — to the DAO, the cooperative that governs the protocol.

On Sunday, Labs put the proposal up for an initial vote that will conclude on Christmas Day.

The proposal was prompted by a recent furore over Labs’ decision to keep certain revenue generated by the website through which most users access the Aave protocol. Previously, that revenue had been directed to the Aave DAO.

Critics called it an unacceptable attempt to profit off the Aave brand, which underwent a DAO-funded visual overhaul this year.

Labs has defended the decision, calling it a reasonable way to defray the cost of running that website.

The ensuing clash has been a surprising show of disunity between organisations that typically work in lockstep.

The proposal’s author, software engineer Ernesto Boado, said the proposal was “intended to bring explicit clarity and DAO control to how Aave-branded assets and intellectual property are, first, owned, and second, can be used.”

Boado is a co-founder of Bored Ghosts Developing, a company hired by the DAO to provide software development and security services.

Stani Kulechov, Aave’s founder and the CEO of Aave Labs, said the discussion has been extensive and token holders should be ready to vote.

As of Tuesday, there were over 160 replies to the proposal, making it the fourth most commented-on proposal in the DAO’s history.

Labs’ decision to move to the voting stage drew a rebuke from DAO members that had been critical of Labs in recent weeks.

Boado called the push for a vote “disgraceful,” citing the ongoing discussion, and urged DAO members to cast an “abstain” vote to convey their displeasure.

To abstain is the DAO equivalent of voting for a write-in candidate.

Marc Zeller, the co-founder of Aave Chan Initiative, one of the DAO’s largest delegates, slammed Labs for scheduling a vote during Christmas week.

“What started as a push for clarity and a more fair relationship between token holders and the current stewards, instead of today’s asymmetric dynamic, is now turning into a hostile takeover attempt by Labs,” he wrote, adding that ACI would cast an “abstain” vote.

Not everyone was convinced Aave Labs was rushing the vote.

One person in the forum noted the controversy has been covered extensively by crypto media. They added they had sold some of their AAVE tokens due to the dustup.

“Some DAO service providers attempted to change the status quo, ignored the risks, and blindly pursued ‘DAO rights,’ escalating a minor issue into a revolution,” they wrote.

Their decision to sell might be a smart move if the controversy drags on. AAVE’s price took 20% nosedive in the past week. In that span, Bitcoin and Ethereum have been flat.

Top DeFi stories of the week

This week in DeFi governance

VOTE: Uniswap DAO votes to activate protocol fee switch

VOTE: Rocket Pool DAO selects members for its grants committee

PROPOSAL: Jito DAO considers early adopter subsidy for Block Assembly Marketplace

Post of the week

Crypto has been seen as a haven for misfits. What are the odds they’ll find a “real job” in the next bear market?

People leaving crypto is nonsensical. If you have skills useful in real world business or employment, you were never really in crypto

— chainyoda (@chainyoda) December 19, 2025

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Blockchain sleuths flagged the painfully expensive error on Friday, claiming that the $49,999,950 loss may be one of the biggest on-chain scams ever.

A poisoning attack is when a hacker creates a wallet address that closely matches the sender’s, leading the victim to transfer funds to the wrong destination.

In this case, the user mistakenly copied and pasted the scammer’s address, which looked like their own.

Crypto security firm SlowMist posted details of the poisoning attack on X and revealed that the scammer —or scammers — quickly swapped the stablecoins for other cryptocurrencies within 30 minutes after receiving them.

30 mins after receiving 50M $USDT, the scammer took action:
• Swapped 50M $USDT to $DAI via MetaMask Swap
• Swapped all $DAI to 16,690 $ETH
• Deposited 16,680 $ETH into Tornado Cash

The scammer addresses:
0xbaff2f13638c04b10f8119760b2d2ae86b08f8b5… https://t.co/ySGWtg3VIB pic.twitter.com/3BsWndrrJC

— SlowMist (@SlowMist_Team) December 20, 2025

SlowMist said that blockchain data showed that the USDT was turned into DAI before being swapped for Ethereum. The Ethereum was then laundered via Tornado Cash — a coin mixing platform that works to obfuscate digital money movements.

Blockchain sleuth Specter Analyst wrote on X that poisoning attacks as big as this one should be rare.

“What leaves me speechless is the type of attack that caused the loss,” he wrote. “Address poisoning should be one of the least likely causes of such a massive loss, yet it still happened.”

Hackers this year have stolen more crypto than ever before with cyber criminals — particularly ones from North Korea — developing more sophisticated scams.

Blockchain surveillance firm Chainalysis this week reported a 51% increase in the amount of digital assets stolen by North Korean hackers in 2025, pushing state-sponsored crooks’ proceeds from crypto theft to $6.7 billion since they began targeting the industry in 2016.

The biggest hack in the history of crypto took place in February, when hackers — again believed to be from North Korea — stole over $1.5 billion in Ethereum and Ethereum-related tokens from ByBit digital asset exchange.

Earlier this year, Michael Okafor and other memecoin investors sued executives at Solana Labs, the Solana Foundation, Jito Labs, the Jito Foundation, and Pump.fun. The lawyers alleged they worked together to create an “insider-rigged casino.”

In September, some defendants demanded that Judge Colleen McMahon toss the case. Before she could, however, the plaintiffs’ lawyers said they had new information: over 5,000 private messages that show Solana Labs and Pump.fun engineers discussing the alleged scheme in real time.

An initial review of the logs, provided by a confidential informant, showed “multiple direct communications” in which engineers from Solana Labs and Pump.fun discussed “integration of key software components,” Max Burwick, one of Okafor’s attorneys, told the judge.

On December 11, the judge approved Okafor’s request to file an amended lawsuit that will include new information gleaned from those messages.

Okafor and his attorney now have until January 7 to file the amended lawsuit.

Some Solana-affiliated attorneys have said they are skeptical the lawsuit will survive the judge’s scrutiny.

Still, her decision comes as the lawsuit has turned ugly.

“I am being threatened with rape and murder for representing my clients,” Burwick, a bombastic attorney with a nose for spectacle, wrote on X on Thursday, just three days after sharing developments in his multiple crypto lawsuits on the social media platform.

“Threats of violence will not stop us from fulfilling our ethical duties as attorneys or from continuing our work to bring accountability and help build a better crypto industry.”

‘Rigged slot machine’

The investors who bought memecoins on Pump.fun were victims of a “coordinated racketeering enterprise,” according to the lawsuit.

The lawsuit likens Solana to a casino and Pump.fun to a slot machine. Jito-created software completes the alleged scheme, by letting certain traders move ahead in the transaction queue by paying “tips.”

The lawsuit calls the Pump.fun memecoin market “extractive,” a “rigged slot machine” that “gave insiders early access to every token” while inflicting “catastrophic losses” on retail investors.

“Pump.fun’s homepage, interface design, and social media campaigns all emphasised ‘fair launch,’ reinforced by claims of ‘no presales,’ ‘no insider allocations,’ and ‘rug-pull proof launches,’” the lawsuit reads.

In reality, Pump.fun tutorials and guides recommended that memecoin creators use Jito software to buy an outsize share of their own tokens before anyone else could, virtually guaranteeing profit at the expense of less sophisticated investors, according to the lawsuit.

“The platform presented a single static screen to all users — while insiders used superior infrastructure to pull the [slot machine] handle first, every time,” the lawsuit alleges.

The lawsuit is unclear why a supposedly rigged system would benefit Pump.fun.

While ensuring creator profits would drive new memecoin generation, it stands to reason it would also drive away the estimated 60% of retail investors who lost money at the “rigged slot machine,” whose combined losses may have topped $4 billion, according to the lawsuit.

But people continue to trade. While it’s fallen by 90% since January, Pump.fun still sees just under $50 million in daily transaction volume, according to DefiLlama data.

And what’s good for Pump.fun is good for Jito and Solana. Pump.fun set off a memecoin frenzy. Much of the ensuing transaction volume flowed through Jito’s software.

Activity on the Solana blockchain boosted the value of its cryptocurrency, SOL, enriching Solana Labs, the Solana Foundation, and their executives.

“While retail users were induced into transacting based on false promises and asymmetric information, the defendants engineered a system in which they were always guaranteed to win,” the lawsuit reads. “Fees accrued whether a token succeeded or failed.”

The lawsuit is seeking extraordinary orders from the court.

The lawyers aren’t just demanding compensation for the plaintiffs’ supposed losses from trading on Pump.fun.

They also it ask the judge to place the companies in receivership, and shut them down unless they acquire gambling and money transmitter licenses, implement customer background checks and anti-money laundering procedures.

It also demands that the companies and executives give up “all ill-gotten gains,” including appreciation in SOL attributable to their alleged scheme.

‘Non-actionable puffery’

In September, the Solana Foundation, Jito Labs, and Pump.fun asked Judge McMahon to dismiss the case, framing it as an example of disgruntled investors attempting to shift blame for their unsuccessful trades.

The lawsuit wasn’t specific enough, they argued. The lawsuit never mentioned any specific examples of the alleged rigged system that allowed “insiders” to profit at the expense of less sophisticated investors.

“It asserts that Pump.fun touted launches as ‘fair,’ ‘safe,’ and ‘rug-pull proof’ but pleads no presales, insider allocations, or rug pulls,” Pump.fun said in its motion to dismiss. “Vague assurances of fairness and safety are, at most, ‘non-actionable puffery.’”

Jito said it began working on its technology long before Pump.fun existed. And that technology was available to anyone.

“Crediting plaintiffs’ theory of liability would be akin to holding a manufacturer of high-speed modems liable for the conduct of third parties on the internet,” Jito said.

Jito Labs, the Jito Foundation, and their executives were dropped from the lawsuit in September.

Perhaps most significantly, the lawsuit offered no proof that the companies and executives conspired to create an uneven playing field, the defendants said.

The lawsuit, Pump.fun noted, relies “heavily on the claim that Jito Labs and Solana Labs had overlapping investors.

But the existence of shared investors among two alleged members of the enterprise does not imply how or whether ‘the various sets of named defendants . . . had any interpersonal relationships.’”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Todd Snyder, who was confirmed to lead the Terraform Labs Wind Down Trust in September 2024, had accused Jump, several of its subsidiaries, and two of its executives of market manipulation, defrauding investors, self-dealing, and more.

“The Office of the Terraform Labs Plan Administrator has filed a $4B lawsuit against Jump Trading over its direct role in the collapse of Terraform Labs, seeking to hold Jump to account,” the administrator said in a post on X on Thursday.

“The action aims to recover value for creditors and hold Jump responsible for exploiting the ecosystem, leaving unsuspecting investors to bear the losses.”

Last week, Terra founder Do Kwon was sentenced to 15 years in prison in connection with Terra’s collapse. He had pleaded guilty to defrauding investors, in part by touting Terra’s UST stablecoin as secure by design even though it had nearly failed in 2021.

The stablecoin only survived that near-death experience due to substantial intervention by Jump Trading — an effort that Kwon and Jump executives kept secret, even as Terra and its cryptocurrencies grew at breakneck speed.

When Terra collapsed a year later, it vaporized some $40 billion, devastating retail investors around the world and setting off a chain reaction that drove several multibillion dollar crypto firms into bankruptcy.

While Kwon begins a lengthy prison sentence, the Jump executives who allegedly helped him perpetuate his fraud have evaded accountability, according to Thursday’s lawsuit.

“This case is about a secretive trading firm that defrauded investors and contributed to one of the largest cryptocurrency collapses in history,” it reads. “This lawsuit is how the estate of Terraform and the victims of Jump’s wrongful conduct will finally hold Jump responsible.”

Jump subsidiary Tai Mo Shan paid a $123 million fine after settling with the US Securities and Exchange Commission in 2024. But that’s far less than the $4 billion in fines Terraform and Kwon were ordered to pay after losing a separate lawsuit brought by the SEC that year.

Jump Trading has a storied history in Chicago, where it was founded in 1999 by derivatives pit traders. It’s a leading firm in the secretive world of high-speed trading.

After founding its crypto arm in 2021, Jump emerged as a major market maker and investor in crypto assets.

The lawsuit

Many of the allegations in Snyder’s lawsuit have already been made public through court documents in Kwon’s criminal case.

Jump was a market maker for Terra’s primary cryptocurrencies: UST, a stablecoin designed to hold a value of exactly $1 through a complicated arbitrage mechanism, and LUNA, a complementary token investors needed to execute the price-stabilizing arbitrage.

In exchange, Jump had the option of purchasing LUNA from Terraform at prices well below its market value.

But there was a separate “gentleman’s agreement” between Kwon and Kanav Kariya, the head of Jump Trading’s crypto unit: Jump would help Terraform protect UST’s peg to the US dollar.

“This agreement did not prescribe how Jump would maintain the peg, only that it would do so — an agreement that took Jump’s relationship far beyond typical market making activity," the lawsuit reads.

When UST fell to $0.90 in May 2021, Kwon and Kariya stuck a deal, according to the lawsuit and court documents in Kwon’s criminal case. Jump would purchase UST until it returned to peg. In exchange, Terraform would waive vesting requirements on the LUNA that Jump was entitled to purchase.

The plan worked. Rather than alert investors UST’s arbitrage-based stability mechanism had failed, however, Kwon and Kariya gave interview after interview in which they said it had been a resounding success.

That’s because Jump couldn’t immediately profit off its deal, according to the lawsuit.

Jump had the right to purchase up to 65 million LUNA tokens for $0.40 cents per token. But it could only purchase about 1.2 million per month through September 2025. That gave Jump an incentive to keep its defence of the peg a secret, according to the lawsuit.

“Jump merely wanted to keep the platform afloat long enough to receive all of its Luna — and the outsized, ill-gotten profits from its ludicrously low strike price," the lawsuit reads.

“Jump’s actions to restore the peg were so secretive that most Terraform employees did not know about them at the time.”

Snyder has also accused Jump of lying about the Luna Foundation Guard, an ostensibly independent body that was funded by Terra and charged with using its vast stores of crypto to defend UST’s peg.

In reality, Kwon and Kariya dominated the organisation, according to the lawsuit.

Terraform gifted Luna Foundation Guard LUNA tokens worth more than $5 billion. The foundation then sold that LUNA for other cryptocurrencies, including Bitcoin.

But it didn’t sell to just any buyer, according to the lawsuit. It sold to Jump, which purchased the tokens at a 40% discount to their market value.

In May 2022, when UST fell below $1 a second time, the foundation transferred its Bitcoin to Jump to use on its behalf, according to the lawsuit. But there was no formal agreement in place.

“It is not clear how Jump used that Bitcoin, and whether it did so in ways that further lined its own pockets,” the lawsuit reads.

At the same time, Jump’s William DiSomma — the other executive named in the lawsuit — tried to marshal other trading firms to help in defending the peg. Instead, those firms saw an opportunity and began trading against UST and LUNA, hastening Terra’s downfall.

In a statement to the Wall Street Journal, which broke the news of the lawsuit, a Jump spokeswoman called the allegations “baseless.”

“This is a desperate attempt by Terraform Labs to shift blame and financial responsibility away from the crimes that Do Kwon committed,” she said.

Kariya first joined Jump as an intern, and was only 25 when he was named the president of its crypto arm in 2021. He announced his departure from the firm last year.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The collective behind the liquid staking platform voted to adopt the Whitehat Safe Harbor Agreement on Friday, helping secure the protocol’s $26 billion worth of deposits.

The agreement, developed by crypto security nonprofit Security Alliance, gives white hats, hackers who use their skills legally and with permission, to intervene should Lido get exploited. This empowers them to potentially rescue funds that would otherwise be stolen by bad actors.

Without such an agreement in place, white hats risk potential legal action or prosecution from law enforcement, even if their intentions are to help the exploited protocol.

Lido joins 20 other DeFi protocols that have already adopted the agreement, which now collectively secures over $45 billion.

Among them are some of the biggest names in DeFi, including top DeFi lender Aave, yield derivatives protocol Pendle, and Uniswap, the biggest decentralised exchange.

Surge in crypto crime

The Whitehat Safe Harbor Agreement, which has been ongoing for several years, has received increased attention in recent months amid a surge in crypto crime.

The amount of crypto stolen by North Korean hackers this year increased by 51%, according to Chainalysis, a blockchain security firm.

Over $2.5 billion has been stolen from crypto services so far in 2025, according to DefiLlama data.

DeFi protocols like Lido — code on blockchains like Ethereum that facilitate permissionless trading, lending, and other services — remain a top target for malicious hackers.

Security Alliance began developing a standardised Safe Harbor Agreement following the 2022 Nomad hack.

“Over $190 million was drained over the course of hours while white hats stood by, willing to help, but unable to act without legal protection,” Security Alliance said on its website. “With Safe Harbor, our goal is to make sure that never happens again and to empower whitehats to rescue funds.”

The framework has received direct input and legal review from experts at a16z Crypto, Cooley, Debevoise & Plimpton, Filecoin Foundation, Paradigm, and several other firms.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

On Thursday, the team behind the Trump family-backed DeFi protocol proposed using up to 5% of its unlocked WLFI token stash to help forge partnerships for USD1, the protocol’s dollar-pegged stablecoin.

“Increased USD1 adoption creates more opportunities for value capture across the WLFI ecosystem, which accrues to the benefit of WLFI-governed initiatives and long-term token utility,” World Liberty said in a governance forum post.

World Liberty holds approximately 20 billion WLFI tokens, valued at $2.6 billion.

It’s not clear what portion of these tokens are unlocked, however.

While the proposal has received some support, it has also generated backlash from dozens of token holders.

They argue that giving away tokens to secure partnerships will harm locked holders by crashing the WLFI token’s price, turning their paper profits into unrealised losses.

World Liberty Financial sold $550 million in tokens to the public over a months-long sale that ended in March. Those tokens were sold locked, meaning buyers cannot sell them until the project’s team decides they can.

Token holders bought their WLFI tokens for between $0.015 and $0.05, meaning they are technically up many multiples on their investments.

In September, the team behind the project unlocked 20% of the WLFI sold through its token sale, letting early buyers partially cash out. The remaining 80% of tokens remain locked.

Since then, WLFI has plummeted some 60%.

As the token continues to fall, buyers are growing restless as their paper gains erode before their eyes.

‘Ghosted the community’

World Liberty Financial’s WLFI token lets holders vote on changes to the protocol. But the protocol isn’t a DAO, and token holders cannot create their own proposals.

This has led to frustration among some token holders who feel the project’s team is not representing them.

“Prior to any governance vote, give us clarity about unlocking, vesting schedule for our remaining 80%!” one token holder said in the governance forum. “You have ghosted the community about this matter for five months.”

“Until you release a roadmap for the remaining 80% unlock I’ll be using my vote to block whatever proposal benefits you,” another token holder said.

Dozens more replies have been deleted by forum moderators.

Trump profits bigly

At the same time, the Trump family, the primary beneficiaries of World Liberty Financial, has profited greatly from the venture over the past year.

Just over $401 million generated through the WLFI token sale goes to DT Marks DEFI LLC, a firm in which President Donald Trump owns 70%, while his family owns the remaining 30%.

World Liberty is also set to bring in around $100 million in interest from the assets backing its USD1 stablecoin, 75% of which goes to DT Marks, per the project’s documentation.

To be sure, not all token holders are against the latest spending proposal.

“Using a portion of the WLFI treasury as incentives to accelerate USD1 adoption is a smart, long-term decision focused on building real utility: not short-term price action,” one governance participant said.

“When our products scale, the whole community benefits.”

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Hackers from the Democratic People’s Republic of Korea managed to steal more than $2 billion in crypto this year.

That’s a staggering 51% year-over-year uptick, according to a new report from blockchain surveillance firm Chainalysis.

The haul pushes North Korea’s cumulative proceeds from crypto theft to $6.7 billion since it began targeting the industry in 2016.

This year was marked by a shift in North Korea’s criminal strategy, which has led to 74% fewer attacks – but much larger thefts.

“When North Korean hackers strike, they target large services and aim for maximum impact,” Chainalysis wrote in its year-end report.

Instead of external hacks, DPRK operatives are embedding IT workers inside crypto companies to gain privileged access and execute massive heists.

Fewer attacks, bigger hauls

North Korea’s strategy has changed — now it’s go big or go home.

The average North Korean hack now steals amounts that dwarf what typical cybercriminals manage.

Here’s how extreme it’s gotten. The biggest North Korean hack in 2025 was 1,000 times larger than the typical crypto hack, according to Chainalysis. It’s the difference between a bank robbery that bags $1,000 and one that bags $1 million.

For example, the Bybit hack alone — which North Korean operatives executed in February — netted a staggering $1.5 billion. That single theft amounted to three-quarters of North Korea’s entire $2 billion haul for the year.

And while other hackers are pulling off dozens of small thefts from DeFi protocols and individual wallets, hackers from North Korea are focused on infiltrating major exchanges and custodial platforms, where the big money really sits.

In 2025, North Korean actors were responsible for 76% of all major exchange and platform hacks — the highest share ever recorded.

And the problem is far worse than most realise.

“North Korea is much worse than everybody thinks,” Pablo Sabbatella, a member of the cyber investigation organisation SEAL, told DL News in November.

“Between 30% and 40% of job applications received by crypto companies are North Korean operatives trying to infiltrate these organisations.”

Flipping the playbook

According to Chainalysis, North Korean operatives are now inverting the IT worker model entirely.

Instead of applying for jobs, they’re impersonating recruiters for prominent crypto and AI firms, orchestrating fake hiring processes designed to harvest credentials, source code, and VPN access from victims’ current employers.

These recruiters reach individuals worldwide through freelance platforms like Upwork and Freelancer.

The modus operandi is elementary.

An individual either loans his verified account credentials or simply allows a North Korean hacker to use his identity remotely. In exchange, the collaborator gets 20% of earnings, while the operative keeps 80%.

“At the executive level, a similar social-engineering playbook appears in the form of bogus outreach from purported strategic investors or acquirers,” Chainalysis wrote.

For Chris Wong, a former FBI agent and North Korea expert now at crypto intelligence firm TRM Labs, the situation goes beyond a simple cybersecurity challenge.

“North Korea’s crypto theft activity is a sanctions, national security, and financial crime issue, and countering it requires real-time intelligence, operational disruption, and sustained cross-border coordination,” Wong said in comments shared with DL News.

Pedro Solimano is DL News’ Buenos Aires-based markets correspondent. Got a tip? Email him at psolimano@dlnews.com.

A proposal to transfer control of the DeFi lender’s web domains, social media accounts, and trademarks to its token holders is gaining traction.

On Tuesday, Ernesto Boado, co-founder of Bgdlabs, an Aave contributor, floated the idea in a post on the Aave governance forum. It has since been viewed almost 4,000 times, and has generated intense debate among Aave DAO, the protocol’s token holder collective.

“Recent events have raised concerns [from] other community members in the forum that these brand assets are being used to enable private monetisation, and to support products the DAO has no practical say on and is not the main value-recipient,” Boado said.

The proposal comes amid an ongoing scuffle between Aave DAO, the token holder collective that runs the protocol, and its developer, Aave Labs.

On December 11, Aave DAO members, led by the pseudonymous EzR3aL, the DAO’s largest delegate, accused Aave Labs and its founder Stani Kulechov of attempting to “privatise” revenue that had previously gone to the DAO.

On December 4, Aave Labs announced it had partnered with decentralised exchange CoW Swap to integrate a token swapping feature into the Aave website.

The problem? The website already had a swap feature from a different provider. Moreover, the revenue from the previous swap feature had gone to the DAO. Revenue from the CoW Swap integration instead goes to Aave Labs.

In response, Aave Labs said the revenue in question had previously only been donated to the DAO, and that the firm needed the new revenue stream to cover the cost of running the protocol’s website, which it controls.

‘Natural next step’

There is a precedent for transferring control of brand assets like trademarks to a DAO.

The trademarks associated with many DeFi protocols are owned by the protocol’s for-profit developer — like Uniswap and its creator Uniswap Labs.

However, some protocols give brand assets to a non-profit foundation for safekeeping, like Lido and the Lido Labs Foundation. Often these foundations are mandated to follow the outcomes of token holder votes.

Some DeFi protocol creators have opted to keep control of brand assets to avoid exposing token holders to legal risks. Yet, with US President Donald Trump’s administration taking a lighter touch on crypto regulation than the previous administration, such precautions may no longer be necessary.

Boado’s proposal asks for a Aave token holder vote to decide whether Aave’s brand, naming rights, and associated assets should be transferred to the DAO via an appropriate DAO-controlled legal wrapper.

So far, dozens of Aave governance participants and token holders, including EzR3aL who sparked the debate, have indicated support for the proposal.

Among them is Jordan Lazaro Gustave, Aave Labs’ former COO.

“It is the natural next step in Aave’s decentralisation, especially now that DeFi benefits from far more regulatory clarity than in prior cycles,” he said in response to Boado’s proposal.

“We should not have to fear that the implicit steward of the brand may at any point leverage that brand for their own benefit without it directly benefiting the DAO and especially not without DAO consent.”

Boado’s proposal is less than a day old, and as such, no vote has been scheduled yet. Proposals that generate substantial debate and receive enough support are usually put to a preliminary vote among the protocol’s token holders.

Aave Labs has not yet responded publicly to the proposal.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Founder Stani Kulechov went toe-to-toe with, well, everybody else who cares about the protocol after his company was accused of attempting to “privatise” revenue that had previously gone to the Aave DAO.

In the DAO’s forum, public opinion was united against Kulechov and his company, Aave Labs. But the most notable opposition came from two people: Marc Zeller, founder of the Aave Chan Initiative, and the pseudonymous Ezr3al, the DAO’s largest delegate.

The fight was a stunning display of disunity between players who should be fully aligned.

On the one hand, the person and company that built the protocol, and on the other, the de facto leaders of the community that have been given control of the protocol.

The fight was also a showcase for the tensions that can arise in crypto developers’ tortured attempts to decentralise — to turn their protocols from privately-owned businesses into publicly-owned ones.

It all started on December 11, when Ezr3al published a post in the DAO forum scrutinising a recent announcement from Aave Labs.

The company had said it had partnered with CoWSwap to provide “an improved swap experience” on its interface. That’s the website that provides non-technical investors an easy-to-use method of accessing the Aave protocol.

The problem? The interface already featured revenue-generating swap technology. Moreover, that preexisting revenue stream had gone to the DAO. CoWSwap-generated revenue, meanwhile, was going to Aave Labs.

To make matters worse, revenue from the old swap provider, Velora — formerly known as Paraswap — was about $1.1 million in 2025. But revenue generated by the CoWSwap replacement has been far higher — at least $10 million annualised — according to Ezr3al.

The delegate said this was an unacceptable attempt to profit off the Aave brand, which underwent a DAO-funded visual overhaul this year.

Aave Labs rushed to defend itself in the forum. The company might not own or control the Aave protocol — AAVE tokenholders control the DAO, and the DAO controls the protocol — but it does own and control the interface, it said.

That interface costs money, and collecting a fee on swaps, a feature that doesn’t exist at the protocol level, is an eminently reasonable way to defray those costs, the company said, adding the DAO was “free to create a DAO-run interface if that direction is ever desired.”

Then Zeller entered the fray. He took his usual bare-knuckles approach.

Zeller said Aave Labs and every other “service provider” hired by the DAO had a fiduciary duty to the cooperative. He also suggested there was a “tacit” agreement between the two: the DAO allows Aave Labs to use the Aave brand in return for directing interface revenue to the DAO.

“It seems we have been fooled in considering this a natural alignment, and we acknowledge the new reality,” he wrote.

Kulechov said the original revenue stream had only been donated to the DAO due to “regulatory uncertainty,” rather than any sort of obligation or duty. As for the idea that Labs owed the DAO a fiduciary duty, that was “nonsense,” he said.

The battle has inspired at least three proposals in the Aave DAO forum. One would have the DAO purchase a competitor, Spark.

Another, the “poison pill,” would have the DAO sue Aave Labs for “full ownership of all code, intellectual property, and brand,” 100% of Labs’ equity, and all past revenue the company generated from Aave-branded products.

A third would simply have the DAO request control of Aave brand assets, such as social media accounts.

The first two aren’t likely to go anywhere. But all three speak to the overall furore the incident has caused. The DAO is looking for solutions, and one person does expect to find answers.

“When you own $AAVE, what do you actually own?” Zeller wrote on X. “The next few weeks will bring definitive clarity to this strategic question.”

Top DeFi stories of the week

This week in DeFi governance

VOTE: Arbitrum DAO votes to implement Fusaka upgrade

VOTE: Compound DAO votes to upgrade incentive program

VOTE: Lido DAO votes on 2026 goals

Post of the week

I’ve got two for you this week.

Stop laughing at kids for believing in Santa.

I know adults who still think NFTs will come back.

— Caitlin Cook (@DeadCaitBounce) December 15, 2025

Stop laughing at kids for believing in Santa.

I know adults who still own Cardano.

— Zack Voell (@zackvoell) December 14, 2025

The reason? The deal acquires Interop Labs, Axelar’s leading developer, but excludes the network itself and the $120 million AXL token that powers it.

It comes as a major blow to investors, as many had thrown in their lot with Axelar, assuming that Interop Labs would stick around and continue developing the project.

Now they feel betrayed, and dozens have taken to social media to air their frustrations.

“Circle acquiring Axelar while explicitly excluding the foundation and the AXL token is outright criminal,” Simon Dedic, founder of crypto investment firm Moonrock Capital, said on X. “If not legally, then morally.”

Interop Labs and Circle did not immediately respond to requests for comment.

In the leadup to the acquisition announcement, Axelar’s AXL token rallied some 45%.

But when the deal details were released, and investors saw it didn’t include the token, it retraced all its gains.

The acquisition highlights the difficulties of aligning the interests of token holders who govern blockchain projects with those of the for-profit firms that create and develop them.

It’s not the first time such an issue has come up in recent weeks.

On December 12, Aave DAO members and Aave Labs, the for-profit firm that develops the popular lending protocol, began quarrelling after a DAO delegate claimed that a recent integration diverted potential revenue away from the DAO toward Aave Labs.

Standard behaviour?

Axelar is a decentralised crypto bridge that lets users send tokens and other information between separate blockchains.

The project was founded in 2020 and has received almost $94 million in venture funding, including $50 million raised through an initial coin offering in 2022.

Not everyone views Circle’s acquisition of Interop Labs so critically, however.

“This is standard behaviour,” Avichal Garg, co-founder of early-stage venture firm Electric Capital, said on X. “No company wants to pay investors if all value is created going forward by the team It’s up to the CEO/founder to fight for investors.”

Electric Capital participated in a strategic $30 million token sale by the Axelar Foundation in March 2025.

Axelar is not listed among Electric Capital’s investments on its website, however.

To be sure, Axelar was floundering even before Circle acquired its developer.

Axelar was once seen as one of the most promising crypto bridging protocols, hitting an all-time high market value of almost $1.4 billion in March 2024.

Yet slow adoption, profit-taking from early investors, and a lack of value accrual have all weighed heavily on the protocol.

Over the past year and a half, the AXL token has plummeted by some 95%.

It currently trades just above its all-time low.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Speaking to the Russian media outlet RBC, Anatoly Popov, the deputy chair of Sberbank’s management board, said the firm will “develop digital asset offerings in collaboration with regulators.”

“Sberbank is already testing various DeFi products,” Popov said. “We are confident that traditional banking and DeFi will soon converge.”

Popov did not specify any DeFi protocol.

While still cagey, Russian banks are becoming increasingly bullish on crypto adoption plans, spurred on by Moscow’s willingness to regulate the sector in 2026.

Sberbank’s market cap is around $83 billion, and the bank says it has around 109 million retail clients and over 3 million corporate customers.

Banks growing cautiously crypto-keen

Earlier this month, VTB, one of Sberbank’s biggest rivals, also said its own clients were keen to buy “real” crypto, rather than trade in derivatives.

This year has seen several major Russian firms, launch a vast range of crypto-themed funds, bonds, and indices that track the price of major cryptocurrencies like Bitcoin and Ethereum. They have also launched funds that track the movement of famous US-based crypto exchange-traded funds.

But banks are still waiting for the green light to let their customers buy and sell coins on their own banking apps.

“Cryptocurrencies are popular among Russians,” said Popov. “The central bank estimates that by March 2025, the volume of cryptocurrency in Russian wallets will reach $10.5 billion.”

He said that Sberbank “plans to actively engage in this market, but only after clear regulations are in place and it becomes economically feasible.”

Popov added that Sberbank clients are “significantly interested in convenient solutions for accessing cryptocurrencies,” and were “consciously seeking ways to invest in cryptocurrency.”

Central bank pushback

The reluctance of the central bank to endorse crypto has been a major sticking point for Russian banks and blockchain firms.

While the Bank of Russia is keen on blockchain technology, its governor Elvira Nabiullina has spoken out against “private cryptocurrencies” like Bitcoin.

Nabiullina has previously called for a sweeping ban on crypto and the promotion of private blockchain-based solutions like the digital ruble, a blockchain-based version of the Russian fiat currency.

However, 2025 has seen much change for the Bank of Russia. As the Russian Bitcoin mining industry continues to grow and more traders use crypto as a sanctions-proof cross-border settlement tool, the central bank’s stance has softened.

Evidence of this could be found in Popov’s interview with RBC.

“We are not limiting ourselves to private networks,” he said. “Sberbank is also working on projects that involve using public blockchains for specific purposes. For example, we are looking to tokenise assets or create connections with decentralised finance platforms.”

He said the bank was interested in working on “networks with developed infrastructure and robust smart contract tools, such as Ethereum.”

Networks like Ethereum “offer flexible integration options, ensure transparency, and facilitate access to international markets,” he said.

“Tokenised assets are being actively tested around the world,” Popov concluded. “And Russia is now also moving in this direction.”

Tim Alper is a news correspondent at DL News. Got a tip? Email him at tdalper@dlnews.com.

Like Bitcoin, Bittensor is programmed to halve rewards of its native TAO token approximately every four years. Unlike Bitcoin, which halves based on block count, Bittensor’s halving is triggered by the total supply of TAO tokens.

Once the network has distributed 10.5 million TAO — half of Bittensor’s 21 million total supply — the number of newly created tokens will drop from 7,200 TAO per day to 3,600.

At the current rate of inflation, that’s set to happen on December 14 at around 3:30 am London time.

Investors are hopeful the event will give the network a much-needed boost.

Supportive environment

The TAO token has fallen some 47% over the past year, dragged down by a stagnating crypto market.

“When inflation falls and demand stays steady, the environment becomes more supportive for long-term price appreciation,” Arrash Yasavolian, founder of Taoshi, a firm focused on leveraging the Bittensor blockchain, told DL News.

“Historically, networks with halving mechanisms see stronger long-term performance because supply contracts as usage grows.”

Yet such an outcome isn’t guaranteed.

Even with the amount of new TAO entering circulation decreasing, it can take time before it has an impact on the token’s price — if at all.

Macroeconomic factors, such as President Donald Trump’s ongoing trade wars and slower-than-anticipated interest rate cuts from the US Federal Reserve, are weighing on the broader crypto market, hampering prices across the market.

‘Zombie’ subnets starve

Bittensor is a blockchain network designed to offer an alternative to centrally controlled artificial intelligence powerhouses like OpenAI and Google.

The network enables anyone to contribute their computing power to AI applications, known as subnets. These entities are usually referred to as miners.

In return, those miners are rewarded with TAO tokens, similar to how the Bitcoin blockchain rewards those who process transactions with new Bitcoins.

The subnet economy will be shaken up after those rewards are slashed by 50%.

“We expect a ‘flight to quality’ where capital aggressively condenses into the few subnets generating real revenue, while the ‘zombie’ subnets starve,” Karia Samaroo, founder of xTAO, a crypto treasury company focused on accumulating TAO tokens, told DL News.

Tightening margins

Just as with Bitcoin, the halving will also squeeze the miners who contribute their computing power to Bittensor.

Bitcoin block rewards halving from 6.25 to 3.125 in April 2024 has forced many miners to diversify into artificial intelligence and seek out cheaper sources of energy to power their machines in a bid to remain profitable.

Samaroo expects the same for Bittensor.

“We expect margins to tighten temporarily, forcing a consolidation of hash power toward the most performant actors,” he said.

The halving will introduce more turbulence into the four-year-old Bittensor blockchain. Yet its proponents say it will make the network stronger in the long run.

“The combined effect is a healthier and more efficient ecosystem,” Yasavolian said.

“Inflation drops, emissions become more selective, and resources move toward subnets that generate value with stronger economics.”

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

While the incident rocked users of Stream and affiliated DeFi protocols, the people behind the company were tight-lipped as to what happened.

Until now.

In a lawsuit filed Monday in federal court in San Francisco, Stream’s co-founders — suing as Stream Trading Corp. — accused Georgia resident Ryan DeMattia of using the $93 million to cover his losses after he defaulted on a personal loan.

The lawsuit also alleged that Florida resident Caleb McMeans had failed to honour an agreement he signed when he took control of the protocol and the Stream brand in January.

Stream Trading Corp. is now asking a federal court to enforce that agreement as McMeans allegedly attempts to deflect responsibility for the incident.

McMeans and DeMattia could not immediately be reached for comment on Wednesday.

‘Delays and excuses’

The lawsuit details the brief, yet winding history of the Stream protocol, which lasted only nine months before its co-founders decided to shut it down in November 2024, citing slowing growth and “operational challenges.”

The co-founders go unnamed in the lawsuit. But Argentinian crypto investor Diogenes Casares has said on social media and in interviews that he built the protocol, as well as Klyra, a platform that allows users to trade across multiple crypto exchanges simultaneously.

Casares did not immediately respond to comment.

Just two months after disabling deposits into Stream, the co-founders met McMeans, a trader “known for managing complex yield farming strategies,” the lawsuit states. McMeans offered to buy the Stream protocol and brand.

According to an agreement signed in January, McMeans would have complete control of Stream, including trading strategies, reporting yield to the protocol’s users, and manually honouring their withdrawal requests, the lawsuit states.

Stream Trading Corp. would act as a service provider, creating new smart contracts, a new website, and a new token, according to the lawsuit.

In exchange, McMeans would route 35% of collected fees to Stream Trading Corp., maintain full liability in the event of a theft, and maintain “total transparency of where stream positions are deployed.”

But after McMeans entered several off-chain arrangements, it became increasingly difficult to monitor Stream’s trading strategy in real time, according to the lawsuit.

When Stream’s co-founders pushed for greater transparency in September, McMeans “consistently responded with delays and excuses,” according to the lawsuit.

He eventually admitted he had allowed an “employee,” DeMattia, to invest more than $90 million off-chain.

An ‘outlandish story’

DeMattia, in turn, also dodged the co-founders’ inquiries, according to the lawsuit.

“DeMattia offered a series of patently false excuses for why he could not provide any further information, even claiming at one point that his laptop had been destroyed in a car crash,” the lawsuit reads.

“This outlandish story was demonstrably false; yet, at the same time, Mr. McMeans urged Stream Trading Corp. to stop asking questions and to believe Mr. DeMattia.”

McMeans eventually relented, according to the lawsuit. He acknowledged he had no formal relationship with DeMattia and agreed to withdraw crypto he had entrusted to his “employee.”

That’s when DeMattia came clean, according to the lawsuit. On November 2, he admitted he had lost “nearly all” of the Stream protocol assets under his control, which were worth about $93 million at the time.

“The precise facts underlying this loss remain unclear,” the lawsuit reads.

“But upon information and belief, on October 10, 2025, Mr. DeMattia faced a margin call on a personal loan for which he lacked sufficient funds to cover, had his position liquidated, and then used Stream Protocol assets to which he had access to cover his loss.”

On November 4, the Stream X account said in a post that it would open an investigation after an “external fund manager” had “disclosed the loss of approximately $93 million in Stream fund assets.”

Ripple effect

The loss was widely felt across the DeFi ecosystem.

All told, Stream had borrowed $283 million to mint its xUSD synthetic dollar, according to an estimate from Trevee, a yield protocol that lost $14 million in the incident.

Trevee wasn’t the only protocol affected. In addition to some relatively obscure protocols, DeFi stalwarts Compound, Euler, and Morpho had various levels of exposure to Stream, according to crypto risk manager Chaos Labs.

McMeans began telling people publicly and privately that he was suicidal, according to the lawsuit.

Moreover, he moved $2.1 million in Stream assets to a personal wallet before routing them through Railgun, a privacy protocol that can be used to cloak the flow of crypto across the Ethereum blockchain.

(McMeans later returned the crypto, according to the lawsuit.)

The co-founders convinced McMeans to transfer assets to a multi-signature wallet so the crypto would not be lost in the event he “became incapacitated,” according to the lawsuit.

But McMeans has since used the joint control of the remaining assets to disclaim responsibility for the incident, according to the lawsuit.

“Presently, Mr. McMeans refuses to take any action to clean up his own mess unless Stream Trading Corp. releases him from all liability for his actions,” the lawsuit reads.

Stream Trading Corp. has accused McMeans of breaching his contract and asked a federal court to award damages of at least $75,000.

The company has also asked the court to find that its agreement with McMeans was “valid, binding and enforceable,” among other things.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Crypto’s most fervent proponents insist they’re not just building trading and gambling platforms, but the foundations of a new, more democratic internet, where an application’s users are also its owners.

Yet, two of the industry’s buzziest businesses that operate outside the realm of betting and investing have failed to live up to the hype.

Farcaster was supposed to supplant X as the world’s decentralised town square. And EigenLayer was supposed to turbocharge staking yield while making it far easier to launch protocols that require cryptoeconomic security.

This month, both acknowledged they’ve failed to realise their visions.

“Despite many different attempts — and a few short-lived spikes — we haven’t been able to find a sustainable growth mechanic for the Twitter-like social network, i.e. no product-market fit,” Farcaster co-founder Dan Romero wrote on December 1.

Instead, Farcaster will focus on the crypto wallet it launched earlier this year.

To be sure, it’s too early to declare the death of decentralised social media. Farcaster has positioned its pivot as an attempt to save, rather than abandon, its social network by luring traders who will eventually begin using the social network itself.

And it’s not the first company that has gone down this road — last year, Sherwood called the New York Times “a games company with a newspaper side hustle,” in reference to the fact the Times has more subscribers to its non-news products than it does news-only subscribers.

EigenLayer, meanwhile, was perhaps the most highly anticipated protocol of 2024. It pioneered restaking, which makes it possible to use the same capital to simultaneously secure Ethereum and a variety of other protocols known as AVSs.

Parent company Eigen Labs raised more than $220 million along the way, and EigenLayer quickly became the third-largest protocol on Ethereum.

“Anybody that has the word AVS or restaking is just getting money shoved down their throat,” Ether.Fi CEO Mike Silagadze told me in March 2024. “We had people reaching out to us, throwing money at us.”

But its growth has stalled since Ether deposited in EigenLayer peaked in June 2024.

Today, few prominent applications use the technology, and Eigen Labs announced lay-offs of its engineers in July amid a pivot to building a crypto-based AWS competitor dubbed EigenCloud.

There were several reasons EigenLayer failed to take the world by storm, Eigen Labs researcher Kydo wrote in a lengthy post on X on December 2. It makes for eye-opening reading.

The target market was too niche and the team “over-engineered” certain features, slowing their release.

Restaking hype lured less capable and reputable AVS developers, and the threat of heavy-handed regulations forced the company to walk on eggshells when talking about its technology.

Going forward, Eigen Labs is betting that EigenCloud will become a key tool for verifying the actions taken by AI agents.

“Restaking did not turn into the ‘everything layer’ some people, including myself, once hoped. It also did not vanish,” Kydo wrote.

“We are still maintaining it. We still care about it. We are just refusing to be limited by that original narrative.”

Top DeFi stories of the week

This week in DeFi governance

VOTE: Spark DAO votes to enable off chain collateralised lending

VOTE: Arbitrum DAO votes on new delegate reward program

VOTE: Sushi votes to increase annual emissions rate

Post of the week

Ethereum co-founder Vitalik Buterin isn’t a fan of the way Elon Musk has run X.

@elonmusk I think you should consider that making X a global totem pole for Free Speech, and then turning it into a death star laser for coordinated hate sessions, is actually harmful for the cause of free speech. I'm seriously worried that huge backlashes against values I hold…

— vitalik.eth (@VitalikButerin) December 9, 2025

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Since September, the amount of PYUSD in circulation has jumped 224% to over $3.8 billion, making it the sixth-biggest stablecoin after World Liberty Financial’s USD1.

Ethena, a DeFi protocol and issuer of the dollar-pegged USDe token, has become the single biggest holder of PYUSD, with $1.2 billion in custody through the custodian Copper, onchain records show.

Ethena holds several stablecoins to back its USDe token, including Tether’s USDT and Circle’s USDC. It’s not clear why the protocol currently holds more PYUSD compared to its rivals. Ethena did not respond to a request for comment.

PayPal’s stablecoin success comes as key crypto legislation in the US opens the industry to institutions.

Wall Street players like BlackRock CEO Larry Fink have lauded the potential for greater efficiency and transparency that blockchain-based stablecoins offer.

There’s also a substantial profit motive. Tether, the issuer of the USDT stablecoin, generated a record $13 billion in profit last year, mainly from yield-bearing US Treasury bonds that back its stablecoin.

The excitement surrounding stablecoins is even percolating at the highest levels of the US government. Last month, Treasury Secretary Scott Bessent said he expects the stablecoin market to reach $3 trillion by 2030, up from his earlier projection of $2 trillion.

Lucrative incentives

PayPal launched its stablecoin in 2023 and was among the first US companies to do so.

The firm has worked with crypto liquidity management firm Sentora to drive adoption. The pair have tried several initiatives, including so-called DeFi bribes on the decentralised exchange Curve Finance and incentives for users of PYUSD in DeFi protocols.

Kamino, a Solana lending protocol, currently offers users almost 6% annual interest on PYUSD lending, partially subsidised by PayPal.

Over the past three months, the amount of PYUSD on Solana increased from around $250 million to over $1 billion, according to DefiLlama data.

Stablecoin issues like PayPal can afford to pay out such lucrative incentives by investing the funds that back their stablecoin in US Treasury bonds — the same way firms like Tether have achieved record profits.

This strategy works well when interest rates are high, as they have been since early 2022.

However, with the US Federal Reserve increasingly hinting at further rate cuts, the future of such adoption strategies could be cut short.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.

Certain Yield Basis users have four weeks to claim more than 17 Bitcoin accumulated since the protocol’s launch in September. That Bitcoin was worth almost $1.6 million on Friday.

The proposal to activate the fee switch was approved unanimously on Wednesday by Yield Basis tokenholders.

Protocol developers often launch tokens in order to reward investors and to transfer management responsibility to their users. But users have shown little interest in taking the reins, with votes at decentralised autonomous organizations, or DAOs, often failing to reach a quorum.

Protocols have come under increasing pressure to show their tokens have value beyond voting rights. While some protocols have long shared revenue with their users — Curve turned on its fee switch in 2020 — the trend has accelerated this year.

Several major DAOs, including Uniswap, Ethena, Aave, and Jito, have approved token buybacks or fee switches, attempting to drive more value to frustrated token holders.

“More recently, it became a little bit safer for US-based projects to do it,” Egorov told DL News.

Impermanent loss

As of Friday, investors have deposited Bitcoin worth more than $130 million in Yield Basis. The protocol was designed to eliminate impermanent loss, an issue that has bedeviled decentralised exchanges since their inception.

Decentralised exchanges such as Curve allow users to swap crypto assets within a pool featuring the asset they want to sell, and the asset they want to buy. In order to lure liquidity providers, the exchanges allow them to take a small cut of every swap.

While providing liquidity can be lucrative, it also has an opportunity cost during times when crypto values are rising. Impermanent loss refers to the profit that liquidity providers would have earned had they held onto their tokens, rather than depositing them in liquidity pools.

Yield Basis uses a leveraged trading strategy to address impermanent loss in Curve’s Bitcoin-crvUSD pool. Investors who hold its token, YB, can lock that token in order to claim a portion of revenue set aside by the protocol.

Yield Basis investors have indeed profited from trading fees while avoiding impermanent loss on their Bitcoin, Egorov said. The protocol will eventually expand to other cryptocurrencies, he added, starting with Ethereum.

Closed-loop economics

While increasingly popular, schemes to boost token valuations have faced criticism.

In October, crypto market maker Keyrock found that many buyback programs were “broken,” overspending when prices are high and underspending when they drop while diverting funds from marketing and growth initiatives. In March, Messari found they have little impact on token price.

And in June, Morpho founder Paul Frambot said he would not seek to flip the protocol’s fee switch.

“Would a high-growth startup distribute revenue to shareholders instead of reinvesting in expansion? The answer is almost universally no,” he said.

“It even took many of the largest tech companies, including Meta and Alphabet, 10 to 20 years before they started distributing dividends.”

Egorov dismissed those concerns, arguing that reinvesting in protocol growth often comes in the form of token incentives. And those incentives will struggle to attract users when the tokens themselves have little value beyond governance rights.

“You will inevitably have the token performing very badly if you don’t have closed-loop economics,” he said.

“To close the loop, you must do some form of fee distribution, if you want to use token incentives at all.”

Disclaimer: The two co-founders of DL News were previously core contributors to the Curve protocol.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

The upgrade, codenamed Fusaka, also sets the stage for future upgrades that could increase the throughput of Ethereum itself.

Since the Merge, the network’s momentous 2022 upgrade, improvements have come at an annual clip. But a crisis of confidence early this year has led to renewed urgency among Ethereum developers, and Fusaka’s release comes just seven months after the previous upgrade, Pectra.

While highly decentralised, Ethereum has long faced a major barrier to mass adoption: it gets congested, sending transaction fees soaring. Layer 2 blockchains have emerged as a workaround, processing transactions affordably while using Ethereum as a settlement layer.

Fusaka’s chief feature is a substantial increase in the amount of data that layer 2 blockchains can send to Ethereum.

“It’s this new technique that people have been working on for a very long time,” Alex Stokes, Ethereum Foundation, said on a livestream hosted by EthStaker on Wednesday. “It lets us scale while not compromising on the values that are so important to Ethereum.”

Layer 2s send packets of data known as blobs to Ethereum for settlement. Fusaka introduces a concept known as peer data availability sampling, or PeerDAS, which allows individual nodes to store a fraction of blob data without compromising their ability to verify the entirety of that data.

Layer 2 blockchains can currently send a maximum of 9 blobs per block. After Wednesday’s upgrade, Ethereum’s blob capacity will jump eightfold, though increases will be implemented slowly in a series of smaller upgrades enabled by Fusaka.

“We could say here, in just a few minutes, dial this knob up 8x,” Stokes said. “Given this is a very new technique, and we’re not sure how the network will respond, this is not the wisest decision.”

The first mini-upgrade is scheduled for December 9 and will increase maximum blob capacity to 15. A second upgrade scheduled for January 7 will increase max capacity to 21 blobs per block.

According to Ethereum co-founder Vitalik Buterin, PeerDAS could eventually make it cheaper to transact on Ethereum itself.

“We think of blobs as being for L2s,” he said on the livestream Wednesday. “In the long term, we want to dump L1 data into blobs as well.”

Other improvements in Fusaka will allow users to sign transactions using biometrics — leveraging smartphones’ facial recognition technology, for example — and will harden Ethereum against denial-of-service attackers, who attempt to render the network useless by clogging it with a flood of spam transactions.

“There are, like PeerDAS in here, a pile of strategic upgrades that frankly are not going to be visible tomorrow,” Paul Brody, of the Enterprise Ethereum Alliance, said on the livestream.

“We actually already have more network transaction capacity than we really need. But we are laying the foundation on the road to a trillion transactions a day, and we will need every single [upgrade] by the time we are done.”

Ethereum’s next major upgrade, Glamsterdam, will be implemented sometime in 2026 and include improvements expected to lower the cost of using Ethereum mainnet.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.

Hey all, Liam here.

Decentralised finance has a reputation for pulling projects’ valuations out of thin air, but new research suggests those values aren’t just a fugazi.

Greenfield, a Berlin-based venture firm, argues that three key metrics provide far more explanatory power for why valuations move in any direction than any other variable.

By closely tracking the fees a protocol generates, its total value locked, and its revenue, Greenfield concludes that investors can typically make better bets on which projects will succeed.

What’s more, a model that uses these indicators typically outperforms analytical models that track Bitcoin and Ethereum performance, as well as models that incorporate social sentiment, such as followers on X.

This thesis holds at three and six-month horizons.

Most importantly, however, it shows that the so-called fundamentals narrative that’s been kicking around X this year is much more than a meme.

“The longer you give the market to play out, the more you actually see that there is a divergent performance based on fundamentals versus just everything being correlated to broader market moves,” Felix Machart, a partner at Greenfield and the paper’s co-author, told DL News.

It’s not a silver bullet, of course.

Investors also need to be aware of temporary spikes in activity related to token incentives, as well as a product’s defensibility amid mounting competition.

And fickle social sentiment can create a noisy investing landscape, at least in the short term.

Over one month, for example, fundamental measures offer less explanatory power for valuations than the model that tracks the price of Bitcoin and Ether alone, according to Greenfield’s analysis.

The analysts also highlight the importance of a token’s volume on decentralised exchanges, active users, daily transactions, and a protocol’s treasury value as additional metrics, albeit with less explanatory power.

Maturing markets

For those outside of the crypto space, the analysis seems pretty intuitive. A company’s stock will typically rise if it experiences higher revenues quarter after quarter.

So, why shouldn’t DeFi protocols?

For one, protocols aren’t companies. Their decentralised nature and how they create investor value can differ.

Machart says, for instance, that one can consider token buybacks and yield from staking as revenue, since value accrues to token holders regardless.

DeFi protocols are also far younger than traditional capital markets.

Greenfield’s analysis, spanning 2021 to 2025, isn’t the final word on the matter, either.

Far from it.

The report ends with additional research questions to expand the data set used, incorporate even more onchain analytics, and extend the timeline for measuring the thesis.

Still, the analysis is meaningful — especially as institutional investors begin tiptoeing into the sector.

“It just proves that you can invest based on an expectation of future fundamentals playing out,” Machart said. “Market outcomes are not just random and purely hype driven.”

“We actually can see trends that show the market is maturing.”

Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at liam@dlnews.com.

Onchain data shows the attack targeted Yearn’s StableSwap pool, a custom vault for trading liquid derivative staking tokens.

On X, Yearn confirmed that the malicious exploit affected only the StableSwap pools and that its major yield markets, with more than $410 million in deposits, weren’t impacted.

The incident comes on the heels of the $128 million loss suffered by Balancer, another DeFi pioneer protocol.

Like Balancer, the affected smart contracts had also been audited by several blockchain security firms.

The attack also adds to mounting losses for crypto investors from hacks and exploits this year.

$2.5 billion

Bad actors have already looted more than $2.5 billion from crypto exchanges and DeFi protocols in 2025, according to data from DefiLlama.

The Yearn attacker turned a maths bug in the yETH smart contract into an infinite-money glitch.

This type of glitch tricks the affected protocol into allowing a bad actor to inflate a token’s supply while still assuming the correct pricing index.

The Yearn exploiter used this vulnerability to mint about 235 trillion yETH out of thin air, onchain data shows. With the inflated supply in hand, the attacker targeted the custom StableSwap pool, which initially held about $11 million worth of liquid staking tokens.

The attacker drained about $8 million from the pool in a single transaction, then swapped $900,000 worth of yETH for wrapped Ethereum.

They also sent $3 million worth of Ethereum to Tornado Cash.

Infinite money bug

Bad actors have used infinite mint bugs to attack other DeFi protocols and blockchains in the past, including Wormhole, Abracadabra and Harmony.

They are a subset of maths errors in smart contracts, alongside rounding mistakes that lead to loss of precision.

Maths errors are often missed by blockchain security auditors, leading to instances where even heavily audited protocols still fall victim to malicious exploits.

Yearn has previously suffered two flash loan attacks, resulting in losses totalling $22 million.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at osato@dlnews.com.

Launched in 2022 at the start of the invasion, DeepState Live is an interactive map that shows how far Russian troops have advanced throughout Ukraine.

It shows the locations of airborne assaults, where the Kremlin’s troops have been pushed back, and the position of Russian rifle divisions.

On Tuesday, the tool was synced with betting markets live on Polymarket by a pseudonymous X user named Pentagon Pizza Watch.

The user used DeepState Live’s API — a kind of digital gateway that connects different platforms — to link specific locations on the map to so-called conflict markets on the popular prediction market platform.

These markets let users bet on when Russia will capture the village of Dovha Balka in Ukraine’s Donetsk region or if troops will capture the Ukrainian city of Lyman.

“Today, your outrage, as well as ours, was triggered by a message from some bookmaker service about integration with our map,” the user behind DeepState Live said on Wednesday.

They added that they have no affiliation with Pentagon Pizza Watch or its service.

“This service profits from bets on the war and connects either through a free API provided to someone for humanitarian and military needs, or through third-party parsers.”

The person behind the Pentagon Pizza Watch account said it had removed the integration after seeing the statement.

“The reason we used DeepState Live’s data is that they have a public endpoint, so we assumed it was free to use,” the person behind the account told DL News. “We voluntarily stopped using it immediately once we saw their tweet that they were unhappy with the use case.”

They added that people misunderstood what they were doing and had received “countless death threats” for the project. The project is part of Polymarket’s Builder Program.

“It’s clear that this is many people’s first exposure to prediction markets,” they said.

“What they don’t realise is that this isn’t a new phenomenon; you’ve been able to bet on Ukraine war markets since the invasion began.”

Neither DeepStateLive nor Polymarket responded to DL News’ request for comment.

Pentagon Pizza Watcher developed another tool that measures fast-food orders at restaurants around the Pentagon and the White House.

It tracks this data under the theory that spikes in such orders occur right before crisis events, such as when Israel bombed Iran in June.

The Department of Defence denied the theory’s validity.

Predicting war and sport

Prediction markets have enjoyed explosive growth this year, buttressed by Polymarket and Kalshi.

Both platforms catapulted into the Zeitgeist in the run-up to the 2024 Presidential Election via markets that let users around the world bet on who would be moving into the White House.

Since then, volumes on both platforms have ramped back up as each offers expansive markets for various sporting events, namely football and basketball. Volumes have been sufficient to even attract traditional sports betting firms, such as DraftKings and FanDuel, into the prediction market space.

The CEO of Flutter, an Irish-American sports betting company that owns FanDuel, said the launch of their prediction market product “unlocks an immediate growth opportunity.”

Many of the Polymarket markets on the conflict are still being traded at press time.

Major prediction markets, such as Polymarket and Kalshi, let users trade on the odds of events such as what a CEO will say during an earnings call, who will win the Super Bowl, and how specific military campaigns will conclude.

The largest market on Polymarket regarding the Russian invasion asks whether Russia and Ukraine will reach a ceasefire in 2025.

For eight cents, users can buy a “yes” token. If the two countries reach a ceasefire agreement before the end of the year, and the market closes, the value of that token will rise to $1.

Conversely, “no” tokens, which are worth 93 cents, would plummet to $0.

Other markets exist for the capture or liberation of other smaller towns.

‘Great website’

Prediction market proponents argue that because there are clear financial incentives, the accuracy of information provided by these markets is far higher than that of news reports and punditry.

Regarding the conflict markets around Russia’s invasion of Ukraine, however, commentators online are split.

“Great website,” wrote pseudonymous X user Car, referring to Pentagon Pizza Watcher’s service. “I hope the Ukrainians understand Polymarket can give them high-quality updates and probabilities on certain events happening.”

Another user explained that data from these markets could inform evacuation plans for specific towns and cities in Ukraine.

Others find the activity appalling.

“For Ukrainians, it is a tragedy,” wrote another X user named WarTranslated. “But for some foreigners, it is a gambling game.”

Update: This article was updated on November 28 to include comment from the individual behind Pentagon Pizza Watch.

Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at liam@dlnews.com.

On November 12, Edel Finance launched its EDEL token, which the project called a “fair-launch,” with only 12.7% of the one billion tokens going to team members.

But an onchain analysis conducted by Bubblemaps and reviewed by DL News found that a cluster of 60 wallets linked to the project scooped up more than 30% of the newly-launched token.

At the EDEL token’s current value, the haul is worth around $11 million.

On social media, James Sherborne, an Edel Finance co-founder, did not deny that his team had sniped the tokens.

He said the transactions were part of a planned manoeuvre to place 60% of the token in a vesting contract, a smart contract that automatically releases tokens to recipients over a predetermined schedule.

Token sniping is the practice of using bots to purchase newly-launched tokens the moment they become available on a decentralised exchange. The goal is often to acquire tokens at the lowest possible price before other investors can react.

Obfuscation techniques

Yet Sherborne’s response raises more questions than it answers.

DL News found no public record of Edel Finance stating that it planned to snipe tokens in advance.

The project’s tokenomics page, which Sherborne says backs up his statement, does not mention placing 60% of the EDEL token supply in a vesting contract.

Sherborne didn’t respond on X when Bubblemaps questioned those issues in his own thread.

What’s more, the sniping transactions involved sending the tokens through dozens of additional wallets and moving the tokens in and out of liquidity provider positions on Uniswap, the decentralised exchange.

While those transactions in themselves don’t constitute any inherent wrongdoing, such behaviour is often used by those seeking to obfuscate transaction traceability.

Sanctioned North Korean Lazarus Group — a cybercriminal organisation — routinely sends funds through multiple wallets to launder crypto assets it has stolen from crypto exchanges and DeFi protocols, according to Elliptic, a blockchain security firm.

Sherborne didn’t explain why he felt it necessary to segregate the tokens by sniping his project’s launch instead of simply sending the tokens directly to the vesting contract.

DL News asked Sherborne why the transactions that he claimed responsibility for employed obfuscation techniques.

Sherborne and Edel Finance didn’t respond to multiple requests for comment.

Lack of transparency

Edel Finance, founded earlier this year, paints itself as a global lending network for tokenised stocks.

The project promises to build “next-generation securities lending infrastructure,” that is “transparent, efficient, and built for scale.”

Several of Edel Finance’s co-founders and advisers have backgrounds at top firms, which the project leverages to drum up interest.

One co-founder, Giles Colwell, previously worked at Bank of America and JPMorgan. In 2021, he began a stint at crypto lender BlockFi, which filed for Chapter 11 bankruptcy in 2022 while Colwell served as an executive at the firm.

Rolando Gonzaga, an adviser, previously worked at Uber and at crypto exchange Binance’s US arm.

Edel Finance isn’t the first project to be marred by suspicious activity surrounding its token in recent months.

Earlier this month, Apriori, a trading infrastructure startup developed by former Jump Trading, Coinbase and Citadel Securities engineers, came under fire after onchain records showed suspicious activity surrounding its token airdrop.

An analysis, reviewed by DL News and reported by Bubblemaps and several other onchain researchers, found that approximately 80% of Apriori’s tokens were claimed by a single clustered group of more than 5,800 wallets.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.