Jack Kubinec

This week, crypto descended on Brussels for EthCC.



Given that Ethereum popularized smart contracts and was the home of NFTs during the space’s <a href="https://blockworks.co/news/nft-craze-rages-on-as-august-sales-near-900m">2021 craze</a>, it seems like consumer applications could have been prominently featured at the yearly Ethereum gathering. But some attendees felt that apps were too muted at the conference — and that crypto’s infrastructure era has overstayed its welcome.



The social lead of the Milk Road newsletter <a href="https://x.com/Raul_Impact3/status/1811045339144585292">wrote</a> that it “[f]eels like we&#8217;ve come to a consensus that we don&#8217;t need more infra. We just need usable apps.”



2077 Collective director Emmanuel Awosika <a href="https://x.com/eawosikaa/status/1811788222076494295">said</a> “one of those things I&#8217;m excited about is people finally (!) acknowledging consumer apps are necessary.”



Arbitrum developer Offchain Labs’ A.J. Warner said he “heard 10x the number of interoperability/crosschain proving ideas compared to novel user applications” at the conference.



Crypto may still be lacking in compelling consumer apps, but EthCC exit reviews definitely showed that the desire is there. This wishful thinking has shown up in other places too: The Arbitrum DAO notably is <a href="https://blockworks.co/newsletter/research/issue/post_dd5f18da-fa69-4bbb-b755-0264dd06ea37">aiming to pour</a> $215 million into crypto <a href="https://blockworks.co/tag/gaming">gaming</a> projects.


<div class="wp-block-image">
<figure class="alignright size-large is-resized"><img loading="lazy" decoding="async" width="2560" height="1707" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=1024&amp;h=1024" alt="" class="wp-image-89265" style="width:491px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=2560 2560w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=392 392w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=329 329w, https://blockworks-co.imgix.net/wp-content/uploads/2024/07/1000151795-scaled.jpg?w=80 80w" sizes="(max-width: 2560px) 100vw, 2560px" /><figcaption class="wp-element-caption">Source: EthCC</figcaption></figure></div>


Read more: <a href="https://blockworks.co/news/crypto-infrastructure-lacking-apps">The crypto infrastructure is here, but where are the apps?</a>



This week, Electric Capital general partner Maria Shen released a “market map” categorizing over 1,500 crypto projects. Interestingly, more than one-third of the projects were labeled as apps.&nbsp;



There’s also a case to be made that insisting on more apps might be putting the cart before the horse. Celestia Labs CEO Mustafa Al-Bassam <a href="https://x.com/musalbas/status/1811039551957156013">said</a> that crypto should focus on mastering its original use case of payments before it moves on to more complex applications.



Read more: <a href="https://blockworks.co/news/helio-upgrades-solana-pay-plugin-for-shopify">Helio upgrades its Solana Pay plugin for Shopify</a>



There are also crypto apps with real users, even if they don’t currently compete with the titans of Web2. Telegram has a lot of users, and the loosely-associated TON blockchain is drawing lots of attention (alongside lots of bots) to (admittedly rudimentary) Telegram games.



And <a href="https://blockworks.co/news/crypto-x-users-solana-blinks">with Solana blinks</a>, you can now <a href="https://x.com/sol_idity/status/1810692504934846564">play</a> Pokemon onchain directly within your X feed. So that’s something, right?



<h2 class="wp-block-heading">Story Protocol is launching a layer-1</h2>



A16z-backed Story Protocol <a href="https://x.com/StoryProtocol/status/1810705596250980677">announced</a> this week it would be launching the “world’s first [<a href="https://blockworks.co/tag/intellectual-property">intellectual property</a>] blockchain” with its new Story network.&nbsp;



The chain will let creators upload their intellectual property to the blockchain, where they can then set the terms for how the intellectual property can be used and monetized. Story cast the onchain intellectual property as being like legos, saying the chain would create an internet “legoland.”



In a seeming homage to the week’s frustration with crypto’s dearth of widely-used applications, Story co-founder S.Y. Lee <a href="https://x.com/storysylee/status/1810741771845939298">said</a> the protocol wouldn’t just be the “millionth defi chain/app without a clear use case in mind.”



<h2 class="wp-block-heading">One interesting stat:</h2>



<ul class="wp-block-list">
<li>Farcaster’s daily active <a href="https://dune.com/pixelhack/farcaster">users</a> hit an all-time high for seven-day trailing average at around 67,000 late last week, according to a Dune dashboard.</li>
</ul>



<h2 class="wp-block-heading">Also of note:</h2>



<ul class="wp-block-list">
<li>Blockchain analytics firm Elliptic published a <a href="https://www.elliptic.co/blog/cyber-scam-marketplace">report</a> linking “pig butchering” crypto scams to a “multi-billion dollar marketplace” popular in Southeast Asia named Huione Guarantee.</li>



<li>Soccer stars Lionel <a href="https://x.com/BitDegree/status/1810678040575566268">Messi</a> and <a href="https://x.com/ikuzoeth/status/1811128692212633774">Ronaldinho</a> promoted a memecoin called WaterCoin.</li>



<li>The forthcoming mobile shooter game “For The Win” <a href="https://x.com/jungle_xyz/status/1811027368116392229">announced</a> it would be building on Solana.</li>
</ul>



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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Web3 Watch: EthCC attendees ask: “Where are the apps?”

This week, the Solana Foundation and Dialect unveiled Solana actions and blinks (a portmanteau of blockchain and links), which lets users transact with crypto directly within X.&nbsp;



Blinks allow crypto actions to look like buttons or widgets, so users can do things like buy crypto or NFTs directly within their X feeds.&nbsp;



Read more: <a href="https://blockworks.co/news/lightspeed-newsletter-solana-transactions-on-x">Lightspeed Newsletter: Solana transactions can now happen directly within X</a>



There are many other ways this could be used, of course. Hedgehog Markets <a href="https://x.com/HedgehogMarket/status/1806690307217506613">embedded</a> a prediction market on X, and another developer built an onchain orb that doles out advice and happily accepts donations. The orb told me to “accept the process of disintegration and prepare for renewal. Let go of what no longer serves you.”



For now, blinks are only on X, but its developers are hoping to expand the feature to other places on the internet, such as Reddit and Discord.



The release generally is reminiscent of <a href="https://blockworks.co/tag/farcaster">Farcaster</a> Frames, which lets users interact with apps directly inside of the crypto-native social media app Farcaster. Frames created a lot of buzz and led to a spike in Farcaster usage.



Read more: <a href="https://blockworks.co/news/social-media-farcaster-interview">Q&amp;A: Dan Romero and Jesse Pollak think this may be Farcaster’s ‘inflection point’&nbsp;</a>



<a href="https://blockworks.co/tag/solana">Solana</a> non-vote transactions <a href="https://app.blockworksresearch.com/assets/sol/analytics?dashboard=sol-onchain-activity&amp;interval=daily">spiked</a> to their highest point in June the day after blinks were released, according to Blockworks Research.



<h2 class="wp-block-heading">Crypto news pageviews slide</h2>



Pageviews for crypto news sites have noticeably declined since Coinbase <a href="https://x.com/Timccopeland/status/1788572592988639277">removed</a> the news feed from its app earlier this year, Axios <a href="https://www.axios.com/2024/06/26/coinbase-crypto-news-traffic-decline">reported</a>. Coinbase had previously been a large driver of traffic to crypto news sites.



Crypto news outlets have generally seen their visitors decline in recent years and are failing to touch the numbers seen pre-FTX’s collapse, the piece noted.



The Block’s Editor-in-chief Tim Copeland has actively written on social media about Coinbase’s news feed removal, <a href="https://x.com/Timccopeland/status/1801269796555600194">saying</a> earlier this month traffic was down 30% to top sites after the crypto market calmed down and Coinbase removed the feature. Copeland <a href="https://x.com/Timccopeland/status/1805598167448064282">updated</a> that sentiment this week to say the traffic decline was worse than he originally thought.



“The SEO traffic game is dead and crypto media sites that keep playing will face the same fate. Can&#8217;t rely on third-party apps like @coinbase anymore either. We decided months ago to try something different at @Blockworks_.&nbsp; It&#8217;s working,” Blockworks managing editor <a href="mailto:michael.mcsweeney@blockworks.co">Michael McSweeney</a> noted on X.



(Shameless plug, but views for our slate of newsletters are increasing every day. Check those out <a href="https://blockworks.co/newsletter">here</a>.)



<h2 class="wp-block-heading">One interesting stat:</h2>



<ul class="wp-block-list">
<li>Blast topped $300 million in volume as its <a href="https://blockworks.co/news/empire-newsletter-ethereum-l2-blast-airdrop">token airdrop went off</a> on Wednesday, but the layer-2’s total value locked (TVL) has slid nearly $500 million in the past week, <a href="https://defillama.com/chain/Blast?volume=true&amp;tvl=true">according</a> to DeFiLlama.</li>
</ul>



<h2 class="wp-block-heading">Also of note:</h2>



<ul class="wp-block-list">
<li>Polymarket <a href="https://x.com/Polymarket/status/1806479362377814378">refunded</a> bettors who said Barron Trump was involved with the DJT token, citing “conclusive” evidence of Barron’s involvement. It said its oracle service UMA was erroneous in saying Barron was not involved.</li>



<li>DEX Screener <a href="https://blockworks.co/news/moonshot-vertical-integration-memecoins">launched a Pump dot Fun competitor</a> named Moonshot.</li>



<li>Internet personality Logan Paul <a href="https://www.courtlistener.com/docket/68891856/1/paul-v-findeisen/">sued</a> the YouTuber Coffeezilla over a video exposé pertaining to the CryptoZoo NFT gaming project.</li>



<li>Crypto-friendly asset manager VanEck <a href="https://x.com/vaneck_us/status/1805243416713810059">changed</a> its X profile picture to a Pudgy Penguin.</li>
</ul>



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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Web3 Watch: Crypto X users get a kick out of Solana blinks

Katherine Ross

David Canellis

<h2 class="wp-block-heading">Momentum shift</h2>



This time last year, the crypto narrative was completely different.&nbsp;



And — while we’re stuck in a weird sideways moment here — there’s no doubt that the market is more positive right now than it was a year ago, when Coinbase and Binance were reeling after the SEC filed lawsuits against both exchanges on consecutive days.



Folks were spooked, and rightfully so. We still don’t have as many answers as we might want, but we’re not seeing projects flee to other countries (to the same extent at least, though the <a href="https://blockworks.co/news/empire-newsletter-sec-issues-robinhood-wells-notice">three Wells notices served to</a> Consensys, Uniswap and Robinhood have left a bad taste).



Blockworks co-founder Jason Yanowitz <a href="https://podcasts.apple.com/us/podcast/how-zk-will-shatter-social-media-monopolies-alex-stani/id1554930038?i=1000658601114">noted on Empire this week</a> that roughly 37% of the speakers for last year’s Permissionless conference dropped out because they didn’t want to risk stepping on US soil.&nbsp;



Obviously, that’s not as much of a concern anymore, <a href="https://blockworks.co/news/consensus-2024-conference-recap">just based on recent industry events</a> such as Consensus.



This leads me to one big question: How much damage has been done to crypto and where do we go from here?



Bill Hughes, senior counsel at Ethereum studio Consensys, said it’s caused the crypto space to mature “more slowly than it would have otherwise.”



“It has stifled innovation from the little guy, who is more concerned with being targeted by the government due to having only modest means, giving larger incumbent crypto firms a competitive advantage, <a href="https://blockworks.co/news/crypto-regulators-us-global-legislation">especially ones that are overseas</a>. The anti-crypto types are the same ones who decry competition problems with Big Tech, and undue foreign interests over sectors that are important to the US, yet they try to repeat history with their policy choices,” he continued.



Stani Kulechov, CEO of Avara — the company behind the Aave protocol — similarly told Yanowitz that the US “lost a lot of innovation” in the past couple of years.&nbsp;



It’s not all doom and gloom. Matter Labs CEO Alex Gluchowski, also a guest on Empire this week, noted that the crypto community in the US has managed to become a “powerful election force.”



In case you live under a rock: The recent <a href="https://blockworks.co/news/house-passes-act-fit21-with-bipartisan-support">bipartisan support for the FIT21 crypto bill</a>, the pre-Biden veto rollback of the SEC’s SAB 121 rulemaking bulletin. But there’s also clearly partisan support, as former President Donald Trump adds crypto donations and <a href="https://www.reuters.com/world/us/trump-pitches-himself-crypto-president-san-francisco-tech-fundraiser-2024-06-07/">allegedly claims</a> he wants to be the “crypto president” (no proposed policies around crypto have been made public though).



Hughes seemingly agrees with Gluchowski, telling me that he’s still bullish on the US as a crypto hub.



“The US is still the best country to lead in this space, in terms of capital, talent and political philosophy. There&#8217;s good reason to believe the US will lead notwithstanding the efforts of loud, energetic detractors,” he added.



Kulechov said DeFi is “just better financial infrastructure” given that the technologies are “valuable” for the users, and ensure that corporations have to play fair when it comes to interacting with the tech. Key note for Kulechov here is that it doesn’t take power from the government itself.&nbsp;



Now, whether the US understands Kulechov’s point is a separate issue. But with the way that crypto continues to innovate — from SocialFi to infrastructure builds — the technology itself addresses questions and concerns that even non-crypto folks have. Such as wanting a social media platform that doesn’t control the data, and instead handing that power to the user.



Hughes summed it up perfectly: “We need a regulatory environment here where the tech can live and die on its own merits around the use cases that the market demands.”



— Katherine Ross



<h2 class="wp-block-heading">Data Center</h2>



<ul class="wp-block-list">
<li>BTC and ETH both slipped 4% this morning, dragging the rest of the market down with them.</li>



<li>Top-100 <a href="https://www.coingecko.com/">tokens</a> are down 10% on average over the past week. NOT, AR, BEAM, ENA and FTM have shed 20%.</li>



<li>ETH has kept up its inflationary streak, on <a href="https://ultrasound.money/">track</a> to add $1.8 billion in fresh supply over the next year, at current usage rates.</li>



<li>Over half of all Bitcoin <a href="https://dune.com/cryptokoryo/runes">transactions</a> are again tied to Runes, with half a million related transfers in the past two days.</li>



<li>Bitcoin has seen more NFT <a href="https://www.cryptoslam.io/blockchains">volume</a> in the past week than both Polygon and Solana combined at over $46 million. Ethereum is a close second with $40 million.</li>
</ul>



<h2 class="wp-block-heading">The other, other use case</h2>



Bitcoin has made money unstoppable. Blockchain really wants to do the same for social media.



And it’s been like that for nearly a decade. Dan Larimer of EOS infamy launched layer-1 blockchain Steem to power a social media platform in 2016.



The fundamental idea was more-or-less akin to the Farcasters and Lenses we have today: build a platform for communities resistant to censorship (and downtime), while giving creators tools to <a href="https://blockworks.co/news/play-to-earn-socialfi-gaming">monetize their content</a> with crypto.



(Extra points if users can own a slice of the network through a token, or at the very least, gain exposure to its growth.)



Lens is meanwhile helping to carry the torch. The number of monthly unique <a href="https://dune.com/sealaunch/lensv2-usage">broadcasters</a> — which includes addresses that posted, mirrored, commented or quoted on the platforms utilizing the protocol — is up 150% since January, going from under 30,000 to almost 75,000 last month. Lens went <a href="https://x.com/LensProtocol/status/1762572454025683302">permissionless</a> in late February.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXfFLR_afQoEAkf-GG3GWwGESCXCk4wV__jbuuKQdqZdTaqBfp9KbSUg9yLGdcFyFh8OxqbqmRxRaM7AjSU6o_ivkaJkBjrng7QbUNncM6PXqdZE3m-9O0ZCJSVpHJZAJlhPrHZOs9ZM56Q8xU1YwRmgGrHz?key=o4YLVA0eGnQUF5SmVbTarw" alt=""/><figcaption class="wp-element-caption">381,000 Lens profiles have been created since launching in 2022 — 229,000 were made this year</figcaption></figure>



With crypto-powered social media, it’s always a question of whether user activity is organic. Some of the most widely-used Lens <a href="https://x.com/orb_club/status/1776044932949799345">apps</a> have points systems and other incentive schemes to spark <a href="https://phaver.gitbook.io/whitepaper-phaver/whitepaper-phaver/tokenomics/usdsocial-season-1-airdrop">engagement</a>, which does muddy the data. As would any activity resulting from anticipation of a future airdrop for a token tied to the platform.



Farcaster, another protocol for decentralized social media, is also plagued by doubts over how much of its onchain activity <a href="https://blockworks.co/news/empire-newsletter-farcaster-users-uniswap-sec">is “real.”</a>



It’s really a moot point. Silicon Valley’s Rus Hannamen was <a href="https://www.youtube.com/watch?v=OH9CXhWV6zE">adamant</a> that Pied Piper should not make any money, or else limit its perceived potential: “If you have no revenue, you can say you’re pre-revenue&#8230; It’s not about how much you earn. It’s about what you’re worth.”



Lens and Farcaster’s noticeably absent native tokens are a lot like that: launching a cryptocurrency would only put a market value on their underlying protocols. Why risk token prices pumping and dumping alongside the ebbs and flows of user retention, as has been the <a href="https://dune.com/cryptokoryo/friendtech">case</a> with friend.tech? Sounds like a distraction.



And without a token, users could still be attracted to use the apps built around the protocol in hopes that one day their activity converts to an airdrop. A win-win for everyone — as long as the user experience is enough to bridge the gap left by a lack of financial incentives.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/docsz/AD_4nXeb87SIDk3BBgspekiH1JjS-qx92bhwMNoOWsYUD7lJgO5GzqC2cm8KZY6GQ4JVUaEJmmmc3Gkk9zbvgR720U1aoJQULQ0-Xtg7MqWtf6DB20mHk7AZYhvwxfOXWRa2pm-LZVA_33E8kKzxGJBSFvd4rko?key=o4YLVA0eGnQUF5SmVbTarw" alt=""/><figcaption class="wp-element-caption">The new wave of social media tokens has picked up where the others left off</figcaption></figure>



No surprise then that both Lens and Farcaster have wound up with “unofficial” native cryptocurrencies in BONSAI and DEGEN, which their communities have adopted for tipping and other SocialFi apps.&nbsp;



It’s a nice compromise — the protocol has plausible deniability around the potential for a future “official” airdrop, while users can still farm any potential allocation and, hopefully, earn a separate community coin to boot.



But crypto is already a mess of hundreds (or even thousands) of blockchains and tokens. And if blockchain is the future of social media, it seems like it’s only going to get even messier, especially if the biggest platforms have multiple native cryptocurrencies.&nbsp;



It does put a certain dampener on the idea of a crypto-powered alternative to Twitter and Instagram. Perhaps the next billion users might be turned off by censorship-resistant social media if it takes tracking dozens of different tokens to use.



While not specific to the idea of tokens, I asked Lens/Aave founder Stani Kulechov about the user experience in a multichain future in a call earlier this year. He brought up the old-school telephone exchanges — warehouses of people switching over networks to connect your call.&nbsp;



“What blockchain is having now is its telephone exchange moment,” Kulechov said. “In the future, you don’t really think about networks at all. Funds and data integrity will stay between these networks and you basically verify data movements or movements of funds. ZKProofs are really an interesting way to do that.”



“We are living in really exciting times because we&#8217;re witnessing how the infrastructure is being built and all these changes. But once we go to the next step, we forget the bottlenecks and complexities that were in the past,” he said.



— David Canellis



<h2 class="wp-block-heading">The Works</h2>



<ul class="wp-block-list">
<li>Tether CEO Paolo Ardoino said Tether’s investment arm plans to put over $1 billion to work in investments over the next year, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-06-11/tether-to-invest-more-than-1-billion-in-deals-over-next-year">reported</a>. </li>



<li>Uniswap Labs <a href="https://blog.uniswap.org/acquiring-crypto-the-game">announced</a> that it&#8217;s acquiring Crypto: The Game.</li>



<li>Japan’s Metaplanet said in a <a href="https://contents.xj-storage.jp/xcontents/33500/7a1b93bb/ab2b/4713/abe9/e2ce84dbdd8a/140120240610525851.pdf">statement</a> that it bought over 23 BTC ($1.54 million) to add to its holdings.</li>



<li>ZkSync plans to distribute 21 billion ZK tokens, Blockworks’ Macauley Peterson <a href="https://blockworks.co/news/zksync-to-distribute-21-billion-zk-tokens">reported</a>.</li>



<li>DeFi Technologies switched to bitcoin as its primary treasury reserve asset with a purchase of 110 bitcoin, the company <a href="https://www.prnewswire.com/news-releases/defi-technologies-provides-monthly-corporate-update-announces-bitcoin-treasury-strategy-302167973.html">said</a>.</li>
</ul>



<h2 class="wp-block-heading">The Morning Riff</h2>



Q: What does SocialFi mean for crypto?



<hr class="wp-block-separator has-alpha-channel-opacity"/>



SocialFi in 2024 really means identity.



The idea of fully standalone appchains tailor-made for social media and microblogging platforms is kinda over for now.



No more Twitters on the blockchain — where all posts, images, videos and other files are stored permanently.&nbsp;



Instead, builders are working to allow social media profiles to exist across multiple platforms at once, without trusting anyone to store it.



Less “monetize and store my content,” and more “assetize my online footprint.” A slight but important difference in value proposition.



— David Canellis



Look, no one wants their data used or held by Big Tech. Maybe it’s just my Instagram, but I’ve noticed more folks making stories about not wanting Meta to use their photos or art as part of its push to train a generative AI program. SocialFi fixes this.



Clearly, there’s a need for it which is always one of the big questions to ask whenever new tech is introduced. The mass demand should follow, but I’m not sure that folks are sold on switching over or coming to terms with the fact that there are more options for social media outside of the classic Big Tech plays.



There’s no doubt that SocialFi could set a new tone for crypto, and open up avenues we haven’t yet seen explored, where your data is well and truly your own. And there’s VC funding to boot.&nbsp;



But I’m not so sure I’m sold on it being the next big thing yet. After all, people never actually left Twitter, after complaining about Elon Musk’s acquisition so much.



— Katherine Ross



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



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Empire Newsletter: How the US has impacted crypto innovation

Another week, another slew of venture capital rounds.&nbsp;



Bitcoin staking protocol Babylon led this week’s raises, <a href="https://www.prweb.com/releases/babylon-completes-70m-raise-led-by-paradigm-to-advance-trustless-bitcoin-staking-302159158.html#:~:text=Babylon%20Completes%20%2470M%20Raise%20Led%20by%20Paradigm%20to%20Advance%20Trustless%20Bitcoin%20Staking">announcing</a> a $70 million raise led by Paradigm on Thursday.&nbsp;



Bullish Capital, Polychain Capital and Galaxy also participated in the round.&nbsp;



“This latest round of investment will accelerate Babylon’s mission to enable a Bitcoin-secured decentralized economy. Babylon Bitcoin Staking protocol allows PoS systems like PoS chains, [layer-2s], DA layers, oracles, etc., to acquire staking capital from Bitcoin.”



PitchBook analyst Robert Le previously told Blockworks that he believes infrastructure projects will capture the attention of venture capital at this point in the cycle.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-staking-babylon">Let’s talk Bitcoin staking: Babylon’s litepaper</a>



“I still think infrastructure <a href="https://blockworks.co/news/bitcoin-halving-bitcoins-original-vision-layer-one">is still underdeveloped</a>,” he told Blockworks at the time, citing prices he’s seen on Base. “There’s no way that we can say infrastructure [and blockchains are] mature when you pay $5 to sign a transaction.”&nbsp;



“Trustless <a href="https://blockworks.co/tag/staking">staking</a> is a novel and fundamental primitive for bitcoin and the broader ecosystem,” Paradigm’s Arjun Balaji said in a statement. He added that the team is “at the frontier of bitcoin innovation.”



The week was quieter on the funding front, though it followed Farcaster’s <a href="https://blockworks.co/news/farcaster-fundraise-user-growth-developer-tools">announcement of $150 million</a>.&nbsp;



Speaking of <a href="https://blockworks.co/tag/farcaster">Farcaster</a>, Fortune <a href="https://fortune.com/crypto/2024/05/30/haun-ventures-coinbase-and-a16z-invest-11-million-in-neynar-a-toolbox-for-web3-social-networks/">reported</a> that Neynar — which allows developers to build social applications on Farcaster — raised $11 million from Haun Ventures and Coinbase.&nbsp;



<h2 class="wp-block-heading">Other notable funding news:</h2>



<ul class="wp-block-list">
<li>OpenSocial, an infrastructure layer to build social applications, announced a $5 million seed funding round, which closed in January 2024.*</li>



<li>DeFi platform Aperture announced a Series A raise, totaling $12 million across its rounds to bring its valuation to $250 million. The raise included Skyland Ventures, and Blockchain Founders Fund. </li>



<li>Swiss-based crypto asset financial services company Scrypt announced a $5 million strategic funding round led by Braza Bank. </li>
</ul>



*Note: Blockworks co-founder Jason Yanowitz participated in the OpenSocial round.



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Funding Wrap: Babylon announces $70M raise led by Paradigm

Casey Wagner

Crypto startup funding hit $2.4 billion during the first quarter of 2024, a report from PitchBook published Monday showed. This represents a 40% increase in invested capital from the last quarter of 2023.&nbsp;



“With positive investor sentiment returning to crypto and barring any major market downturns, we expect the volume and pace of investments to continue increasing throughout the year,” PitchBook analysts wrote in the report.&nbsp;



Big deals this week include Web3 social media platform Farcaster raising $150 million in a Series A round led by Paradigm. Other investors include a16z crypto, Haun Ventures, Variant and Standard Crypto.&nbsp;



&#8220;Since going permissionless last October, Farcaster has seen 350,000 paid sign-ups and a 50x increase in network activity,” Farcaster co-founder Dan Romero said in a <a href="https://danromero.org/farcaster-update/">statement</a> Tuesday.&nbsp;



Read more: <a href="https://blockworks.co/news/farcaster-fundraise-user-growth-developer-tools">Farcaster secures $150M to grow users, add tools for decentralized social media protocol</a>



<a href="https://blockworks.co/tag/farcaster">Farcaster</a>, the protocol behind the much-talked-about social network Warpcast, has gained significant attention in the crypto sphere this year. The company launched its Frames feature, which incorporates <a href="https://blockworks.co/tag/identity">identity</a> and payment rails, in February.&nbsp;



Also this week: EVM layer-2 Plume announced a $10 million seed funding round led by Haun Ventures. Other investors include Galaxy Ventures, Superscrypt and Portal Ventures.&nbsp;



Plume, built to bring <a href="https://blockworks.co/tag/real-world-assets">real-world assets</a> on-chain, currently has more than 80 RWA and DeFi projects building on its private testnet, the company said. <a href="https://blockworks.co/news/what-are-real-world-assets-defis-newest-yield">RWAs include collectibles</a>, alternative assets, synthetics, luxury goods and real estate.&nbsp;



“While many are attempting to solve <a href="https://blockworks.co/tag/tokenization">tokenization</a> through permissioned environments, Plume stands out by prioritizing a crypto-first approach,” Chris Yin, CEO and co-founder of Plume, said in a statement. “We operate as a permissionless chain, offering seamless compliance tooling as a notable feature.”



<h2 class="wp-block-heading">Other notable funding news</h2>



<ul class="wp-block-list">
<li>Blockless, a decentralized physical infrastructure network (<a href="https://blockworks.co/tag/depin">DePIN</a>) project, raised $8 million in pre-seed and seed funding at an undisclosed valuation. </li>



<li>Fantom Foundation on Friday announced a $10 million strategic funding round led by Korean fund Hashed. </li>



<li>Crypto firm New Form Capital is back on the scene and looking to raise a $100 million fund in the midst of the recent crypto fundraising boom, the Wall Street Journal <a href="https://www.wsj.com/articles/crypto-venture-firm-new-form-aims-to-raise-100-million-fund-eb03c940">reported</a> Monday.</li>
</ul>



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Funding Wrap: Crypto startup funding rises for second straight quarter 

<h2 class="wp-block-heading">Can’t believe it’s not botter</h2>



Farcaster’s big <a href="https://blockworks.co/news/farcaster-fundraise-user-growth-developer-tools">raise</a> came with a mission attached: Grow the number of daily active users.



But measuring DAU in anything crypto can be <a href="https://blockworks.co/news/empire-newsletter-crypto-users">really hard</a>, as returning Empire readers would know.&nbsp;



What founder Dan Romero said in his fundraising announcement <a href="https://danromero.org/farcaster-update/">post</a> is true. Farcaster, a social media protocol powering the crypto-native app Warpcast, has seen a 50x increase in network activity since last October, at least according to this Dune <a href="https://dune.com/pixelhack/farcaster">dashboard</a>.&nbsp;



And the growth doesn’t seem to be slowing. There were almost 35,000 daily unique users after <a href="https://blockworks.co/tag/farcaster">Farcaster</a>’s initial <a href="https://blockworks.co/news/farcaster-just-might-be-the-new-crypto-twitter">hype peak</a> in February. Then, after a brief lull, Farcaster beat that by 30% in March before reaching an all-time high of over 48,000 earlier this month.



Romero pledged to focus on bringing in more daily active users for the rest of the year. But it’s likely nobody knows how many active users Farcaster has — as in real people using the platform.



What’s knowable is the number of paid signups: In total, there have been more than 382,000 unique addresses interacting with Farcaster, and it’s highly likely that some individuals paid multiple times for additional Farcaster IDs.



Some of those individuals could be running botfarms to hoover up DEGEN tips, making a straight reading of Farcaster’s DAU practically infeasible.



A post from Ethereum team lead Péter Szilágyi ran through the thought experiment more directly in an X <a href="https://x.com/peter_szilagyi/status/1788145447099355301">post</a> earlier this month:



&nbsp;“Farcaster DAU printer:



&#8211; Bots pay 5$ to FC to sign up.



&#8211; Bots circle-jerk to amass DEGEN tips.



&#8211; Degen tokens cover the signup fees.



Rinse and repeat.”



DEGEN, which is unaffiliated with Farcaster, started out as an ERC-20 token for tipping other users within Warpcast’s channel community, /degen, complete with its own Blur-style points program.



It quickly took on a life of its own across the platform and is now seen as the de facto currency within the Warpcast universe, while its team has since launched their own <a href="https://blockworks.co/news/degen-layer-3-chain-outage">layer-3</a> (mostly for trading <a href="https://blockworks.co/news/community-focused-layer-3-degen-chain">memecoins</a>) that uses DEGEN as its native asset.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/dq7QCx8f2LRVhVtr73Rv-O4_UVWbGoCh9d2SZ9ARo0QsyJ-GeL9K7V-h6LlX1S1ZsoAb1G3eBCu4u84EjZ60bmL-XTk9HqhtwzvGTpY_i7B3QtW1XL224K5A2cUIfTzBe_sW9DqG4Xqdlh9RrkOo3Gk" alt=""/></figure>



Spam on Farcaster is easy to <a href="https://dune.com/queries/3035483/5046273">point</a> to, as is the case with most other networks in and around crypto. But there are also organic Warpcast communities unassociated with DEGEN seeing traction, including ones for <a href="https://warpcast.com/~/channel/dev">devs</a>, <a href="https://warpcast.com/~/channel/travel">travel</a>, <a href="https://warpcast.com/~/channel/art">art</a>, <a href="https://warpcast.com/~/channel/food">food</a>, <a href="https://warpcast.com/~/channel/lifeisgood">positivity</a> and gambling on virtual <a href="https://warpcast.com/~/channel/russianroulette">Russian roulette</a>.



Still, the steps laid out by Szilágyi are most surely being abused right now. Let’s say he is correct to the extreme and every address who tips DEGEN is a bot: There were nearly 44,000 daily unique casters yesterday, and under 16,000 unique DEGEN tippers, as shown on the above chart.



That leaves 28,000 daily users definitely not part of a bot-powered racket to capture tips from real humans by sending DEGEN amongst themselves. And that number, while lower, is growing even as DEGEN trade volumes cool.



It’s certainly possible that the same bot scheme is playing out elsewhere, boosting engagement stats in other token-driven communities, like the <a href="https://warpcast.com/~/channel/fckn">ones</a> about <a href="https://warpcast.com/~/channel/kfc">fried chicken</a>. That bot activity wouldn’t be measured by tracking DEGEN tip farming.



When I spoke to Romero in February, he expressed that Farcaster wanted to “double down on being an amazing opportunity for anyone building anything onchain to immediately go to market and find interested users.”



Romero also said the sudden growth uptick was a sign of “a ton of pent up demand by developers to be able to actually have opportunities to get distribution for their experiences that they want to build.”&nbsp;



If that includes building experiences for points-farming botnets, then who’s to stop them?



— David Canellis



<h2 class="wp-block-heading">Data Center</h2>



<ul class="wp-block-list">
<li>Daily active accounts on Degen are back <a href="https://explorer.degen.tips/stats">above</a> 300,000 after days-long unexpected downtime last week.</li>



<li>Arbitrum was <a href="https://defillama.com/dexs/chains">third</a> for daily DEX volume yesterday with $1.1 billion, behind Ethereum and Solana but ahead of BSC.</li>



<li>Global stablecoin <a href="https://defillama.com/stablecoins/chains">supplies</a> are basically flat this month, hovering between $160 billion and $161 billion. </li>



<li>ETH is holding above $3,700 after a 28% rally in the past week — but still a quarter below its November 2021 record.</li>



<li>Only TON, TRX and WIF are down over the same period, with the former losing 3%.</li>
</ul>



<h2 class="wp-block-heading">Wells, wells, wells</h2>



Uniswap Labs took a line out of Coinbase’s book yesterday and said it’s ready to fight back if the Securities and Exchange Commission takes the crypto firm to court.



Uniswap <a href="https://blockworks.co/news/uniswap-responds-to-sec-wells-notice">responded</a> to the <a href="https://blockworks.co/news/sec-issues-uniswap-wells-notice">SEC’s Wells notice</a>, calling the SEC’s claims “weak” and further referring to them as “theories” rather than allegations.&nbsp;



For the first time, we got an idea of why the <a href="https://blockworks.co/tag/sec">SEC</a> is targeting <a href="https://blockworks.co/tag/uniswap">Uniswap</a>.&nbsp;



“The SEC asserts that the Uniswap Protocol is an unregistered securities exchange controlled by Uniswap Labs, that the Uniswap interface is an unregistered securities broker-dealer, and that the UNI token is an investment contract,” Uniswap wrote.&nbsp;



That likely sounds familiar because the SEC raised similar allegations against Coinbase, Binance and, allegedly, Consensys. In a lawsuit filed in Texas, Consensys said it was also served with a Wells notice.&nbsp;



Here’s what Uniswap said: Secondary market trading through a protocol isn’t an investment contract and the volume traded is composed of bitcoin, ether, stablecoins, or foreign transactions. None of which, they argued, fall under the SEC’s jurisdiction.&nbsp;



Uniswap added that its protocol was never designed for securities trading which is a staple requirement for a, well, securities exchange. It’s also not a marketplace.



The big question, outside of when, is what the lawsuits will look like. Now that Uniswap’s revealed some of the claims being made by the SEC, it’s a lot clearer what legal action the SEC could be plotting and it’s not surprising that it falls under the same umbrella as previous actions. However, there are more precedents to back up arguments for and against the allegations.



For example, Judge Katherine Polk Failla sided with Coinbase in dismissing the SEC’s claims that its wallet service <a href="https://blockworks.co/news/judge-rules-against-coinbase-sec-dismissal">acted as an</a> unregistered broker. The crypto company wasn’t able to get other claims dropped, but this one could become important for Uniswap.&nbsp;



One argument that might not be as favorable for Uniswap is the major questions doctrine.&nbsp;



Like the allegations from the SEC, this is one tactic we’ve seen used by a few crypto companies now. However, it has yet to be successfully argued, with two judges shooting down attempts by Coinbase and Terraform Labs to use it.&nbsp;



Not only can Uniswap fall back on legal precedent — and has already started to do so in its 43-page response — but there’s also the shifting political environment to consider.&nbsp;



Bloomberg analyst James Seyffart told us <a href="https://blockworks.co/news/empire-newsletter-sec-about-face-fires-up-eth-etf-hype-loop">yesterday</a> that he believes there may be a political push behind the SEC’s sudden rush to engage with <a href="https://blockworks.co/news/sec-ether-etf-decision-soon">potential ETH ETF issuers</a>. If there is an ounce of truth to the political play here, the SEC may have to rethink its regulation-by-enforcement approach. (Note: The SEC is meant to be an apolitical regulatory body.)



But even if that playbook isn’t retired, there are still plenty of legal precedents set for the teams at Robinhood, Uniswap and Consensys to push back on.&nbsp;



As I’ve said before, if nothing’s changed and the SEC follows the timeline we saw for Coinbase, then we could see three prominent legal battles begin this summer —&nbsp;right as Coinbase and Binance celebrate their one-year anniversaries of fighting Gary Gensler’s agency.



With an <a href="https://blockworks.co/news/crypto-bills-in-house-and-senate">election</a> in November, and crypto now a political <a href="https://blockworks.co/news/donald-trump-accepts-crypto-donations-2024-election">hot potato</a>, it’ll be interesting to see what happens next.



— Katherine Ross



<h2 class="wp-block-heading">The Works</h2>



<ul class="wp-block-list">
<li>SEC Chair Gary Gensler <a href="https://www.sec.gov/news/statement/gensler-21st-century-act-05222024">said</a> a crypto market bill set for a vote today in Congress “would create new regulatory gaps and undermine decades of precedent.”</li>



<li>Reminder: That bill, the Financial Innovation and Technology for the 21st Century Act, is expected to <a href="https://blockworks.co/news/fit21-vote-expected-wednesday">receive a vote</a> this afternoon in the US House of Representatives. </li>



<li>The American Prospect reports that former House Speaker Nancy Pelosi, D-Calif., is a <a href="https://prospect.org/politics/2024-05-21-pelosi-industry-friendly-house-crypto-bill/">possible yes vote</a> on the measure — a sign of the bill’s bipartisan support. </li>



<li>Speaking of politics: Donald Trump’s campaign is <a href="https://blockworks.co/news/donald-trump-accepts-crypto-donations-2024-election">now accepting</a> crypto donations, including shiba inu, via Coinbase. </li>



<li>A Hong Kong regulator <a href="https://www.pcpd.org.hk/english/news_events/media_statements/press_20240522.html">ordered</a> Worldcoin to cease operations, accusing it of violating data privacy rules. </li>
</ul>



<h2 class="wp-block-heading">The Morning Riff</h2>



Crypto is growing old.&nbsp;



Bitcoin’s genesis block was more than 15 years ago. Vitalik Buterin was only 20 during the Ethereum initial coin offering, and now he’s in his early 30s.&nbsp;



The recent <a href="https://x.com/search?q=eigenlayer%20advisor&amp;src=typed_query">hubbub</a> about two long-standing Ethereum figures taking paychecks to advise new-kid-on-the-block EigenLayer is another sign that crypto may no longer be a young man’s game.



Much of the controversy reflects concerns around conflicts of interest: Can someone reasonably separate determining what’s good for Ethereum from what’s good for EigenLayer, if they’re being paid by both camps?



Who knows. Maybe, maybe not. What’s important is that the conflicts are disclosed, which <a href="https://x.com/drakefjustin/status/1792143477163106787">both</a> <a href="https://x.com/dankrad/status/1792741374447534083">individuals</a> have done.



Idealism, even to the point of maximalism, can make sense for those still in their early income-earning years. But as life goes on, major paychecks tend to be harder to ignore, as this <a href="https://x.com/hudsonjameson/status/1792891901860880624">post</a> from former Ethereum contributor Hudson Jameson alludes.&nbsp;



It’ll only get messier from here.



— David Canellis



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Empire Newsletter: Counting Farcaster users while Uniswap spills the SEC beans

Ben Strack

Industry heavyweights are supporting Farcaster in a big way —&nbsp;and the social media protocol now has an additional $150 million at its disposal.&nbsp;



Paradigm led Farcaster’s latest fundraise, the startup revealed Tuesday. Other participants included a16z, Haun Ventures, Union Square Ventures, Variant and Standard Crypto.



Farcaster looks to use the $150 million in capital to grow its user base and add developer tools, <a href="https://x.com/dwr/status/1792948611585831302">according</a> to co-founder Dan Romero.



Farcaster is the permissionless protocol behind the social network Warpcast. In January it launched a feature called Frames that <a href="https://blockworks.co/news/web3-watch-farcaster-nfts-memecoins">allows users to embed functionality</a> on Farcaster applications without having to leave the app.



Read more: <a href="https://blockworks.co/news/farcaster-blockchain-onboarding">Farcaster is marrying social media and Web3 to onboard the masses</a>



“We didn’t know what shape it would take, but we knew it had to be sufficiently decentralized,” Romero said of Farcaster in a blog <a href="https://danromero.org/farcaster-update/">post</a>. “We believed that if users and developers felt they were in control, they would be willing to invest their time and energy in building out the network.”



Since October, <a href="https://blockworks.co/tag/farcaster">Farcaster</a> has seen 350,000 paid sign-ups and watched its network activity increase by 50 times, the co-founder added.



Jesse Pollak, creator of Coinbase layer-2 <a href="https://blockworks.co/tag/base">Base</a>, told Blockworks in February that Farcaster’s launch of Frames likely marked “an inflection point” for the space.



“We have low-cost layer-2s, managed wallets, better identity like Farcaster, and then the social graph and feed that will get us into viral consumer growth,” Pollak said at the time. “I think it’s gonna happen faster than people anticipate and make a massive impact on the world for the better by bringing people on-chain, where they’re going to have ownership of their creativity.”



Read more: <a href="https://blockworks.co/news/social-media-farcaster-interview">Q&amp;A: Dan Romero and Jesse Pollak think this may be Farcaster’s ‘inflection point’</a>



The major fundraise comes as <a href="https://blockworks.co/news/crypto-fundraising-capital-allocation">crypto fundraising has seen an uptick</a> so far this year.&nbsp;



Crypto advisory firm Architect Partners counted 444 disclosed private financings during the first three months of 2024, totaling $3.1 billion raised.



That marked a substantial quarter-over-quarter increase in both categories, with capital raised up 36% and the number of financings rising by 77%.



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Farcaster secures $150M to grow users, add tools for decentralized social media protocol

Bessie Liu

Community-focused layer-3 network DEGEN chain launched last week, stirring interest in the memecoin community.



DEGEN chain is the brainchild of Jacek Trociński. After leaving his job as a data engineer and architect at Hedgehog Technologies in November last year, Trociński began thinking of ways to build his own business. At the time, Farcaster, a decentralized social network, was gaining momentum, and Trociński became more active in the degen channel on the app.



According to Trociński, the degen space on Farcaster was not an extremely popular channel when it first launched and was filled with many builder personas. This began to change in December after someone created a points token.&nbsp;



“All of a sudden, people just started piling into the channel,” Trociński told Blockworks. “That ended up kind of crumbling. Then they created a different token, and it ended up getting hacked, and then someone created a wowow token. I don’t know what happened with that; I think it just kind of fizzled out. But these tokens were just getting astronomic inflows in a very short time span…so I started realizing, well there’s something going on here.”



Read more: <a href="https://blockworks.co/news/social-media-farcaster-interview">Q&amp;A: Dan Romero and Jesse Pollak think this may be Farcaster’s ‘inflection point’</a>



Trociński began working on a token with similar tokenomics to Blur’s token (<a href="https://blockworks.co/price/blur">BLUR</a>) and Uniswap’s token (<a href="https://blockworks.co/price/uni">UNI</a>), eventually launching it on Jan. 8. The idea behind the token would be that users could earn points if they were active in the channel. Points were awarded to users who received likes and comments on their posts or if users held certain <a href="https://blockworks.co/tag/nfts">NFTs</a>.



One point always equated to one DEGEN token, and users were rewarded through an <a href="https://blockworks.co/tag/airdrop">airdrop</a>. With a growing community interest, Trociński noted that more developers began building applications using DEGEN as its native token.



Read more: <a href="https://blockworks.co/news/layer-3-loyalty-points-base">Stack ‘points chain’ layer-3 aims to bring loyalty points to Base</a>



“I think they are using DEGEN as the token for various reasons. One is the community, the other is that it is hard to launch a token. There’s a lot of legal issues around tokens, and there’s also a lot of things like trade and liquidity pools…I think [projects] want to focus on building an app, not a token,” he said.&nbsp;



DEGEN chain itself launched as a layer-3 blockchain to enable community members of DEGEN to enable customization, Trociński explained. He noted that the chain itself is not designed to be able to do anything “technologically different” but act as an “application layer chain.”



“If the community wants, I don’t know, <a href="https://blockworks.co/tag/farcaster">Farcaster</a> pre-compiles, so instead of calling a smart contract, you could have it natively in the blockchain level as a function…we can add that customization,” he said. “I think it makes a lot of sense for us to do some level of customizations, but not necessarily innovate in the way <a href="https://blockworks.co/news/blast-developers-layer-2-liquidity">that say Blast is innovating </a>or OP is innovating.”



Trociński remarks that if the DEGEN chain becomes a <a href="https://blockworks.co/tag/meme-coins">memecoin</a> chain that enables applications to build games and design fun applications, then it will become extremely valuable.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-leaders-insist-on-memecoin-utility">Web3 Watch: Crypto leaders insist memecoins have a purpose</a>



Although Trociński likes the idea of being part of <a href="https://blockworks.co/news/optimism-bedrock-upgrade-superchain">Optimism’s superchain vision</a>, he noted that the OP stack itself did not offer native gas tokens.



“One of the things I really, really wanted was for DEGEN chain to have DEGEN as the native gas token,” he said. 



For this reason, the DEGEN chain itself is built as an Arbitrum Orbit chain, which settles on <a href="https://blockworks.co/tag/base">Base</a> and uses AnyTrust for data availability.



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What is DEGEN chain? The L3 built for the memecoin community DEGEN

Michael McSweeney

<h2 class="wp-block-heading">The Fed: Custodia can’t sit with us&nbsp;</h2>



A judge last week sided with the Federal Reserve in the Custodia Bank lawsuit, confirming that the central bank is under no obligation to grant master account access and membership to all eligible institutions.&nbsp;



Wyoming-based Custodia first brought legal action almost two years ago as the Kansas City Fed dragged its feet on making a decision about Custodia’s membership application. Master accounts allow banks instant access to services like clearing and wire transfers directly from the Fed, meaning institutions don’t have to go through intermediaries.&nbsp;



When Custodia’s application was denied in early 2023, Custodia’s legal team pivoted and amended the suit, arguing that the Fed’s board of governors had a hand in the regional bank’s rejection.&nbsp;



Read more: <a href="https://blockworks.co/news/banking-sector-uncertainty-crypto">What banking sector uncertainty could mean for crypto markets</a>



Judge Scott Skavdahl disagreed, stating that there was no evidence that Kansas City officials didn’t reach their decision on their own. Skavdahl said they were completely within their right to reject any application they want, even if the bank does fit the master account requirements.&nbsp;



Custodia’s team said they are considering their “options” and an appeal is not off the table. Sounds like an expensive uphill battle.&nbsp;



The Fed frequently rejects master account applications, and now a federal judge has established a precedent stating that they are allowed to do just that. It’s hard to imagine where Custodia could go from here, but founder and CEO Caitlin Long has never been known to back down from a challenge.&nbsp;



Long didn’t issue any posts on X herself, but she did re-post a series of messages supporting her bank, including one that likened the whole situation to another “Operation Chokepoint” scenario.&nbsp;



The so-called Chokepoint 2.0 — the idea that the federal government is strategically blocking crypto’s access to banking services — has been a conspiracy in the crypto space for years. The narrative especially picked up steam in 2023 when crypto-friendly banks Silvergate and Signature shuttered.&nbsp;



Read more: <a href="https://blockworks.co/news/custodia-banking-bitcoin-custody">Custodia Bank debuts segregated custody accounts service</a>



“What began as a trickle is now a flood: The US government is using the <a href="https://blockworks.co/tag/banking">banking</a> sector to organize a sophisticated, widespread crackdown against the crypto industry,” Nic Carter, a long-time crypto supporter and venture capitalist, wrote in a 2023 <a href="https://www.piratewires.com/p/crypto-choke-point">blog post</a>.



Wyoming Senator and crypto-champion Cynthia Lummis <a href="https://x.com/SenLummis/status/1773836427177955566?s=20">chimed in</a> on the court’s Custodia decision, stating that the <a href="https://blockworks.co/tag/federal-reserve">Fed</a>’s denial is “unacceptable” and Skavdahl’s ruling “goes against clear laws enacted by Congress.”&nbsp;



At this point, Custodia’s best bet is probably a federal law requiring regional Fed branches to approve applications that meet the requirements — perhaps an effort <a href="https://blockworks.co/tag/cynthia-lummis">Lummis</a> will spearhead — although we know bills never move fast in DC, <a href="https://blockworks.co/news/crypto-super-pacs-election-primaries">especially in an election year</a>.&nbsp;



– Casey Wagner



<h2 class="wp-block-heading">Data Center</h2>



<ul class="wp-block-list">
<li><a href="https://defillama.com/dexs">DeFiLlama</a> reports $261 billion in decentralized exchange volume across all blockchains in March.</li>



<li>Crypto security firm PeckShield <a href="https://twitter.com/PeckShieldAlert/status/1774701695895027920">said</a> that among the more than 30 hacks across the crypto space in March, roughly $188 million was lost — with about $98 million recovered.&nbsp;</li>



<li>NFT marketplace Magic Eden’s volumes grew nearly 200% in the past month, according to<a href="https://dappradar.com/rankings/nft/marketplaces?range=month"> DappRadar</a>.</li>



<li>The major US crypto stocks — COIN and MSTR — are down, 1% and 5% respectively, in pre-market trading.</li>



<li>Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) is <a href="https://www.tradingview.com/chart/?symbol=BITSTAMP%3ABTCUSD">trading</a> just below $70,000 this morning.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">In the eye of the Tornado Cash storm</h2>



The <a href="https://blockworks.co/tag/tornado-cash">Tornado Cash</a> saga continues.



As Roman Storm’s team filed a motion to dismiss, Dutch prosecutors are <a href="https://www.coindesk.com/policy/2024/03/27/dutch-prosecutors-seek-64-month-jail-sentence-for-tornado-cash-dev-alexey-pertsev/">reportedly</a> eyeing a 64-month sentence for the developer.



Storm’s team <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.604938/gov.uscourts.nysd.604938.30.0.pdf">argued</a> that Tornado Cash was “immutable and publicly available” and therefore Storm and others who worked on Tornado Cash couldn’t prevent a “sanctioned entity” from using Tornado Cash.&nbsp;



“It is well established that computer code is speech the First Amendment protects. Yet, all three counts here seek to criminalize the development and publication of code and the maintenance of a website that provided open-source software,” Storm’s team wrote.



Pertsev, in the Netherlands, <a href="https://blockworks.co/news/bank-secrecy-act-doj-kucoin">faced lines of questioning</a> from a panel of judges last week about open-source coding and why Pertsev had to make a smart contract’s source code public when deploying the contract, <a href="https://twitter.com/ameensol/status/1772655426171023564">according</a> to Ethereum developer Ameen Soleimani.&nbsp;



Storm was arrested in August of last year, and the motion to dismiss alleges that Storm had met with and tried to work with law enforcement prior to his arrest.&nbsp;



Read more: <a href="https://blockworks.co/news/tornado-cash-fans-appeal">Tornado Cash plaintiffs seek appeals after federal court losses</a>



The Treasury <a href="https://blockworks.co/news/judge-backs-us-treasury-tornado-cash-sanction">announced sanctions against Tornado Cash</a> in 2022, alleging that the service allowed for the laundering of over $7 billion in crypto. Tornado Cash has been used to hide some activity on the blockchain.&nbsp;



The open cases against developers of Tornado Cash are setting the stage for a much larger fight about the future of mixers. The US and Dutch governments are arguing that the service is dangerous, with the US going so far as to declare that it’s a national security issue.&nbsp;



However, the long-standing <a href="https://www.coincenter.org/u-s-treasury-sanction-of-privacy-tools-places-sweeping-restrictions-on-all-americans/">arguments</a> — made since Tornado Cash was sanctioned two years ago — are that the service doesn’t lean towards the bad or the good, and is inherently neutral, like a VPN.&nbsp;



From our oped section: <a href="https://blockworks.co/news/tornado-cash-privacy-prevention">Tornado Cash got wrecked, and we could have prevented it</a>



The May sentencing of Pertsev, and the court’s decision on the motion to dismiss, will bring the back and forth around the service to a head once and for all.



– Katherine Ross



<h2 class="wp-block-heading">The far-seeing unicorn?</h2>



<a href="https://blockworks.co/news/social-media-farcaster-interview">The startup behind Farcaster</a>, the decentralized social media protocol, has reportedly scored a $1 billion valuation in a new funding round.&nbsp;



<a href="https://www.bloomberg.com/news/articles/2024-03-30/crypto-social-media-firm-merkle-sees-1-billion-valuation-in-paradigm-deal?utm_content=crypto&amp;utm_source=twitter&amp;utm_campaign=socialflow-organic&amp;utm_medium=social&amp;embedded-checkout=true">According</a> to Bloomberg, the funding round for Merkle Manufactory is led by Paradigm, the crypto investment firm. It’s not known precisely how much the firm will raise; it garnered a $30 million seed round in 2022, <a href="https://www.crunchbase.com/organization/merkle-manufactory">per</a> Crunchbase data.&nbsp;



By all accounts, <a href="https://blockworks.co/tag/farcaster">Farcaster</a>’s star appears to be rising. The protocol’s bid to become <a href="https://blockworks.co/news/farcaster-just-might-be-the-new-crypto-twitter">a new town square for crypto</a> was buoyed by the launch of Frames in January. Co-founder Dan Romero said yesterday that the platform scored a new high for daily active users. “70K+ DAU yesterday. New record,” he wrote.



Read more: <a href="https://blockworks.co/tag/farcaster">Farcaster is marrying social media and Web3 to onboard the masses</a>



It’s tempting to draw a connection between apparent success and the seeming troubles over at Elon Musk’s X, formerly Twitter. As NBC detailed, one data-tracking service recently claimed that X’s global daily active user count <a href="https://www.nbcnews.com/tech/tech-news/fewer-people-using-elon-musks-x-struggles-keep-users-rcna144115">tumbled</a> in February —&nbsp;174 million, a decline of 15% from a year before. X claimed a different, higher number for DAUs: 250 million globally.&nbsp;&nbsp;



Meanwhile, much ink has been spilled over X’s advertiser exodus, driven in no small part by <a href="https://blockworks.co/tag/elon-musk">Musk</a>’s <a href="https://blockworks.co/news/x-removes-nft-profile-pics">controversial behavior</a> on the site.&nbsp;



As Business Insider reports, Musk’s electric car company, Tesla, recently <a href="https://www.businessinsider.com/elon-musk-x-twitter-advertisers-ad-problems-solution-tesla-2024-3">bought</a> ads on X.&nbsp;



Does Farcaster’s reported unicorn round reflect the blood in the social media water? Perhaps. It could just as easily further signal that the positive vibes are indeed back in the crypto world and investors are once again eager to sign big checks for noteworthy projects. We might gain further insight once additional information about the funding round drops.



Stay tuned.&nbsp;



– Michael McSweeney



<h2 class="wp-block-heading">The Works</h2>



<ul class="wp-block-list">
<li>Social media platform Telegram is<a href="https://telegram.org/blog/monetization-for-channels?ln=r"> </a>now <a href="https://telegram.org/blog/monetization-for-channels?ln=r">accepting</a> TONcoin for advertising, as part of a revenue sharing announcement over the weekend.</li>



<li>The Wall Street Journal<a href="https://www.wsj.com/finance/currencies/crypto-fuelsrussian-shadow-trade-for-weapons-parts-1bfdc1a1"> reports</a> that middlemen in Russia used USDT to purchase weapons manufacturing components and avoid US sanctions.</li>



<li>BitKub, Thailand’s biggest crypto exchange, is aiming to go public next year,<a href="https://www.bloomberg.com/news/articles/2024-04-01/thailand-s-biggest-crypto-exchange-hiring-advisers-for-2025-ipo?embedded-checkout=true"> according </a>to its CEO.</li>



<li>The Biden administration is<a href="https://www.axios.com/2024/04/01/biden-energy-ai-nuclear-power"> pushing</a> big tech companies to explore new ways to generate electricity as <a href="https://blockworks.co/tag/artificial-intelligence">AI</a> fuels a power consumption surge.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">The Morning Riff</h2>



Stop “poo-pooing” <a href="https://blockworks.co/tag/meme-coins">memecoins</a>, says Arthur Hayes.



The former CEO of BitMEX argued that memecoins add value because “the chains that support this culture are going to be the chains that have value.”



He added that the coins bring “attention and more engineers to the space,” setting up opposition to Vitalik Buterin’s argument that there isn’t anything “new and interesting” about memecoins.



Read more: <a href="https://blockworks.co/news/crypto-leaders-insist-on-memecoin-utility">Web3 Watch: Crypto leaders insist memecoins have a purpose</a>



Check out what Hayes had to say on <a href="https://www.youtube.com/watch?v=VGlCevPdFKU&amp;t=3280s">YouTube</a>:



<iframe loading="lazy" width="560" height="315" src="https://www.youtube.com/embed/VGlCevPdFKU?si=ieXO1z6KmFkUGMMB&amp;start=3282" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>







– Katherine Ross



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Why Custodia’s loss isn’t the end of its Fed fight

The social media protocol Farcaster generated a lot of buzz this week, driven by the success of its X-like client, Warpcaster.&nbsp;



The standard version of the story goes something like this: In late January, Farcaster released Frames, a feature that lets external sources be natively displayed within the Warpcast feed. This bit of technology allows developers to build cool things, such as in-app Girl Scout cookies order flows. As a result, users have flocked to what might become crypto’s <a href="https://blockworks.co/news/farcaster-just-might-be-the-new-crypto-twitter">new public square</a>.



This is all true, but the app also comes out of crypto, where the potential for profit is often a driver of user interest. Much of the Farcaster coverage this week showed this graph of Farcaster’s parabolic usage growth:



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1192" height="916" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=1024&amp;h=1024" alt="" class="wp-image-79918" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=1192 1192w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=334 334w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=340 340w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=285 285w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/Screenshot-2024-02-11-at-1.33.52-AM.png?w=80 80w" sizes="(max-width: 1192px) 100vw, 1192px" /></figure>



Data from the same Dune Analytics <a href="https://dune.com/pixelhack/farcaster">dashboard</a> shows that each of the 10 most popular posts (casts) this week used Frames to promote NFTs and other assets. Many of the posts required users to like and recast in exchange for a free mint.&nbsp;



Some Warpcasters have taken notice. A host of the /replyguys channel <a href="https://warpcast.com/tervo/0xb69a610f">complained</a> they saw “channels be inundated with [altcoin references] over [the] past two days.”



In an interview with Blockworks this week, Farcaster co-founder Dan Romero said he wasn’t overly concerned about financialization on Warpcast and other Farcaster clients.



“Distribution is distribution. I think in the case of crypto, obviously, if you have a wallet, there’s naturally going to be probably a bit more financialization for some of the use cases,” Romero said.



“But I want to emphasize this: I think some of the most creative Frames aren’t overly financialized,” Romero continued.



Read more: <a href="https://blockworks.co/news/social-media-farcaster-interview">Q&amp;A: Dan Romero and Jesse Pollak think this may be Farcaster’s ‘inflection point’</a>



<h2 class="wp-block-heading">NBA sued over Mark Cuban’s Voyager deal</h2>



The NBA was “grossly negligent” in not blocking a promotional deal between now-bankrupt crypto firm Voyager Digital and the Dallas Mavericks, a class action suit filed in a Miami district court <a href="https://www.courtlistener.com/docket/68229938/1/karnas-v-mccarter-english-llp/">argues</a>.



The suit alleges the NBA had a responsibility to review all marketing campaigns pertaining to the league, including Voyager’s with the Mavericks and owner Mark Cuban.&nbsp;



The Mavericks announced a five-year exclusive <a href="https://www.mavs.com/mavsvoyager/">partnership</a> with Voyager in 2021, offering fans $100 in crypto for signing up to the platform. Cuban and Voyager CEO Stephen Erlich <a href="https://www.dallasnews.com/sports/mavericks/2021/10/27/mark-cuban-mavs-partner-with-voyager-cryptocurrency-platform-in-teams-first-international-deal/">promoted</a> the deal at a press conference with several Mavericks players. Cuban <a href="https://brownrudnick.com/news_post/firm-defends-mark-cuban-and-mavs-in-voyager-digital-lawsuit/">faces</a> a class action suit of his own for his Voyager promotion.



<a href="https://blockworks.co/news/voyager-files-for-bankruptcy-days-after-freezing-withdrawals">Voyager filed for bankruptcy</a> in mid-2022 during the fallout from the collapse of crypto hedge fund Three Arrows Capital.



Read more: <a href="https://blockworks.co/news/mark-cuban-to-be-deposed-next-month-in-voyager-ponzi-suit">Mark Cuban To Be Deposed Next Month in Voyager ‘Ponzi’ Suit</a>



Voyager’s law firm, McCarter &amp; English, is also named in the suit. It’s the latest in a series of lawsuits athletes, sports teams, and now leagues have faced over ties to crypto firms.



Read more: <a href="https://blockworks.co/news/golden-state-warriors-lawsuit-ftx">Golden State Warriors, Steph Curry face class-action lawsuit from FTX investors</a>



<h2 class="wp-block-heading">One interesting stat:</h2>



<ul class="wp-block-list">
<li>NFT collection Nobody, which <a href="https://nobody.xyz/">uses</a> generative AI to let owners chat with their NFT characters, <a href="https://defillama.com/nfts">saw</a> 11,208 ether in sales volume this week, according to DeFiLlama. The next-most traded collection did under 3,000 ether in volume.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">Also of note:</h2>



<ul class="wp-block-list">
<li>Mastercard <a href="https://www.mastercard.com/news/europe/en/newsroom/press-releases/en/2024/mastercard-launches-its-web3-uefa-champions-league-trivia-competition/">announced</a> a “Web3 powered trivia competition” where users can compete for UEFA Champions League match tickets in trivia contests unlocked with an NFT pass.&nbsp;</li>



<li>The NEAR Foundation and D3 Global are applying to <a href="https://blockworks.co/news/near-foundation-top-level-domain">create a .near top-level domain (TLD).</a></li>



<li>The Avalanche-built first-person shooter game Shrapnel launched early access for some users on the Epic Games <a href="https://store.epicgames.com/en-US/p/shrapnel-e59542">store</a>.</li>
</ul>



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Web3 Watch: Farcaster’s most popular posts are NFT and altcoin promos

Molly Jane Zuckerman

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="256" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024&amp;h=1024" alt="" class="wp-image-60166" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



It&#8217;s beginning to feel like there is no escaping Farcaster.



Other decentralized social media platforms are larger. For instance, Mastodon boasts 8.7 million users, and Bluesky is nearing 4 million after opening to the public this week. In contrast, Farcaster lags with just tens of thousands of users, despite having launched back in 2020. Yet, it seems like all of crypto has suddenly discovered this app.



Since Elon Musk bought X (and arguably quite a bit before that), the wider crypto community has been exploring different Web3 platforms that might give them what they want better than X can —&nbsp;namely, a place to talk about crypto without being spammed by fake airdrop bots, or more recently, lewd pictures of a certain Canadian rapper.&nbsp;



But while other social media apps have had some measure of success, it seems that nothing has really stuck. In the non-Web3 world, Instagram’s launch of Threads managed to get a massive number of users incredibly quickly, but the app is now essentially a wasteland, only populated by big brands. Friend.tech, which took the whole Web3 thing quite seriously by monetizing your profile, <a href="https://blockworks.co/news/friendtech-downturn-socialfi">nosedived</a> after its initial popularity. And Bluesky, whose users (including myself) really pushed to make it a thing, just still isn’t really a thing. (I’m purposely leaving out Lens Protocol, as it’s still in beta and I never managed to get an invite code.)



Read more: <a href="https://blockworks.co/news/farcaster-blockchain-onboarding">Farcaster is marrying social media and Web3 to onboard the masses</a>



As a crypto journalist, I’m quite sick of the current version of X myself, though I&#8217;ve been cautiously optimistic about each new social media platform that I’ve tried. In an ideal world, I’d be able to go on this new app, find sources for my journalism job, laugh at jokes that aren’t wildly offensive, and even learn new things from strangers’ posts. With X as it stands, this all isn’t possible.



With <a href="https://blockworks.co/news/farcaster-blockchain-onboarding">Farcaster</a> (so far), it’s looking like it is.&nbsp;



Now, I’m not saying that Farcaster is the app that’s going to replace X for the masses. Far from it. In fact, the Farcaster channels that are not about crypto always somehow seem to sneak crypto in there. The /food channel is active, but people are shilling the $Degen token among recipes. The /books channel has callout for crypto trading advice, /space has a post about a new space token funding a space mission, /fitness has chatter about a workout tracker blockchain app.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/crypto-subculture-x-reliance">If we want crypto to succeed, we’ve got to give X the boot</a>



The crypto draw is undeniably huge — there are barely any users in the /dogs and /cats channels, but tons of people in cat-NFT channels and of course, the DOGE channel. All of this is to say that Farcaster, despite its promise for you to “find your tribe,” does seem to limit those tribes to crypto ones.&nbsp;



But it’s this preponderance of crypto in every channel that might be a sign that Farcaster is actually poised to become the new crypto town square, just like Blueskye and Friend.tech had promised.&nbsp;



As Paul Dylan-Ennis <a href="https://blockworks.co/news/crypto-subculture-x-reliance">wrote back</a> in September of last year, for crypto to succeed in the mainstream, it has to rid itself of its poisonous relationship with X. The only way forward to rehabilitate crypto’s reputation, he noted, is for crypto to shed the bad habits enabled by Web2 platforms like X, and instead return to its subculture roots.&nbsp;



“Then maybe, just maybe, when people come across us again, they’ll find a group of people living according to their values and be able to see the good in those values for themselves.”



This isn’t to say that <a href="http://blockworks.co/tag/farcaster">Farcaster</a> is a utopia of crypto camaraderie. In the few days that I’ve played around on the app, I’ve seen my fair share of meaningless airdrop farming and memecoin shilling. And, I hate to say it, but it is still too early to say with certainty if Farcaster is definitely the one that’s going to stick around — no big news sites are on it yet (Bloomberg still posts daily on Bluesky, for comparison), and while the recently launched Frames are a big draw, they’re such a new addition that people haven’t fully figured out all the ways to experiment with them. 



However, Farcaster’s current success is taking place in a new crypto climate. Unlike the brief fads of other decentralized social media platforms, crypto’s new obsession with the app takes place with Bitcoin at a high, bitcoin ETFs finally approved and the stigma of big court cases like Sam Bankman-Fried and Changpeng “CZ” Zhao having faded from public consciousness.&nbsp;



This combination of factors may be <a href="https://blockworks.co/news/social-media-farcaster-interview">what’s needed for Farcaster to cement its place</a> as crypto’s new favorite stomping ground. Or maybe I’m just caught up in the hype, and crypto will remember Farcaster with the same fondness that we all remember Clubhouse and BeReal. Nothing more than a brief blip in our continual search for new, better ways to entertain ourselves online.



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I don’t care much about tech, I don’t care a whole lot about finance, either. I care about writing stories and watching weird things unfold. And that’s why I’ve ended up in crypto. But because I’m missing that passion for what crypto and blockchain are all about — finance, tech, privacy, yadda yadda — I’m going to write instead about what I am actually interested in. Everything about crypto that has very little to do with crypto. That’s what this column will be about. All the tangential stories that come out of the blockchain and crypto space, what I think about them, and how I navigate it all as a skeptical former Russian literature major. It’s precisely my perch as an outsider that lets me do what I do: Opine on all sides of any crypto issue, no strings attached, no skin in the game. If you want to talk crypto with me, let’s go off topic.



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Farcaster just might be the new Crypto Twitter

Following the launch of Frames, Farcaster, the protocol behind the much-talked-about social network Warpcast, has gained significant attention in the crypto sphere.



Frames is a feature that enables users to embed functionality on Farcaster applications without having to leave the app itself.



This may sound simple at first glance, but is something that was not achievable on previously popular Web2 social media platforms like Facebook.



In an interview with Blockworks, Antonio García Martínez, a former product manager at Facebook and founder of Spindl, noted that in Facebook’s earlier days, the social network wanted to create ways to incorporate ways you could interact with siloed media experiences on its platform.&nbsp;



Read more: <a href="https://blockworks.co/news/social-media-farcaster-interview">Q&amp;A: Dan Romero and Jesse Pollak think this may be Farcaster’s ‘inflection point’</a>



“<a href="https://blockworks.co/tag/facebook">Facebook</a> used to be the one social network that everyone was on, and the idea was you would have, like, a Spotify player with a play button on your feed when your friends share what they are listening to or something like it, but it never quite came together,” Martínez said.



The latest Frames feature is the first step in making this dream a reality. With blockchain technology that incorporates aspects such as <a href="https://blockworks.co/tag/identity">identity</a>, money and payment rails, developers are now able to use it to interact with apps outside of it and create in-context experiences.



“The cool thing about it from a marketer’s perspective, is the typical user funnel — clicking on one thing, going somewhere else, putting in my financial credentials — all of that gets compressed down to just this nexus of the social layer,” Martínez said.



The reason this is possible is that when a user is signing up for a <a href="https://blockworks.co/tag/farcaster">Farcaster</a> application — like Warpcast — Farcaster creates an underlying <a href="https://blockworks.co/tag/wallets">wallet</a> for that account that can be connected or associated with a real wallet.&nbsp;



Although at this point in time on-chain transactions are not yet a functionality on Frames, it is something that Martínez believes will happen in the near future.



<h2 class="wp-block-heading">Biggest consumer app in Web3?</h2>



Martínez notes that in <a href="https://blockworks.co/tag/web3">Web3</a> today there has yet to be a popular consumer app, and mainstream users are unlikely to use a product for its cryptocurrency features.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-infrastructure-lacking-apps">The crypto infrastructure is here, but where are the apps?</a>



What is important, though, is being able to create products that enable users to interact with experiences that they would not otherwise be able to access on Web2, like group listening through a music provider, Martínez said.



“There’s a lot of excitement, but you know 20,000 new users on Farcaster is pretty small in the scheme of things, it’s not even a rounding error on the Facebook dashboard, but we’ll see, it’s growing pretty fast,” he said.



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Farcaster is marrying social media and Web3 to onboard the masses

Social media protocol Farcaster saw its active users <a href="https://dune.com/pixelhack/farcaster">increase</a> by nearly a factor of ten after it released Frames, a feature allowing apps to run inside of posts on Warpcast.



Frames launched Jan. 26 on Warpcast, an X-like client built atop Farcaster by the Farcaster team. Frames allow small apps to run natively, sometimes with crypto rails, within the Warpcast feed. It spawned a raft of <a href="https://x.com/AlanaDLevin/status/1752017315867083101?s=20">hackathons</a> and in-app Girl Scout cookie <a href="https://warpcast.com/cookie/0x35bbc5a0">orders</a> — alongside <a href="https://warpcast.com/~/channel/degen">speculators</a> hoping for airdrops.



Blockworks spoke with <a href="https://blockworks.co/tag/farcaster">Farcaster</a> co-founder Dan Romero and Base founder Jesse Pollak about Farcaster’s big couple weeks and plans for the future.



Keep reading for excerpts from Blockworks’ interview.&nbsp;



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Blockworks: Let’s start with Frames because that&#8217;s really been the story of the past week and a half. Walk me through the new feature.



Romero: Frames make a cast, our version of a post, interactive. That&#8217;s the simplest way to describe it.&nbsp;



Frames allows you to display an image and then up to four buttons or a text box. That canvas, even though it&#8217;s so simple, allows developers full creative freedom to build whatever they want, and it will natively show up within Farcaster apps like Warpcast.



Blockworks: I want to gauge your thoughts on financialization in consumer crypto apps. Frames let you interact with assets, but there are also polls and other things. So how do you balance the financial and non-financial aspects?&nbsp;



Romero: The way I think about Farcaster is, we wanted to build a credibly neutral social network. That means developers have permissionless access to everything on the network, can permissionless build on the network, and ultimately if it works, it provides distribution. Importantly, that distribution belongs to the person doing the distributing.



And so I think in a world where that works — and you know, it&#8217;s taken us a while to even get kind of on the map, three years of banging your head against the wall in some ways — the usage of that distribution is going to mimic everything that happens on Twitter, right? Distribution is distribution.



I think in the case of crypto, obviously, if you have a wallet, there’s naturally going to be probably a bit more financialization for some of the use cases.&nbsp;



But I want to emphasize this: I think some of the most creative Frames aren&#8217;t overly financialized.&nbsp;



5/9 is a pretty well known anon crypto developer on Twitter. That person <a href="https://warpcast.com/fiveoutofnine.eth/0x5021acbb">built</a> a frame: on-chain chess, and if you beat the computer, you get an NFT. So I don&#8217;t think anyone would look at that and say, ‘Oh, that&#8217;s hyper-financialization.’ It’s more, ‘Oh cool, I can play around with this app, and if I win I get a little marker that says yeah, I’m actually good at chess.’



Read more: <a href="https://blockworks.co/news/a16z-backed-social-dao">Web3 Watch: A16z-backed Scene Infrastructure Company hopes to show crypto is ‘not just money’</a>



If you give developers something to play with, they&#8217;re going to surprise you with their creativity, and I actually think if Farcaster works, it will shift the narrative around crypto from purely this kind of speculative, financialized thing to — it&#8217;s like the internet, you can do anything you want with this new platform and actually emphasize the idea that you as a consumer or user can have real ownership in whatever experience you&#8217;re working with.



Blockworks: Warpcast is a client of the Farcaster protocol, whereas if you look at X, the protocol and the client are collapsed. That&#8217;s a distinction that I can make, but why does that actually matter?&nbsp;



Romero: So to do a little history lesson, Twitter was not always like that. The original Twitter mobile apps were all third party clients. Twitter only had a website and they had an open API and there was a lot of innovation in the early days of Twitter — retweets, quote tweets, hashtags, “@” replies — all not native originally on Twitter, invented by third party developers.



I think it&#8217;s easy to forget that when you actually have a marketplace of ideas and any developer with a good idea can permissionlessly just go and build a new app on top of a protocol, you get way more innovation, better consumer experience, more consumer choice.&nbsp;



Someone was trading messages with me yesterday saying ‘Hey, do you support not safe for work content on Warpcast?’ And I said no, we don&#8217;t. A) we’re 12 people, we don&#8217;t have the team to do that kind of content moderation and B) it&#8217;s probably going to get us in trouble with Apple.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-subculture-x-reliance">If we want crypto to succeed, we’ve got to give X the boot</a>



The reality is you don&#8217;t have to ask my permission. If you want to go build that type of client, maybe you go build a website that&#8217;s responsible in that sense, like you can get in some pretty gnarly stuff, but no one has to ask to add that to Farcaster.



Warpcast, just like an email client, can decide what content is shown to our users by default in the same way that an email client like Gmail can decide what is spam, but that&#8217;s not a universal policy.&nbsp;



A world where we can get to many different clients that suit many different communities and niches, I think that&#8217;s really powerful.



Blockworks: Ten years down the line, if we&#8217;re living in the Farcaster version of the internet, what does that look like? How&#8217;s it different from today?&nbsp;



Romero: A billion-plus daily active users of the protocol, thousands of apps and services and any interest you have or any quirk in terms of the way you wish something existed.



And I think in a world where Farcaster achieves the kind of vision that we have is that every single one of those Farcaster users is on-chain, so every time someone is coming onto Farcaster, they have an <a href="https://blockworks.co/tag/ethereum">Ethereum</a> wallet created under the hood.



With Frames, I think increasingly you&#8217;re going to see ways for people to have their first on-chain experience in a totally seamless way and the vast majority of those are going to end up on <a href="https://blockworks.co/tag/base">Base</a>.&nbsp;



If Farcaster achieves what we&#8217;re hoping to achieve over the next 10 years, maybe 80% of Americans have some type of crypto, whether they think about it as crypto or not. It could be a Taylor Swift ticket that&#8217;s a collectible, that&#8217;s fine. You don&#8217;t have to know how an ERC-721 works.



Pollak: Yeah, and it&#8217;s happening fast. I feel like we&#8217;ve all been saying for the last few years, ‘Oh, we&#8217;re getting close to the inflection point where we&#8217;re gonna start to see real product growth.’&nbsp;



I really feel and I think a lot of the other people feel like two Fridays ago was that inflection point when Farcaster launched Frames, in that we now finally have all the tools.



We have low-cost layer-2s, managed wallets, better identity like Farcaster, and then the social graph and feed that will get us into viral consumer growth. I think it&#8217;s gonna happen faster than people anticipate and make a massive impact on the world for the better by bringing people on-chain, where they&#8217;re going to have ownership of their creativity.&nbsp;



They can get paid for it, they&#8217;re gonna have a graph that&#8217;s theirs, they can&#8217;t be de-platformed by these large centralized corporations, and everything&#8217;s going to be open source, transparent and decentralized, which is going to be a much stronger platform for enabling developers to build these next-generation applications because they know that they&#8217;ll always have the right to build for these users as well.&nbsp;



Read more: <a href="https://blockworks.co/news/friend-tech-copycats">Friend.tech copycats eager to capitalize on social finance craze</a>



Romero: Yeah, I think that&#8217;s really important. The last 10-15 years, there was this initial gold rush with mobile and it was this totally new paradigm for developers. As that S-curve adoption curve has matured, there&#8217;s been a lot more value extraction from the platforms themselves, whether that&#8217;s cutting off the access for APIs at both Meta and and Twitter or the app stores.



I&#8217;m optimistic that in a world where the platform is, at its root, a transparent permissionless public blockchain, developers actually have a lot more freedom and that means consumers have a lot more choice.&nbsp;



I think it&#8217;s a huge net positive for the world, but I think to reverse a trend of centralization is actually a pretty rare thing. I don&#8217;t even know if I can think of a historical example. There&#8217;s a great book called The Master Switch that talks about every new communications technology that comes out start[ing as] decentralized and ends up very, very centralized.&nbsp;



I&#8217;d like to think that crypto could be the exception to the rule, where by pushing the core of these big networks to a credibly neutral decentralized platform like Farcaster, you actually remove the ‘don&#8217;t be evil’ thing that the companies say and you move to something like ‘can&#8217;t be evil.’



This interview was edited for brevity and clarity.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.