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IP-Backed Meme Token CAT Bags Binance Spot Listing, Spiking Bullish Sentiment

Open interest in the token’s future products nearly doubled to over $60 million, showing a bump in expectations of further volatility with a bullish bias.

IP-backed memecoin Simon’s Cat (CAT) surged 50% Monday after becoming the first cat-themed token to get a coveted Binance spot listing — amid some meme tokens taking the plagiarism heat.

CAT zoomed from $0.000039 to a record peak of $0.000067 in early Asian hours Tuesday, data shows, before paring gains. Trading volumes rose tenfold from $55 million to over $500 million.

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Open interest in the token’s future products nearly doubled to over $60 million, showing a bump in expectations of further volatility with a bullish bias.

Binance said Monday it would offer airdrops of CAT to users of their Earn products who staked specific amounts of BNB tokens last week. It would then list 1000CAT (where a single token holds a thousand CAT) at 09:00 UTC later on Tuesday.

CAT is the official token of Simon’s Cat, an animated series about a hungry house cat and its adventures, with over 20 million followers across YouTube, Facebook, and Instagram.

Comparisons with other cat-themed memecoins like Popcat, MOG, and MEW often place CAT at a perceived undervaluation due to its spot listings and IP backing, among other reasons. Data shows it is the fourth-largest by market cap in that category, one that’s led by MOG at $1.1 billion as of Tuesday.

Well-followed trader @theunipcs — who famously turned $16,000 to $18 million on a BONK trade — is among the most vocal supporters of CAT and expects it to become the largest cat-themed meme token in the coming months.

“A $CAT flippening of $POPCAT to become the top cat memecoin is highly likely,” the trader said in a Monday post. “(It has) the best mainstream recognition for a cat memecoin brand, the best unit bias among major cat memecoins, strong and official IP, 99% of CT is sidelined, so a hated rally is likely”

one voice has consistently told you for months that a $CAT flippening of $POPCAT to become the top cat memecoin is highly likely

and that voice has consistently been shut down by people who would rather marry their bags than make money

but you don't have to listen to me anymore… https://t.co/CxCaTNTuMQ pic.twitter.com/aBYI95WUsh

— Unipcs (aka 'Bonk Guy') 🎒 (@theunipcs) December 16, 2024

Are IP memecoins the future?

CAT’s spot listing comes as non-IP memecoins increasingly see legal heat.

IP, or intellectual property, can include characters from memes, video games, or any cultural phenomenon that have officially been trademarked or copyrighted before their tokens were offered to the public.

Tokens backed by IP have a clearer legal standing regarding usage rights. The creators or owners of the IP can legally license the use of their characters or concepts, reducing the risk of legal challenges like cease and desist orders or lawsuits for unauthorized use of copyrighted material, which can abruptly devalue non-IP-backed tokens.

Tokens are starting to face the risk of legal action from IP holders if they do not own or securing rights to the IP they emulate or represent. Non-IP tokens like chillguy (CHILLGUY) and pnut (PNUT) face challenges despite being popular and widely traded.

On Monday, Mark Longo, the owner of Peanut the Squirrel which inspired the PNUT token, issued a cease-and-desist letter to Binance, accusing it of trademark infringement for listing and offering the PNUT memecoin.

Longo claimed Binance used his “Peanut the Squirrel” trademark and mascot likeness without permission, noting he has been using the PNUT brand for educational and animal welfare initiatives since 2017.

The cease-and-desist warning of potential legal action and sought penalties of up to $150,000 per infringement. PNUT’s prices are down 5% in the past 24 hours, in line with a broader market lull.

As such, CAT is officially licensed to the mainstream Simon’s Cat brand and is the first major cat memecoin on the BNB Chain, backed by the company’s IP which earned $5.8 billion in revenue last year.

That drives the token’s investment thesis for traders such as @theunipcs.

“The reality is that T1 CEXs (Binance/Coinbase/Upbit/etc) and major entitites will not touch memecoins with IP issues with a ten-foot pole,” he noted in a November post. “Because while the memecoin is likely decentralized and launched by an anon, these CEXs are real entities that could be held liable for IP violations and it’s just not worth the drama for them.”

“Official Simon’s Cat channels have promoted and will continue to promote the $CAT memecoin. This is an advantage no other cat memecoin in the space has right now,” he added at the time.

In the world of memecoins, CAT’s IP could prove to be its nine lives.

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Revolut to Strengthen Crypto Fraud Protections With Added Security, Risk Scores

The Revolut Pay enhanced due diligence API will be rolled out to crypto customers from start of 2025.

Fintech giant Revolut plans to extend its battle-tested security wrapper, Revolut Pay, to crypto customers from the start of 2025 to improve protection against fraudulent attacks.

As it stands, Revolut says, there is limited visibility into card transactions and bank transfers its crypto customers make with exchanges, potentially exposing them to higher levels of fraud due to card mechanisms having limited anti-scam protections.

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A 12-month pilot of firms using Revolut Pay’s enhanced due diligence, direct API integration and end-to-end control over the payment process showed crypto customers were exposed to about 50% fewer attempts to defraud them, Revolut said in a statement.

These enhancements include know-your-customer (KYC) name matching, fraud warning screens, proof of crypto delivery and the ability for crypto merchants to receive transaction risk scores.

Crypto has more than its fair share of fraudulent activity and scams, whether that involves identity theft, phishing scams and even the involvement of AI deep fakes and so on.

“In the crypto space, there’s a little bit of an issue with fraud outcomes,” said Alex Codina, general manager for merchant payments at Revolut in an interview. “Now, crypto firms, either exchanges or on-rampers, can integrate Revolut Pay as a payment method and by doing that we allow our users to directly buy crypto on those checkouts in a safer manner.”

Match your customer

Under the hood, the integration with third-party exchanges or on-ramps starts with KYC matching, so validating that the person who is buying on Revolut side is the same person who is KYC’d on the exchange’s side.

“If those names don’t match the transaction is rejected. In the card world, this would be the equivalent of a stolen card or something like that,” Codina said.

Beyond that, firms are in a running battle to combat a sophisticated array of investment scams, whereby customers are duped into thinking they need to perform some transaction or other to qualify for a fictitious reward of some kind, he added.

“These are the hardest ones to deal with,” Codina said. “Basically what we do is assess the risk score of the transaction based on information on our users, like if they have traded crypto in the past or not with Revolut, with a third party, and assess the probability of that transaction being part of an investment scam.”

Obviously, a balance has to be struck when it comes to user experience and safety, Codina said. The safety measures put in place by Revolut could be a question or two about the transaction, or in some cases the customer could be referred to a customer services manager to briefly chat about the transaction.

“We have a pretty robust model and framework where we can add some friction, depending on how risky we think the transaction is,” he said.

Tether Invests in MiCA-Compliant Stablecoin Issuer StablR

The crypto company behind USDT, the largest stablecoin, decided to shutter its own euro-pegged stablecoin and back smaller issuers that comply with the EU’s MiCA regulations.

Tether, the crypto company behind the $140 billion USDT cryptocurrency, said on Tuesday it has invested in European stablecoin company StablR.

StablR issues euro and U.S. dollar stablecoins EURR and USDR and obtained an electronic money institution (EMI) license in Malta in July, a necessary step to comply with EU-wide regulations.

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Tether will also support StablR’s operations with its recently unveiled tokenization platform Hadron, providing tools for compliance, know-your-customer (KYC) and anti-money-laundering (AML) checks, risk management and secondary market monitoring.

The firms did not disclose the size of the investment nor the valuation. A Tether spokesperson told CoinDesk that Tether now has a “significant equity position” in StablR.

The investment is the latest example of Tether’s strategy to keep a foothold in the EU by backing smaller issuers and providing services through its tokenization platform Hadron as the bloc’s MiCA regulation enters into force by the end of this year. The firm decided to shutter its own euro-pegged stablecoin last month, while invested in Netherlands-regulated payments firm and stablecoin issuer Quantoz.

“The European stablecoin market is at a turning point, with regulation finally catching up to innovation,” Tether CEO Paolo Ardoino told CoinDesk. “The company sees the evolving regulatory landscape as a positive step forward but is concerned about the systemic risks it introduces, particularly within the already vulnerable European banking sector.” Tether has been a vocal critic of the MiCA rules that require major stablecoin issuers to hold a large part of the backing assets in bank deposits. The company holds over 83% of USDT reserves in U.S. government bonds, repo agreements and money market funds.

Stablecoins, or cryptocurrencies with steady prices pegged to fiat currencies, are a $200 billion and quickly growing class of digital assets. They are popular as liquidity for crypto trading and are getting increasingly used for everyday payments and remittances due to cheaper and faster settlements using blockchains instead of traditional banking rails. U.S. dollar stablecoins dominate the market with a nearly 99% share, while their euro counterparts lagged in adoption sitting at just about $400 million in market value.

How MicroStrategy and Others Are Taking on Billions in Debt to Buy More Bitcoin

Michael Saylor has raised $6 billion in convertible bonds, with $18 billion more to come. His strategy is unprecedented — here’s how it works.

Have Michael Saylor and MicroStrategy (MSTR) stumbled onto an infinite money glitch?

It would be hard to blame anyone for thinking so. While the Saylor-led company began buying bitcoin (BTC) more than four years ago, over the past 10 months MicroStrategy has used a unique strategy to raise over $6 billion for the express purpose of adding more bitcoin to its balance sheet, which as of Dec. 15 footed to 439,000 tokens worth $46 billion at the current price of about $106,000.

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MicroStrategy did not raise these funds by taking out loans or by issuing more company shares (though it has separately issued billions of dollars worth of equity). Rather, the firm sold convertible notes — debt securities which can be converted into equity on specified dates or under special conditions. And it’s not done yet: Saylor and company intend to raise at least another $18 billion through such bonds over the course of the next three years, according to a plan laid out in October.

Demand for this convertible paper has been so high that other companies, bitcoin miner MARA Holdings (MARA) among them, have adopted a similar playbook to raise billions to add to their own stacks.

But that raises a question: Could issuing so much debt eventually become dangerous for these firms, and for the crypto market at large?

“If bitcoin faces a prolonged period of low/declining prices, [the companies] could have to issue more equity and dilute shareholders at an inopportune time … [or] sell the bitcoin for less than they bought,” Quinn Thompson, founder of crypto hedge fund Lekker Capital, told CoinDesk. Thompson added, though, that he doesn’t expect the companies to become insolvent.

How convertible notes work

Convertible notes are a financial tool that allows companies to quickly raise funds without needing to provide collateral (as they would for a loan) or to immediately dilute their stock. These bonds are priced based on the interest rate baked into them, the firm’s underlying stock, the volatility of that stock and the firm’s credit worthiness.

For example, in November bitcoin mining firm Bitdeer (BTDR) raised $360 million by issuing convertible notes with an interest rate of 5.25%. These will mature on Dec. 1, 2029 at a price of $15.95 per share — which is approximately 42.5% higher than what these shares were trading for on Nov. 21 when the convertible notes were priced.

In other words, instead of simply buying the company’s shares on the open market, investors can earn a solid yield by holding these notes while also benefitting if the stock surges. Even better, convertible notes come with downside protection. On specific dates, such bonds can be redeemed in cash for an amount equal to the original investment plus interest payments. Put differently, investors are almost guaranteed to get their money back even if the stock plunges before the note matures.

But MicroStrategy’s situation is rather unheard of in that the firm has found demand for convertible bonds at a 0% interest rate even though benchmark U.S. interest rates are closer to 5%. Why? Volatility. Being essentially a leveraged play on bitcoin, MicroStrategy common stock most recently has been trading with a 30-day average implied volatility of 106 and prior to that even higher. For comparison, the S&P 500 usually trades at roughly 15 in implied volatility, and bitcoin at 60.

The stock volatility affects price action in MSTR’s convertible bonds and sophisticated market participants are able to score sizable profits by trading that volatility in a market neutral fashion. “I was on the phone with a convertible note [arbitrage] trader… just to sort of understand what he’s going through with all of this,” Richard Byworth, a convertible bond expert and managing partner at asset management firm Syz Capital, told the On The Margin podcast. “He said ‘Rich, I’ve become a degen crypto trader. … It’s insane. I go to the bathroom, if I haven’t tightened up all my deltas and at least left some limits, I can come back and have millions of dollars of exposure.’ This stuff is whipping around like crazy.”

There’s thus a huge demand for MicroStrategy’s convertible notes, and that has allowed the firm to sell a ton of them — five issuances in a year, which is unprecedented. At press time, the company had six outstanding convertible notes, with maturations between 2027 and 2032. Two of these have 0% interest rates, while two others yield 0.625%, a fifth 0.875% and the last one 2.25%. Because these rates are so low, MicroStrategy is managing to sell equity at a massive premium compared to its current stock price, while only paying a blended 0.811% interest rate on its debt, or $35 million annually, an amount easily covered by the firm’s revenue.

“Should implied volatility remain high, I bet MSTR sells more and more convertible bonds… meaning they buy more and more bitcoin,” Greg Magadini, director of derivatives at crypto data firm Amberdata, told CoinDesk. “To me the first sign of a bitcoin rally “TOP” will coincide with a drop in MSTR implied volatility.”

Convertible notes mania

In addition to the above-mentioned bitcoin miners, there’s medical device company Semler Scientific (SMLR), which made public its bitcoin treasury strategy in late May. While the firm to date has only purchased bitcoin with cash already on its balance sheet and capital raised through share sales, its stock was granted an options market on Tuesday, which will make note offerings much more attractive to investors and traders looking to profit in similar fashion to that of MicroStrategy’s debt.

Bitcoin miners took on roughly $5.2 billion in debt from June to Dec. 5 alone, according to the MinerMag. Some of these convertible notes have been issued with 0% interest in the case of MARA and Core Scientific, while others like Bitdeer, IREN (IREN) and TeraWulf (WULF) have issued them at rates ranging from 2.75% to 8.5%.

Not every company is employing the strategy for the same reasons, however. MARA and Riot Platforms (RIOT) are walking in MicroStrategy’s footsteps by using the proceeds from the convertible notes to add more bitcoin to their balance sheet, but Core Scientific, for example, wants the funds for operating expenses, capital expenditures, and potential acquisitions. Bitdeer, meanwhile, said it aimed to further develop its mining rig manufacturing business.

Bill eventually comes due

Convertible notes, however, are not free money. As mentioned previously, once the notes reach full maturity, holders can decide to convert them for equity at an agreed-upon price per share, or redeem them for cash if the stock has underperformed expectations.

The danger, then, is that the stock prices of these various firms could drop significantly over a long period of time, incentivizing holders to redeem their notes for cash instead of shares. In MicroStrategy’s case, that could compel the company to sell some of its bitcoin holdings to pay investors back, while bitcoin mining firms could be forced to sell off various mining assets. In a worst case scenario, firms could end up facing bankruptcy.

Forced selling of bitcoin isn’t necessarily the end of the world, at least as long as the company’s average purchase price is lower than the price it sells at. MicroStrategy’s stash, for instance, was acquired for $61,725 per bitcoin on average, which gives the firm a certain amount of breathing space. The trouble is bitcoin is well known for plunging 80% every few years. Just this year — in the middle of a bull market — the price declined nearly 40% at one point, so there’s no guarantee the top cryptocurrency won’t ever sink lower than MicroStrategy’s average purchase price.

Even so, MicroStrategy’s bonds are staggered, meaning that they all have different maturation years. That reduces the company’s risk because it won’t need to repay all of that debt all at once. In other words, bitcoin and MSTR would need to stay down for a significant number of years for the firm’s situation to get really dicey. The fact that most of MicroStrategy’s notes already meet the requirements for conversion is another point in the company’s favor, and it always has the option of rolling over its debt by issuing new convertible bonds, even if they wouldn’t be on such favorable terms.

In a sense, MicroStrategy is a grizzled veteran of this strategy. It’s possible the newcomers like the bitcoin miners and maybe Semler (if it does choose to issue debt) — whose average bitcoin purchase prices will be far higher — could find themselves far more exposed, having taken on large liabilities closer to a potential cycle top.

Next U.S. Senate Banking Chair Calls Crypto ‘Next Wonder’ of World

Senator Tim Scott said the Senate will tackle crypto bills, and the incoming chair of the House Financial Services Committee said he hopes to pass them in 2025.

WASHINGTON, D.C. — The crypto industry got a promise for action Tuesday from the Republican U.S. lawmakers who will have the authority to move digital assets legislation, with key members of the Senate and House of Representatives saying the sector will finally get what it’s awaited for years.

The incoming Republican chair of the U.S. Senate Banking Committee, Senator Tim Scott, and his counterpart on the House Financial Services Committee, Representative French Hill, were welcomed with enthusiasm by a Blockchain Association crowd in Washington, in sharp contrast to the uncertain tone of the same event last year. The two lawmakers said at the policy event that both chambers of Congress and the administration of President-elect Donald Trump will all be pulling in the same direction to make legislation happen.

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The two starting points, they said, will be the Financial Innovation and Technology for the 21st Century Act (FIT21) — the bill to establish comprehensive crypto market guardrails that cleared the House this year by a wide bipartisan margin — and a stablecoin bill that was close to a bipartisan deal but ground to a halt over a few sticking points around the role of the federal and state governments.

“Congress needs to do its job, find a compromise and put things right,” Hill said, suggesting his aim is to get passage of crypto market-structure legislation — something “like FIT21” — in the first few months of the session.

That’s a familiar message from the House side of Congress, but it’s the Senate that had long been the source of resistance. Senator Scott will soon arrive in his committee chairmanship with a stark reversal of Democrat predecessor Senator Sherrod Brown’s crypto suspicion.

“In my opinion, it is the next wonder of the world,” he said, also promising that his panel would have a crypto offshoot. “I’m going to be the chairman that creates a digital assets subcommittee for the first time.”

Senator Brown, the current chairman, lost his Ohio Senate race in November, overcome by Republican Bernie Moreno, a blockchain businessman. Brown had been a key constraint to crypto progress in the Senate, though the new top Democrat of the committee will be Senator Elizabeth Warren, the progressive firebrand from Massachusetts, who is expected to loudly criticize crypto from the sidelines in the next couple of years.

Scott acknowledged, “She’s very good at what she does.”

But he said, “I think the future’s incredibly bright,” and he said he’s already started conversations on crypto policy.

Hill argued that crypto legislation can’t properly happen without wide bipartisan support.

“To win, ultimately, you need 60 votes in the Senate,” he noted. “You need to build consensus.”

Most Republicans have drifted into the crypto camp over the years, a trend that accelerated since last year. But some Democrats — often younger lawmakers — have joined them, culminating in 71 Democrat votes for FIT21 in the House. But the Senate will be closely divided, with 53 Republicans to 47 Democrats, so both parties must be involved in any major initiative.

SEC’s role

Also at the Blockchain Association Policy Summit on Tuesday, the U.S. Securities and Exchange Commission’s two Republican commissioners — Mark Uyeda and Hester Peirce — spoke about the changes they expect at the agency next year.

Uyeda criticized the agency’s crypto accounting standard, the controversial Staff Accounting Bulletin No. 121 (SAB 121), which he said had “very, very wide-ranging ramifications” for a policy that didn’t go through the proper channels.

Peirce said that while the regulator awaits new digital assets laws from Congress, “we can say some of this stuff is just outside our jurisdiction.”

“We can certainly work closely with the CFTC,” she said. “We stand ready to work on things once that’s a possibility. … I think there are a lot of places for us to help.”

Coinbase Says It Nixed wBTC Because Justin Sun Posed ‘Unacceptable Risk’

BiT Global, issuer of the “wrapped bitcoin” token, “refused” to answer Coinbase’s questions about Sun’s involvement, the exchange said in a court filing.

Coinbase delisted wBTC “due to the unacceptable risk” that the top bitcoin stand-in on Ethereum “would fall into the hands of Justin Sun,” the exchange said Tuesday in response to a lawsuit over its decision.

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Market observers had previously read between the lines of Coinbase’s November nixing of wBTC. At the time, the exchange cited its listing standards as the reason for the move without elaborating. Last week, wBTC’s issuer BiT Global filed a wide-ranging suit accusing Coinbase of improperly favoring its competing asset, cbBTC.

But in a 25-page response, Coinbase said the decision had everything to do with Justin Sun, the crypto billionaire and founder of the Tron blockchain, who is also accused of fraud and market manipulation in the United States. Sun became associated with wBTC via a partnership announced in August, according to Coinbase’s filing.

“Coinbase—like many others in the industry—had serious questions about whether BiT could be a reliable steward given Mr. Sun’s involvement,” the exchange said.

Coinbase initiated a review of wBTC after the partnership’s unveiling. It asked BiT questions about its ownership and Sun’s suspected involvement, but the firm “refused” to answer them, Coinbase’s filing said.

“At the conclusion of its diligence, Coinbase concluded that Mr. Sun’s affiliation with—and potential control over—wBTC presented an unacceptable risk to its customers and the integrity of its exchange,” the filing said.

Whether Sun has any involvement with BiT remains unclear. Lawyers for BiT Global did not immediately return a request for comment. Neither did representatives of Tron.

But the mere appearance of a connection was enough to spook Coinbase into cutting ties, it said.

“No law supports BiT’s claims—and certainly none compels Coinbase to host an asset on its exchange that is now connected to an individual with a long history of alleged fraud and market manipulation,” the filing said.

Dogecoin Pup’s IP Owner Bags Rights to Neiro, Putting Namesake Memes in Focus

IP-backed meme tokens are quickly becoming a hot topic in crypto circles. The market is showing signs of being wary of unlicensed offerings.

An intellectual property (IP) ownership could soon end up in a fight of digital dogs.

Own The Doge DAO, a collective that holds the original ‘doge’ meme, on Tuesday said it had acquired the rights to use pet shiba inu Neiro’s images and was holding a community discussion on which NEIRO token can continue to use the dog’s liking.

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“We’re pleased to announce that @kabosumama has officially granted our DAO the Neiro IP,” Own The Doge said on X. “When Atsuko revealed the name of her new adopted dog, Neiro, many tokens were launched in an attempt to capitalize on her name and story.”

“However, since then, these various tokens have battled each other to become the ‘real’ Neiro, with no agreed criteria. But it does not have to be this way. Our DAO owns the IP rights for Neiro,” the post said, adding that the doge community could join the DAO and vote for which token they considered the “real” one.

The ongoing discussion will let the community and outside members comment and find a way forward to use Neiro’s IP, before being put into an actual on-chain proposal voted on by DOG token holders.

Neiro is the shiba inu adopted by the human owner of Kabosu, the dog that inspired the “doge” meme, after she passed away in July. The announcement of a new dog spurred the creation of numerous NEIRO tokens on Solana and Ethereum at the time — with two such tokens surging to hundreds of millions in market capitalization and enjoying active communities as of Wednesday.

As far as Neiro’s owner Kabosumama was concerned, none of the tokens were legitimate.

“I see many tokens related to Kabosu and Neiro. To clarify, I do not endorse any crypto project except @ownthedog $dog because they own the original Doge photo and IP,” she said in an X post at the time. “They are committed to doing only good every day, charitable works, and Doge culture.”

“Please watch out for token scams,” she said.

The discussion has sprouted opinions from various token teams that use or are around Neiro — each claiming to be the first or claiming to be better than the other.

“We believe the Neiro IP should correspond with the first Neiro meme coin on-chain,” @Neirowoof, the first NEIRO token on any chain, said on the discussion page. “This being the original Neiro with a dedicated community who’s mission has been to guard the legacy of Kabosu since the day Atsuko made her blog post announcing Neiro’s adoption.”

“Unfortunately, we have been up against several power-hungry forces whose only goal was to usurp the narrative for a quick financial gain. Being the first Neiro means something special, as we are the true Sister of DOGE and the Guardians of Kabosu’s Legacy. We will never stop loving both Kabosu and Neiro for the lovely creatures and memes that they are,” the team added.

The discussions come as IP-backed memecoins start to become an important topic in the world of memecoins, which have so far operated without any legal troubles.

Tokens are starting to face the risk of legal action from IP holders if they do not own or securing rights to the IP they emulate or represent. Non-IP tokens like chillguy (CHILLGUY) and pnut (PNUT) are already facing legal challenges despite being popular and widely traded.

Could NEIRO tokens see the same fate soon? Their communities will decide.

Deutsche Bank’s L2 Blockchain to Be ‘Public and Permissioned,’ Says Tech Partner

The banking giant is building a rollup on Ethereum using Matter Labs’ ZKsync technology.

Banking giant Deutsche Bank is building out a layer-2 rollup network on Ethereum with Matter Labs’ ZKsync technology.

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Bloomberg reported the project Wednesday, and a representative for Matter Labs confirmed the story.

The chain will be “a public and permissioned L2,” Omar Azhar, the head of business development at Matter Labs, told CoinDesk over Telegram. When asked to elaborate, he referred a reporter to another participant in the project, Memento Blockchain, which did not immediately respond to a request for comment. Generally “public permissioned” means anyone can see what’s happening on the network but only authorized participants can do certain things.

The project is a sign of a renewed interest in blockchain technology among institutions, as prices for various cryptocurrencies reach all-time highs. It also echoes the private enterprise blockchains that were in vogue nearly a decade ago. Those systems were disconnected from public chains like Ethereum and Bitcoin, though they sometimes borrowed code from them.

According to the Bloomberg report, the bank is creating the layer-2 network in order to address regulatory compliance issues that come with public blockchains in finance. (Regulated institutions have to know who they are dealing with, which is hard in completely open networks like the main Ethereum chain). The bank believes that by creating a layer-2 on top of Ethereum, it will improve the speed of transactions as well as address those compliance needs.

The ZKsync-based rollup could allow banks to experiment with blockchains, and let them select which validators could run said blockchain, Boon-Hiang Chan, Deutsche Bank’s Asia-Pacific industry applied innovation lead, told Bloomberg. The L2 blockchain may also give regulators “super admin rights,” allowing them to look more deeply into the movement of funds, Chan said.

Memento Blockchain announced the L2 endeavor on Nov. 6, but it received little attention at the time. The chain is currently in a test network environment. It is built with ZK Stack, a customizable toolkit that lets developers build their own blockchains based on ZKsync’s technology.

The L2 is part of Dama 2, a multi-chain initiative led by Deutsche Bank. Dama 2, in turn, is part of the Singapore Monetary Authority’s Project Guardian, which is bringing together 24 major financial institutions that are looking into ways to use blockchains to tokenize their assets.

The Protocol: Solana’s Allure for Devs; Avalanche’s Big Upgrade

Also: ENS picks tech for its L2; Bitcoin’s Runes Get an AMM

Welcome to The Protocol, CoinDesk’s weekly wrap-up of the most important stories in cryptocurrency tech development. I’m Marc Hochstein, CoinDesk’s deputy editor-in-chief for features, opinion and standards.

In this issue:

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Solana was the biggest draw for new crypto developers in 2024
No wonder: Solana’s transaction volume is off the charts
Coinbase alums take next step toward no-code blockchain development
Kraken’s ‘Ink’ layer-2 goes live
Avalanche activates biggest-ever upgrade
Ethereum’s ENS picks Consensys’ tech for its L2
Bitcoin’s Stacks L2 gets an automated market maker for Runes
Most Influential 2024: EigenLayer’s Sreeram Kannan

This article is featured in the latest issue of The Protocol, our weekly newsletter exploring the tech behind crypto, one block at a time. Sign up here to get it in your inbox every Wednesday.

Network News

NEW DEVS ❤️SOLANA: The Solana ecosystem, ground zero for the memecoin craze, was the most popular blockchain among new developers this year, according to a report released last week by Electric Capital. In July, this community became the first since 2016 to bring on board more devs than Ethereum. Solana attracted 7,625 new developers in 2024, the most of any chain and a little over 1,000 more than Ethereum. The results underscore the challenge Ethereum faces as rival smart contract platform Solana’s low fees and fast transactions attract investment and talent. Read more.

SPEAKING OF SOLANA: Solana’s network activity has lit up as the Pudgy Penguins NFT project debuted its native token, PENGU, on the programmable blockchain. Solana registered a total transaction tally of 66.9 million Tuesday, the highest daily volume since its inception in 2020, according to data source Artemis. To highlight how busy it was, Solana’s transaction count eclipsed the total of all other major chains combined. Read more

THE INK IS DRY: Kraken, the seventh-largest crypto exchange, said its layer-2 rollup network, built on top of the Ethereum blockchain, has gone live. The network, called Ink, is Kraken’s answer to Base, the highly successful blockchain launched by rival exchange Coinbase. Like Base, Ink is based on the OP Stack, a customizable framework that lets developers build their own rollups using Optimism’s technology. The team had originally planned for Ink to go live in early 2025, so the launch of its main network is ahead of schedule. Read more

AVALANCHE UPGRADE: Avalanche, a layer-1 blockchain launched in 2020 that’s now the tenth-largest by total value locked (TVL), activated its highly anticipated Avalanche9000 upgrade Monday, marking the ecosystem’s biggest technical changes to date. The network has been prepping for these changes for months, with new features that will cut the costs for sending transactions, operating validators and building applications on the network. Leaders at Avalanche previously said that part of the goal with the upgrade is to attract developers to Avalanche and encourage them to create customized blockchains using its technology, known as subnets, or “L1s.” Read more.

A BOON FOR RUNES: Crypto degens have a new – and, if all goes according to plan, faster, cheaper and safer – way to trade Runes, the Bitcoin ecosystem’s answer to memecoins. An automated-market maker (AMM) for the Runes protocol went live on Wednesday on Stacks, following the unveiling of the layer-2 network’s native BTC-backed asset sBTC on Tuesday. It’s the first AMM for such tokens on Stacks. The teams behind decentralized exchange (DEX) Bitflow Finance and Bitcoin bridge Pontis developed the AMM. Runes launched in April and spurred a flurry of activity, paying 78.6 BTC ($8.18 million) in fees in the first 90 minutes. However, less than a month later, this excitement waned considerably, with fees dropping more than 50%. Bitflow’s aim is for its AMM to help Runes scale and address some of the shortcomings holding it back. Read more.

ENS PICKS L2 TECH: ENS Labs, the company behind the Ethereum Name Service, has picked Linea’s technology to build its upcoming layer-2 network, Namechain. Linea is a zero-knowledge rollup that came out in July 2023 and was built by Ethereum infrastructure giant Consensys. It is the seventh-largest rollup network, according to L2Beat, with $1 billion locked in its ecosystem. Rollups are a special type of blockchain where one can transact faster and at a lower cost. There are two kinds of rollups: optimistic and zero-knowledge. Optimistic rollups use optimistic proofs, which have a seven-day window to dispute transactions before they are finalized. Zero-knowledge rollups, by contrast, finalize proofs within minutes. ENS has been described as “the phone book for Web3,” but a more precise analogy is the web’s domain name service (DNS). The domain name “CoinDesk.com” is easier to remember and type than a numerical IP address. Similarly, ENS handles like parishilton.eth, which the namesake heiress acquired in 2021, are more relatable than the strings of letters and numbers that make up Ethereum wallet addresses. For this service, “we need fast finality,” said Nick Johnson, the founder and lead developer of ENS. That’s because “you want to be able to update your ENS name and have the chain reflect it in the smallest interval possible. And to do that and have it remain decentralized and secure, we need fast finality, and optimistic roll-ups can’t deliver that.” Read more.

NO CODE, NO PROBLEM? Patchwork, a startup focused on simplifying blockchain and smart-contract development founded by former Coinbase employees, has released the next version of its low-to-no-code tools for building decentralized applications (dapps). Currently linked to Coinbase’s Base and backed by Coinbase Ventures, the “Create-Patchwork” picks-and-shovels approach lowers the barriers to building blockchain applications and attaching data to them. Following the trend toward easily generated content, the complex world of blockchains and smart-contract design is on a path to no-code applications, or a “text-to-app” experience. Create-Patchwork is the first of several features the team plans to roll out in early 2025 and a foundational step to enable creators to generate contracts and applications in seconds using natural language inputs. “Patchwork is an Ethereum protocol that makes it really easy to build dynamic on-chain applications,” co-founder Kevin Day said in an interview. “It lets on-chain things own other on-chain things, and it allows anyone to attach programmable data to on-chain things.” Read more

EIGENLAYER’S SREERAM KANNAN: KING OF THE PROFESSOR COINS

For a crypto founder who’s attracted so much controversy, Sreeram Kannan is surprisingly sanguine.

In a wide-ranging interview after his selection as one of CoinDesk’s “Most Influential” figures in crypto for 2024, the EigenLayer founder was generous with his time, chatting more than an hour beyond our scheduled slot. I was surprised at his openness because the last time we spoke, a colleague and I had just published an investigation into potential conflicts of interest at his company, Eigen Labs, and in the interim Kannan had disavowed our reporting point-by-point on a Blockworks podcast.

This time, Kannan emerged in a different light. Whatever his misgivings about CoinDesk’s past coverage, they didn’t seem top-of-mind.

What emerged wasn’t the portrait of a defensive tech founder, but rather that of a driven, thoughtful academic-turned-entrepreneur still adjusting to a spotlight few in this industry ever enjoy. Instead of bitterness or evasion, I found ambition, reflection and a quiet kind of excitement.

Kannan seemed as astonished as anyone by how swiftly EigenLayer had transformed from a concept into one of crypto’s most talked-about experiments, telling CoinDesk that he continued to view EigenLayer as a “scrappy startup.”

Over the past 12 months, EigenLayer — which allows emerging blockchain applications to borrow Ethereum’s robust security — went from a relative unknown to an industry heavyweight. The platform raised more than $100 million from venture firms including Andreessen Horowitz and, before even fully launching, drew hundreds of millions of dollars in deposits from crypto users seeking extra yield. Many were incentivized by a viral points program that investors hoped would translate into a lucrative future token airdrop.

EigenLayer’s success during the bear market was striking, and Kannan may have played a larger role than any other entrepreneur in revitalizing decentralized finance on Ethereum. But not everything went according to plan. Industry critics took issue with the EIGEN token distribution plan — which locked up tokens for months and barred claimants from certain geographies — as well as the platform’s slower-than-expected feature rollout and concerns about “rehypothecation,” or the reuse of collateral for multiple purposes. In August, the CoinDesk investigation (that Kannan disputed in the podcast) raised questions about EigenLayer’s conflict-of-interest policies, which may have allowed employees preferential access to tokens powered by its platform.

None of this seemed to derail Kannan’s intellectual ascent. Beyond running Eigen Labs, he still holds a position as an affiliate professor of electrical and computer engineering at the University of Washington, and his theory of “restaking” — letting people reuse staked Ethereum assets to secure other networks — has sparked a wave of innovation and copycats. He’s become a familiar face on the conference circuit, where he unpacks his vision of blockchains as tools for solving humanity’s endless “coordination problems.”

Blockchains, Kannan says, “are the biggest upgrade to human civilization since the U.S. Constitution.”

CLICK HERE FOR THE FULL PROFILE BY COINDESK’S SAM KESSLER:

Money Center

‘Wrapped’ in intrigue

Coinbase Says It Nixed wBTC Because Justin Sun Posed ‘Unacceptable Risk’
WBTC Episode ‘Reopened Old Wounds’ of Centralized Failures: Bitcoin Builders Association

Deals and grants

Stablecoin Payments Platform BVNK Raises $50M to Fuel U.S. Expansion
RWA-Focused Plume Raises $20M from Brevan Howard, Others Ahead of Mainnet Launch
Custody Firm Taurus Partners With Temenos Bringing Crypto Wallets to Thousands of Banks

Regulatory and policy

Next U.S. Senate Banking Chair Calls Crypto ‘Next Wonder’ of World

Calendar

Jan 9-12, 2025: CES, Las Vegas
Jan. 15-19: World Economic Forum, Davos, Switzerland
January 21-25: WAGMI conference, Miami.
Jan. 24-25: Adopting Bitcoin, Cape Town, South Africa.
Jan. 30-31: PLAN B Forum, San Salvador, El Salvador.
Feb. 1-6: Satoshi Roundtable, Dubai
Feb. 19-20, 2025: ConsensusHK, Hong Kong.
Feb. 23-24: NFT Paris
Feb 23-March 2: ETHDenver
March 18-19: Digital Asset Summit, London
May 14-16: Consensus, Toronto.
May 27-29: Bitcoin 2025, Las Vegas.

Bitcoin’s Nosedive to Under $100K Shaves $700M Crypto Longs, XRP Drops 5%

XRP and DOGE futures recorded an unusually high $70 million in liquidations, indicative of rising speculative activity in majors.

A bitcoin (BTC) slump spiraled into over $700 million worth of liquidations across futures tracking major tokens, with XRP and dogecoin (DOGE) products recording unusually high losses.

BTC fell under $100,000 in late U.S. hours before slightly recovering during early Asian hours Thursday, as the Federal Reserve hinted at a few rate cuts in 2025. Fed chair Jerome Powell then said at a post-FOMC press conference that the central bank wasn’t allowed to own bitcoin under current regulations — in response to a question about President-elect Donald Trump’s strategic reserve promises.

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“That’s the kind of thing that Congress should consider, but we are not looking for a law change,” Powell said. In a July campaign, Trump said the government would keep 100% of all the bitcoin it currently holds or acquires in the future under his administration — referring to the stockpile of seized BTC held by the country.

BTC fell 3% after Powell’s comments, causing a dive across majors. XRP, dogecoin (DOGE) and Solana’s SOL fell as much as 5.5%, with BNB Chain’s BNB and ether (ETH) down 2.5%. Chainlink’s LINK fared the worst with a 10% drop — erasing some gains from earlier in the week as Trump-backed World Liberty Financial purchased $2 million worth of the tokens.

The market slide led to over $700 million in bullish bets liquidated, with futures tracking smaller altcoins and meme tokens recording higher losses than BTC or ETH futures in an unusual move, data shows.

A liquidation occurs when an exchange forcefully closes a trader’s leveraged position due to the trader’s inability to meet the margin requirements. Large-scale liquidations can indicate market extremes, like panic selling or buying.

A cascade of liquidations might suggest a market turning point, where a price reversal could be imminent due to an overreaction in market sentiment.

Some traders say Powell’s comment may mark a local top, dampening expectations of a continued rally toward the end of the month.

“Crypto markets may have entered a peak if a U.S. Bitcoin strategic reserve is no longer in play, as this promise helped to fuel the recent months’ rally to new all-time highs, Nick Ruck, director at LVRG Research, shared with CoinDesk in a Telegram message. “Although an interest rate cut would normally have a bullish reaction since it was largely expected, the market strongly reacted after Fed Chair Jerome Powell stated that inflation would be a continuing problem throughout the next year.”

Traders at Singapore-based QCP Capital, however, remain generally bullish for the coming year.

“Don’t get shaken out of your positions if a drop occurs. With 2025 poised to be a potentially bullish year for crypto, particularly with Trump in office, staying the course may prove beneficial,” the company said in a Thursday broadcast message.