It's been a celebratory week for crypto with Bitcoin hitting all time highs after the US election results have rolled out. President elect Trump and the US republican party have been more embracing of crypto, so there is good reason for this optimism. Here are some of my baseline expectations for the staking and validator landscape (please do note that I'm no legal expert).
The SEC took action against MetaMask and Coinbase for their staking products. If Gary Gensler is replaced with a more crypto friendly chair, these actions will likely be dismissed.
Once the SEC suits are dropped, this will give LSTs and LRTs more room to grow. LSTs and LRTs were not even considered an option by institutions due to the legal risks involved. They may soon be back on the table. We may even see an LST and LRT implemented into an ETF.
Many protocols have had to exclude US based validators or ask validators to use servers outside of the US regions for their incentivized testnets or delegation programs. These restrictions may no longer be a concern for protocols when selecting validators.
Ethereum ETFs initially mentioned staking in their offerings. The ETF issuers had to revise and drop any such plans, but if the suits against MetaMask and Coinbase are dismissed, this could give issuers more comfort to revisit this plan. On the current Fed's trajectory, we will be approaching a low interest environment within the next two years. A real yield of 3 to 4 percent on ETH will look extremely attractive to tradfi investors.
Protocol updates
EigenLayer
The EigenLayer team has introduced a dashboard to highlight key economic metrics of their ecosystem. The thing that stands out most is the number of AVSs in development, which covers both public and stealth mode AVSs. There's roughly more than 100 AVSs and counting, which is more than double what I've been able to identify from my own research. Next year will undoubtedly be the year of AVS launches.
Namada
Namada has announced a dry run, that will run from November 12th to November 22nd.
Space and Time
The team has unveiled the testnet for SXT Chain, which focuses on zk-proven data.
Interesting reads
Hyperliquid's HyperBFT: Consensus at the Speed of Light by ASXN covers the new Hotstuff inspired consensus mechanism, HyperBFT. Theoretically, HyperBFT can cover up to 2 million orders per second, which is critical to support high-frequency trading firms on Hyperliquid.
Parallel block building by Robert Miller (Flashbots) introduces a method of processing transactions where transactions that don't conflict can be executed in parallel rather than sequentially. This would greatly improve performance for chains like Ethereum, where parallelization has yet to be implemented.
LRT Liquidity and Utilization Updates (July - October) by Kairos Research dives into the recent trades for LRTs. With the exception of Ether.fi, growth has largely stalled. The post anticipates that the next leg of growth will depend on rewards from AVSs and how LRTs navigate them.
Random ramblings
There is some interesting drama unfolding between Degen and Conduit. Degen started off as a fun memecoin spawning from the Farcaster community. The memecoin eventually evolved into an L3 with Base underneath, which Conduit has helped build out. (Conduit is a Paradigm backed company that helps teams deploy any type of rollup.) Last week, Degen has officially communicated the difficulties they've been facing with Conduit. In face of this criticism, Andrew, the founder of Conduit, has provided his account of the current situation. I have no clue who is in the wrong here, but this situation does raise an interesting question of just exactly how much sovereignty a rollup has. I don't think Conduit has any incentive to go rogue, but there will undoubtedly be teams or team members in the future who may not be as civil.
Gnosis is exploring the possibility of becoming an L2. At the moment, Gnosis is a close copy of Ethereum with the same setup of using a Consensus layer and Execution layer architecture. It's a great chain to try running validators at a fraction of what it would cost to run an Ethereum validator. However, while Gnosis Chain has been a great testing ground for validators, it has not seen as much success as some peers like Polygon. Becoming an L2 could bring in more security minded users, but there is still no guarantee that TVL and chain activity will grow. We'll have to see how this conversation evolves, but it'll be a real shame to see Gnosis letting go of its validator ecosystem.
Gnosis Chain faces a pivotal decision: remain an independent Layer 1 blockchain or evolve into a Layer 2 solution on Ethereum. This choice involves balancing sovereignty and ecosystem integration, with significant implications for its 300,000+ validator network.
The Layer 1 path…
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