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Shipping season for Kraken, Karak and Fuel
Chart: PYUSD supply tapers off
Listen & Read: Hyped for Hyperliquid
Shipping season for Kraken, Karak and Fuel
Big launches in the onchain world this week.
Kraken launches kBTC wrapped bitcoin competitor
More challengers are gunning for BitGo’s wBTC market share as Kraken plans to roll out its own wrapped bitcoin product, kBTC. The ERC-20 token will be available on Ethereum and Optimism.
kBTC will be backed 1:1 by bitcoin held at Kraken Financial, a Wyoming-chartered Special Purpose Depository Institution, and will carry full proof-of-reserves onchain.
Kraken’s move comes just after its rival centralized exchange Coinbase launched its own cbBTC on Ethereum and Base a month ago.
Despite market predictions that BitGo would lose its wBTC market share, wBTC’s total market cap has stayed relatively stable at $10 billion since the introduction of cbBTC, which itself has scaled to a $463 million market cap.
Karak launches V2 mainnet
Founded by ex-Coinbase and Risk Harbor (a Terra-based risk management platform) employees Raouf Ben-Har and Drew Patel, Karak is the third largest restaking protocol by TVL ($554 million). Today, it launched its v2 mainnet.
Karak v2 will notably introduce slashing, a way to penalize the stake of operators that fail to comply with DSS’s (distributed secure services; the equivalent of an EigenLayer AVS) rules. This makes Karak the first restaking protocol to do so.
Karak was the first restaking protocol to enable the use of non-ETH assets for restaking. This feature was later adopted by Symbiotic and more recently EigenLayer, marking a complete shift away from the industry’s exclusive restaking of ETH.
Fuel launches Ignition rollup
Another Ethereum L2 joins the fray. The optimistic rollup Fuel Network announced on Wednesday the launch of “Ignition” v1 mainnet.
Ignition runs on its own programming language, Sway and FuelVM, an alternative execution layer to the EVM. The new rollup will employ a UTXO-based transaction model and use the Ethereum L1 for data availability. It claims to run about 21,000 TPS per core at a one-second blocktime, in contrast to Ethereum L1’s 12-second blocktime.
Before Ignition, Fuel’s claim to fame was based on its Fuel v1 rollup, the first rollup to achieve “Stage 2” security in 2020. Based on L2Beat’s framework, Stage 2 indicates a permissionless fraud proof system and the ability for users to have at least 30 days to offload assets from the rollup in the event of upgrades. To date, only the DeGate v1 rollup has achieved Stage 2 status.
Ignition will begin at a Stage 0 rating at launch, though “it will rapidly move toward Stage 1 and then eventually Stage 2,” its blog claims.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
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PYUSD supply tapers off:
The market cap of PayPal’s PYUSD stablecoin has tapered off from its late August highs of $1 billion to about $604 million today. PYUSD’s rapid growth in July was largely driven by millions in incentives. In mid-August, PYUSD deposits on Kamino yielded a 17.6% APY, in comparison to about 5.7% today. The value is still marginally higher than the 4.6% supply APYs on Aave today, but with incentives drying up, it’s no surprise that farmers have moved on from PYUSD.
As the crypto industry continues to mature, staking has emerged as a primary avenue for institutional investors to generate yield and contribute to a network’s security. However, the landscape of staking for institutional investors remains complex.
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The hype around Hyperliquid
Ryan Connor: It’s hard to ignore Hyperliquid. It’s generating meaningful revenue, volume and is pivoting to a more general-purpose chain to attract spot asset issuers. So it’s really not a validation of the appchain thesis that some people have been celebrating. It validates the idea that one app wants to own the entire stack and maximize revenues.
Boccaccio: Hyperliquid is leading in perps volume, with over double the volume of its closest competitor, Jupiter, in the last seven days. Based on a FDV/fees comparison to Drift and Dydx, Hyperliquid would be valued at an estimated 2.5 to 3 billion FDV, making it quite a sizable airdrop. The other thing is that Hyperliquid is running four colocated validators in Tokyo right now, which makes scalability an open question.
Marc Arjoon: In the perps world, players are often compared to Jupiter. It’s bad that Jupiter took 12-18 months to build a cross-collateral engine feature which is important to attract institutional capital, but it’s also building many other features across different verticals — trying to be a one-stop shop for DeFi.
What is Avalanche’s value accrual from Off the Grid?
Boccaccio: Avalanche is probably making anywhere from $300 to $2500 monthly if the Gunzilla subnet chain built on top of Avalanche had about eight validators, which I think makes sense to have the game be as performant as possible. How the hell then does Avalanche make money as a chain that helps other chains launch? What SaaS product charges only $300 to their enterprise customers?
Ryan Connor: It’s definitely a conundrum. The way an L1 makes money is getting people to pay fees on their base chain, not allowing others to launch new L2 chains on top cheaply.
Marc Arjoon: I agree with Avalanche’s move. The previous way to do it was to get someone to buy hundreds of millions of your AVAX token to stake and run a validator and it was a huge entry barrier. Most successful companies today like Amazon were loss making in the first decade of their existence. The strategy to increase customer usage is in my books, a good move. When customers change their behavior and start using products, that’s the real disruptive factor.
Danny Knettel: Agreed. It’s a forward-looking design. If Web3 gaming truly is the future, Avalanche would be hoping to have thousands of subnets for games in the future — just like Steam has tens of thousands of games launching every year, that’s when the economics starts to make sense for Avalanche.
Plus, gauging Yano’s sentiment with the election a few weeks away.
Today’s data points further solidify the notion that the economy is largely doing okay.
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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.