Weekly Top Stories - 5/2

This week in the newsletter, we discuss Ethereum’s reprioritization of Layer 1, Bitcoiners debating the age-old question of how the network should be used, and Tether’s first-quarter attestation.

Ethereum Charts a New Path Forward

Ethereum is going through a new set of growing pains, changing foundation leadership, contemplating sweeping technological changes to the execution layer, and material economics changes for stakers. Among the most provocative developments is a proposal from Ethereum researcher Dankrad Feist to drastically raise the network’s gas limits, potentially by a factor of 100, through Ethereum Improvement Proposal 9698. This initiative would gradually increase the block gas limit from 30 million to 3 billion over several years, significantly boosting transaction throughput and enhancing scalability of the L1 without requiring a hard fork. The move aims to keep pace with the network’s growing demands and to reinforce Ethereum’s position as a performant base layer in a multichain world.

At the same time, the Ethereum Foundation’s internal governance has undergone a shakeup. The Ethereum Foundation restructured its leadership in response to mounting internal friction and external criticism. Vitalik Buterin, while still highly involved, has emphasized the need for a new generation of leaders with deep technical credibility and stronger coordination skills. This restructuring is an effort to streamline decision-making and foster a more responsive, strategically aligned foundation as Ethereum faces heightened competition and increasing expectations from developers and users alike.

Adding to the mix, Buterin has proposed replacing the Ethereum Virtual Machine (EVM), the computation engine at the heart of the network, with RISC-V, a modern open-source instruction set known for its hardware efficiency and extensibility. If realized, the transition would represent a radical departure from Ethereum’s current architecture and could unlock long-term benefits in terms of performance, modularity, and compatibility. However, such a foundational change would come with enormous complexity, requiring buy-in from the developer ecosystem and extensive migration planning.

OUR TAKE:

Taken together, these developments signal Ethereum’s eagerness to reinvent itself and adapt to the market, but they also highlight the political and technical volatility that continues to define its evolution. In the past 6 to 12 months, Ethereum’s roadmap has become more fluid and ambitious, but also more contentious. Major shifts, be they in leadership, execution layers, or throughput strategies, are increasingly proposed and debated in rapid succession. While this dynamism fuels innovation, it also poses risks to network cohesion and developer confidence.

But, Ethereum doesn’t need to win the narrative war every week on crypto Twitter. It’s already won the battles that matter. The Merge was an engineering marvel. The L2 ecosystem is thriving. LSTs, account abstraction, and modular data availability are all real and in production. Ethereum has scaled, perhaps not in the most glamorous, moon-charting way, but in a resilient, decentralized, and robust manner. The network processes more transactions daily across its rollups than most L1s could ever dream of.

In that light, these new proposals and organizational changes shouldn’t be misread as panic —they are Ethereum flexing its capacity to evolve. Price isn’t the scoreboard for technological maturity. Winning means surviving scaling challenges without compromising decentralization. It means enabling a billion-user future without central control. Ethereum isn’t failing because the price is flat. It’s succeeding because it’s laying down infrastructure that others are copying. As Ethereum charts its future, the challenge will be not just to scale or modernize, but to do so with stability, clarity, and community trust. – Thad Pinakiewicz

Bitcoin Community Debates Age-Old Question of How the Network Should be Used

Bitcoin upgrade proposal relating to spam mitigation causes community uproar. Four days ago, Bitcoin developer Peter Todd (the same individual that an HBO documentary fingered as Satoshi last year – Todd denied it) made a pull request in the Bitcoin Core Github repository to remove limits on a key method of storing arbitrary data on Bitcoin.

In short, the proposal would remove a data size limit on the OP_RETURN field in a Bitcoin transaction, allowing for arbitrarily sized data storage in that field. That field’s size had previously limited arbitrary data storage to 40 bytes in 2014, before being expanded to 80 bytes in July 2015 with the release of Bitcoin Core v0.11.0. Developers had discouraged users from posting arbitrary data to Bitcoin, but given demand from entities like Counterparty and Tether, developers wanted to create a safe and limited way to support data storage so that users wouldn’t use less desirable methods to store the data. OP_RETURN transactions can carry arbitrary data, but they are also probably unspendable, meaning they don’t add to the UTXO set, and uninterested nodes can safely ignore them while remaining up to date with network consensus.

The new proposal emanates from a discussion on the Bitcoin mailing list between key developers seeking to provide a cleaner mechanism for usage of Bitcoin that most view as unstoppable and inevitable. However, a small but loud contingent of hardline Bitcoiners view not only such usage of Bitcoin but also this effort to mitigate its effects as an attack on the network, and they are making their voices heard. The current debate is the latest salvo in a decade-plus conversation about what is the correct way to use Bitcoin.

OUR TAKE:

Ever since the launch of inscriptions in 2023, which we have written about repeatedly, the question of how bitcoin should be used has escalated. At a high level, Bitcoin is a monetary network, and transactions on the network typically involve the movement of monetary value. But Bitcoin is also a permissionless system, and there have always been users who like to encode non-monetary information into the blockchain, whether for harmless fun (graffiti), business purposes (Tether originally ran on Bitcoin using arbitrary data), or other purposes. There are mostly harmless ways to store data on Bitcoin, and then there are very disruptive ways to store data on Bitcoin. One abjectly terrible way is what Bitcoin Stamps does — creating normal-looking transactions that spend coins to fake addresses, where the addresses themselves contain plain-text arbitrary data. This method is particularly abusive because the transactions themselves look like monetary transactions, so nodes must evaluate and store them, even though they have negligible monetary value. Inscriptions utilize a different method of data storage, which is less abusive, but not entirely costless for network participants. Inscriptions store data in the witness data of a Taproot transaction; in this case, nodes must evaluate them but can discard them after processing. Then you have the OP_RETURN field, which is perhaps the least abusive way to store data on Bitcoin, but its limited size pushes some use cases to other methods.

If users are going to store data on Bitcoin (use it for data availability, which we wrote about last year), and the users can’t be stopped without otherwise unpalatable trade-offs, then the network should take steps to corral those users into less abusive methods. That’s the impetus behind the current pull request to remove the data size limit on OP_RETURN transactions. The proposal results from the acknowledgment that there will always be a class of users who want to use Bitcoin in this way and that they can’t be stopped, so it attempts to offer those users an outlet for their “transgressions” that is minimally abusive to the rest of the network.

Most critics of the proposal think that accommodating the data posters in this way, or any way, represents an implicit normalization of behavior that could otherwise be considered spam. Critics view arbitrary data storage on Bitcoin, whether to create NFTs or operate L2 bridges or anything else, as irregular and spammy non-monetary usage, which bloats and degrades the sacrosanct monetary nature of Bitcoin.

While we are mostly ambivalent to the specific pull request, because we don’t know that it’s required now and we aren’t particularly concerned that there’s actually a problem that needs fixing, we nonetheless wholeheartedly disagree with the critics, and we conceptually agree with the proposal. There will always be people who want to permissionlessly use Bitcoin for data storage, and there’s nothing we can do about that. So, we may as well offer a method for this behavior that is minimally invasive to the rest of the network, and that’s what this proposal does. Hysterical opposition is unproductive, unprofessional, and unrealistic. – Alex Thorn

Tether Releases its Q1 2025 Attestation Report for USDT

This week, Tether released its Q1 2025 attestation report covering company revenue and USDT reserve asset mix. The attestation revealed two key points: (i) the reserve asset mix of its stablecoin, USDT, remained mostly unchanged quarter-over-quarter, and (ii) company profits declined substantially from Q1 2024.

The reserve asset mix of USDT, as of March 31, 2025, was comprised of:

• 66.05% Treasuries amounting to $98.59 billion (of which $98.52 billion were U.S. Treasuries)

• 11.19% Reverse Repos amounting to $16.71 billion

• 9.61% corporate bonds, funds, and metals amounting to $14.34 billion (of which $7.66 billion was bitcoin, $6.66 billion was precious metals, and $14.35 million was corporate bonds)

• 5.91% secured loans amounting to $8.83 billion

• 4.21% money market funds amounting to $6.29 billion

• The remaining 3.03% was in cash and bank deposits and other investments amounting to $4.53 billion, rounding off the assets held by the company to $149.275 billion against $143.683 billion in total liabilities.

Quarter-over-quarter, the change in the reserve asset mix was negligible, with corporate bonds, funds, and metals having the biggest increase in relative share from 9.18% after Q4 2024 to 9.61% as of March 31, 2025. The biggest decrease in relative share was seen in reverse repos, which declined from 11.95% after Q4 2024 to 11.19% as of March 31, 2025. A notable trend from the reserve asset mix from Q1 2024 is the rise in the relative share of secured loans, which have grown from $4.74 billion in Q1 2024 to $8.83 billion as of March 31, 2025 (share moving from 4.29% to 5.91%). Tailwinds from expanding demand for crypto loans over the last year have presumably been driving the growth in Tether’s secured loans. More details on the growth in the sector can be found in our crypto lending report.

Additionally, the company experienced a significant decrease in quarterly profit from Q1 2024. In a report released by Tether, the company announced it made $1 billion in operating revenue over the last quarter, compared to $4.52 billion in Q1 2024. This represents a 77.88% decline from year to year.

OUR TAKE:

Tether’s attestation, while showing declining profits, shows that USDT still stands as a behemoth in the stablecoin arena with a 62% market share. However, the sector is quickly evolving with new competition coming online and two stablecoin bills under consideration in the U.S. Congress. It is obvious that the stablecoin world of yesterday is quickly fading, begging the question of what happens to Tether in this reimagined world of digital dollars?

The two bills currently circulating in U.S. Congress, the STABLE Act (House) and the GENIUS Act (Senate), both have implications for the world’s largest stablecoin issuer. The House Financial Services Committee has advanced the STABLE Act, and the Senate Banking Committee has advanced the GENIUS Act. The next step is for the House and Senate to pass the bills on the floor and then reconcile the two versions to create a unified version for the President to sign. On the stricter side sits the STABLE Act, which includes provisions on “extraterritoriality” that allow the Treasury to prohibit or limit offshore issuers from issuing inside the U.S. As a result, if the STABLE Act—or this provision within its framework—prevails in the reconciled legislation, then Tether could be forced to adhere to all its rules (despite not being an onshore entity), or potentially face an onshore ban that could disrupt its functionality, hamper its market-leading position, and introduce turbulence into stablecoin markets. The Senate’s GENIUS Act is somewhat less punitive to offshore issuers, though we understand that new drafts are being worked on that possibly move the GENIUS Act closer to the STABLE Act on this issue. Whether Tether would choose to move onshore and register in the U.S. under a new stablecoin framework codified by federal law remains an open question about which Tether has not said much.

In general, we view the creation of law that results in unenforceable prohibitions on market leaders in a mature industry as bad law. It’s not entirely clear yet if these bills are that, but if they are, that would be unfortunate—not because we want to defend or protect Tether specifically, but because we believe law should be written with open eyes to the market and stakeholders as they actually exist, not as policymakers wish them to be. It’s also worth noting, as we wrote several weeks ago, that stablecoins are an integral part of the government’s strategy to defend and grow the dollar’s reserve status, and Tether is among the world’s largest distribution agents for exporting dollars worldwide (and the biggest in crypto). The issues at play in negotiating stablecoin legislation are not just related to consumer safety—geopolitics must also be considered. If done correctly, stablecoin legislation can create a new industry in the U.S. that concurrently 1) expands domestic access and improves payment efficiency, 2) protects consumers with rigorous collateral prescription and oversight, and 3) expands American power by flooding the world with digital dollars while simultaneously creating a new purchaser of U.S. debt. – Zack Pokorny & Alex Thorn

Charts of the Week

The amount of SOL stuck in Pump.fun ungraduated token vaults has made new all-time highs north of 237,200 SOL. This amounts to $35.6 million at SOL’s current market price of $150.

When tokens are launched on Pump.fun, they start on bonding curves, which, unlike Automated Market Makers (AMMs), use demand as a price determinant (e.g., incremental buys move price higher) instead of liquidity distribution and the ratio of tokens in the pool. Pump.fun tokens “graduate” to dex liquidity pools upon reaching a market cap of $69,000. Until then, however, users buying along the bonding curve lock their SOL on the platform. The low graduation rate (1.25%), combined with the large number of tokens created on Pump.fun (10.05 million), has left a lot of SOL stranded on the application. Users are free to withdraw it, however, most users don’t.

Other News

• Senate Majority Leader John Thune seeks to expedite GENIUS Stablecoin Act 

• Ubisoft, LayerZero launch network for cross-chain gaming assets 

• SEC drops probe into PayPal's PYUSD stablecoin 

• Ripple made $4-5 billion offer to acquire USDC stablecoin issuer Circle 

• Nike accused of deceptive practices, securities fraud in class-action lawsuit over RTFKT NFTs