🟣 Bitcoin staking in sight

Babylon mainnet finally has a launch date

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Macauley Peterson & Donovan Choy
August 19, 2024

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Welcome back to 0xResearch. Here's what we’ve got for you today:

  • Babylon hits mainnet this week

  • Worldcoin gains ground

  • Chart: pump.fun not fun for most

  • Gov: Optimism’s fraud proofs

Markets are quiet at this week’s start, but there will likely be news emerging throughout the week following the Democratic National Convention starting today in Chicago and the annual Fed Symposium in Jackson Hole.

Zooming out, one point of concern for crypto markets is the fact that the US dollar index (DXY) has been notably weak since July, and is now trading near the 2024 open. Dollar weakness is usually a tailwind for bitcoin, but that hasn’t been the case of late.

Meanwhile, the price of gold — also more often than not correlated with BTC — is breaking out to fresh highs, while bitcoin has been ranging its way gradually lower. Not a good sign.  

Bitcoin staking coming soon

Babylon is set to shake up the bitcoin versus ether debate with the mainnet launch of self-custodial bitcoin staking on Thursday. Its move sets the stage for BTC to become a productive asset.

Phase-1 focuses on the supply side, allowing bitcoin holders to lock their BTC with Babylon’s self-custodial staking script. Future phases will empower proof-of-stake networks to leverage the assets’ capital base to secure dapps and earn a yield in exchange.

The system is initially capped at 1,000 BTC as a form of training wheels during its rollout phase.

Babylon’s mainnet is supported by over 200 “finality providers” — operators who play a role similar to PoS validators. Wallets and liquid staking protocols will provide distribution by integrating Babylon’s staking infrastructure into their offerings.

The big question is: Will Bitcoiners buy into the concept and actually supply their precious satoshis to Babylon? Conceptually, Babylon is a bit like EigenLayer, which has sucked in 5.75 million ETH, including LSTs.

Also like EigenLayer, Babylon’s mainnet will be launched without a slashing mechanism enabled, so the risk is limited to the protocol design itself.

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

The world of Worldcoin

Here’s the Worldcoin sales pitch: Scan a high-res image of your eyes to onboard “World ID” — a state-of-the-art digital identity solution that is superior to the modern standard of federated identity protocols like OAuth and SAML. Thanks to zk proofs, your data is private (even from Worldcoin), you’re definitively able to prove your “personhood” (iris data is unique) and you’ll never have to deal with another annoying “click on the traffic light” CAPTCHA puzzle.

The icing on top of the cake? A constant stream of WLD tokens that you can sell for money.

It’s an ambitious play at solving today’s problems of centralized digital identity. Worldcoin is already the second most successful Web3 digital identity project in terms of user uptake, with 6,481,501 unique users.

Yet, onboarding users is only step one. Digital identity is only as successful as its integrations with the real world. The team announced last week an integration of Worldcoin with the Malaysia government’s digital infrastructure, a country with a non-trivial population of approximately 34 million. 

In the last month alone, other companies integrated with Worldcoin include Japanese gourmet app SARAH with two million users, Singapore beverage company Flojo, and the zkEVM L2 Reddio, whose aim is to improve sybil resistance on its points system.

Since May, iris scans have also become available in Austria, Ecuador, Colombia and Peru.

Worldcoin plans to migrate off Optimism mainnet onto its own L2 World Chain later this year, with Fireblocks, Elliptics, Alchemy, Moralis and Safe already integrating onto it.

Not everything in Worldcoin world is rosy, though. Criticisms of Worldcoin have centered on its low-float tokenomics — WLD has an astoundingly low market cap to FDV ratio of 3%! For a “universal basic income” token, WLD has suffered an abysmal 87% drop since its all-time high in March. The project also faces regulatory onslaughts from governments like Hong Kong, Kenya, Portugal and Spain, all of which have banned the use of orb scanning on the grounds of data privacy.

Worldcoin’s market hype comes from its expert stacking of a smorgasbord of market narratives across AI, blockchain, zk tech and universal basic income. Despite the controversy, it remains one of this crypto cycle’s most daring and ambitious ventures.

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

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Pump.fun traders deflated:

Here’s some consolation for the next time you’re beating yourself over the head for missing out on the latest memecoin pump: 64.7% of pump.fun traders on Solana lose money or breakeven at best. Only 3% of all pump.fun wallets make more than $1000. 0.47% make above $10,000 and a very ultraslim minority of 0.0028% wallets achieve the million-dollar moonshot of trading memecoins, based on Dune. 

Yet, memecoins don’t show any sign of slowing down.

Back in March, the Avalanche Foundation tried to bootstrap memecoin trading in its own ecosystem with a $1 million liquidity mining incentive program.

Just last week, Justin Sun of Tron fame launched his very own pump.fun — “SunPump” — with Tron’s SunSwap DEX as the launchpad. He’s already teasing publicly potential CEX listings of memecoins on Huobi or Poloniex.

These deliberate attempts to launch memecoins is a somewhat cringe attempt to replicate Solana’s success with organic memecoins. Yet with pump.fun racking up $340 million in annualized revenues, who can blame them for trying?

— Donovan Choy

OP Labs on Friday pulled the plug on fraud proofs on OP Mainnet. This decision was driven by security concerns identified in a recent audit, which revealed vulnerabilities that could be exploited if fraud proofs remained active. Fortunately, none was, according to OP Labs.

The temporary deactivation is part of a broader strategy to implement a more secure and decentralized fault-proof system, known as the Granite upgrade. This upgrade is expected to address the audit findings and enhance the network’s resilience.

In now disabling fraud proofs, OP Labs aims to safeguard the network while preparing for the transition to a more robust system.

The move prompted L2 Beat to place OP Mainnet “in review.”

“Optimism has taken exceptional care in making sure that users’ funds remain safe in the presence of bugs, and that any action performed by the OP Foundation can be reverted by the Security Council,” L2 beat wrote.

OP Mainnet, plus Base and Blast — the top rollups based on the OP Stack — collectively have over $13 billion in TVL.

— Macauley Peterson

Berachain is an experimental take on an alternative EVM chain, as opposed to more traditional, alt EVM L1s such as Avalanche and BNB Chain. Although the chain is innovative and has a unique approach, it comes with caveats. Both Polaris EVM and proof-of-liquidity are very nascent, and have not yet been battle-tested. This could lead to potential issues.

Today, the Obol Collective launched a contributions program which allows all stakers to stake on distributed validators (DVs) and earn access to future governance and ownership of the Obol Collective. By staking ETH on DVs, users enhance the security and resiliency of Ethereum and therefore improve the network’s decentralization properties.

Blockworks Research is conducting a survey to gain insight into the institutional staking landscape. This data will help industry leaders adopt their strategies as the industry matures.

If you're an institutional staker, we want to hear from you (and if you’re new to Blockworks Research, get 20% off of our service while you’re at it!)

Wicked smart royalties on NFT resales and a steady stream of unofficial memecoin taxes are padding Trump’s crypto wallet.

The acquisition is set to bring nine European-listed crypto ETPs under San Francisco-based Bitwise’s brand.

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.