GM all, and happy Thursday. The first full week of trading in 2026 is moving well, with all crypto indices showing positive returns and outperforming TradFi benchmarks. ETF AUM is starting to show a floor, as SOL ETF AUM continues its notable strength. The hot topic over the past few days has been Solana’s block-building dynamics, which we explore in depth at the end.

— Luke and Carlos

While majors have shown strength off the November lows, they remain rangebound and sideways with respect to Q4’s range. Amidst the reprieve, strength has emerged under the surface in longer-tail names and sectors. Every index we track is green over the past week, showing notable positive breadth, with DePIN and AI leading the way, up 28% and 23% respectively. Importantly, all indices are outperforming gold and equities on the week, putting crypto back in the spotlight for alpha and momentum.

Within the AI index, VIRTUAL is the leader, up over 60% in the past week following the announcement of three new launch mechanisms. Despite this surge from the lows, VIRTUAL remains over 40% beneath its Q4 high. 

Within DePIN, RENDER leads the sector, up 75% over the past week. Like VIRTUAL, RENDER remains 33% beneath its Q4 high. The eyepopping weekly performance for both these names could quickly retrace absent fundamental legs.

Despite chop in the majors, strength and breadth have shown beneath the surface, suggesting that appetite for risk is back in play. 

— Luke

After a rough Q4, BTC ETF inflows have opened the year strong, seeking to set the floor in AUM after a Q4 of -$6.2 billion in outflows.

Contrary to both BTC and ETH ETFs, which exhibited outflows throughout Q4 amidst the weak price action, the AUM in SOL ETFs has climbed steadily, showing persistent demand for the product. SOL ETFs now hold 1.18% of the SOL supply, compared to 6.6% for BTC and 2.7% for ETH.

While the bid for majors has resumed in ETFs, support from DATCOs remains anemic. The new weekly purchases made by these vehicles continue to stay near lows.

Across BTC, ETH, and SOL DATCOs, the aggregate mNAV remains beneath 1. Absent a premium to NAV, these vehicles will be sidelined from tapping the ATM facility to fund new purchases, which has historically accounted for the majority of funds raised for new purchases. Instead, these vehicles will need to look to convertible debt issuance or embedded option sales to fund new purchases. 

Across indices and ETFs, signs of life are showing with a positive start to the year. While breadth improves slightly, conditions tilt towards cautious optimism. 

— Luke

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Solana’s block-building wars

On Jan. 5, 2026, Jito introduced IBRL Explorer, a public tool to measure validator block packing behavior on Solana and expose previously invisible “timing games” in block construction.

First, some context on Solana’s market structure. Solana is built as a streaming system: When used as intended, the leader propagates shreds (small packets of data) continuously as the block is being built. This behavior minimizes transaction-landing latency, defined as the time between a validator receiving a transaction and that transaction being processed. However, whether Solana’s transaction pipeline is truly continuous depends on how validators assemble their blocks.

Jito defines optimal block-packing behavior from a validator perspective as: build fast, stream continuously, and propagate state early. Jito’s IBRL score is a weighted mix of these three variables:

• Slot time (35%): Validators score well if their blocks are built within the following thresholds: less than 550ms for handoff slots from another validator or less than 380ms for continuation slots (i.e., any remaining slot in a leader’s rotation). 

• Non-vote packing (40%): The score rewards validators when transactions are distributed uniformly across the slot’s 64 ticks as opposed to cramming the majority of non-vote transactions into the final ticks of the slot (i.e., late packing). This is the most controversial variable for the IBRL score, as I’ll explain later.

• Vote early (25%): Validators receive a perfect score when at least 90% of vote transactions are processed within the first 32 ticks. The score decays if votes are pushed later in the block.

IBRL Explorer shows that many validators late-pack non-vote transactions and, in some cases, even extend slot times. Late packing delays state propagation, increases execution variance, and undermines Solana’s streaming design, degrading network latency. Instead of a stream, you get a burst.

In an optimal block, such as the example from the Helius validator below, most vote transactions are processed within the first half of the block (“propagate state early”), while non-vote transactions are spread relatively evenly across the slot’s 64 ticks (“stream continuously”).

By contrast, intentional late packing is evident in blocks like the Galaxy example below, where most non-vote transactions are crammed into the final ticks of the slot. In doing so, the validator prioritizes extractive value over network health by delaying state transitions until the last possible moment.

According to Lucas Bruder, co-founder and CEO of Jito Labs, validators are incentivized to wait until the end of the slot to observe more incoming transactions, select the highest-fee-paying ones, and maximize rewards.

But why should users care? While rational for an individual validator to maximize profit, this behavior introduces implicit censorship, delays state propagation, and forces the next leader to “catch up,” slowing the entire network.

More importantly, late packing also ties directly into Solana’s emerging payment for order flow (PFOF) dynamics, which Benedict Brady outlined here. Because wallets and apps often generate pre-routed signed transactions (i.e., market orders with slippage limits), there’s valuable backrun optionality embedded in the order. The user-aligned approach is selling that backrun to a trading firm, while the extractive approach is sandwiching. Either way, there is an incentive to slow down transaction landing to increase the value of the backrun, which is what late packing can accomplish.

This incentive pushes Solana toward a more adversarial market structure for apps and users. It also weakens crucial guarantees that market makers rely on, especially around intrablock cancels and deterministic execution, thereby widening spreads. Without streaming, true real-time markets remain out of reach for Solana, regardless of how good the application logic is.

The Temporal vs. Jito debate

Before diving into how Solana might address this problem, it’s important to acknowledge that there’s an active debate over what “good” block construction even means. Temporal, the core contributor of Harmonic, disputes Jito’s framing and the IBRL scoring methodology. Their critique is that the score embeds a particular set of design preferences that favor Jito’s approach to block building and make Harmonic look worse by default, reflected in consistently lower scores for validators running Harmonic.

According to Harmonic’s co-founder, Harmonic blocks are continuously executed without delay, but shreds are released only once the auction is done after around 300ms. This approach gives block builders enough time to compete, and gives the rest of the network enough time to replay Harmonic blocks. The visuals below show the same slot (391,822,619) from Temporal Emerald, a validator running Harmonic.

Harmonic’s execution looks evenly-spaced when viewed in the context of how the block is propagated (top visual). In other words, block builders are constructing the block continuously via parallel block-building, and transactions only appear concentrated in the final ticks (bottom visual) because that’s when the auction resolves.

Over the past 30 days, Harmonic has outperformed both Jito and Firedancer on mean and median per-block total income (priority fees + tips), leading to higher rewards paid to validators and stakers. The open question is whether that outperformance is being achieved at users’ expense via the timing games described above.

 Multiple Concurrent Proposers (MCP) and BAM

Having laid out both sides, one point still holds: Continuous streaming is crucial. Harmonic’s claim is not that streaming doesn’t matter, but that IBRL fails to capture how Harmonic achieves it and can misclassify its auction mechanics as “timing games.” At this stage, I don’t yet have the technical context or data required to take a firm view, but Solana is already working on an in-protocol solution designed to address the underlying incentive problem.

That solution is Multiple Concurrent Proposers (MCP), an architecture developed by Anatoly Yakovenko and Max Resnick. The motivation is simple: Under today’s single-leader model, one proposer controls ordering and can effectively act later than everyone else, enabling late packing and reinforcing the PFOF-style dynamics described above. MCP gets rid of the single-leader monopoly by having multiple proposers independently build candidate blocks in parallel. This architecture prevents a single leader from unilaterally suppressing transactions or delaying execution to extract profit.

That said, a prerequisite for MCP is Alpenglow being live on mainnet. Alpenglow is expected in 2026, but timelines remain uncertain. Meanwhile, Jito’s BAM could move the needle by making sequencing logic auditable. BAM aims to expand Solana’s microstructure design space, enabling applications that need more granular control over sequencing (e.g., prioritizing cancels for perps venues) while helping mitigate negative MEV externalities like frontrunning. The chart below provides an overview of BAM’s transaction pipeline.

BAM (Agave-BAM) is already the third-largest client by stake (~12%) on Solana, trailing only Agave-Jito and Frankendancer-Jito. Roughly 205 validators are already running BAM, underscoring its rapid adoption across Solana’s validator set. By contrast, Harmonic remains relatively small, with just over 3% of stake and around 20 validators.

It will be worth monitoring how block-building competitive dynamics evolve over the coming months and what they imply for Solana’s market structure.

— Carlos

1. Quadrillions: The Crypto Capital of the World | Acting Chairman Pham

This episode of Quadrillions features Acting CFTC Chairman Caroline Pham. She outlines a shift in US crypto regulation toward a “back-to-basics” approach that prioritizes market integrity, clear rules, and responsible innovation over regulation by enforcement. She argues that blockchain technology is neutral and that prior regulatory hostility pushed crypto activity offshore, while the current administration is actively encouraging firms to build and invest in the US within a regulated framework. Pham emphasizes renewed cooperation between the CFTC and SEC to pragmatically divide oversight, avoid turf wars, and support new market structures for digital assets. She details the CFTC’s 12-month “Crypto Sprint,” which aims to bring crypto fully inside the regulatory perimeter through initiatives like leveraged spot crypto on futures exchanges and the use of tokenized collateral and stablecoins in cleared markets. Overall, she positions the US as moving quickly toward becoming the global crypto capital by pairing regulatory clarity with lessons learned from past reforms to avoid excessive consolidation and fragmented liquidity.

2. Equity Perps with Annanay

Annanay Kapila joins Smac to discuss how his background in high-frequency trading and crypto market making led him to build QFEX, an exchange focused on bringing crypto-style perpetuals and modern exchange design to traditional equity markets. He argues that crypto exchanges, despite their flaws, have innovated far faster than traditional markets, which remain constrained by outdated regulation, fragmented clearing, limited leverage, and fixed trading hours. Annanay believes equity perpetuals are an inevitable evolution, replacing inefficient quarterly-futures rolls with more capital-efficient, always-on instruments better suited to modern traders. A major theme is market structure design, where he strongly advocates for central limit order books over AMMs, explaining from first principles why CLOBs better protect liquidity providers, enable tighter spreads, and improve price discovery. Overall, the conversation positions QFEX as a TradFi-native platform borrowing the best ideas from crypto, such as perps, improved UX, and faster iteration, while applying deep microstructure discipline to build a more efficient equity derivatives market.

3. Agentic Payments and Crypto’s Emerging Role in the AI Economy

Lucas Tcheyan and Vikram Singh from Galaxy published a report on agentic payments. They outlined how x402 could become core plumbing for AI agents paying other software, positioning stablecoins on public blockchains as the default machine-native money. The piece explains x402 V2’s unified multi-chain interface, wallet-based identity, and automatic service discovery; it maps a stack where agents route intents through facilitators that hide blockchain complexity, settle mostly in stablecoins, and get instant access to APIs and other services. While early x402 usage was dominated by speculative memecoin activity, it is shifting toward pay-per-request access to data, models (e.g., Nous’ Hermes 4), and infrastructure that are hard to price via subscriptions, with especially strong product-market fit for buying online context and paywalled content on demand (e.g., Cloudflare’s planned Pay-per-Crawl integration). The report also contrasts x402’s open, permissionless rails with incumbent “agentic commerce” stacks like Stripe ACP and Visa/Mastercard agents, arguing they will coexist. 

— Luke and Carlos