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

• Why companies are creating their own wallets

• Chart: Morpho growth

• Research: Solana Radar Hackathon

The Fat Wallet thesis

In the past year, crypto has seen wallet launches from centralized exchanges including Kraken, Coinbase and Bitget, NFT marketplaces like Magic Eden, TradFi firms Naver and CoinFlip, and of course DeFi protocols such as Osmosis’ Polaris Wallet, Uniswap, and Aave which announced its own Family wallet at Devcon last week.

All these are in addition to the hundreds of already-existing wallets that work perfectly fine. This begs the question: Why do crypto users need more wallets?

But that’s the wrong question. The right question is, why does every company want their own wallet? It turns out that owning the end-user via a crypto wallet is quite a prosperous business.

Wallets are typically the first front-end touchpoint for crypto newbies wanting to buy their first crypto tokens. This puts wallet providers in a uniquely close position to the end-user, in turn granting them the bargaining power to command a take-rate.

This take-rate is primarily exercised through in-wallet swaps on “fee-insensitive” users (i.e. normies). MetaMask for instance, makes about a weekly average of $1.5 million on wallet swaps.

Wallet providers also enjoy privileged oversight over transaction order-flow, a fancy way of saying that wallet providers know the trades that thousands of users are making. That knowledge is highly valuable because wallet companies are potentially selling that order-flow to professional block builders who extract MEV.

The latter is, of course, somewhat dubious. It’s possible that wallets like MetaMask already do so, and we know for a fact that Telegram trading bots (with integrated wallets) like Banana Gun are doing so and divvying up MEV profits with block builders.

Wallets are also becoming increasingly the preferred interface for onchain activity. There is some data to show that DEX front-ends are increasingly relegated to the back-end as wallets, solver models (CowSwap, 1inch Fusion) and DeFi aggregators take over.

This thesis is more popularly known as the “Fat Wallet” thesis, yet another one of the crypto industry’s tendencies to predict trends in one grand proclamation. The thesis is not new — it first emerged in early 2023, but is now seeing some attention again thanks to a well-articulated update from Robbie Petersen.

Builders and investors banking on the Fat Wallet thesis also believe that there will be potentially valuable ways for wallets to monetize their users down the line. 

As wallets increasingly move away from a utilitarian barebones “send and receive crypto” design toward feature-rich hubs that are plastered with trending onchain dapps, mints and messaging capabilities, it may not be surprising to see something like a 30% Big Tech tax on this distribution.

Wallets also have strong natural synergies for B2B integrations with crypto payments services. We’ve seen this lately with wallets like Zeal or Fuse which let you spend your DeFi yield or idle stablecoin holdings via Visa integration.

The Fat Wallet thesis may very well amount to just another failed investment theory, but it does provide a convincing rationale for why the industry is seeing a new wallet launch every other week.

With hundreds of competitors looking to grab the new wave of users that onboard every bull market cycle, wallets are competing in myriad ways.

Coinbase Wallet is turning to the tried and true strategy of market incentives, announcing today a 4.7% APY on USDC holdings.

Magic Eden has promised claimable airdrops for its native ME token — but only if you’re using Magic Eden’s very own wallet.

Everyone wants to be the first wallet to bind the user. It’s a tough business. The good news is that free market competition is the most effective check on economic concentration, and consumers can rest easy that no one wallet will probably ever dominate the market.

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

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Morpho Protocol deposit growth:

Morpho’s total value locked (TVL) has passed $1.6 billion, with total deposits around $2.5 billion.

The Morpho DAO voted earlier this month to enable MORPHO token transferability — effective today.

Since its 2022 launch, the DAO distributed tokens to users, contributors and strategic partners, but these tokens were non-transferrable pending a number of milestones, culminating in the DAO vote.

Legacy MORPHO tokens must be converted to wrapped MORPHO for transferability, voting and future cross-chain interoperability. As of 11:30 am ET, the tokens are trading for about $1.27.

— Macauley Peterson

The Solana Radar Hackathon, organized by Solana Colosseum, drew 10,000+ participants and 1,359 product submissions, highlighting innovation in gaming, finance, and creator tools. Winners include:

• The Arena: Gamified trading battles with a focus on mobile integrations.

• Wink: A marketplace for crypto transaction templates (Blinks).

• Pregame: Sports betting with potential in e-sports markets.

• Reflect: Delta-neutral stablecoin protocol using liquid staking.

• Genesis: Crowdfunding platform for tokenized IP projects.

Boccaccio breaks down the market competition, UX, and ecosystem adoption plans in Blockworks Research's latest subscriber note.

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GLIF is the foundational DeFi primitive of Filecoin — enabling Filecoin token holders to earn sustainable rewards on their $FIL by lending it to a diverse pool of Filecoin Storage Providers. Storage Providers borrow FIL to store data and grow, and simultaneously improves the security of the Filecoin network.

Similar to liquid staking solutions for PoS networks like Lido or Jito, GLIF solves a major capital inefficiency for Filecoin, and is Filecoin's first and most popular DeFi protocol.

• BitGo's establishment of BitGo Singapore highlights its commitment to delivering regulated digital asset services in the APAC region, the company says. This move comes amid recent changes in WBTC's custodial structure, where BitGo plans to distribute custody across multiple jurisdictions, including Hong Kong and Singapore, to enhance decentralization and mitigate regulatory risks. WBTC still dominates the market for bitcoin on Ethereum, although Coinbase announced this week it would delist WBTC from its exchange in December, as it seeks to promote its own custodial bitcoin wrapper cbBTC.

• Aragon and MetaLeX are collaborating on legal and technical solutions for DAOs, addressing the unique challenges of onchain governance. Their partnership combines Aragon’s governance expertise with MetaLeX’s legal structures to create flexible, composable systems for DAOs and BORGs (cybernetic organizations). Offerings include custom services, Aragon OSx integration with MetaLeX BORGs, and no-code tools for modular governance, enabling decentralized organizations to navigate a dynamic legal and technological landscapes.

• A new white paper by Cosmos co-founder Ethan Buchman released today aims to tackle longstanding issues in global finance: liquidity and equitable access to credit. “Cycles: a peer-to-peer electronic clearing system” outlines a system to optimize liquidity utilization and empower small businesses. Cycles leverages atomic multilateral settlement to optimize debt clearing across network participants with minimal liquidity, bypassing intermediaries and unlocking financial efficiency. The graph-based approach integrates obligations, acceptances, and settlements, enabling private, secure, and inclusive payment systems.

• The Sui network experienced a 2-hour outage today due to a bug in transaction scheduling logic causing validator crashes. The Sui’s validator community was able to resolve the issue around 6:45 am ET, and transactions are back online. Despite the downtime, SUI's price was down less than 1% on the day before recovering.