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As DeFi gears up for institutional adoption, “just KYC the pool” isn’t good enough. Predicate’s hook-based policy engine, now powering Paxos’ USDL deployment on Uniswap v4, shows how asset-specific rules can be enforced onchain — while keeping liquidity intact.

— Macauley

Introducing the Token Transparency Framework:

Blockworks today introduced the Token Transparency Framework, an open-source framework for evaluating tokens.

The framework assesses tokens across four categories:

• Project and Team: How are revenue streams generated? What is the relationship between equity and token? Are core team members compensated by token allocations to the foundation?

• Token Supply and Allocation: What does token distribution look like? How are tokens vested? Are there wallets holding unissued tokens?

• Transactions and Market Structure: What do CEX and market-maker agreements look like? Have team insiders participated in OTC rounds?

• Financial Disclosure: Are there quarterly updates on financials and operations? Are foundation’s assets/working capital held onchain and publicly labeled? 

Based on the project's filings, each criteria is weighted, assigned an individual score then aggregated into a topline transparency score. 

Scores are not meant to be a value judgment on the project’s business model, but merely serve as an indicator for overall transparency. Investors are free to ignore the scores and make their own judgments based on the team’s disclosed information.

Aerodrome, Jito, Jupiter, Morpho, Raydium and Stride have contributed to the Token Transparency Framework thus far. You can access the filings here.

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It concentrates liquidity into core applications and channels the chain’s revenue back to the users. Creating a better DeFi experience that benefits the active users on the chain.

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The policy layer DeFi didn’t know it needed

On June 12, a massive outage originating in Google Cloud disrupted over 70 services globally, affecting platforms like OpenAI (ChatGPT suffered its longest outage to date), Cloudflare, Spotify, Discord, Snapchat, UPS, DoorDash and more. We often don’t appreciate how much critical infrastructure we’re now routing through opaque, centralized systems. And it’s not just a Web2 story. It’s also a DeFi one.

Before the likes of OpenAI were scrambling to reboot, another less publicized outage rippled through crypto: TRM Labs, a widely used blockchain compliance provider, went down on June 10 for nearly 12 hours after a Salesforce-related failure. If you were using TRM directly to screen transactions, your policy layer went offline.

If, on the other hand, you were using Predicate, you simply switched providers and kept running.

What is Predicate?

Predicate is building a programmable policy enforcement layer for DeFi. Think of it as an operating system for pre-transaction compliance. Its latest white paper, co-published with Paxos and Uniswap, outlines how hooks in Uniswap v4 can now enforce asset-specific rules before swaps or liquidity deposits occur. That’s things like jurisdictional geofencing, market conduct constraints or investor accreditations, according to Predicate CEO Nikhil Raghuveera.

“You might have a pool that enforces different rules for different users that could be based on their IP [or] on accreditation or some other kind of entity status,” Raghuveera told Blockworks. “It could be literally anything.” That includes onchain or offchain data.

In the case of Paxos, whose USDL stablecoin is yield-bearing and rebasing, the situation is especially nuanced. US regulators may treat such an instrument as a money market fund, so Paxos International, which issues USDL from Abu Dhabi, must geofence US access. Using Predicate, the Paxos liquidity pool on Uniswap enforces a custom policy enforced via frontend IP gating or onchain attestations. A second hook wraps USDL into a non-rebasing token behind the scenes so it can interact with Uniswap’s accounting model. Thus, Paxos meets its regulatory constraints without compromising composability.

Part of the modular movement

When recalling the outage headaches, a highlight is Predicate’s fallback architecture. Compliance “verdicts” (e.g., “This wallet passes TRM’s screen”) are signed by off-chain operators and checked onchain via Uniswap hooks. If one provider like TRM fails, another — say, Elliptic or Crystal — can step in without changing the smart contracts.

This modularity mirrors trends in decentralized AI, where teams like Venice AI use decentralized networks such as Akash to route around centralized GPU bottlenecks.

“Policy is critical infrastructure because policies determine whether a transaction can go through or not,” said Raghuveera. “You need a holistic set of different pieces in case something goes down.”

We’ve spent years making smart contracts composable. Predicate reminds us that policy must be composable too: resilient to upstream failures, upgradable without liquidity migration and adaptable to jurisdictional nuance.

Institutional DeFi won’t scale on a “one-size-fits-all KYC.” But programmable, source-agnostic compliance enforcement might just work…and still keep the cypherpunks happy.

— Macauley Peterson

SPK airdrop:

Spark saw its token generation event airdrop yesterday.

3% of its total supply (300 million SPK) was airdropped to USDS/DAI holders and SparkLend depositors. But even holders of competing stablecoins (USDC, USDT, USDe), users of competing lenders (Aave, Morpho, Fluid) and non-related DeFi app users (Pendle) got an allocation.

Despite its wide distribution, though, the token is down 18% at a $85m market cap ($506m FDV).

As seen in the above chart, SparkLend deposits have held steady at $5m, suggesting that activity was largely organic and not in pursuit of a quick airdrop. Net deposit flows saw a meager outflow of $57m yesterday, with WETH and wstETH comprising the bulk.

— Donovan Choy

Chess clocks ticking, pull-up bars waiting, dunk tank ready — all hosted by the 0xResearch and Blockworks Research teams.

Expect real arguments, fast plays, and a crowd that knows the difference between conviction and cope.

📅 June 24-26 | Brooklyn

What do weak token holder protections look like?

Felipe: We had an investment whose token was trading at $40m FDV. We helped them quite extensively and spent dozens of hours bringing them onto Solana. The project did well, making ~$40 million in cash flow but then, one day, we got a call from the team telling us they’re leaving the token. They decided to take the IP out from the token, and keep all the cash flow for themselves — a team of four. That is not unfamiliar to crypto-natives — it’s called rugging. But that is unthinkable in public markets. There's no chance that Tim Cook would rug the Apple shareholders.

Luis: The lack of transparency around the relationship between equity and tokens is one of the reasons why GameFi was killed. A lot of GameFi projects used the token to incentivize gamers, but at the end of the day, all those earnings went to equity holders. I've heard of many examples of projects generating eight-nine figures in revenues, which all went to equity while [the] token trended down to zero FDV.