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Vivian Vecchiarelli Creative
Riley
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Disclaimer:
This content is for informational purposes only and is not legal, tax, investment, financial, or other advice. You should not take, or refrain from taking, any action based on any information contained herein, or any other information that we make available at any time, including content such as blog posts, data, articles, links to third-party content, discord content, news feeds, tutorials, tweets, and videos. Before you make any financial, legal, technical, or other decisions, you should seek independent professional advice from a licensed and qualified individual or firm in the area for which such advice would be appropriate. This information is not intended to address or be comprehensive of all aspects of EIC or its products. There is additional documentation on the ETH Investors Club website about how EIC and its community function.
Contributors
Riley Blackwell Editor-in-Chief, EIC
Maika Isogawa CEO, Webacy
Cheryl Douglass Seed Club
Trent Van Epps Contributor, Protocol Guild
Jane Khodarkovsky Advisor, Predicate Partner, Arktouros pllc
In Hot Pursuit of a Dramatically More Interesting Internet
Cheryl Douglass
Towards a New Onchain Market
Benoît Palop, Vienna Kim
Betting on Tomorrow
Nick Tomaino
EVM vs. SVM
Not all Security is the Same
Maika Isogawa
The Policy and Legal Implications of Inclusion Lists
Jane Khodarkovsky, Nikhil Raghuveera, Khushi Wadhwa
Identity Fragmentation: The Hidden Bottleneck of Scaling the Blockchain Industry
Evin McMullen
Onchain Butlers: Scaling Ethereum Activity through Automation
Réka Medvecz
Celo as a Cultural Extension of Ethereum
Marek Olszewski
Protocol Guild: A Funding Framework for the Ethereum Commons
Trent Van Epps
Editor’s Letter
Writing my first editor’s letter for a print publication in over 15 years is a fulfilling, full-circle moment. As introductions go, my journey into media production started in small newspapers and writing for local magazines, but that work halted when I began a career in engineering. A few months ago, I couldn’t have imagined being at the helm of a print magazine for Ethereum stories. My career path as a freelance community builder and writer was up in the air, and I wasn’t sure there was an especially viable career path for me in this space. But when Peter and Vivian asked to sit with me to hear my thoughts on the current state and future of media at FWB Fest, I spent some time considering how print can continue to be a tangible, more tactile bridge to new onchain media. Sitting outside the Uniswap Cafe with the bright Idyllwild sun glaring into my eyes, we discussed how print media should connect real human stories back to the cultural richness of the cypherpunk ethos. In fact, as you’ll read, despite a bit of memecoin mania, there’s a cypherpunk renaissance emerging once again throughout the Ethereum builder community.
I think it’s quite magical that we have this very diverse melting pot of opinions that pervade the Ethereum community, where, for some, being too online is more than just normalized. On the other hand, certain personalities have taken it upon themselves to relentlessly debate Ethereum values, while L2s of every flavor under the sun have taken over mindshare this quarter. Still, print media remains a vital link for connecting consumers to experiences beyond apps and chains. It serves as a bridge into the onchain ecosystem of communities and products that make up the permissionless, robust, privacy-preserving layer of a new internet built on Ethereum.
ETH Investors Club Quarterly aims to provide a snapshot of narratives, trends, reports, and analysis of the Ethereum ecosystem. This issue, in particular, includes several thought-provoking reports that had me questioning the role of AI and human connection as Ethereum grows. Réka Medvecz gets our collective gears turning with a theory on how DeFi automation may evolve (pg. 60); we examine a future where bots act as agents, further transforming how money is moved on the internet. How we, as human operators of the EVM, identify ourselves comes into question when Evin McMullen (pg. 53) goes deep on the evolving nature of ZK tech. For the policymakers among our readership, I encourage you to take a look at page 46 for an inviting piece by a team of researchers at Predicate (who, by the way, recently raised $7 million) on inclusion lists and how censorship continues to play a significant role in MEV redistribution.
Lastly, I would like to thank my team for their part in producing this issue of EIC Quarterly. Peter Vecchiarelli’s relentless curiosity to activate our supporters onchain through quests is incredibly inspiring. Working with Vivian Vecchiarelli as our Creative Director has been a masterclass in collaboration as we continue to iterate on spreads that present the vision and hard work our authors have put into each piece. As the magazine moves to production on future issues into 2025 and beyond, I’m personally looking forward to growing our staff of writers, editors, and onchain developers.
Tap the IYK sticker at the front of the magazine to claim exclusive airdrops as they are announced via social media. We would love your feedback on this issue’s articles and how we can improve each quarter. Chat with us @ethinvestorsclub on X, formerly Twitter, and visit us at ethinvestorsclub.com for the latest updates!
Fully onchain games facilitate everything—their assets, logic, rules, and state—directly on their underlying blockchain.
As such, in this new gaming frontier, every action is ultimately recorded onchain. This dynamic offers various benefits, like transparency and possibilities around novel game economics. However, these offerings also especially attract a deadly efficient type of player: bots.
Can onchain games survive and thrive in spite of the specter of bots going forward?
Can humans be competitive in onchain games?
Recently, Dan Elitzer, a cofounder of venture capitalist firm Nascent, asked on Twitter whether it was “even possible to make a fully onchain game in which unassisted humans can be competitive?”
Elitzer asked the question in the context of a thread by plotchy, a security researcher at Nascent Security who has become a dominant force in Kamigotchi, a new fully onchain RPG I recently profiled in Metaversal.
Despite Kamigotchi’s early testnet smart contracts being unverified and closed source, plotchy managed to reverse-engineer the game’s architecture and created an indexer to parse its data.
Better keep your Kami’s health up while plotchy’s on the hunt.
A Kamigotchi community quest to target Plotchy’s Kamis.
Still, the specter of plotchy—and of bots in onchain games in general—remains.
lethe, one of the creators behind Kamigotchi, noted in a retrospective thread that onchain games must accept bots as part of the user base due to their open nature, and the challenge is to make game design adjustments to balance for this dynamic.
With access to detailed game info, including the locations and health status of Kami pets, plotchy then wrote a bot to hunt down other Kamis and quickly started dominating the in-game leaderboards.
In the wake of this impressive performance, plotchy has been in discussions with the Kamigotchi team, who are iterating all the while. Players have also adapted their playstyles to optimize for survival, and a new quest was introduced to lead to widespread coordination against plotchy’s pet army.
Yet bots are just one potential woe. What about browser cheats? A browser cheat typically involves manipulating the game’s client-side code—often through browser extensions or developer tools— to alter gameplay elements like revealing hidden information or bypassing certain restrictions.
This can include modifying variables, altering the game’s appearance, or automating simple tasks within the browser. These browser blitzes are in the same league as bots in this way. We’ve also seen plotchy use this approach to great effect in the Minecraftlike Biomes game on the Redstone gaming L2.
“ That said, the ultimate goal is to create a playing environment where human players and bot or script players can coexist in a way that’s still fun and not impossibly daunting for human players.
Plotchy’s arrival in Biomes.
This is the nature of onchain games—they’re transparent and have all their logic and data stored on the blockchain, so both browser cheats and bots can exploit this openness to gain significant advantages. You can leverage onchain data and smart contract code to create tools or scripts that give you an edge over others.
That said, the ultimate goal is to create a playing environment where human players and bot or script players can coexist in a way that’s still fun and not impossibly daunting for human players.
”So what might the future of onchain gaming look like when it comes to threading this balance? When it comes to mitigating users who deploy many bots to manipulate games with automated account swarms, developers may increasingly turn to anti-sybil measures.
To be sure, sybil attacks remain an open problem in crypto, so no solution will be perfect here. Yet some combination of proof-of-individuality techniques, like signing up via social media, community reporting initiatives, and AI analytics, may prove fruitful in tamping down on bot swarms in onchain games. On the flip side, another strategy for fighting bots is to tackle them head-on in numbers. As my former colleague Ben Giove recently put it, “The best defense against bots in onchain games is to join a guild.”
Plotchy on human coordination and the new EVE Frontier game.
Ben would know, too, as he’s the founder of WASD, the largest onchain gaming guild in crypto. When you have a large group of human players that are locked in and coordinating tightly together, you get a fighting force that can start to hold its own or even outperform against bot players.
Of course, if you can’t beat them, join them. Ben has also predicted that “access to bots will become democratized to where non-technical players can use them too.” Think game plugins or services that make it easy for anyone to optimize their gameplay. At the very least, this approach would help level the playing field!
Another avenue to consider here is meticulously crafted quests that can help onchain games address the issue of achievements being “too open” by introducing meaningful narratives and engaging challenges that require human creativity and collaboration. This way, developers can create experiences that transcend simple tasks or token collection. If made well, such quests encourage player interactions that
bots can’t easily replicate, adding depth to the gameplay and making achievements feel earned and personalized while mitigating automated players’ advantages.
Looking further ahead, it is likely that zero-knowledge (ZK) proofs will be increasingly used to hide info about in-game actions and create a fog of war that makes life harder for bots. EVE Frontier, an upcoming space survival game on Redstone by the creators of the popular EVE Online franchise, is implementing this approach. More onchain games will surely follow suit.
All in all, onchain gaming is still in its frontier days, so it’s no surprise that the scene is grappling with bots now. I face bots when I play mainstream games like Fall Guys or Overwatch, which run on much more closed rails. Bots are simply a paradigm in modern gaming.
Yet I don’t think this dynamic relegates onchain games to being niche forever. As this scene matures, advances and innovations will help clamp down on the dominance of bot players and cheating so that human players can still thrive. There are plenty of challenges ahead, but I, for one, am optimistic about the future here.
Questing into a New Experience Economy
Riley Blackwell Editor-in-Chief, EIC
Questing onchain has always bothered me. Unfinished, underexplored, yet extremely popular to one very specific type of person. It’s time we take a second look at the inherent meaning-making behind onchain questing beyond click-farming.
Since 1998, when Joseph Pine and James Gilmore coined the term, the Experience Economy has only accelerated. With the pace of the internet and the rise of social algorithms, AI, prediction markets, and crypto, the new experience economy is filled to the brim with degenerate slop, yet not beyond repair. Beyond crumbling latestage capitalism and experience products like AirBnB, Top Golf, and roomy Apple Stores, this new experience economy is being built onchain for a new generation.
Building new quests by fusing fun, more connected experiences may indeed lead to a cheaper, caring resolution to the loneliness epidemic and a path toward purpose.
This essay explores how principles from game design and event planning can transform onchain questing into a more meaningful, engaging experience, giving our physical self a tether to a new digital world. However, speaking as a community builder and
lifelong gamer, we seem to have stopped short of making quests meaningful in any sense of the word. With more fringe tech becoming more accessible, we now have the opportunity to build creative experiences that feel integrated and interoperable, bridging an in-person journey with the digital self.
The emergence of a new taste economy, as Daisy Alioto so aptly described it at FWB FEST this year, offers an opportunity to unfold design patterns that feel a little more adventurous and a lot more cooperative. In my view, no design pattern is more fitting for reimagining than questing.
But designing a community for this new internet requires a variety of emergent skills beyond just creating a compelling app with cool backend tech or your run-ofthe-mill social club. Expert knowledge of event design and interfaces, game design, storytelling, and human psychology combine to create just the right ingredients for quests to be fun while eliminating unnecessary annoyance. Before we get started, one thing to make absolutely certain is that a questing platform that lists NFTs as bait for airdrop farmers to swoop on like vultures is not in any shape a complete, meaningful quest. Questing platforms
are well aware of this reality, though, so it’s up to individual communities to put in the creative work to finish the loop. Now, this isn’t necessarily the fault of the market or the builders. This kind of thing just takes time to get right, especially when dealing with new interfaces.
Game Design for Events
For the non-gamers out there, most non-FPS (firstperson-shooter) games these days operate in two main types: open-world and linear gameplay. In the first, players are given a wide stretch of land, a city, or some animated place to explore freely, like you would when visiting a new town on vacation. In the second linear gameplay option, a player has a series of steps to complete, usually in order—go here, do this, talk to this person, all in a sequence.
Both of these types work well for in-person events. However, for them to work exceptionally, a team of excellent storytellers must work toward a cohesive, fun, well-crafted narrative. The four steps of game storytelling help guide their decisions:
Introduction
Travel to a new area (including travel time and getting acquainted), talk to new people
Expansion
Click on or complete objectives, collect items, learn mechanics, and introduce themes
Progression
Craft things, use items, interact with the world
Finale
A test of everything the player has learned, typically with some boss battle (or, in our case, perhaps hackathon judging)
Event designers can take these building blocks (and the respective onchain infrastructure) to create more vibrant, seamless, interoperable experiences that make communities swell. This type of gamification goes beyond leveling up in a noisy Discord server by
piling onto the noise. Instead, it gets us out of the algorithmic echo chambers, creating ample opportunity for connections, similar to those made in classic online games like World of Warcraft, but in person or onchain. For example, a raid (scavenger hunt that leads to a harder puzzle) at the next 30,000-member event where people must work together. Or technology that reads your phone’s proximity to resources (merch) and automatically opens chests when you’ve collected enough items. With a balance of positive and negative feedback loops, players of all skill levels find their place. This collaborative play is additive to community care, not extractive.
Now, let’s look at what questing actually looks like for events when we combine these gameplay elements.
Quest Design for Events
Each of a game’s storytelling steps is replicated in questing as well, making it super easy to translate to various types of questing. For a full list of non-violent game design patterns, check out Patrick Littell’s incredibly resourceful free book on the subject.
The four fundamental quest game elements are:
▪️ Explore: new areas
▪️ Expand: discover things to do
▪️ Exploit: get rewards and items
▪️ Exterminate: boss battle
Now, as we well know, to this date, crypto has largely stuck with one single part of the questing model: Expansion. Let me tell you, as a gamer and consumer, collecting things is the most boring part of any quest. If our imagination stops at the most monetizable part of a quest, that makes it very clear why we’re here. However, we can integrate the other steps in the model. Events that incorporate all elements of a quest build memories. After all, the number one goal for an event should be to create experiences worth retelling.
This year, FWB Fest ‘24 was the only event that did that correctly with a scavenger hunt in which nearly all the IYK tags to collect were situated around (walkable) places where one would naturally meet a friend. Oh, and they designed the scavenger hunt without making attendees pay for something or download a new app.
This expansion experience gave the quest a social aspect, distributing rewards to successful content creators, players, and side event stations for their hard work.
Another up-and-coming project ripe for questing is Soulmates by Amelia Guertin. Soulmates is a matchmaking quiz that brings people together at crypto events. Loneliness epidemic be damned, Amelia shows that while meeting new people
“
Now, the good news is that by building more connected, varied experiences to onchain activations, we can start to measure for fun, all while integrating tech that helps creators earn more at the same time
and dating can be awkward, it can still be fun by incorporating before and after feedback loops.
Event Designers Need Game Designing Skills
The event space for emerging tech has always amazed me, usually not in positive ways. From inviting too many speakers to side events sprawled across an entire major city, events are often a topic of contention. So before we get to the problems questing solves, we need to make sure we’re not adding unnecessary noise to already crowded cities, resulting in largely disappointing events.
Imagine bopping around Brussels trying to attend all the right events!!
Take, for example, this list of just under 400 ETHCC ‘24 side events that Michael Williams , Head of Product at Serotonin, helped put together with the aid of the Serotonin Platform. That’s a ton of events for around 5,000+ people, especially considering that other major events like DragonCon welcome around 70,000 people each year, with a fraction of the side events put on by major sponsors. Most of these events require excessive transportation, backtracking, and a test of time management skills.
Now, the good news is that by building more connected, varied experiences to onchain activations, we can start to measure for fun, all while integrating tech that helps creators earn more at the same time. Let’s dive into how event designers can build better quests and campaigns.
How Questing Builds Better Offchain and Onchain Economies
Though internet users may be burned out by all the social apps and things they are constantly asked to do, watch, or read, the fun part of communities does require a bit of friction. Unfortunately, all questing is work. We’re not getting out of that part of the equation. The good thing is that quests are also labors of love on both ends. As I often say, “I don’t invest with money, but I do invest with love,” and that love goes both ways. Whether you’re joining a run club, a chess club, or
a Don’t Die club, quests offer opportunities to add gamification in the form of resources (fake or real), storytelling, and character development that translate really well for in-person and onchain cooperation. These mechanisms allow for collaborative control a new experience economy requires:
A Tap: How do we translate the token faucet into a safe in-person experience? Is this necessary? Can this be done pre-event in the introduction phase?
An Inventory: How can we build better UX for loyalty quests via ERC6551 token-bound contracts? How do we reward players via contracts that give power-ups once a player collects enough items? Does this properly limit the player or cause undue in-person friction?
A Converter: How do we exchange one resource for another (typically through burn mechanics) to level up? Can we use an earned persuasion check
to give the player better in-person merch retrieval? How does this affect the pace of the event or game?
A Drain: Can we remove resources from the economy or fiddle with a difficult meter that constrains or slows a player? Efficiency nerds love this one trick!
Trading Systems: Can we create more fun ingame and in-person shopkeepers and merch table experiences? I love a good “the shop is cheaper in this part of the map” arb-type scenario! This is typically where cryptocurrency excels but is often limited by capital and, at times, frankly, diversity of imagination.
These are the questions and mechanisms game designers, event planners, and TGE (token generation event) ask themselves all the time. However, they have yet to utilize onchain at a true scale through things like interoperability, chain abstraction, cheaper L2 alternatives, smart wallets, paymasters, and widespread AI agents.
Free-to-play games like Forgotten Runiverse, now on Ronin Network, offer unique onchain experiences through inventory management and quests that co-build worlds together with their community through active storytelling.
Forgotten Runiverse inventory management
An in-game side quest might have you collect 20 stars, while an in-person quest might have you collect 20 people’s social links. The tap for one looks
completely different than the other, as do the other mechanics, but the feedback loops typically work just the same. Except this time, the community determines the meta and governs changes to the game or algorithms, creating more fair, aligned experiences. As a side note, quests create a unique opportunity for spreading the word about a community, game, or campaign via content creators. I can’t tell you how many hours I’ve spent reading about changes to Overwatch meta or guides for Skyrim quests. It’s definitely somewhere in the tens of thousands.
Fun as a KPI
Even if you’re not a gamer, if you watch enough Twitch streamers or you have kids, you start to get a read on what makes modern video games fun. However, determining what makes actions fun in person or onchain is a bit more tricky.
That being said, measuring for or building with fun at the forefront is the hard part. Games, and by extension quests, “are fun because they are experiences we encounter through play,” says Ian Bogost, writer and video game designer, in a 2014 WIRED by Design talk. Coming in with the community aspect of games, he adds, “Fun comes from the attention and care you bring to something that offers enough freedom of movement - enough play - that such attention matters.” Events have long been a staple of web3 development. This is one reason we’re starting to see more brands attempting to measure for fun, which, in my view, goes a level beyond previous cycle measurements for vibes. When we can measure onchain how much fun people are having in person, the leverage is infinite. For builders like Winny, founder of Chipped Social, whose motto is “Fun as a KPI,” a tap of an NFC chipped nail measures how often you meet new people. That’s considered a luxury for many these days, as is constantly attending events across the world. This is exactly why Chipped works; it provides endless interaction outside of just crypto events. Luckily, our ecosystem has quite a few S-tier event builders. Each understands “Fun as a KPI” and how to engage in the experience economy. A few communities I see doing this well currently are Lens, FWB, Boys Club, and Allships, which know how to engage the senses, have relentless authenticity, and lead with wonder.
Closing Thoughts, Finding Meaning
All these words to explain such simple concepts. What do I really want out of all this? Well, to be honest, I’d personally love more puzzle games. I want to think with my friends more often. I want to vote them off an island. Okay fine, I want more Crypto The Game. But seriously, take a page from their book, an event literally made of side quests with friends (and enemies).
It seems absolutely ridiculous that, exaggeration or not, Ethereum was conceived due to frustration with a WoW update. And we have yet to give justice to the source material by making actually fun onchain quests.
Layer3 is not a questing platform; it is a tool, and we should use it and others like it as such to complete feedback loops (positive or negative, both equal in importance) woven through storytelling and interoperable between communities for maximum fun. Token incentives are just one single layer of a complete quest experience.
Why are onchain quests better than a database with XP and endless Google Sheets passed from group chat to group chat? Onchain quests provide a full marketing funnel that doesn’t force users/players/ community members to pay to win; they help build an interchangeable, interoperable, sovereign digital identity, all while being a vessel for fun. The key here is to push the narrative away from “do this quest with the hope of an airdrop” to “do this quest in the hopes of fun,” which, as we’ve seen, has not been the focus of a hyper-financial, currency-obsessed industry thus far.
Look, quests are fun, especially when you do them with friends. It’s not a matter of if, but when we start seeing unique video-game-like experiences in person beyond Pokemon Go using a combination of onchain and offchain tech.
In hot pursuit of a dramatically more interesting internet
Cheryl Douglass Seed Club
Today’s internet is a boring, sterile place. It feels more like a Walmart in the panopticon than the new frontier of digital discovery. We all share a general dissatisfaction with the current state of our online lives. We’re desperate for more agency and optionality in how we spend our time, invest our money, and connect with others. This isn’t anyone’s fault. It’s the natural end state of immense network effects, walled gardens, and ad-based monetization. Luckily, there’s a whole new internet just around the corner.
It’s clear to us that the participatory, permissionless, and open worlds that crypto enables are an antidote to the old internet — and we’re finally reaching a technological and cultural tipping point toward consumers. Over the past year, the consumer crypto ecosystem has grown rapidly, with an explosion of companies across attention-asset exchanges (e.g., memecoin protocols), social games, new forms of information and prediction markets, and financialized social networks.
This expansion is driven by the maturation of crypto infrastructure, specifically in scalability and usability. These improvements have enabled new consumer experiences (like mobile PWAs), reduced transaction costs (through L2s), and accelerated app development via enhanced developer tools such as account abstraction and walletas-a-service. With foundations now in place for business models involving protocol rewards, transaction fees, shared data layers, memberships, and collectibles, and innovations like embedded wallets, alt L1s, and biometric passkeys, it’s dramatically easier and cheaper to bring great products to market. Improved infrastructure has also broadened the definition of a crypto user, accommodating a wider range
of use cases and interests than we’ve seen in previous cycles. Beyond speculative traders and developers, new archetypes like artists and creators have emerged who are actively participating in the creation and propagation of crypto culture. Various apps and ecosystems like Farcaster, Zora, Paragraph, and Base have emerged as a fertile breeding ground for acquiring early users, distributing media onchain, and testing new ideas. Builders are waking up to the opportunity that attentiondominating consumer products will have to vertically integrate and serve their communities in increasingly expansive ways.
That being said, I believe we’re entering a golden age for crypto startups. We have the tools we need. Now, it’s time to build the products and attract new communities. There’s immense opportunity to build the definitive digital experiences of soon-to-be huge categories like decentralized social, onchain media, and novel digital assets. But the challenges and uncertainties for founders are also great: Investor appetite is low, users are flaky, positioning is a moving target, you’re competing for attention in a chaotic industry — the list goes on. For consumer crypto founders, navigating all of this alone can feel like an impossibly incredibly isolating experience.
At Seed Club, we’re all in on the audacious, novel, socially motivated ideas that empower consumers with ownership. We love communities that harness economic coordination, as well as online experiences where digital objects and permissionless creation make the internet dramatically more interesting.
We have so much work to do to get there, but we see it. Crypto is about to have its consumer moment.
These new networks need you. Go explore. Click buttons. Build things. The internet, and our digital lives, will be better for it.
A bit of background before we jump in. My name is Cheryl Douglass (@cherdougie on X) – I’ve been working in the crypto space since 2017, shortly after my epiphany that so many in this space had:
1) crypto is inherently cool,
2) it represents a fundamental turning point in our relationship with the internet and money, completely disrupting our understanding of how value is created, how it moves across networks and borders, and who can benefit by being part of it,
3) crypto’s killer use case will eventually be its consumer applications.
My journey started at Consensys, an Ethereum venture studio. I met Joe Lubin when he came to speak at one of my math classes at Columbia. He had recently co-founded Ethereum and founded Consensys to bring together researchers, developers, and builders who were obsessed with the idea of decentralizing the world.
It was so early. The infrastructure was developing; the onboarding process for any crypto tool was basically 100 steps, and the common
user would give up at around step 10. We collectively built through crypto summers and winters and refined the fundamental tools, infra, and wallets that could support Ethereum-based apps at scale. We hosted massive events and created all the materials to help developers as they transitioned from web2 to web3. We educated institutions and brands looking to implement blockchain tech and everyday users who were just starting to jump down the crypto rabbit hole.
The macro project was always telling the story of Ethereum, but in doing so, I helped support and bring to market a lot of the earliest web3 companies across almost any imaginable industry use case – from developer tools & infrastructure to early tokenization and NFT projects, to digital art and music, to real estate, supply chain, and a slew of Ethereum based social impact projects. I also helped bring to life the Ethereal Summit in 2018, curated the first-ever IRL blockchain-based art auction, and founded my creative studio to help brands understand crypto and tap into its zeitgeist. My passion has always been in the creative, cultural, and social impact that blockchain would unlock for consumers and applications, and all this brought me to Seed Club.
Seed Club — What started four years ago with Jess Sloss , Josh Cornelius , and some friends exploring social tokens together has grown into a network that has incubated and funded over 200 inventive, provocative, challenging, optimistic, and humanistic crypto projects. We’re more convinced than ever that consumer crypto experiences are critical to our ecosystem and the internet broadly.
Build something people want to be a part of. When you’re in the weeds building in the consumer space, hype shifts on
a weekly or monthly basis. Yet, when we take a step back to focus on what’s actually valuable, it’s the incredible teams with deep visions and trust in their ability to drive toward those visions that stand out. Here are some of my favorite consumer crypto projects I’ve played around with this year.
Onchain is the New Online
For most of the internet’s history, creating and monetizing content has been precarious and inherently imbalanced. Artists have long been denied the ability to capture the full value of their work as corporations and platforms monopolized creative ownership. The rise of NFTs, or “onchain media,” is a direct response to this undervaluation, as content trapped in outdated business models is finally finding a way to break free.
Crypto’s mission should be to shift networks away from addriven business models toward a more sustainable, meaningful economic engine. Putting content from Web2 platforms like IG and
Twitter onto an onchain platform unlocks direct interaction between creators and audiences, eliminating intermediaries and algorithms. This is a transformative improvement in content ownership, allowing creators to earn value directly from their communities without being exploited by ads or subscription models. This shift isn’t just about cutting out middlemen—it’s about creating new revenue streams and engagement models that empower creators to build sustainable careers and brands to form more inclusive, active communities.
By embracing crypto, creators can capture value from their content very early on. A thousand collectors onchain can be exponentially more powerful than a million followers on traditional platforms, as collectors are not just passive viewers but active participants who invest in the content they love. This model incentivizes creators to produce content worth collecting, fostering a more equitable system while offering collectors a chance to support, own, and share in the long-term value of that content.
I love creating and distributing my content onchain, which is why I’ve loved Zora’s mobile app, which was released this year. It’s an onchain social network that unlocks new opportunities to create, connect, and earn from your life online. The app feels as intuitive as Instagram, allowing users to scroll through creative content, buy mints with Apple Pay, and even double tap to mint. Notably, you can sign up with just an email—no crypto wallet required—and then sync your Farcaster or Instagram accounts to instantly connect with friends and curate a personalized feed. Creators can upload content straight from their phone gallery, using Sparks—Zora’s in-app currency— to collect their favorite NFTs. Behind the scenes, the app leverages
Privy embedded wallets and Coinbase Smart Wallets to handle gas fees and transactions, removing UX hassles like signing transactions externally. This means users can seamlessly collect from their feed without leaving the app. Zora also introduced a major protocol upgrade this quarter, launching onchain secondary markets for mints. This upgrade enables Zora’s ERC1155 tokens to be wrapped into ERC20s, allowing them to be easily bought and sold on Uniswap after mints close. What’s especially exciting is how this tackles a long-standing challenge for NFTs—secondary market liquidity—by making them compatible with Uniswap, a leader in secondary markets.
This shift reflects a mental model change. People typically mint to support creators and the work they want to see more of while also hoping to profit by being early adopters as demand rises. But NFTs, especially with open editions where supply is infinite, have
struggled to generate consistent secondary demand. Zora’s new approach directly addresses this by integrating a liquidity pool, allowing patrons to continue supporting creative work while significantly increasing the potential for profit. The result? Everyone benefits from more secondary market volume.
I’ve always admired how willing Zora is to disrupt themselves while evolving the narrative. They’ve become one of crypto’s standout projects and, with this new app, have demonstrated a user-friendly vision of what onchain social can be. Zora now boasts over 2 million collectors, 426,000 creators, 15 million NFTs minted, and has rewarded creators with 3,553 ETH (approximately $9.15 million). This signals a new level of interaction and monetization, where media assets with access controls and economic incentives programmed into them can flow through global markets, bridging the gap between creators and audiences. All this has
me thinking about how our craft and consumption behaviors will evolve as media formats change.
Onchain creation is powerful because it allows information to be free and accessible while minting and selling accrue value to both the creator and the collector. It also lets you earn passive crypto rewards when people collect the media you’re already producing. In addition to creating and collecting on Zora, I’ve really enjoyed minting my weekly newsletters on Paragraph and Seed Club’s weekly podcast episodes on Pods. These platforms offer enhanced functionality, preserving content as permanent, verifiable records onchain and expanding reach through wallet distribution. Readers can collect or mint posts as NFTs, while publishers can build more advanced media platforms that are token-gated or membership-based, managed through connected wallets. Since its debut at SC06 a year ago, Pods has achieved $1M+ in mint volume,
Artists have long been denied the ability to capture the full value of their work as corporations and platforms monopolized creative ownership. The rise of NFTs, or “onchain media,” is a direct response to this undervaluation, as content trapped in outdated business models is finally finding a way to break free.
onboarded 75+ pods, published over 1,000 episodes onchain, completed 475,000 mints, and attracted 120,000 collectors. Paragraph has delivered over 15 million emails, seen more than 1 million writing NFTs collected, and enabled creators to earn over $250,000.
Interface is another great app for discoverability and exploration of everything happening onchain. It presents transaction data in a super social way, making it really easy to follow wallets and see their activity in a single feed. Interface users can also discover new opportunities happening by syncing various onchain social graphs to make new connections, find new media to collect, and listen, watch, and read any media format in-app.
Loyalty
Blackbird is a new app founded by Ben Leventhal, the visionary behind Resy and Eater. This app introduces loyalty rewards to your favorite local
restaurants using crypto. You can browse the app’s map to see which restaurants are partnered with Blackbird. Once you arrive, simply check in by tapping your phone on the Blackbird-branded scanner at the cashier’s counter (it looks like a hockey puck). For each visit, you earn FLY points in the app, which unlock special perks as you accumulate them. Imagine free coffee every morning, surprise desserts, or access to exclusive events. There are even special passes like the Breakfast Club, offering unlimited coffee. Blackbird is constantly expanding its partnerships with new restaurants, cafés, and bars across NYC.
Beyond the map, Blackbird also features a curated feed of restaurant content, almost like a restaurant TikTok, helping you discover exciting new spots around the city. The app rewards customers with FLY points for actions that benefit restaurants, like sharing data or paying with a debit card. These points can then be used to pay for meals, effectively introducing a new payment system where customers earn and spend points instead of traditional *tradfi* currency. In turn, restaurants gain valuable insights into their customers, allowing them to tailor experiences and reward loyalty, incentivizing return visits. This system also facilitates seamless bill settlements using in-app points, eliminating the need for traditional credit card payments and their associated high fees. Blackbird charges just a 2% processing fee, which is 50% lower than the typical fees charged by other payment processors. By reducing fees and offering enticing perks through its network, Blackbird creates a flywheel effect that drives FLY point volume to restaurants, spurring even wider adoption among restaurants.
You might be asking, ok, but who cares? It can be challenging for
people to grasp the “why” behind putting media or loyalty programs onchain, largely because the immediate benefits aren’t always tangible or visible. The value often becomes apparent only after these systems are in place. Network effects—the compounded benefits that arise as more people and assets interact in a decentralized ecosystem—can’t be realized until we start building onchain. Much like the early days of the internet, where the long-term impact was difficult to predict, we need to put the assets onchain first in order to discover how they can truly transform industries. By embracing and experimenting with putting media and experiences onchain, we open up possibilities for ownership, transparency, and innovation that might not be immediately obvious but will become essential as the ecosystem matures and network effects take hold.
Full Stack Brands
People are increasingly looking to brands for a sense of belonging,
identity, and meaning. However, most brands remain focused solely on selling products and have yet to meet this deeper need. There’s a significant opportunity for brands to evolve beyond commerce and integrate with culture, transforming into social networks. As the costs of creating content and software decline, and with advancements in open social graphs and protocols, brands can engage with their communities in entirely new ways. With the value-capturing potential of tokens, brands can become more valuable than ever before. Crypto plays a crucial role in this evolution, with tokens being used to coordinate and distribute ownership within these communities and protocols bundled into products that cater to specific types of people. A great example of this new wave of full-stack brands is Chipped , founded by Winny, which creates
press-on nails embedded with NFC chips. With a simple tap of your nail on someone’s phone, you’re directed to your Chipped social profile, where you can add links to your socials, portfolio, contact card, or any other website. By bridging digital identity with real-world consumer habits, Chipped seamlessly integrates blockchain tech into everyday life, making crypto interactions fun and accessible without being so obsessed with financialization.
Another fun one is Slow Rodeo. In September, during the US Open in NYC, they launched “Court Date” alongside their debut capsule collection, “Oncourt Hardware,” in collaboration with Mesh and Scene Infrastructure Company. They hosted a pop-up in LES for the limited edition 13-piece apparel collection. When you buy a piece from the collection, you’re prompted to create a Court Date profile and start earning onchain points that unlock real-life experiences and features within their platform.
We’ve also seen this with 9dcc, a crypto-centric luxury fashion label that merges fashion with tech. By integrating NFC-enabled apparel, from suits to leather jackets, 9dcc ensures authenticity and ownership verification onchain. This allows participants to accumulate digital badges—NINES—that serve as both tokens of appreciation and gateways to exclusive experiences. 9dcc exemplifies how brands can elevate the consumer experience far beyond the transactional.
Similarly, Sofamon recently teamed up with K-pop group tripleS cosmos to offer limited-edition onchain collectibles. By spinning the gacha machine with JiWoo, you can unlock digital wearables for your Sofamon avatar. The platform is mobile-friendly, allowing users to sign in with Google and pay with ETH, credit card, or Apple Pay—
offering the kind of seamless user experience that consumers deserve.
Sanko is another diverse ecosystem of products, including an NFT project, a social network, a gaming platform, and a token called Dream Machine Token, all built on their own L3. Their games, such as Dream Machine, are very nostalgic for the 80s/90s, and they’ve continued to incorporate new experiments into their world over the past year. A core part of their strategy has been to do fair launches of their tokens ($DMT) early and treat them as iterative products. They’ve also made sure to focus on starting with culture rather than tech, believing that dominant ecosystems will emerge from tokens that first aggregate communities and then build tailored applications and networks. Aggregation of these communities allows them to
build not only a valuable identity layer but also a suite of consumer products that otherwise might not be successful as standalone ideas.
In this new landscape, brands are no longer just selling products— they’re creating ecosystems where digital and physical worlds blend, giving their communities new ways to interact, express identity, and participate in shared culture.
If crypto is going to truly be exciting, it needs to expand by unlocking something new and additive. Successful user acquisition, media distribution, and community discourse all stem from having
something interesting to talk about. Facilitating surprising experiences is key to that new reality. Consumers crave unpredictability, whether it’s avoiding movie spoilers, chasing rare concert moments, or the thrill of a sports game. In crypto, this feeling is heightened by market volatility, meme culture, and the constant shift of attention— creating an environment where no one knows what’s coming next. This element of surprise is what keeps people coming back, driven by the thrill of the unknown.
Crypto: The Game (CTG) exemplifies this with its onchain survival game, where contestants buy in for 0.1 ETH, join tribes, and participate in challenges until one winner takes the pot. Compared to Survivor, Hunger Games, and Squid Game, CTG has been described as dramatic and
As
crypto products evolve,
intentional ephemeral designs will capture value in moments of high attention, and
SocialFi
apps and predication markets will likely integrate more social contexts.
”
insanity-inducing—one of the most fun crypto experiences in years. The first season (January 2024) attracted 410 players, including big names like 3LAU and Bored Elon, and ended with a Japan-based player winning 41 ETH. It had players strategizing around the clock. They communicated in tribe-specific chats and faced the potential of being voted out by their tribemates each night. They could gain immunity by topping the daily leaderboard in tribal immunity challenges, which ranged from classic arcade games to digital scavenger hunts and crypto puzzles. Season 2, built on Base, sold out 800 player tokens in 13 minutes, with a prize pool exceeding $250,000. The season introduced a new mechanic: when players were
voted out, their NFTs transitioned to jury status, meaning they could still influence the game or even sell their NFT, creating an in-game economy reminiscent of “Deal or No Deal,” only possible onchain.
The World’s Largest (TWL) also taps into this sense of unpredictability with its unique mix of “pop-up digital circus meets luxury meme factory,” creating immersive social experiences at the crossroads of AI, web3, and gaming. TWL’s first release was a completely unhinged trailer video that allowed users to mint a frame for $1, resulting in 57,000 NFT mints within 24 hours. Their second release, Sperm Game, was a web-based infinite runner that attracted over 6,000
players, accumulating 170,000 minutes of playtime during a 7-day event. They are now preparing to launch a social simulation game powered by onchain AI characters.
Polymarket takes a different approach, leveraging the thrill of surprise through permissionless prediction markets. The product isn’t just the interface—it’s the experience. Polymarket has brought together meme creators, market speculators, and a devoted community, keeping the platform fresh and entertaining. It’s found product market fit, ranking #2 in the Apple App Store news section, above the New York Times and CNN. Every campaign staffer and political pundit is now tracking Polymarket odds.
Bracket.Game is tapping into the power of fandom by building cryptopowered games that give sports fans new types of participation and ownership within their fanbases. Whether it’s through memecoins that capture the cultural value of teams or fans pooling capital to recruit college players, the possibilities for crypto in sports are vast.
While it’s easy to use speculative incentives to attract users, keeping them engaged long-term is a bigger challenge. Sustainable products will need to cater to broader future demographics, not just the current novelty-seeking audience. As crypto products evolve, intentional ephemeral designs will capture value in moments of high attention, and SocialFi apps and
predication markets will likely integrate more social contexts. These apps, leveraging social graphs and tokens, will encourage the formation and growth of onchain communities, marking the next iteration of this space.
Headless Marketplaces
Since major social platforms cut off API access, launching a new app or marketplace now requires exceptional distribution strategies. The rise of decentralized social protocols and wallet infrastructure, however, offers a solution. Businesses can reach users without relying on centralized platforms, as decentralized networks use crypto wallets for identity, allowing apps to tap into users’ existing identities,
funds, and data. Traditionally, marketplaces require users to visit a website or app, create an account, and provide payment details. With headless marketplaces, the destination becomes the user’s wallet, embedded in the applications they already use, significantly reducing transaction friction.
Web2 creators are increasingly prioritizing audience ownership and minimizing dependency on centralized platforms. They understand the importance of building direct relationships with their audiences to gain more control over content and distribution. Crypto enables this shift by providing tools for creators to truly own their work, carry their audiences across platforms, build communities, and monetize through tokenized systems. This frees creators from platform constraints and grants them the autonomy to grow and engage their audience on their own terms.
We’re also seeing hyper-connected audiences forming highly aligned groups across multiple platforms, which are more active than mainstream communities. Brand building is becoming more culturally sensitive to these groups’ preferences, giving community members a meaningful role in shaping a project’s trajectory. It’s also becoming much more considerate of the natural ways people gather into communities, share knowledge via social networks, build trust, and create culture.
The Power of Interoperability
In Web2, products are built with the goal of creating flywheels that retain users within a specific network. In Web3, we start with a network of onboarded users, and within this ecosystem, the most successful crypto apps seamlessly integrate into various user journeys. Crypto’s key
advantage lies in its interoperability: users can onboard once and transact across multiple apps onchain without duplicative efforts. This allows users to perform actions on one app that are recognized across others, unlocking more seamless and cohesive experiences. The potential for consumer crypto apps is massive, particularly those that integrate with niche networks and provide interoperable identities and open social graphs. Farcaster and Lens, for example, have harnessed the power of interoperability by creating decentralized platforms where users maintain control of their data and social connections. These platforms allow users to move freely between different clients built on their protocols, retaining their follower base and content. This fosters a more open, flexible ecosystem where social data can be leveraged across multiple applications, enhancing user experiences and expanding opportunities for innovation in the decentralized web.
Opportunities for Consumer Crypto Apps
This shift offers significant opportunities for consumer crypto apps, particularly those that can leverage interoperable identities and open social graphs. Beyond traditional business models like ads and subscriptions, apps can explore new revenue streams, such as transaction fees and token-based engagements, while empowering communities. The focus on userdriven value has the potential to reshape both social networks and marketplaces, creating a more equitable, dynamic digital landscape… and dramatically more interesting internet.
It’s so important that what we build is shared with a more broad, inclusive community. Developers
and enterprises are essential to our business, but like with Web1-2, they aren’t the whole story. For this technology to be a movement, we need to serve the consumers, creators, meme admins, tastemakers, collectors, influencers, gamblers, degenerates, entertainers, architects, and everyday users. I believe we will continue our tradition of building out applications and the larger creative economy in a way that is widely accessible. If you’re building in this arena or interested in trying out apps that are, come join our world.
Go explore. Click buttons. Build things.
The internet, and our digital lives, will be better for it. If you’re as fascinated by the world of consumer crypto as I am, shoot me a message or subscribe to my weekly consumer crypto newsletter. Also, check out Internet Explorers, a live show where Jess & Josh deep dive into consumer crypto with new guests weekly (live.seedclub. xyz every Friday @ 1pm ET!)
Towards a New Onchain Art Market
Vienna Kim & Writer & Curator
Benoit Palop (LAN Party) Digital Culture Producer
You already know the story: NFTs hit their peak in 2021, then the market crashed, and everyone’s been obsessing over the losses since the summer of 2022. Stats and charts flood the conversation, breaking down just how much value has tanked. But what’s next? Who’s taking this as fuel to build something fresh? In this onchain art market analysis, the goal isn’t to add to the echo chamber of the bear market narrative but rather to use these statistics to highlight and imagine alternative market models. Rather than dwelling on what’s gone, we aim to encourage a rethinking of how we engage with the current market to shape a sustainable future. These numbers matter, not just for marketplaces or platforms but for curators, builders, artists, and galleries, pointing out gaps and untapped opportunities waiting to be seized.
Overview of the Current Onchain Market
After attaining an astronomical market value of over $2.9 billion in 2021, the hype around NFTs fell drastically alongside the tumbling value of Ethereum in 2022, with the onchain art market shrinking in value by 51% year on year between 2022 and 2023.1 Art-related NFTs, specifically, were by far the largest category of NFTs in 2020, making up 67% of the market. However, the rise of JPEG Summer in 2021 meant that collectibles as a category have dominated since. The prevalence of collectibles–such as PFPs, ingame items, sports memorabilia, etc.–constitute 84% of the NFT market today, with art-related NFTs–such as unique 1/1 artworks, limited editions, open editions, or any creation by an artist intended
to be perceived as a work of art–occupying 16% of the pie (notably, a 4% increase from 2022).2 Despite the glaring crash of the market, many experts agree that the market correction was a necessary step to overcome the hyper-speculative aspects of NFTs and, therefore, pave the way for sustainability and longevity.3 Today, the onchain art market sits at $1.2 billion, a 60% decline from its $2.9 billion high, but still 60 times up from figures in 2020 ($20 million), demonstrating significant growth over time.
Another shift we’re seeing is in holding times. In 2021, NFTs were held for an average of 33 days—an alarming contrast to the traditional art world, where collectors hold onto pieces for 25-30 years. 4 With a slower and less liquid NFT market, holding periods among NFT collectors have become longer.
Annual Sales of Art and Collectibles NFTs 2019-2023,
The Art Basel & UBS Art Market Report 2023
Arts Economics (2024) with data from NFT18.com
For example, Art Blocks collectors are now much more selective of the pieces they buy and retain them for an average of 500 days.5 This reveals two possibilities: first, serious digital art collectors might be playing the long game, treating their NFT portfolios as true investments or keeping them for personal enjoyment rather than chasing quick flips. If this is the case, it is a positive signal that the onchain art scene is maturing. On the other side, there is the possibility that some collectors have abandoned their collections, knowing that selling their assets now would mean taking a loss. Whether these statistics divulge a move towards long-term vision or resignation, the NFT art market is certainly going through a major recalibration.
This having been said, a lot of the data from 2023 is heavily skewed by a handful of major projects that brought in eye-watering amounts for a single artist. For example, Jack Butcher’s projects, including his landmark open edition series, Checks, brought in $350 million alone, resulting in a single artist’s winnings representing 29% of the entirety of the art-related NFT market in 2023.6 This figure
of Sales by Value of Collectibles Versus Art-Related NFTs 2019-2023, The Art Basel & UBS Art Market Report 2023
is enormous. These statistics are corroborated by NFT18’s ‘Generative Art–Complete Guide’, which notes the discrepancy between a handful of Art Blocks’ most famous collections, which sell for the millions, and the majority of collections on AB Curated, which barely exceed 1 ETH.7 It’s safe to assume, therefore, that the narrative of the onchain art market being ‘more stable’ may not necessarily reflect the realities of most artists, especially those who are emerging or mid-career, with many of the numbers favouring a handful of extremely popular (“grail”) artists.
Observations From the Field
On a more qualitative basis, one determined through our observations and close involvement with digital art communities, the meta for how we distribute, view and collect digital art has undergone yet another major development in
recent months. In today’s onchain art landscape, platforms like Rodeo and Zora have come to the fore as active loci for onchain art. The focus of these new apps, which operate on cheap L2s (Base L2 and Zora L2, respectively), is lowrisk and affordable ‘social media’ publications that can be collected, with the content ranging from memes to snapshots of daily life to artwork WIPs, sketches, posters, or even open edition artworks. The popularity of these apps has been met with deviating responses, with some celebrating the emphasis on increasing distribution and ease of access and others decrying the loss of focus on building sustainable markets and audiences for artists. Apps like Zora and Rodeo enforce the idea that collectibles remain the dominant category in the NFT market, leaving a question mark on where people can go to collect more carefully curated 1/1 or limited edition artworks today. Acquiring works from galleries such as Verse and EXPANDED.art, which have
Share
Checks via Jack Butcher
emerged as go-to destinations for serious collectors seeking unique pieces, or specialised platforms such as fx(hash), Highlight, Artblocks, and Feral File, may be a solution.
Some Thoughts on the Future
Many see the current emphasis on distribution over curation in the NFT space as a challenge for the digital art market, but it also presents unique opportunities. Curators and galleries have the chance to differentiate themselves by raising awareness of their expertise and doubling down on marketing efforts to stake ground as the premier destinations for digital art. Market shifts also open up a chance to go beyond the Web3 platform economy. Artists, for example, can explore ways to broker sales independently, bypassing platforms altogether (see: the infamous yet nebulous “private sale”). Those with the financial means or strong networks may even collaborate with art dealers—a role almost nonexistent in Web3 but one that, in principle, is becoming increasingly appealing. Artists can take advantage of tools like Manifold contracts to mint their work on their terms or sell directly from their personal websites. However, this requires a strong online presence and a dedicated audience, which takes considerable time and effort to build.
Curators can play a key role in helping artists navigate these new dynamics. Through thoughtful writing, research, and market positioning, curators can help boost an artist’s conceptual storytelling, spotlighting their work to serious collectors and galleries interested in exhibiting their work.
On a developer level, protocols like Lens and Farcaster have introduced decentralised approaches to social
When it comes to rethinking the technology behind many onchain art platforms, so much of the focus has been on making minting as cheap and as efficient as possible. This was an incredibly important factor in easing access to Web3, with the hopes that more people would be able to onboard with comfort.
media, which could inspire similar models in the onchain art world. Imagine an open-source art protocol that allows artists to mint their work across different platforms without losing their audience. For example, an artist might use the Zora app to mint quick sketches or WIPs, while a new separate, dedicated art platform built on the Zora protocol could offer collectors the finished, unique piece. As the social graph on the Zora Protocol is the same across platforms, followers of the artist who saw the initial sketch on
the Zora app would also be notified when the finalised piece is minted on the dedicated art platform. When it comes to rethinking the technology behind many onchain art platforms, so much of the focus has been on making minting as cheap and as efficient as possible. This was an incredibly important factor in easing access to Web3, with the hopes that more people would be able to onboard with comfort. Zora and Rodeo are the fruits of this labour. Now that this milestone has been achieved, Sales of Art-Related NFTs 2019-2023, The Art Basel & UBS Art Market Report 2023
Average Prices of ArtRelated NFTs 2019–2023, The Art Basel & UBS Art Market Report 2023
Source: Arts Economics (2024) with data from NFT18.com
perhaps the next evolution lies in how to maximise an artist’s reach, ensuring that there is minimal slippage of audience between applications so that collectors won’t miss a new piece by the artist. In addition, working towards a truly decentralised art market ensures that one application or company is not able to monopolise transactions and consequently have too much influence over the development of collecting trends.
Smaller Communities, Bigger Impact: The Next Onchain Art Cycle?
In Web3, we often speak of ‘onboarding’ new users and evangelising blockchain technology to the normie masses as if Web3 were a monolith that everyone should naturally accept as an inevitability of our technological future. But in so doing, we are perhaps turning a blind eye to the smaller, tight-knit communities that truly make up a decentralised
internet. The statistics and trends we are observing in the onchain art world, both on a quantitative and qualitative level, demonstrate that global interest in art on the blockchain has faltered, but smaller pockets of interest have arisen in specific art types and motives that are forming a buzzing rhizome of an onchain art community.
From dedicated generative art platforms such as fx(hash) and Highlight to those sharing WIP images and exhibition posters on Zora and Rodeo, those seeking their new unique fine digital art acquisition at Verse or EXPANDED. art, or even the degens who give in to the craze over a Jack Butcher open edition, these distinct approaches to collecting art-related NFTs are all relevant and constitute the market today.
Perhaps the ‘new’ onchain art market involves leaning into these distinct communities and movements, with smaller groups uniting to strengthen their particular subcategory of interest. By building
upon these distinct subcultures, we can ultimately dismantle the platform monopoly that currently exists within the Web3 art world and allow for a truly decentralised and diverse digital art world.
1 Dr. Clare McAndrew, ‘The Art Basel & UBS Art Market Report 2023’, UBS and Art Basel, 2024, p33
2 McAndrew, ‘The Art Basel & UBS Art Market Report 2023’, p34.
3 McAndrew, ‘The Art Basel & UBS Art Market Report 2023’, p33.
4 McAndrew, ‘The Art Basel & UBS Art Market Report 2023’, p35.
5 Cédric Maugard and Maxime Laglasse, ‘Generative Art - The Complete Guide’, NFT18, 2024, p12.
6 McAndrew, ‘The Art Basel & UBS Art Market Report 2023’, p34.
7 Maugard and Laglasse, ‘Generative Art - The Complete Guide’, p8.
BETTING
Nick Tomaino Founder, 1confirmation
ON TOM
Prediction markets are not a new phenomenon. In 1916, on most days, there was more trading volume on the Woodrow Wilson vs. Charles Evans Hughes presidential election market than on the New York Stock Exchange. Prediction markets, a.k.a. markets that allow people to trade on the outcomes of political and cultural events, lost prominence soon after. The behavior mostly languished in obscurity for the past 100 years.
Polymarket changed that this year. There’s been over $2B in trading volume on the 2024 U.S. Presidential market. People are risking money by buying Yes shares on the candidate they believe will win, and the market is playing a key role in the global discussion about the election. Companies like the New York Times and CNN have long dominated the debate, but recently, Polymarket even surpassed them both in the Apple App Store rankings.
Onchain prediction markets may now seem like an overnight success to outsiders, but that is far from the truth. Here’s background on how we got here:
Ethereum roots
To many in the Ethereum community, it has long felt like global markets for people to speculate on world events was an ideal use case for a decentralized app platform. In 2015, around the time of the Ethereum mainnet genesis, Vitalik often wrote about his excitement about prediction markets. Ethereum could uniquely enable such a product because of its ability to run code onchain without reliance on a single server and connect all Internet users via an open, global payment rail.
It didn’t happen right away. Augur was a solid early attempt on Ethereum that wasn’t able to find the right balance of decentralization and user experience. The Augur product skewed more toward decentralization. The main interface was a desktop client and there was not an easy web interface to use. There was a brief surge in Augur activity in 2018. But the product lacked staying power and never grew beyond a few thousand users.
Polymarket emerged in late 2019 and is where it is today, largely thanks to the persistence of the team and three innovations pioneered by the Ethereum community: stablecoins, self-custodial wallets, and L2 scalability. Polymarket was truly one of the first to integrate all three into the product from the beginning. All markets are denominated in USDC. All users interact with markets in a non-custodial manner - meaning you must use a selfcustody wallet like Metamask to trade. And there is no trusted third party that controls customer funds at any point in the UX - it is a purely user-controlled experience.
Polymarket blocks U.S. customers from trading because of CFTC rules that have historically restricted Americans from betting on politics. The recent Kalshi vs. CFTC court decision is changing that, but to date, being built on Polygon and denominating markets in USDC has given the rest of the world easy access to liquid markets related to politics, sports, culture, and more. The trifecta of being onchain, non-custodial, and USDC-based has helped Polymarket reach a level of success that Intrade, Betfair, Augur, and many others that came before were not able to come close to. Before Ethereum, it was simply impossible for a prediction market platform to aggregate global liquidity the way that Polymarket has. This year’s growth to over $1B in monthly volume reflects that.
So What?
Some look at the recent activity and say, “So what? It’s just another form of gambling.” Maybe they’re right. But maybe something deeper is happening when we
get liquid markets that are easy for anyone in the world to participate in. Maybe we get a useful information source that helps people get closer to the truth.
One of the biggest problems facing young people today is how to know what is true. Corporate media has historically been a trusted source of information, but people are increasingly recognizing that the information that comes from corporate media is not always accurate. A small pre-selected group of humans controls the corporate media narratives. Sometimes, they are truthful, but sometimes, they are influenced by their own bias and financial incentives.
Citizen journalism on social media has emerged as another source of information in the past decade, and Elon acquiring X has been a win for free speech. Many different voices can be heard on social media, which is great, and sometimes the truth rises to the top. But even on X, it’s easy for anyone to make up their false narratives, and the algorithm tends to reward popularity over truth. Community Notes addresses this to an extent, but X has a long way to go in helping people distinguish between truth and lies.
Markets add another tool in the toolkit to help people make sense of what is true. That is not to say they are always accurate or they always predict the future. However, when a wide variety of people are able to express their views by taking a financial position where they either make money if they are right or lose money if they are wrong, the output is a valuable piece of information. Talk is cheap, and skin in the game is valuable. Markets reflect what a group of financially incentivized people think is going to happen, and that reflection can be closer to the truth than media narratives. We saw that perhaps most clearly this year in the “Will Joe Biden
drop out of the 2024 U.S. Presidential election” market. Back in October 2023, the market indicated there was a 26% chance that Biden would drop out. Meanwhile, the New York Times and the rest of the corporate media continued to lie about Biden’s mental state. They said he was “sharp as a tack” and “knows what he’s doing.”
Most people at the time thought the Polymarket odds were too high. They said it was just biased crypto bros gambling. They said pretty much all of the same things they are saying about the current election odds favoring Trump at 62%, 15 days out from the election.
It turned out the market was closer to the truth than the media was, though. As you probably know, during the debate in June, Biden displayed his blatant lack of mental acuity to the world. The market price of his dropping out doubled as the world watched the debate, and the rest is history.
What does the market actually tell us?
New tech is always polarizing. Ethereum community members understand that well. When people first hear
Talk is cheap, and skin in the game is valuable.
about onchain prediction markets, they tend to question their validity, especially if the market does not confirm their bias.
This election cycle, Trump’s odds dropped from 72% on July 16th (shortly after the assassination attempt in Butler, PA) to 44% on August 15th when the Democratic Party replaced Biden with Kamala Harris. When the popularity of Harris grew and Trump Yes shares dropped down to below 50%, some loud Trump supporters suggested that Polymarket information was meaningless and dark money groups were manipulating the market for Harris. Now Trump is above 60%, and the loud supporters for Harris are saying the same thing the other way - that Trump supporters are manipulating the market to make it falsely appear like Trump is the favorite.
The call for “manipulation” is a tale as old as time. But if a market is being manipulated, then traders would likely come in and profit from the manipulation. If market volume is low and traders don’t know about the market, then there’s more of a chance for true manipulation. But the more volume and the more eyeballs on the market, the less likely there actually is manipulation in the market. The 2024 election market is a $2B+ volume market with lots of the world watching. It’s highly likely that it is not manipulation moving these markets - it’s just sentiment from traders willing to bet
on what the outcome will be based on new information. Markets are not perfect. They are based on the whims of irrational humans and do not always accurately predict the future—far from it. But they do reflect the aggregate view of a wide group of people with skin in the game. In a market, if you are right, you win, and if you are wrong, you lose. In a world where talk is cheap, and it’s hard to know what is true, markets are a useful information source that will only rise in prominence in the coming years.
SURFING CHAIN
EVM vs. SVM:
Not all Security is the Same
Blockchain technology has grown into a broad phrase, now requiring specifications like which network, chain, or environment to understand what people are really talking about. When it comes to “blockchain security,” the term can mean different things depending on the network in question.
Solana and Ethereum (specifically the Ethereum Virtual Machine or EVM and the Solana Virtual Machine or
Maika Isogawa CEO, Webacy
SVM) have distinct approaches to security, each shaped by unique architectures and design philosophies.
Basic Infrastructure Differences
To understand how “security” considerations are different across the networks, you have to start from the basic infrastructure of each system. Since Ethereum transitioned from Proof of Work (PoW)
to Proof of Stake (PoS), it adopted Execution Layer (EL) and Consensus Layer (CL) clients, and Ethereum validator nodes run both. Solana, on the other hand, combines both in a single client. This enables some of the speed and parallel processing capabilities that are well-enjoyed within the Solana ecosystem. For example, Ethereum’s original PoW system limited its capacity to 15 transactions per second. While the transition to PoS has improved this speed, ultimately,
Thousands of Ethereum validators secure the network by validating transactions and creating new blocks. The more validators, the more decentralized and resistant the network is to attacks, and EVM has the most robust distribution of validators in the industry. On the audit side, EVM networks rely heavily on smart contracts, and auditing these contracts thoroughly is a core necessity to prevent attacks that have plagued the ecosystem in the past. While EVM has a robust
it is generally still too slow and expensive. In contrast, Solana can process thousands of transactions per second. The other part of the infrastructure to consider is the different types of nodes. Ethereum classifies nodes into three types based on the scope of data storage and participation in consensus: full nodes, archive nodes, and light nodes. Solana nodes are divided into two types: consensus nodes and RPC nodes. Due to the high number of transactions per second on Solana, storing the entire blockchain on every node (like Ethereum full nodes) is impractical. Instead, Solana stores data on a database and RPC nodes access the data from there.
General Security
Security in EVM environments primarily comes from two main factors: decentralization and audits.
decentralized structure, it also faces bottlenecks in terms of speed and cost, which has sparked the development of hundreds of new layer 2 networks. Solana, on the other hand, prioritizes speed and scalability through its hybrid Proof of History (PoH) and Proof of Stake consensus mechanism. Solana’s optimization of network throughput reduces the risk of congestion-based attacks but introduces challenges around centralization and reliability (as seen in the multiple system-wide downtimes experienced over the years). The Rust development language, highly leveraged by the Solana ecosystem, reduces certain types of vulnerabilities (like memory overflow). Nonetheless, audits and security reviews are still critical.
Ultimately, both ecosystems offer different trade-offs. Solana’s reliability and popularity has grown, raising new safety considerations for applications and users.
Ethereum and Solana network activity displayed on Dune
Program Security
For many individuals and teams, the “security” to consider is a layer above the network’s core security mechanisms. Users and builders want to keep their assets safe, which is what the bulk of hacks and scams in the space target. We’ll save the specifics of “security” around self-custody, phishing, and seed phrase management for another day. EVM uses an account-based model where each account has a state. The state is stored on the blockchain. Accounts can be either externally owned (like your everyday EOA or self-custodial accounts) or smart contract accounts. The state of the entire blockchain is updated after every transaction. Each smart contract invocation changes the state of accounts and contracts involved, and many attacks are targeting the vulnerabilities that arise in this relationship. When considering program security on EVM, you have to battle test the code, interactions with the code, and how interactions with that code are ultimately settled onchain and in what order, in accordance with EVM infrastructure.
SVM is also account-based but with a crucial difference: Solana’s programs are stateless. Instead of storing the state directly within the smart contract, Solana stores the state in separate data accounts. Programs then interact with these data accounts to modify or update their state. This separation facilitates
the high throughput of transactions that Solana is so famous for. It also enables parallel processing since the program doesn’t lock all of its states at once but only accesses the specific accounts needed for the transaction.
A diagram displaying the relationship between program and data accounts for a program on
Solana
A time series chart comparing Ethereum TVL (Teal) vs Solana TVL (Pink) on Defi Llama
his means that potential attack vectors on SVM differ a bit from those on EVM. For example, re-entrancy attacks, common on EVM, are inherently limited on Solana due to its execution model. The attack vectors on SVM revolve more around logic bugs, data validation flaws, and access control vulnerabilities.
In Practice
Smart contract audits will continue to remain a lucrative business for security companies. Unless you need to develop a truly novel technology, leveraging existing battle-tested contracts and differentiating on go-to-market and user experience may be a strong choice to reduce systemic risk for new protocols. This shifts “security” to yet another higher level of execution.
For example, the rise of memecoins and trading bots, built on templated contracts, leave little at risk for code-based vulnerabilities and instead shift the concept of “security” to a financial one. The deployer address, the liquidity providers, and the distribution of tokens all impact the susceptibility of a project to “rug” its customers.
Regardless of which blockchain environment you choose to build or exist on, having a core layer of trust and safety is critical to the long-term health and wellness of the ecosystem. Teams should implement basic safety practices for their platform and users, and consumers should also put their safety over the promise of monetary gain.
Unless you need to develop a truly novel technology, leveraging existing battle-tested contracts and differentiating on
go-to-market and user experience may be a strong choice to reduce systemic risk for new protocols.
THE POLICY AND LEGAL implications OF INCLUSION LISTS
Jane Khodarkovsky Advisor, Predicate Partner, Arktouros pllc
Nikhil Raghuveera Co-Founder, Predicate
Khushi Wadhwa Head of Research, Predicate
Introduction
Censorship resistance is a core value proposition of Ethereum. The network is designed to be open, permissionless, trustless, and decentralized. However, censorship can occur at different points of the infrastructure stack via builders, relays, and proposers. Builders can censor transactions by building blocks that exclude specific transactions, relays can programmatically prevent the dissemination of blocks containing certain transactions, and proposers can censor by only presenting blocks with transactions they want to include in the network.
Inclusion lists have been proposed as a mechanism to enhance Ethereum’s censorship resistance by allowing proposers to specify transactions that must be included in the next block. This paper explores the policy and legal implications of implementing unconditional inclusion lists on Ethereum. We examine two contrasting scenarios: one in which inclusion lists reinforce Ethereum’s credible neutrality, thereby shifting regulatory scrutiny to more appropriate parts of the stack, and another where they may invite increased regulation by portraying Ethereum as less neutral. Understanding these potential outcomes is crucial for the Ethereum ecosystem when considering inclusion lists and the broader discourse around appropriate and thoughtful regulation in this space.
Context
to be permissionless, trustless, and decentralized. However, censorship can occur at different points of the infrastructure stack by builders, relays, and proposers. Builders can censor transactions by building blocks that exclude specific transactions, relays can programmatically prevent the dissemination of blocks containing certain transactions, and proposers can censor by only presenting
or proofs of qualification, and onchain gaming where in-game actions are recorded as onchain data.
Discussions about censorship resistance have intensified since the U.S. Office of Foreign Assets Control (OFAC) added smart contract and wallet addresses (including ETH addresses) to the Sanctions List , and Tornado Cash founders were charged with money laundering and sanctions violations related to the development of Tornado Cash. Over the last 30 days (as of Oct 8, 2024), relay censorship of OFAC-sanctioned addresses has been approximately 55%, while block builder censorship has been around 4% Currently, 98% of all blocks produced via MEV-Boost come from only three block builders.
Censorship resistance is a core value proposition of Ethereum.
Censorship resistance is a core value proposition of Ethereum. The network was originally designed
blocks with transactions they want to include in the network.
In the context of Ethereum, censorship broadly refers to the ability to restrict available information or, as it relates to the base layer, the inability to report a transaction. The term “transaction” encompasses a wide range of both financial and nonfinancial interactions, such as crosschain messaging for transferring data between different blockchain networks, attestations to verifiable credentials like digital identities
Inclusion lists are designed to enhance the censorship resistance of Ethereum by allowing proposers to specify a set of transactions that must be included in the next block. This paper explores the policy implications of the unconditional inclusion list design. Unconditional inclusion lists force block builders and relays to include specified transactions in their blocks if they want them to be accepted into the network, effectively preventing censorship at these levels. Additionally, this design seeks to minimize proposer censorship by enabling each proposer to set a list of transactions that the next proposer must include in their block.
The introduction of inclusion lists to the Ethereum network has the potential to significantly impact the perception of its credible neutrality, leading to various policy and legal implications. This paper explores two contrasting scenarios that could result from the implementation of unconditional inclusion lists. In the first scenario, inclusion lists may reinforce Ethereum’s decentralization and neutrality, shielding the base layer from regulatory scrutiny and redirecting attention to the application layer. Conversely, the opinionated nature of inclusion lists could portray Ethereum as less credibly neutral, increasing regulatory scrutiny on infrastructure providers.
Inclusion List Architecture
The Ethereum blockchain has undergone significant architectural changes since its inception, continually evolving to improve scalability, security, and decentralization. Often, these changes are battle-tested as out-of-protocol solutions that eventually become enshrined in the network. Proposer-builder separation (PBS) is one of those solutions, with approximately 90% of all Ethereum validators using Flashbots’ MEV-Boost as a tool for out-of-protocol PBS.
Proposer-Builder Separation
PBS decouples the roles of block construction (the builder) and block proposing (the proposer). Specialized builders focus on optimally ordering transactions and generating profitable blocks, while proposers are pseudorandomly selected to validate and propose these blocks for inclusion into the network. This separation of powers aims to improve Ethereum’s maximum extractable value (MEV) redistribution.
The key players in the PBS ecosystem include:
▪️ Searchers: Construct bundles of transactions for builders to include in blocks.
▪️ Block Builders: Construct blocks from transaction order flow, including bundles from searchers or public/private transactions from users.
▪️ Relays: Intermediaries that securely store blocks received from builders and provide the most profitable block to validators.
▪️ Proposers/Validators: Ethereum network participants are selected to validate blocks received from a relay and propose them for inclusion into the network.
Currently, the most prominent implementation of PBS is Flashbots’ MEV-Boost, in which relays coordinate the PBS process out-of-protocol. However, plans to enshrine PBS (ePBS) into the Ethereum architecture have been proposed and are being researched. The concept of ePBS aims to address centralization by incorporating PBS natively into Ethereum’s consensus layer, thereby eliminating the need for external relays.
Unconditional Inclusion List Design
The latest Ethereum Improvement Proposal to add inclusion lists into
Ethereum (EIP-7547) is based on the design of unconditional inclusion lists. Currently, when a validator is selected to propose a block for a given slot, the validator can include any pending transactions it wants in that block. However, with PBS, most proposers outsource the full block construction to block builders. The simplest idea for inclusion lists would be to allow the proposer for the current slot to specify a set of transactions that the builder must include when constructing the block for that slot. However, this design is not incentivecompatible; if proposers place too many constraints on builders, the builders can simply refuse to construct blocks out of alignment with natural market incentives.
To avoid this, Ethereum researchers proposed a variation of inclusion lists. Instead of the current proposer’s inclusion list applying to their slot, the inclusion list actually specifies transactions that must be included in the block for the next slot; a different proposer/builder pair constructs the transaction. This allows the current proposer to put some guardrails around transaction inclusion while not directly constraining the block
builder for their own slot’s block. The builder for the next slot is still incentivized to follow the previous slot’s inclusion list, as failing to do so would make their block invalid for that slot. Inclusion lists remove the block builder’s ability to censor specific transactions if they want their block to be accepted into the network by requiring block builders to include all transactions specified by the previous proposer. Similarly, relays will not transfer censored blocks because the block cannot be included unless it conforms to the inclusion list.
Exploring the Potential Policy and Legal
Implications of Inclusion Lists
The goal of the unconditional inclusion list design is to increase Ethereum’s censorship resistance by having block proposers explicitly specify which transactions must be included in the next block. This design can significantly impact the perception of Ethereum’s credible
neutrality due to the opinionated nature of inclusion lists, potentially leading to unintended effects. On the one hand, the implementation of inclusion lists may reinforce the decentralized and consensus-driven nature of Ethereum infrastructure providers, potentially shielding the base layer from regulatory scrutiny and redirecting attention to the more appropriate application layer. On the other hand, the opinionated nature of inclusion lists could portray Ethereum as less credibly neutral, thereby increasing regulatory scrutiny on infrastructure providers.
Scenario #1: Improve Ethereum’s Claim to Credible Neutrality
A core principle of Ethereum is its commitment to being permissionless . Ethereum’s permissionless nature is similar to the Transmission Control Protocol/ Internet Protocol (TCP/IP) standard, a set of rules that govern the connection of computer systems to the internet. TCP/IP is a protocol
that remains fundamentally neutral as to the data it transmits. This neutrality is essential for it to function as a universally accepted and trusted protocol. Similarly, Ethereum intends to function as a decentralized platform where all transactions are treated equally, irrespective of origin or purpose.
Compared to the block-building process today, the unconditional inclusion list design shifts some decision-making power from the block builders to the proposers. This can be seen as positive for the continued decentralization of the Ethereum ecosystem, as the set of proposers is larger and more diverse than the current set of specialized block builders. Additionally, blockchains like Ethereum are based on consensus mechanisms, making it possible for the amalgamation of diverse viewpoints to define credible neutrality. Thus, the shift may be beneficial for Ethereum’s claim to credible neutrality as the number of decision-makers increases and grows more diverse.
If the implementation of inclusion lists reinforces the perception of Ethereum as a credibly neutral base layer, it may shield the protocol and its infrastructure providers from additional regulatory scrutiny. Regulators might recognize that targeting the Ethereum base layer or infrastructure providers is ineffective, as these entities are merely facilitating the neutral transmission of data—similar to the role of TCP/IP on the internet.
Shifting Regulation to Application Developers
Consequently, policymakers and regulators may shift focus to the application layer, which might be seen as a more appropriate place for regulation. In this context, the application layer might consist of any range of frontends, RPCs,
sequencers, and any other point in the stack closer to users and developers where risk management can exist.Decentralized applications (dApps) built on top of Ethereum often have centralized points of control, administration, or participation, which could make them more susceptible to regulatory oversight. Regulators could find that requiring dApps to implement risk mitigation is sufficient for consumer protection, removing the need to impose regulations on the base layer.
In August 2022, OFAC sanctioned the Tornado Cash smart contract and added 38 wallet addresses associated with the mixer to the Specially Designated Nationals (SDN) list. Instead of targeting the Ethereum blockchain itself, OFAC also took action against one of the founders, which could be viewed as enforcing censorship at the application level. OFAC’s designation of placing an application smart contract on the SDN list was the first of its kind. It demonstrated a shifting focus toward who controls,
administers, or plays a centralized role in developing a tech stack. Though sanctioning the smart contract itself may not be the best way to regulate an application, regulating at the application layer may generally enable a more nuanced and context-specific approach compared to blanket regulations at the protocol level. By focusing on dApps, regulators may be able to enforce policies that combat illicit actors while still allowing for innovation and the development of legitimate applications. This approach would not be dissimilar to how regulators hold traditional technology companies accountable for the content and interactions facilitated through their platforms, as evidenced by the UK Online Safety Bill passed in September 2023. In order to boost Ethereum’s claim to credible neutrality via inclusion lists, regulators must develop a clear understanding of the distinction between Ethereum’s foundational infrastructure and the diverse dApps built on top of the network. While it may be appropriate for regulators to focus on dApps with financial purposes or those acting as intermediaries to determine if they should be subject to regulations, it is equally important to ensure that non-financial dApps are not inappropriately targeted with regulatory requirements.
In order to boost Ethereum’s claim to credible neutrality via inclusion lists, regulators must develop a clear understanding of the distinction between Ethereum’s foundational infrastructure and the diverse dApps built on top of the network.
Inclusion lists involve proposers making deliberate choices about which transactions to include in a block—something that is inherently opinionated. Such decisions by proposers could be based on different criteria, including regulatory demands, personal biases, or varying risk tolerance, thereby introducing subjectivity into what is intended to be an impartial system. This choice by proposers can be seen as directly contradicting the principle of credible neutrality, making the system’s impartiality dependent on proposers as individual decision-makers.
For policymakers or regulators who are already skeptical of Ethereum’s neutrality and do not understand the underlying technology, this change could be another example of how blockchain technology claims neutrality while making opinionated decisions. For example, the fact that a proposer would have the ability to select which addresses to filter or not could cause policymakers to question whether Ethereum is a neutral platform. Invasive political, economic, or moral questions can emerge from regulators looking to understand a proposer’s decisionmaking for any one of the blocks added to the network. The respective proposer’s responses could then be used by regulators or law enforcement to bring enforcement or criminal actions.
Scenario #2: Raise a Red Flag to Regulators that Ethereum is not Credibly Neutral
The proposed introduction of inclusion lists into Ethereum’s ecosystem can also pose a challenge to the ethos of neutrality.
In the current U.S. political climate, inclusion lists may bring additional scrutiny to Ethereum, including by policymakers who openly argue that blockchain technology is primarily a tool for illicit activity. By implementing inclusion lists, Ethereum could diverge from the current and appropriate model that is best analogized to TCP/ IP, wherein there is already legal precedence in the United States that routers of messages do not have the same regulatory requirements
or obligations as financial institutions or intermediaries.
Migration of Proposers and Block Builders Out of Regulated Markets
The implementation of inclusion lists could also ultimately force proposers and block builders to relocate from regulated markets:
Proposers
Proposers residing in jurisdictions that regulate or want to regulate blockchain infrastructure as if it is equivalent to traditional financial rails may be faced with the following options:
1. Implement inclusion lists in a way that does not contribute to Ethereum’s censorship resistance;
2. Move to another jurisdiction where the laws or regulations are more lax (or may not exist)
In the first case, proposers may try to avoid regulatory scrutiny by implementing inclusion lists that filter addresses based on their regional sanctions list. For robust protection, proposers would have to ensure that they are cross-
referencing (and deconflicting) sanctions lists in each jurisdiction that could be applicable to them because there is no governing global sanctions list. This, in and of itself, could be very burdensome on the proposer. Alternatively, the proposer could refuse to create an inclusion list at all and leave it up to the block builder to exclude any transactions deemed necessary. Both of these scenarios might protect the proposer from enforcement action, but they would not improve Ethereum’s censorship resistance.
In the second case, a proposer who wants to contribute to improving censorship resistance but resides in a jurisdiction that regulates the base layer may decide to move to a different jurisdiction that does not impose such strict requirements. As with anything that limits or decreases the diversity of ecosystem participants, including geography, this could undermine Ethereum’s validator decentralization.
Block builders
The regulatory risks are even more acute for block builders. Block builders will have no choice but to follow the enforced inclusion lists to ensure that their blocks are accepted into the network. This lack of autonomy will expose builders to heightened regulatory risks, and they could be held liable for blocks containing transactions from sanctioned addresses. Similar to the proposers discussed above, block builders may be forced to migrate their operations to more permissive jurisdictions to avoid potential legal or regulatory action.
The discretionary power granted to proposers and the lack of autonomy for block builders under this system may expose these entities to heightened scrutiny from regulators and law enforcement agencies, especially in jurisdictions like
the United States. As mentioned before, even if proposers or block builders reside in more permissive jurisdictions, they will have to take on the burdensome task of tracking the sanctions requirements across multiple jurisdictions in order to minimize the potential enforcement actions outside of where they reside. This further underscores the unique challenges of imposing unconditional inclusion lists on the proposers and block builders, who are critical to the security of Ethereum and the broader ecosystem.
Further Research
Inclusion lists represent the complex challenge of enhancing censorship resistance in the Ethereum ecosystem. However, as discussed, this solution comes with its own set of legal and policy implications that could potentially undermine the very principles it aims to uphold. To guide future research and development efforts, we propose a two-pronged framework that prioritizes credible neutrality and minimizes legal and policy risks.
Defining and Enforcing Credible Neutrality
The first step in developing effective solutions is to establish a clear and widely accepted definition of credible neutrality within the context of blockchain technology. This definition is necessary in order to maintain expectations that must be met for a solution to uphold the credible neutrality of the network. The definition should encompass the core principles of permissionlessness and decentralization that underpin the Ethereum ethos. Some key aspects to consider include:
1. Equal treatment of all transactions, regardless of origin or purpose
2. Minimal reliance on subjective decision-making by individual actors
3. Resistance to external influence or manipulation
4. Transparent and auditable processes for transaction inclusion and validation
Once a robust definition of credible neutrality is established, researchers can focus on designing solutions that uphold these principles. This may involve exploring alternative incentive structures, architectural modifications, or encryption schemes that inherently enforce neutrality without relying on the discretion of individual participants.
Minimizing Legal and Policy Implications
In addition to technical solutions, it is essential to have continued public-private engagement. Ongoing education from the private sector with policymakers can help demonstrate how cryptography and decentralized ledger technology can actually build better risk management solutions than exist in the traditional tech and financial sectors. Establishing publicprivate partnerships with subject matter experts that bring together industry experts, academics, and government officials should aim to:
1. Provide clear and accessible explanations of blockchain technology, emphasizing its role as critical infrastructure (and its neutral and decentralized nature);
2. Highlight the potential benefits of blockchain technology beyond financial transactions, including concrete examples of technological innovations (e.g., privacy enhancing technologies, onchain attestation, and identity systems);
3. Develop legislative and regulatory frameworks that clearly distinguish between financial institutions and critical infrastructure, including clarity to distinguish between data transfer, data ordering, messaging, broadcasting, etc. These frameworks must balance consumer protection, security, and innovation;
4. Foster open dialogue and knowledge sharing to ensure that a deep understanding of the technology informs policy decisions. For example, the Bank of International Settlements initiated project Aurora to use privacy-preserving technologies to detect money laundering, and FinCEN launched an initiative to promote privacy-preserving technologies toward the same end.
By proactively engaging with regulators and policymakers, the Ethereum community can help shape the legal and policy landscape in a way that supports the growth and adoption of the technology while mitigating potential risks.
Conclusion
As the Ethereum network evolves, each technical modification influences regulatory perceptions and responses. Even though Ethereum exists as an open technology, many of its participants operate in regulated markets. Inclusion lists, as a result, have significant implications for Ethereum’s broader roadmap and usage, especially when building a global financial settlement system. Looking forward, research on censorship resistance will be a balancing act that requires ongoing dialogue amongst developers, network participants, and policymakers. This open form of research is what defines Ethereum as a community-run network.
Acknowledgments
Thank you to Brendan Malone (Paradigm), Mike Neuder (Ethereum Foundation), Alex Stokes (Ethereum Foundation), Michael Mosier (Arktouros), Walt Smith (cyber fund), Matt Homer (Department of XYZ), Jack Deeb (Pier Two), Angus Eaton (Pier Two), Lev Livnev (Symbolic Capital Partners), James Parillo (Figment Capital), Sultan Meghji (Frontier Foundry), and Riley Blackwell (ETH Investors Club) for valuable input, review, and debate.
Research was supported by grants from the Paradigm Policy Lab and the Proposer Builder Separation Foundation.
Identity Fragmentation:
The Hidden Bottleneck of Scaling the Blockchain Industry
Evin McMullen Co-Founder, PrivadoID
Blockchains anchor immutable data about their addresses - which are controlled by people, agents, organizations, and institutions. If we want to coordinate more than timestamps and treasury allocation onchain, we need to be able to discover and verify more about our counterparties.
Early blockchain identity experiments have created separate, sometimes conflicting, silos of data about addresses onchain. Our programmable, dynamic state machines cannot realize the vision of chain abstraction and
identity to move with users and agents across chains and legacy systems and break the bottleneck of identity data fragmentation.
Many blockchain identity experiments have created their own data types and protocols built for niche use cases without the intent of interacting with legacy systems, composability, or interoperability. Some identity projects are optimized for a single blockchain environment, some are exploring support only within specific rollup ecosystems, and some are designed only for specific applications. Some
access control at all layers of the stack is a pressing bottleneck for growth across the entire blockchain industry. Early experiments that prioritized immediate, simple, carte blanche onchain access to static identity data optimized for specific protocol ecosystems offer short-term value but are breaking down with scale as they have proven to be insufficient for a multichain, modular reality. People, agents, organizations, and institutions use multiple tools and multiple protocols to interact with one another. More than only one organization on
Today’s identity fragmentation not only increases costs for onchain businesses but also poses substantial barriers to institutional adoption and regulatory compliance.
unified liquidity unless identity is similarly unified, programmable, dynamic, and verifiable across networks. Otherwise, such blockchains are doomed to isolation and functionally centralized away, separated from the state of shared truths syndicated across the rest of the connected world.
To unlock immediate utility across these fragmented systems, an open ecosystem of reputation sources that can be applied to many different value flows is emerging. A new wave of middleware infrastructure is delivering ZK rails and data extensibility, enabling verifiable
even eschew interoperability by design, instead working toward their visions of the future where single providers have monopolies on the technical definitions of our identity traits (thus preventing some potential network effects). Centralized compromises in censorship-resistance, accessibility, and consent in these systems create risk for censorship and surveillance (the same capabilities that also enable curation and observability).
Fragmented across different data types, blockchains, sources of reputation, applications, and services, identity-based
earth signals a useful reputation for humans and machines. Each layer of abstraction in the stack enables access, composability, and opportunity for fragmentation at a corresponding order of magnitude. These realities demand unified, verifiable, interoperable identity across blockchains and legacy systems, coordinating among known institutions and fueling an ecosystem of independent developers.
Regulated financial liquidity is largely sidelined from this brisk pace of development due in large part to the difficulty of zero-knowledge
technologies in compliance frameworks, as well as the challenges of enabling access control and permission capability across chains. Nevertheless, progressive government regulators and institutions recognize the inevitable field of digital identity - especially onchain - and are increasing their focus and investment in bringing solutions to market at scale.
While the ecosystem has made remarkable strides in performance, interoperability, and user experience, we are still early in the development of unified, verifiable identity coordinating disparate onchain truths in the same way we can token holdings. Today’s identity fragmentation not only increases costs for onchain businesses but also poses substantial barriers to institutional adoption and regulatory compliance. Addressing this challenge is crucial for the continued growth
and maturation of the blockchain ecosystem as well as the increased value and capital efficiency that it can enable for institutions.
Identity: Driving Value To Apps
Bitcoin’s public addresses enable publicly discoverable token balances, both fungible and, more recently, non-fungible. Ethereum and subsequent chains enabled more expressive onchain data.
Today, in the year of a thousand chains, we’re entering a golden age of middleware infrastructure, such as social protocols, identity protocols, bridges, and zkVMs, that can expand the range of potential use cases that can be built with the underlying chains and make it easier to composably interact with onchain data. Such infrastructure spurs the proliferation of apps, abstracting away chain complexity
and laying the groundwork to reuse data — rehypothecate data value — across them. Such middleware creates virtuous cycles between the app, where development is enriched with highquality data, and protocol value accrues more efficiently through more meaningful transactions.
At Privado ID, where I serve as CoFounder and CSO, we enable Unified Identity through middleware infrastructure. The forthcoming Unified Identity Protocol makes possible onchain validation of any trait or capability through onchain ZK registries, which are syndicated for use by oracles across all blockchains where the Unified Identity Protocol is deployed. It is already live in production with early partners across the EVM ecosystem, securing value onchain. This ability to prove once and use forever, on any chain or any device, is backed by a network of institutional,
The Unified Identity Protocol, Privado ID
government, enterprise, and onchain reputation issuers.
In our work with governments, we’ve seen the emergence of promising initiatives like the European Digital Identity Wallet (EUDI), which aims to provide EU citizens with a secure digital wallet for storing and sharing identity credentials across member states, potentially serving as a model for interoperable, government-backed digital identity systems. This has occurred in tandem with our team’s leadership in achieving the incorporation of zero-knowledge proofs (ZKPs) in compliant identity verification processes under MiCA (Markets in Crypto-Assets Regulation). Zero-knowledge proofs allow users to prove certain attributes about their identity without revealing unnecessary information. For example, a user could prove they are over 18 without disclosing their exact birthdate, enhancing privacy while still meeting verification requirements. These developments signal a shift towards more regulatory appetite for efficiency in data exchange and open identity ecosystems with multiple reputation sources.
Feel The Fragmentation
Identity fragmentation has created searing growing pains across the industry and throughout the tech stack, especially where capital is distributed onchain.
Apps and protocols struggle to personalize content and distribute incentives effectively with limited data about the identities of their active addresses, constant farming, and inevitable sybils. Administrative risk makes grants, governance, treasury management, and incentive distribution complex and costly. Compliance is complex, institutions are skittish, and app development is challenging with limited value propagation up from the underlying protocols. Users face challenging UX in blockchain onboarding and high-friction switching costs trying to use new apps, especially on different chains. Token-market fit signals effective value accrual and distribution onchain, which are ever more difficult to bootstrap. This makes distribution just as vital – if not more so – than the features, cost, or content that may enable product-market fit. Scaling that
Apps and protocols struggle to personalize content and distribute incentives effectively with limited data about the identities of their active addresses
PMF successfully relies on the resonance of the core product value proposition and, even more so, on the distribution of it. When both can be built organically or bought through incentives, a precise understanding of identity for network value distribution can make this process infinitely faster and more efficient, especially given that blockchains are themselves tokenized global content distribution networks.
Age-based access control is integral to many use cases in gaming and entertainment. However, for developers looking to build on decentralized backends, age verification remains a significant challenge for applications serving adult-only content. Without meaningful onchain solutions for age-based access controls, many powerful use cases in gaming, entertainment, and financially-enabled content remain out of reach or unduly complex for everyday developers.
Airdrops, governance participation, and other forms of community incentives struggle with Sybil attacks due to the ease of creating multiple addresses. Applying onchain identity data in service of more precise incentive distribution can enable a more targeted and efficient distribution of value to drive meaningful transaction volume and community participation.
As governments worldwide grapple with blockchain regulation, the lack of standardized identity solutions makes it difficult for projects to demonstrate compliance across different jurisdictions. Blockchain
Source: RWA.xyz
serves as a global settlement layer and allows for seamless cross-border transactions and interactions. This fragmentation forces companies to implement multiple, often incompatible identity verification systems, which significantly increases compliance and implementation costs. Moreover, it creates regulatory arbitrage opportunities that undermine the effectiveness of AML efforts. Rapidly growing real world asset (RWA) markets demand identity verification services and are leveraging a patchwork of incomplete solutions today to enable even primitive onchain asset issuance and offerings.
Zero-Knowledge Proofs For Scalability
The role that zero-knowledge (ZK) proofs play in resolving the tension between privacy and accountability in blockchain identity systems cannot be
overstated. This technology allows users to prove statements about their identity without revealing unnecessary personal information. For instance, a user could prove they are over 18 without disclosing their exact birthdate or demonstrate their accredited investor status without revealing their net worth. Emerging KYA (Know your Agent) processes enable agents to enjoy similar selective disclosure. For example, an agent can prove access to $2B in liquidity without disclosing the firm it represents. Privado ID leverages ZKPs to enable data minimization and allow applications to request only the necessary information through flexible ZK queries. The vast majority of transactions onchain will be executed by agents in the near future, so unified, verifiable identity must incorporate non-human identities, such as agents and hardware. The integration of ZK proofs into blockchain identity solutions is the key to unlocking government
approval and enterprise adoption. Industries with stringent privacy requirements, such as healthcare and finance, need these tools to be able to safely and securely leverage blockchain security while maintaining compliance with data consent, verification, and protection regulations like GDPR in the EU, CCPA in California, PIPEDA in Canada, PDPA in Japan, LGPD in Brazil and an even greater coalition of regional and national age verification regulations.
Enterprise Chains
The recent announcements of enterprise chains like Uniswap’s Unichain, Coinbase’s Base, Sonieum from Sony, and X Layer from OKX highlight a return to previous cycles’ sensibilities (toward more controlled, permissioned blockchain environments) with a new tech stack (L2s instead of private permissioned chains). These chains combine the benefits of public blockchains with the control and compliance features required by large organizations. Identity-based participation in these enterprise ecosystems, backed by the weight of the associate institutions, is already being used to improve short-term developer experiences (such as Coinbase as a reputation source on Base). Exchanges like OKX and Kraken can operationalize their role as both data and financial custodians leveraging identity data. Uniswap v4 hooks could easily be
Source: Jordan McKinney
created for liquidity pools based on certain verifiable data traits –KYC/AML, location, and net worth. The question remains whether LPs will lend against it before regulators provide more aggressive guidance. These new protocols have an immediate opportunity to generate immense value from engaging in an open reputation ecosystem. Therefore, institutions can enjoy verifiably compliant DeFi, and enterprises can leverage security assurances and active usership already onchain.
The Path Forward
Bitcoin enabled permissionless money with the identity-based internet. Ethereum-enabled programmable money with selfexecuting code and an identitybased world computer. And now, as the multichain ecosystem is driving the swiftly evolving app layer, we are seeing emergent progress toward composable, programmable identity with a dynamic state.
1. ZK Identity Solutions: Further development and standardization of zero-
knowledge identity proofs will be crucial. These solutions must be efficient, userfriendly, and widely adopted across different platforms.
2. Onchain Verification and Reuse of Identity Data: Systems where users can selectively share verified identity attributes across multiple platforms without repeatedly going through repeated onboarding processes for services like KYC will greatly enhance user experience and reduce friction.
3. Institutional Acceptance: Engaging with regulatory bodies and financial institutions to create identity standards that meet compliance requirements while preserving the benefits of blockchain technology.
4. Interoperability Standards: Developing open standards for identity verification and sharing across different blockchain networks, similar to how the ERC-20 standard enabled interoperability for tokens.
5. User Control and Privacy: Ensuring that users maintain control over their identity data and can selectively disclose information as needed, adhering to the principles of self-sovereign identity.
6. Trust Ecosystems: Establishing trust registries and issuer audits to codify and communicate the level of assurance for different identity providers, similar to the approach taken by EIDAS 2.0 in the EU.
A Call to Build
Identity fragmentation is the outcome of short-term experimentation and a nascent multichain landscape. The solutions that enable value to flow more easily, lower switching costs, and maintain security will be those open ecosystems best informed by the requirements of builders, investors, policymakers, institutions, and, ultimately, users. The burgeoning middleware infrastructure layer is an accelerant for value accrual among protocols and applications, rehypothecating data value for faster app development and smoother personalization. Open reputation ecosystems will unlock the full potential of blockchain technology for the world’s largest capital allocators and reputation sources. We are witnessing the advent of a new era of onchain covenants, digital interaction, and value exchange where identity, like tokens, can traverse every plane of the connected world, where anyone or anything with an internet connection can take part.
FUTURE FINANCE
Onchain Butlers: Scaling Ethereum Activity Through Automation
The hypothesis is simple: Consumer-driven automation will take over the ecosystem and scale onchain activity to what the infrastructure stack was built to accommodate.
DeFi came about to enable peer-to-peer transactions, where two parties agree to exchange cryptocurrency for other currencies, goods, or services without a third party involved.
We set out to do this, then went much more granular to make even bigger, more impactful technologies and systems. One could say we are on many side quests. The state of the industry is fragmented, modularized, and spread too thin, but hopeful and constantly looking for the next narrative or technological
advancement to kickstart another massive growth cycle to push crypto into a more mainstream position.
We are looking at facts that tell us that next thing is bubbling under the surface already:
▪️ increased trading volumes and frequencies
▪️ more efficient modular stack and EVM-compatible L1s
▪️ intent frameworks having a renaissance
▪️ adoption of AI agents, bot networks, and Telegram trader bots
In the meantime, scaling Ethereum has been a common goal that is mainly being worked on using two different approaches. One is from a blockchain capability perspective to
make the throughput, latency, and general capacity of Ethereum and its rollups the strongest it’s ever been. The other, more forgotten, is the application layer approach to scale activity, easing the blockage that human-driven execution is imposing on the ecosystem that no rollup or infrastructure solution is fixing directly.
Based on the convergence and progress of the above approaches and factors, we are at the tipping point of generalized automation taking over how we approach DeFi and the execution of blockchain transactions.
Onchain Activity at an All-time High
Besides the sentiment shift, market challenges, fragmentation issues, and “lack of real world adoption,” onchain activity is very much on an upward trajectory. Some of the data also shows that as much as there is a growth tendency, there is also stagnation, suggesting the theory that we have reached the point of user limitations. It’s not just that we haven’t “onboarded the next billion”. The millions using crypto right now might have reached their activity limit with the existing systems.
▪️ Is it DeFi season again? We tend to glamorize 2017’s summer with all the food coins and lively DeFi
activity, but the amount of onchain activity right now is way larger than during that time. DEX volumes, as a big part of onchain actions for an average user, still show this massive and consistent level of activity.
▪️ Have we achieved the cap of daily transactions on Ethereum? Transaction count has been around the same quantity range since 2021.
Daily DEX volume via Defillama Daily
▪️ The number of active addresses on Ethereum mainnet is seemingly stagnating as well, compared to L2s with farming potential or other incentives. The difference is striking: Ethereum stays below 500,000 daily active addresses, while Base has skyrocketed to 1.5 million by 1st of October 2024.
▪️ Daily DEX volume is at $3.739 billion. While we can’t estimate the full extent of bot activity onchain, we can easily tell how over $100 million in volume a day on average is cross-chain DEX trader bot activity already. Solana leads in this area, with more bot-assisted activity than all EVM combined, consistently doing over half of the botted volume.
▪️ How much can crypto really grow from here? There are roughly $100 billion locked into all of crypto. A conversation I keep having, mostly with investor friends, is about the “trillion-dollar limit” that seems to be approaching crypto. As an industry, there is space for one more 10x growth until we reach that $1 trillion. Meaning that crypto would grow to a trillion-dollar industry and then start to stagnate in overall growth, which is why a lot of LPs in funds have started to allocate less and less toward crypto investments. Compared to the underlying risk crypto investments carry, an expectable 10x gain over a couple of years is already way less interesting as a potential investment than in the earlier days of crypto. It is a pure strategic question and decision.
Daily Active Addresses on Multiple Chains via growthepie.xyz
Volume of Bot Trades
By Chains via whale_ hunter on Dune
This obviously does not mean that some rockstar unicorn projects won’t inevitably break out harder than that.
There is a clear paradigm shift of value circulating models that need to accompany the change from being a nascent, niche industry with massive investment capital funding the ecosystem, providing liquidity, and sustaining onchain activity from behind the scenes to a more mature one with different capital flow.
From all the data above, the tendencies of the industry, and the deep technological advancements, we can see that there is a change upcoming in how we interact with onchain ecosystems. How do we sustain the growth of the onchain economy?
Human-Driven Execution is the Bottleneck
We are doing a lot already, but even if everyone were to be more onchain every day, making moves, it is definitely still not enough to be a meaningful change to the growth metrics of the space and we are leaving an immense
amount of potential activity and ecosystem benefits on the table. Not to mention the yield opportunities on a personal level. In a 24/7 market that is open, active, and moving every single day, human-driven execution is not enough. The amount of crypto that is idle and unutilized in people’s wallets is unfathomable.
It is physically impossible for any of us to challenge the status quo of onchain activity by just being online more. If anything, we should strive to be online less and less and make that time more and more efficient by making tech work for us. We need to sleep, eat, exercise, spend some time with loved ones, learn new concepts, and engineer solutions for difficult problems. There is no way we can make users spend 1000x more time executing onchain actions to achieve sufficient growth. We need more asynchronous and continuous action through automation.
What Actions Can We Even Automate?
Limit orders are what comes to mind for most when we ask this question, but what if I told you:
Daily Ethereum Transactions via etherscan.io
Everything that can be signed with a signature can be automated. Beyond that, we can combine them into more complex transaction workflows with other “unrelated” onchain and even offchain data through intent frameworks.
You set your desired outcomes (what), along with some constraints for execution (when, how much, etc.), and let bot networks execute through trusted apps and their smart contracts.
It can be swaps, lending, borrowing, LP position readjusting based on price or APR changes, grid trades, NFT mints, compounding rewards, staking, restaking, betting, and so on.
What does Automation Look Like Right
Now?
Bots have been widely adopted for years in executing MEV strategies, supporting market making, and farming upcoming airdrops either on socials or onchain. Something is shifting, though. The ecosystem is preparing for a larger-scale adoption of bot networks being trusted with the execution of transactions to do what we want to do onchain without us having to sit in front of computers with our hardware wallets and sign every single message instead of doing our jobs or going to a dinner date.
Less than 1% of crypto holders currently benefit from true onchain automation. The type of automation that allows for the most flexibility, security, customizability, and versatility of execution. These opportunities require a specific set of skills and, in most cases, a combination of them to be able to participate:
This high barrier to entry does not benefit the ecosystem. It is largely focused on a few individuals. If opportunity and execution efficiency grow in parallel with the lowering of the access hurdle, there should be way more room for financial opportunities still. The pie grows as it’s being eaten.
In efforts to make that happen, so far on the consumerfacing, no-code side, there are simple and frankly disappointing solutions. I have only tried most of them out of curiosity and market research. Their promised value, returns, or usability have not been exceptional enough to retain me, a very keen and somewhat experienced user.
The majority of available no-code solutions are around limit orders and vaults that manage forms of yield. I would also group here the trading bots that abstract the UX away from DEXs to chat interfaces and the most promising, heavy-hitter direction: intent-enabled frameworks. Other paths are being paved as well, such as LP management directly through Uniswap contracts and AI agents that are involved in some part of the transactions scheduling or execution process.
Most of these available solutions clearly lack diversity of actions and opportunities. They are almost always limited to a certain vertical of action or chain. Generally lacking security and trust, building to be suitable for a wider range of users, and most importantly, they are putting constraints on the user instead of the execution requirements.
Doing better is technically possible through the combination of infrastructure advancements, liquidity availability unlocks, progress in cross-chain account abstraction, and intent-enabled frameworks.
Reacting to market changes in real-time unlocks a whole new set of gains that have been unimaginable previously.
Automation Effects On The Ecosystem:
More Automation Means More Onchain Activity:
In general, DeFi automations aim to simplify workflows by minimizing manual actions, decreasing potential errors, and increasing overall speed. Complaining about the UX issues of onchain apps has become an unserious meme at this point, but what if we were not supposed to bridge ETH over to an L2, to swap into the gas token of the L2, to then be able to execute anything on the L2. What if we were meant to make strategic decisions and let automated systems do the work?
Throughput and other general capabilities of blockchains, like latency and transaction finality are so powerful already, thanks to infrastructure advancements, the sharding update, and the upcoming account abstraction upgrades. Ethereum is in ship shape. The concern is that we won’t even be able to utilize this magnitude of potential and grow Ethereum if we don’t bring in a massive amount of new active users or we don’t find other ways of increasing the activity of existing user bases. I say let’s do both, let’s scale activity.
Easily creating a 10+ step DeFi strategy that repeats itself on different chains automatically to achieve the outcomes we wish for sounds like magic right now. Moving between LP pools and swapping underlying assets seamlessly to maximize yield potential with funds that would otherwise just sit in our wallets waiting for the markets to move. Huge difference on a personal and an ecosystem level. Abstractions that aim to solve interoperability and fragmentation issues would be mostly put into a different perspective. They would not be built for
chains anymore but for the apps and end users. The cold start problem of liquidity inefficiencies would be gone, with smoother volume flow, less gapping, less market inefficiencies, and an increase in overall transaction volume. It would bring about an increase in protocol revenue and increased gains for users. Effectively changing the whole market for the better.
Even short-term improvements with some initial automation can be vastly better than completing these actions using multiple apps at once, running into failed transactions, switching between chains, and exposing ourselves to scams and missing opportunities that lie outside of our immediate vision.
Benefits to Adopters
The effects of using automation in DeFi are even more impactful on a personal level. Reacting to market changes in real-time unlocks a whole new set of gains that have been unimaginable previously.
Accessibility: Typically, hedge funds and institutions use tools that would be accessible to retail investors.
Saving Time: Much less manual management of multiple wallets and protocols, waiting for price changes, and doing repetitive tasks.
Higher Yields: Automations maximize opportunities for compounding, staking, and adjusting positions with ease.
Lower Risk: Automated responses to black swan events, liquidation prevention, and portfolio rebalancing protect from being exposed to market conditions.
Agent to Agent or Bot to Bot
The angle of AI agents comes into the equation. The scaling might be scaling even more through the bot networks being managed by agent networks. There is also a potential for these agents to be in a DAO-like entity together that governs and distributes capacity and efficiency amongst themselves. The executing bots are managed by agents in the DAO, which are in turn managed by other agents that are then managed by humans.
Scaling Ethereum to its full potential has been set up to be achievable through creating workflows and scheduled automations that execute themselves when certain conditions are met and our specified outcomes can be achieved. We define outcomes and conditions, and bots execute when they can programmatically be achieved.
As we can see above, the space has matured in infrastructure and trading capacity to point us to making more and more transaction automations possible, making
Crypto can be a facilitator, bots the executor, agents the opportunity finder and resource distributor, and humans the final decision maker.
Closing
It is inevitable: those who won’t adapt to automation and who don’t embrace bots as their onchain butlers will be obsolete and be left behind.
them more widespread to keep the growth trajectories of the ecosystem. It clearly is the path that we need to take to scale Ethereum activity from a user perspective.
Scaling blockchains through consumer-driven automations is in our near future.
SCALING ETHereum
Marek Olszewski Co-Founder, Celo
Celo as a Cultural of Ethereum
In his recent post, “Layer 2s as cultural extensions of Ethereum,” Vitalik laid out an intriguing idea: that Layer 2 networks aren’t just technological add-ons to Ethereum but cultural extensions as well. With Celo’s upcoming transition to a Layer 2 on Ethereum, this idea resonates deeply with me. I’m excited for how Celo’s unique culture and technology will contribute to the Ethereum ecosystem.
I’m incredibly happy that Ethereum chose to adopt its current Layer 2-based scaling roadmap instead of the original sharding design. Not only does it address the scalability trilemma more effectively, but as Vitalik points out, it is more pluralistic better suited to fostering diverse approaches and cultures. I suspect this pluralism was key to the Celo community’s governance decision to transition to a Layer 2 and why the Ethereum community has welcomed us so warmly. It is also why I’m optimistic about more Layer 1s becoming Layer 2s and for Ethereum to become the settlement layer for Web3.
But how do Celo and Ethereum differ culturally? As Vitalik noted, Ethereum embodies a combination of Cypherpunk, Regen, and Degen philosophies. Celo, on the other hand, brings a different blend: It shares Ethereum’s Regen culture but puts a bigger emphasis on enabling decentralized finance on mobile phones, with a particular focus on real world use cases like payments, savings, credit and commerce. This emphasis on practical use cases is likely why Celo recently surpassed Tron in daily active users transacting with stablecoins (Tron is still ahead of Celo when it comes to stablecoin volume). But how did we get here?
The Celo Journey
Celo’s journey began on Ethereum. In 2018, inspired by Ethereum’s vision, we set out to build technology that could drive financial inclusion, aiming for a simple, intuitive financial application something as user-
Cultural Extension Ethereum
friendly as Venmo. Our mission was ambitious yet straightforward: to build a regenerative system that creates the conditions for prosperity for all.
Initially, we tried to build a wallet on top of Ethereum but soon realized that the user experience we needed wasn’t quite there. So, the growing Celo community took a different path: we built our own chain from the ground up, integrating the software (wallet) and hardware (blockchain) layers, much like Apple’s seamless approach to products. This allowed us to build a scalable EVM-compatible proof-of-stake chain with features like gas being payable in stablecoins, an identity layer that safely maps phone numbers to wallet addresses, and even a Cypherpunk-esque zkSNARK light client.
A quorum of independent validators launched the Celo network on Earth Day 2020, a symbolic reflection of our commitment to regenerative principles. Shortly after, the network’s first governance proposal activated
proof-of-stake consensus along with a system for programmatically offsetting the network’s carbon footprint integrating sustainability into the protocol’s core.
Since then, we’ve been focused on turning our mission into reality. Our first wallet, Valora, showcased what financial inclusion could look like: an easy-to-use wallet using phone numbers instead of addresses as identifiers, where transactions could efficiently be paid for with stablecoins (without Account Abstraction). While elegant and easy-to-use, we quickly realized that on- and off-ramps in emerging markets were missing a critical gap for any product targeting real world users.
Rather than waiting, we took action. Over the past three years, we invested in companies, incubated startups with Celo Camp, and formed partnerships to build these financial bridges. These efforts have paid off, and now, with the help of bigger brands such
as Opera that have joined us, more and more emerging market-focused on- and off-ramps continue to launch and join the ecosystem.
With these now in place, we’ve finally been able to unlock end-to-end experiences that rival those built on traditional financial rails. As an example, with Opera’s Minipay wallet, you can now send money from Norway to Malawi with local on- and off-ramps built into the experience, at a cost that’s 30% cheaper than MoneyGram. If you find this compelling, you are not alone. In just one year, Minipay has onboarded 3M users onto their beautifully designed phone number-based wallet. This isn’t just a milestone; it’s proof of crypto serving real people.
Though payments were our entry point, the Celo ecosystem has since expanded into broader financial services, such as savings and uncollateralized lending. The introduction of USDT and USDC this year has dramatically increased liquidity, making it easier for users to cash in and save in dollars, a popular choice for people looking to hedge against inflation in their local currencies. As with other chains, additional yield opportunities exist through DeFi protocols on top of Celo. Efforts to simplify these opportunities, such as through Valora’s Earn plug-in system, now let users effortlessly earn rewards on their stablecoin savings directly from their wallets.
We realized, however, that true financial inclusion requires more than just dollar-based stablecoins. People want to save in USD, but because they frequently earn in local currencies, borrowing against future income in dollars becomes risky due to foreign exchange exposure. This insight led to Mento Protocol’s ambitious goal: launching a stablecoin for every currency in the world. Mento has already made progress, with stablecoins for the US Dollar, Euro, Brazilian Real, Kenyan Shilling, West African Franc, and Philippine Peso all live today.
These local stablecoins are already making an impact. In Kenya, for instance, Haraka is successfully running lending campaigns with the Mento Kenyan Shilling stablecoin, providing access to credit in a familiar currency. Haraka uses the time-tested concept of credit circles to protect against defaults, allowing it to offer uncollateralized loans a key differentiator to the collateralized lending offerings targeting Degens on other chains.
The diverse set of stablecoins on Celo is enabling more than just lending. With 11 different stablecoins covering 7 currencies on Celo, we’re seeing a vibrant on-chain foreign exchange market take shape. As liquidity pools for these stablecoins continue to form on Uniswap, Celo is rapidly becoming the go-to destination for on-chain FX trading. Uniswap volumes have surged 20-fold since last year, hinting at the potential for a global, decentralized FX market that’s more accessible than any centralized counterpart.
As Celo returns to the Ethereum ecosystem as a Layer 2, we’re bringing not just our technology but our unique approach to growing financial inclusion and using crypto for the real world. While we’ve surpassed Tron in one metric , daily active users transacting with stablecoins , we’re still behind in other metrics and there’s so much more we aim to achieve.
The Celo flywheel is starting to spin, but we can’t achieve this alone. We’re here to stand alongside Ethereum’s Cypherpunks, Regens, and yes, even the Degens. We’re here to create the conditions for prosperity for all and believe that by working together, we can make this vision a reality. We invite you to join us on this journey toward a more inclusive and regenerative financial future.
This essay was originally published as a submission to the Kiwi News L2 Plurality writing contest.
Haraka founder in the field talking to users
INVESTING
Protocol Guild: A Funding Framework for the Ethereum Commons
Trent Van Epps Protocol Guild
Commons are productive systems that create resources for collective benefit. Some examples from the broader digital commons include Wikipedia, Linux, and Ethereum.
Ethereum as a commons, parallel to existing natural and digital common resources
In Ethereum, sets of peers produce three resources: a blockchain network, an asset, and media. The way these resources are produced matters to their integrity and fundamental characteristics. These resources create a larger, valuable whole we call Ethereum. These interwoven resources can be extended outside of their original production contexts but still within the bounds of the broader commons.
Three common resource types: network, asset, media.
Neither peers nor external capital can make complete ownership claims to these digital resources without destroying their integrity. However, open governance processes can also be acted on from a distance (in contrast to natural physical commons). In light of these conditions, capital seeks influence within the frameworks of production themselves.
Anyone can use or operate the Ethereum network infrastructure. Each participant running a node independently chooses which protocol version to run, resulting in an emergent set of actors who agree to be bound by the same set of rules. For example, an open validator set alongside credible neutrality norms makes it more difficult for internal or external actors to fully own the entire consensus
process. However, value can still be extracted by a purchasing agency (e.g., Proposer-Builder Separation) or by encumbering the Proof of Stake mechanism (e.g., restaking, liquid staking tokens).
Anyone can purchase, transfer, or hold individual units of Ether as a private good. However, because the network and the software define emergent features of the asset, it cannot exist outside of either context. Actors interested in influencing its supply, characteristics, or uses must engage with the other forms of resource production.
3. Media
resource: software, specs, EVM, p2p code, research, All Core Dev call transcripts, Ethereum Improvement Proposals (EIPs)
protocols/norms: open source software, permissive licensing, public by default, open governance, rough consensus, collaboration
Anyone can use, modify, or contribute to technical media. The production of these artifacts is structured by technical, legal, and social protocols. The permissive licensing of open source software (OSS) sidesteps the restrictive norms of commercial software, carving out a space for software media to exist on its own terms. This resource includes artifacts of the governance processes. When boxed out of media ownership, capital surfaces extractable influence by funding and directing the labor of those producing the media. Norms of openness and working in public are helpful in curtailing capture but can never fully prevent it.
Comprehensive funding information across all nonprofit and for-profit entities engaged in this media production is hard to come by but necessary for community selfassessments. The community and labor engage, but their agency could be enhanced. I believe that funding streams should be passed through simple protocols. They should be transparent, legible, sustainable, and accountable. They should be held to the same standards of rigor that we expect of network protocols. Protocol Guild is one such candidate funding protocol. There are a few things that make it unique in the landscape of protocol funding mechanisms (1):
Narrow mandate: Just focused on funding - does not direct work - not involved in Ethereum governance, upgrades cycles
Broad self-curation: Membership of 181 individuals across all of L1 core development (client teams, research, coordination, support). The most knowledgeable people curate the membership. It considers the entire watershed, not one of the many individual rivers.
Members are individuals: Funding doesn’t flow to teams, companies, or projects - we wanted members to represent themselves and retain their agency.
Four-year onchain vesting contract: This list of members is published onchain with an immutable vesting contract, providing transparent, legible assurances for funders and members.
Designed with time in mind: Regular curation and vesting are crucial in the recognition that Ethereum is a resource commons being stewarded over time: in the same way, our funding streams should be allocated with that in mind. The Ethereum of 2015 is different from what we have today, just as it will look very different in 2035. Per-member allocations are time-weighted by months active.
As a mirror to our resource production, the mechanism assembles a collective whole capable of providing benefits that would be inaccessible to maintainers seeking funding on their own. Vested funding and deterministic member allocations - both onchain - create legibility and certainty for both funders and beneficiaries alike.
The challenges of capture and influence are not unique to Ethereum - see other digital commons precedents like Linux and Red Hat (2). More broadly, the history of natural commons is rife with examples of exploitation until exhaustion - often by return-seeking capital. These are incompatible logics: extract value for private gain VS cede value for shared benefit. In pursuit of its own ends, capital destabilizes the healthy equilibrium of commons management.
It’s worth remembering that some historic natural commons have survived despite inhospitable contexts. Continuously sustained outside of popular awareness - some for thousands of years - Inuit fishing practices (4000 years), Ifugao rice terraces (2000), Dehesa farming system (2000). In the same way, blossoming digital commons should practice the posture and develop the mechanisms necessary to ensure uncaptured longevity.
(1) In another article, I plan to explore the theoretical and tradeoffs bundled by in-protocol funding, i.e., minted de novo by the software rulesets which set how validators/miners are compensated for consensus participation but directed instead to an onchain or offchain allocation mechanism (foundation, for-profit, DAO). Our goal with Protocol Guild is to construct it robustly enough that it would be capable of taking in-protocol funding but then scale it through opt-in norms like the 1% Pledge to never have to push that lever.
(2) Capital and enclosure in software commons: Linux & Ethereum at trent.mirror.xyz
EIC DATA INSIGHTS
QUARTERLY REPORT on ethereum
Data–curated by hildobby–sourced from Dune, Growthepie, DefiLlama, Stablepulse, Rwa.xyz, The Block, and Stand with Crypto.
Economic Security
- $80B of staked ETH | source: hildobby on Dune
- $12.5B restaked across Eigenlayer, Symbiotic & Karak | source: Blocklytics on Dune
