On June 9, London-based Janus Henderson signed a four-part deal with Ethena, the crypto company behind USDe stablecoin. As part of the agreement, the $480-billion asset manager agreed to place one of its own funds inside the reserves backing the digital dollar, whose circulating supply is $5.5 billion. It also agreed to package and sell Ethena’s products to its clients and park its corporate cash in USDe.

Janus is not alone. In the last four months, BlackRock and Apollo, two of the largest asset managers on earth, each made similar moves across different crypto protocols. Collectively, these three companies manage over $15 trillion in assets.

In today’s piece, I explain why Wall Street’s biggest names are buying stakes in the crypto rails and what the quid pro quo is for the crypto companies.

On to the story…

The TradFi-Crypto Deal

Let’s start with what Ethena and Janus will walk away with from the latest deal. Ethena took Janus Henderson’s tokenised credit fund into the reserves that back its USDe. This move strengthens Ethena’s latest attempt to revamp its collateral mix backing the USDe reserves.

In When the Yield Runs Out, I explained how Ethena is diversifying its collateral across traditional and crypto assets. Its earlier reserve strategy, which relied solely on capturing yield from crypto-backed basis trades and treasury bills, unwound amid the market downturn.

Janus’s AAA-rated fund is one of the safest slices of pooled corporate loans. These carry the lowest risk of default and the highest priority for receiving interest and principal payments. Ethena’s risk committee has already approved the fund as an eligible component of the collateral mix. This will be the first time USDe will be backed by a real-world corporate credit instrument.

Janus also did three more things as part of the deal. It bought ENA, Ethena’s governance token, through its blockchain venture ANTIK. It agreed to jointly build regulated exchange-traded products (ETP/ETFs) for USDe in the second half of 2026. This would allow ordinary investors to buy exposure to Ethena’s dollar from a normal brokerage account, without ever opening a crypto wallet. Lastly, it said it would hold USDe, and its yield-bearing version, sUSDe, as its own treasury cash.

For Janus, there’s now a consistent, captive demand from Ethena for its tokenised credit fund. Since Janus’ credit fund now sits in the reserves backing USDe, every dollar of new USDe minted forces Ethena to buy more reserve assets, including JAAA. This excess flow into Janus’s credit fund now happens without the asset manager having to market it.

In return, the asset manager became a customer of the protocol’s dollar, gained a share in its governance by buying the ENA token, and doubled down as a distributor of both products to its traditional clientele.

The other two managers had similar deals four months back. BlackRock bought an undisclosed amount of Uniswap’s token, UNI, while listing its tokenised Treasury fund, BUIDL, on Uniswap’s rails. However, access for BUIDL is gated and open only to large, qualified investors and approved market makers. Apollo signed an agreement to buy up to 90 million MORPHO tokens, nearly a tenth of the supply, while building lending markets on Morpho and using its own credit fund as collateral there.

One asset manager making a small investment toward a crypto protocol could be dismissed as “testing the waters”. But we are now talking about three of the most established money managers buying a protocol’s token and plugging their products into the blockchain-enabled ecosystem.

But why are they governance tokens? Two reasons.

The perspective of traditional finance towards crypto exposure has taken a 180-degree turn. A few years ago, the instinct was to get crypto exposure without touching the infrastructure. They opted to either hold crypto through a tokenised fund, a custodian, or an ETP wrapper.

But the evolving use case for crypto infrastructure has significantly redefined where value now lies. The rise of stablecoins and the tokenisation of real-world assets have shown traditional players that finance can be made much cheaper to operate on-chain. Settling a trade, holding the asset, and keeping the record of who owns what were all hard, expensive jobs that someone charged an expensive fee for. On-chain, they collapse toward the cost of running software.

When the plumbing commoditises, value moves to the layer that decides what flows through it, who sets the rules and who distributes the product. Those who control this layer get to capture the value flowing through it. Right now, the simplest way for traditional finance giants to do that is to buy a stake in these crypto infrastructure protocols that already control this layer. Since Uniswap or Ethena don’t have equity to purchase in the ordinary sense, their governance token offers Wall Street the closest way to own a share of the company.

The other reason is that an ownership stake brings a captive demand for its product. When someone demands USDe, they must pledge equivalent dollars to Ethena as collateral against which it issues the stablecoin. Ethena then has to park the incoming collateral in reserve assets to back the dollar it just minted. JAAA is now one of the assets it is approved to hold, so as USDe’s supply grows, a share of that fresh collateral flows into Janus’s fund. This excess demand arises as a by-product of USDe’s expansion, without Janush having to market it.

Both Apollo and BlackRock did the same with Morpho and Uniswap. In each case, the manager owns the token, supplies the product, and can then drive deposits into the protocol. Deeper deposits mean more demand for the fund that the asset manager just integrated.

For Wall Street, owning the crypto rail gives them control over the reserve, captures the distribution and lets them feed its products using the blockchain at a fraction of the cost.

What’s in It for Protocols?

Two words: Scaled distribution.

For Ethena, Janus opens its distribution network to people who would otherwise never open a crypto wallet or access a crypto protocol. The ETPs and ETFs that Janus and Ethena agreed to build together will allow advisors to buy into Ethena’s products without needing to understand blockchain. Janus’ $480-billion client book dwarfs the few billion Ethena manages by almost 100 times.

This adds on to the distribution boost Ethena got from another such deal it entered into with Coinbase two weeks back.

On June 2, Coinbase Ventures bought ENA and agreed to launch a savings product for Coinbase’s 100 million-plus users.

Coinbase already holds roughly $19 billion in its USDC ecosystem. If Ethena’s yield even marginally outperforms USDC, then Coinbase can route some of its idle USDC balance into Ethena’s product, offer users a better yield, and, in return, Ethena gets deeper funding and broader circulation.

In just four days since its launch, USDe circulation in Coinbase Vaults crossed $100 million.

Distribution also helps source cheaper funding to run its yield machine. By pulling in a slice of a $19 billion exchange balance, or a $480 billion manager’s client base, Ethena can lower the marginal cost of expanding its circulation. For a protocol with $5.5 billion in circulating supply today, even a 1% conversion rate of Janus’ $480 billion in AUM can almost double Ethena’s base.

But why should a Wall Street company hold a stablecoin over an ordinary money market fund?

With Janus’ AAA-rated loan funds now part of Ethena’s reserve strategy, USDe’s backing now looks like a conventional cash portfolio. The reserve now has short-duration, high-grade collateral along with more stable basis trades around commodities like gold. This makes the reserve look familiar to a money market fund that a corporate treasurer has been managing for decades.

That Janus took the extra step of holding the dollar itself as treasury cash shows the asset manager’s belief in Ethena’s ability to defend its dollar with the new collateral mix. It’s something which even BlackRock and Apollo didn’t do with Uniswap and Morpho.

But there are some points to note with caution.

First, a staked USDe still doesn’t guarantee returns. The yield depends on a set of trades on exchanges and market conditions. AAA credit is low-risk but not risk-free altogether, as 2008 showed.

Second, the governance token that the Wall Street companies are buying in crypto protocols pays its holders nothing yet. Ethena’s fee switch, which would route protocol revenue to ENA holders, met its conditions in September 2025 and has yet to be implemented.

So Janus, BlackRock and Apollo are not entitled to any cash flow. But what they are indeed buying is a claim to prospective income once the protocol decides to pay them. The fee switch is off at Morpho, too, and only half-resolved at Uniswap.

But these companies still have two big wins right now.

First is the captive demand they can generate for their products through the partnership with the protocols. Second is being early to position themselves where the value emerges. By buying a stake in blockchain-enabled products, these companies are also buying a share of the prospective income they generate once they become widely adopted across the broader financial markets.

BlackRock, Apollo and Janus are not the first set of institutions to recognise the value that a prospective infrastructure can generate.

We have been discussing this pattern in our last few pieces.

Banks operated as mere deposit-taking businesses until Merrill Lynch unbundled the account and paid savers a market yield. The banks then followed suit.

Read: Defending the Deposit

Exchanges were equivalent to the trading business until vertical integration forced them into price discovery platforms. All exchanges have now become (or are becoming) venues that offer perpetual contracts, pre-IPO markets, and prediction markets, all under one roof.

Read: Every Exchange is an ‘Everything Exchange’

A synthetic dollar is the latest chokepoint to come loose. The dollar, the rail it moves on, and the reserve that backs it are separating into layers, each claimed by whoever runs it best. While Ethena is rebuilding its reserve, players like BlackRock and Janus are offering distribution. Wall Street, having watched the fee on the infrastructure shrink toward zero, has decided to gain control over how the digital dollar is issued.

When you strip this entire phenomenon down to first principles, these asset managers are buying a stake in a crypto protocol that’s doing exactly what the BlackRocks and Apollos of the world have been doing all these years. They are buying a stake in a blockchain-enabled platform that still holds and moves assets (here, stablecoins) and seeks to maximise the return on those assets for its holders. Classical asset management stuff, isn’t it?

That’s it for today. I will be back with the next one.

Until next time, stay curious,
Prathik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

That’s an old joke among the economists about the soviet union.

Stuck in that same loop, we have neobanks. Five hundred startups built checking accounts that 1.4 billion people actually used. But making money out of it has been tough.

76% of neobanks are still unprofitable. The average neobank earns $45 per user per year. A traditional bank earns $350.

It comes down to the product you chose to build at the beginning, and whether that product has any real margin in it.

To understand why everyone chose what they chose, you have to look at what they were running from.

Traditional banks were bleeding people dry. They even charged you at the ATM just to take out your own paycheck. If you grew up without much capital, it's even worse. When the first neobanks showed up offering accounts with zero fees and no minimums, people chose that.

Soon, hundreds of millions of users joined. Today, Nubank serves over 60% of the adult population in Brazil. Local banks treated regular customers like an annoyance, which made that growth inevitable.

But it didn’t work out for the companies.

When you swipe a debit card at a coffee shop, the merchant pays a small fee, which is capped at around 22 cents on a $40 purchase under Federal Reserve Regulation II. That fee gets split across the card network, the bank, and the processor.

The neobank’s cut is thin. And thin, multiplied across millions of users who treat their neobank as a spending account, does not add up to a business. They keep their mortgages and investments somewhere else.

Traditional banks don’t make money when you borrow. Spending and transactions add just a tiny bit.

Banking profitability has been about credit, the interest on your mortgage, your car loan, and so on. Payments are how banks see you every day. Lending is how they make money from you. Neobanks were unprofitable because of that. You can’t just hand out loans and charge interest on a massive scale without a banking charter. Most neobanks started out as tech platforms built on top of other banks’ licenses, which meant their hands were tied legally when it came to major lending.

Nubank started in Brazil back in 2013 with a free credit card. At the time, the big traditional banks there were charging massive interest rates. So it worked out for Nubank, and they ended up getting 131 million users by 2026.

Nubank is worth $60 billion today. The free accounts were a way to get people to download the app. The profit comes from lending.

Out of their $15.8 billion in revenue last year, most of it came from credit cards, personal loans, and interest. In fact, their personal loan business grew so fast it became their biggest moneymaker. Nubank didn’t survive by inventing a new type of tech. They survived by lending money. The nice app was just the hook to get people in.

Revolut found a new way to make money. By 2025, it reported £1.3 billion in net profit. Revenue increased by 46%, reaching £4.5 billion, marking its fifth consecutive profitable year. The company’s profits mainly came from forex fees, subscriptions, crypto and lending book. Lending portfolio doubled in size with 120% growth YOY, reaching $2.9 billion. They developed these features because they had early revenue from exchange fees and subscriptions. This income gave them the time they needed to grow their lending business quietly.

Chime took the longest to figure this out. They survived almost entirely on interchange fees. Getting customers in the US is incredibly expensive, the margins on the card swipes are tiny, and you only make money when people are actively spending. If they stop swiping, your revenue goes to zero.

By 2025, Chime brought in over $2 billion in revenue but still posted a billion-dollar loss, mostly because of massive stock payouts for its IPO. They went public at an $11 billion valuation. The stock took a hard hit within months. But then, in the first quarter of 2026, they made a profit of $53 million for the first time in 12 years. Why? Because their lending products finally took off. Their paycheck advance feature was on track to clear $400 million, and their instant loans blew up.

In June 2026, a developer at Nubank accidentally activated a liquidation protocol during a routine software update. A push notification and email were sent to many customers, stating that the central bank had liquidated the bank and explaining how to claim their money from the deposit insurance fund. Co-founder Cristina Junqueira had to apologise on Instagram. She said the incident was a “bizarre” operational error. The bank and the user's money were safe and sound. But for a few minutes, a stupid mistake made it look like the company had disappeared.

To be fair, old banks do this all the time, too. Like accidentally wiring a billion dollars because of a typo. But a giant like Citi keeps rolling because it’s been around since 1812. The old banks are just terrible at tech, and the new apps are still learning how to be banks. Citi glitches, people just assume it’s a corporate mistake because they’ve been around since 1812. If people think a startup bank is failing, they run.

In April 2024, Synapse filed for bankruptcy.

Neobanks are just software companies. To offer checking accounts, they have to stitch together a web of partners behind the scenes. Synapse was the middleman connecting over a hundred different neobanks to the old-school banks holding the cash. Synapse managed the books, ran the compliance checks, and kept track of who owned what.

When Synapse went out of business, its records went with it. Around $265 million in customer money was put on hold. The partner banks had no idea which money was which users’ and discovered that $95 million had gone missing. That was a complete lack of accountability. While people were unable to access their preferred banking apps, like Yotta and Juno, for several months, some were even blocked from making their mortgage.

If one of your favourite banking apps relies on a bank that it doesn’t control, and a middle bank that it doesn’t control, then it’s an elaborate fake. The system is built to fail.

At the end of the day, the only protection against a mess like that is a banking license. Neobanks always said they didn’t need one.

I wrote last October that crypto neobanks seemed to be the real deal. Regulation was clear, and people had wealth on-chain and wanted to spend directly from it. What I wrote is still true. But I completely underestimated how infrastructure built on a partner bank would include whatever breaks in a partnership with them.

The response from crypto has been to abandon the charade and start doing. From December 2025 to May 2026, the OCC ‘conditionally approved’ about 10 crypto and FinTech national trust charters. That’s already more than the total in the previous decade. Paxos, BitGo, Fidelity Digital Assets, Ripple, Circle, Bridge (which Stripe acquired for $1.1 billion), Crypto.com. They all applied for the same charter in the US that the neobanks claimed they didn’t need (because they didn’t want it).

Because a national trust charter is the ultimate escape hatch from the middleman trap. It gives these companies a direct stamp of approval from the federal government to hold customer assets, settle payments, and operate across all fifty states under a single rulebook. They no longer have to beg traditional partner banks for permission to exist, and they don’t have to risk their entire business on invisible middleware like Synapse.

Crypto companies realised that if you want to move billions of dollars without getting riddled by the plumbing of an old-school bank, you have to buy your way into the federal system.

Read: Charters, Keys, and Control 🔐 - by Prathik Desai

Kraken’s parent Payward now has three different regulations in the US. This includes a charter from Wyoming, a Federal Reserve master account that was secured in March 2026, and an OCC national trust application from May 2026. SoFi also got its OCC charter in 2022 by acquiring Golden Pacific Bancorp. In December 2025, SoFi launched a dollar-backed stablecoin, which was the first stablecoin issued by a US national bank built on a public, permissionless blockchain. By May 2026, it was available to 14.7 million members to hold, spend, and convert within the SoFi app. Mastercard became a settlement partner for SoFi. Coinbase started moving BTC-backed loans through Morpho on the Base chain and by early 2026 had more than $1.4 billion in collateralised BTC.

SoFi’s evolution is unique - student loan refinancer to a neobank to chartered bank to stablecoin issuer. It has one of the first complete stories in the space.

The remaining gap is unsecured lending. Total crypto collateralised lending across CeFi and DeFi combined is $67.42 billion.

The real unsecured lending throughout DeFi only amounts to $24 Million. The protocols that attempted to tap into the unsecured lending market (i.e. Goldfinch, early Maple, or TrueFi) have all either pivoted toward fully collateralised lending models or are in the process of shutting down. Maple is now the largest lending protocol in DeFi and operates at 160% collateralisation.

Read: The Lenders’ New Rails - by Prathik Desai - Token Dispatch

On a pseudonymous blockchain, unsecured lending lacks a viable enforcement mechanism. In the real world, if you default on a loan, a bank can ruin your credit score or take you to court. In DeFi, there are no credit bureaus or repo men. If a borrower walks away with an uncollateralized crypto loan, they just abandon the wallet address, and the money is gone forever. DeFi protocols tried to fix this with soft reputation metrics, but they got hit with massive defaults and realised that without real-world legal enforcement, anonymous people just won’t pay you back.

Nubank lends to 131 million customers, many of whom do not have a credit history, using transaction behaviour for the lending underwriting process. This type of product does have a real economic value, but is very unattractive and operationally intensive. For someone to solve these particular infrastructure frontiers on the blockchain, they will most likely be required to obtain a banking license in order to do the same at scale. I expect the Office of the Comptroller of the Currency (OCC) waiting room to become more crowded.

Back in October, I suggested that the crypto neobanks were revisiting the themes which emerged about a hundred years ago. I said the tech will always change, but the way humans relate to money will always be the same. I intended there to be some beauty to that setup. And now it presents a different image.

The banks will always charge you to lend you your own money. The surviving neobanks came along with the promise to stop this, and the ones that did survive did it by... lending you your own money, but at better rates and better interfaces, yet by the same mechanism.

All I want to tell you is that:

“The more things change, the more they stay the same.” - Jean-Baptiste Alphonse Karr, 1849

—Thejaswini

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

Going public for a company is one of capitalism’s great rituals. A company spends weeks on the road (quite literally) parading its pitch deck before fund managers, hoping they buy in. Bankers play the role of the jury, weigh the demand, determine what they believe is the value of the shares the company is offering, and allocate the shares. Then a bell rings on one fine morning, and voila - the private company is now public. The buyers and sellers then engage in a battle of orders in public markets, leading to price discovery over the next few hours or days.

These rituals involving the roadshow, book and bell exist because nobody could see inside a private company and had to wait for the bankers to set a price. Every company had to go through it all and arrive on the other side.

But SpaceX, the latest to go public in the US stock market, didn’t quite walk this journey. Elon Musk named his price even before the roadshow or the bankers calculated it.

An IPO has historically bundled three things as a job for bankers and paid them a fee for doing so. They figured out the price, found the buyers, and delivered the shares. With SpaceX, all three were unbundled and functioned separately. The public had already priced the company, and buyers had already lined up before it went public.

In today’s piece, I explain how SpaceX is changing the way companies go public and the role banks play in the new journey.

Onto the story,
Prathik

The Bankers’ Fee

Bankers charge the company a fee to execute the IPO process. For most of the past century, that fee was calculated as a spread on what the company received from its investors.

As part of the execution, the banks ran a roadshow, collected soft orders from institutions and retailers across a range of price bands, and settled on a price that the market would deem right. It then had to ensure delivery of shares. In a standard firm-commitment deal, the underwriting banks buy the entire offering and resell it to those who applied for the offering.

These three functions of price discovery, distribution and allocation were fused together because it couldn’t have been done differently for years. Banks were the only institution that saw the full picture, which made them the best party to estimate demand. They had access to the company’s financials and plans ahead, which let them price its shares more accurately. Banks’ diverse clientele and cross-sector relationships enabled them to place the stock in the hands of influential institutions and retail investors. Banks’ robust settlement systems guaranteed that the shares actually moved.

So the company going public had no choice but to buy them as a set and pay the bank for the bundled services.

With an unbundled IPO, that chokepoint no longer exists. The demand is now visible to everyone in public through perp venues, prediction markets, and pre-IPO platforms, even before the bank begins work on the public offering. This lets the company negotiate its fee and choose the best venue for each service in the IPO journey.

For mid-sized American IPOs, that fee averages around 7% of the total deal value. Big deals pay less. In 2014, Alibaba’s $25 billion listing paid 1.2%. SpaceX paid only 0.67%. There could be multiple reasons for the largest IPO in history paying one of the smallest fees. The unbundling of the expectations from an underwriting bank must surely be one of them.

The Public Pricing

SpaceX went against conventional IPOs even before the roadshow began. Instead of banks testing a price range before arriving at the offer price, Elon Musk straightaway named one price, $135. Investors can either take it or leave it.

SpaceX could skip the banks for price setting because that had already been done for weeks before it went public.

Three public markets priced SpaceX differently. On pre-IPO secondary marketplaces like Hiive and Forge, where employees and early investors trade private shares, SpaceX’s share price hovered near $150, its opening price at debut.

On Polymarket, the crowd was pricing in where the stock would close on its first day, with the highest cumulative betting volume implying a valuation above $2.0 trillion.

On Friday, June 12, SpaceX shares did close at ~$161 apiece, 20% above its offer price, with a valuation of $2.1 trillion.

On Hyperliquid, a perpetual futures contract on SpaceX traded continuously, around the clock, acting as a live public signal of how the market wanted to price its shares.

Until the public listing, these pre-IPO perpetuals have no underlying shares to anchor their price to. So, they act more like leveraged bets on how the market thinks the stock will be priced when it debuts.

Most of the open interest in Hyperliquid’s permissionless markets was tied to this one SpaceX contract. On debut morning, the perp contract on HIP-3 markets was trading around $174–185, a 30–35% premium to the offer price of $135. On its first day of trading on the stock market, SpaceX reached an intraday high of $176 per share.

The price of the perp contract also immediately corrected towards the opening price of $150 when the stock debuted on the bourses.

Possible coincidence? Well, it wasn’t the only time the unconventional pricing mechanisms got it right.

When chipmaker Cerebras went public weeks earlier, its pre-IPO perpetual on Hyperliquid landed within 1.3% of the eventual Nasdaq open, which then compressed to a near-zero spread once trading began. The venue predicted a company’s opening price before the company had a price.

This is how SpaceX skipped the banks for the first job in the IPO bundle - the price discovery.

The Delivery Problem

After banks help set the price for conventional IPOs, they help distribute the shares by finding buyers. We will get to this part later. Let’s jump to the third aspect of the bundled services the underwriting banks offer: allocating and delivering the shares.

On the listing day, SpaceX was trading at different venues and under different arrangements, contrary to how conventional IPO stock trades. A token on Solana issued by Backpack, a US-registered product from Kraken, a tracker from Ondo, and Hyperliquid’s synthetic perpetual all had SPCX as their underlying asset. Many centralised exchanges, like Bitget, Bybit and Binance, also allowed their users to apply for these IPOs.

On the day of listing, some of them delivered and others didn’t.

The products that held the asset directly, or sourced it through a registered broker-dealer, opened on time and tracked the stock. Backpack’s Solana token was backed 1:1 by real shares held at its broker-dealer arm. Kraken’s US product sourced stocks through Payward Securities. Ondo ran daily custody attestations against its tracker. Hyperliquid’s perp never needed a share in the first place, but its price corrected to track SPCX’s stock once SPCX went public.

Binance, Bybit and Bitget had run tokenised allocation campaigns, allowing users to subscribe to SpaceX, with xStocks (Kraken-owned tokenised stocks platform) promising to source the actual stock underlying those tokens. The shares were never allocated, and the exchanges refunded subscribers in full, with Binance alone returning roughly $557 million.

Was it a failure of blockchain? The other venues that held the asset honoured their agreement. So, the tokenised version of the stock itself wasn’t the problem. SpaceX was oversubscribed, with demand reaching 3.5 to 4 times the $75 billion on offer. It was just in case of centralised exchanges that were counting on a middleman to get shares allotted that the delivery failed. Eventually, the subscribers were compensated in full.

So, when the price discovery is commoditised and public, pricing is no longer the scarce and valuable thing in the IPO bundle. It comes down to proving whether you can deliver the shares.

This is not a new problem, though. Wall Street faced a similar problem about 60 years ago and built an institution to end it.

In the late 1960s, American trading volumes outran the paperwork. The back offices drowned in paperwork because the stock certificates were physical paper that had to be located, checked and hand-delivered for every trade. Trades failed constantly because the seller simply could not produce the certificate. The exchange closed every Wednesday just to dig out from the backlog. The industry came to a fix that involved avoiding paper movement.

In 1968, the Central Certificate Service was established (later reorganised into the Depository Trust Company in 1973) to hold certificates in a single vault and record ownership as book-entry entries. If everyone’s shares sat in the same trusted place, delivery would no longer be a question. The depository could guarantee that the seller had the share and the buyer received it.

This is the fundamental problem that custody infrastructure has to answer: Does the seller actually have the asset, and can they hand it over?

Tokenisation presents a similar problem because a token can be issued before the shares behind it ever reach the depository’s guarantee. When the claim is backed by real stock sitting at a broker-dealer, it inspires confidence in delivery. When the token is sold ahead of shares that were never sourced, the claim isn’t as strong. In 2026, it was a tokenised claim whose shares were never procured that became the problem. The difficult part of an IPO to crack will no longer be price discovery. It will be around proving that the underlying asset exists and can be transferred.

What’s Left for the Banks?

Let’s walk the IPO from start to finish and see what’s changed hands.

At the earliest stage, the private price discovery will no longer be the banks’ stronghold. It now happens continuously and in public, on secondary marketplaces, prediction markets and perpetual futures, for weeks or months before a listing. By the time a company like SpaceX decides a price, the market has already priced it using multiple tools.

Read: Pricing the Private

The listing itself is now contestable. SpaceX traded on Nasdaq and, the same morning, on a handful of on-chain venues. Secondary trading no longer stays within a single exchange, courtesy of blockchain-enabled 24/7 venues.

The answer to the delivery problem rests on who actually holds the asset. This, too, used to be the bankers’ monopoly, where they guaranteed delivery of assets by relying on the depository in which they held the shares. Now, anyone who can prove custody can stand in that position.

What still rests with the banks? The four things in the messy, middle phase.

First is the certification. The endorsement of a lead underwriting bank at the top of the prospectus vouches for the deal, telling cautious institutions this one is safe to buy. That endorsement is reputational, built over decades, and a token wrapper cannot issue it. Banks charge a fee for this reputational validation. Goldman Sachs and Morgan Stanley each walked away with $100 million from the $500 million in total fees SpaceX paid the bankers. This was despite the fact that these banks played little role in price discovery.

Second is the distribution authority. The lead bank still allocates the vast majority of shares at its own discretion, deciding who gets in and who is left out.

Next is the risk absorption. In a firm-commitment deal, the kind SpaceX had signed, the banks contractually buy the entire offering and resell it. If demand collapses and the book goes unfilled, the banks, and not SpaceX, would have to hold the unsold stock. No on-chain venue will step up to bear that kind of risk.

Lastly, the stabilisation. In the fragile initial days of trading, if a stock is wobbling, the lead bank buys back shares it had deliberately oversold at the offering (also called the “greenshoe” mechanism) to prevent wild price swings. In SpaceX’s case, it was Morgan Stanley supporting SpaceX after the bell. It is a job that needs a balance sheet and a market-making desk, and it is the banks doing that, for now.

Everything else in the IPO journey is being picked up by markets that run cheaper, for longer hours and in public.

Blockchain-enabled pricing venues have proven effective for pricing companies planning to go public. These venues are always on and offer a market for continuously pricing the stock, better than any bank does. It was evident in how SpaceX’s book was oversubscribed multiple times, and the stock closed its first day up about 19%, close to a textbook-perfect example of an IPO pop.

The old IPO model has been unbundled, and each part is being taken over by the venue that executes it most efficiently. We see this happen across every market - financial or otherwise. In Pricing the Private, we argued that markets no longer wait to price private companies. Banks that guarded and held a monopoly over pricing a company and delivering its shares will no longer be paid for these services in the new IPO model.

So, will the bankers’ revenue from IPOs all but vanish? Not really. SpaceX paid 0.67%, but that spread alone was not what the bankers focused on.

Consider the first-day pop. SpaceX closed about 19%, which on a $75 billion deal amounts to roughly $14 billion in unrealised gains in a single session. Some of the lucky investors who book part of these profits are most likely clients of the underwriting banks that made the allocation possible. Although banks can’t allocate shares to their own books, they still receive inflated trading commissions from their clients, who thank banks for continued access to favourable IPO allocations.

This is why a 0.67% fee still drew almost two dozen banks into a fight for position. The spread is no longer the main deal. The allocation power, the soft dollars banks get to make on their positions, and the wealth tail are what the banks will be in it for.

So the bank’s economics will migrate up the prestige ladder, from a commodity (pricing, which anyone can now do) toward a scarcity (access, which some banks still control).

That’s it for today. I will be back with the next one.

Until next time, stay curious,
Prathik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

For almost nine months of 2025, every Monday on Token Dispatch opened with our Bitcoin macro edition. Price, on-chain flows, ETF prints, what the miners were doing and where the industry was in the crypto cycle. It seemed like the most obvious thing to write about. If you were a crypto publication, you would lead with Bitcoin, just as a market wrap leads with the index.

Then, one Monday, we shipped without it. We have now gone almost nine months without a Bitcoin macro column. I didn’t think much of it at the time. But now, when I look back, it helps me acknowledge how far the industry we operate in has come.

For most of crypto’s life, people cared about just one question: what is Bitcoin doing? It made sense then. But crypto has outgrown its connection to BTC price charts and ETF flows. When I hear crypto today, I think of how it is building a better financial world, running stable businesses on existing or new infrastructure, or turning into a new version of fintech that improves the way we transact or move money.

Many great innovations have taken this road in the past. The smartphone went through this when it stopped being measured against the phone call. The internet did too. That’s how crypto is graduating, too.

We have been writing a lot lately at Token Dispatch about the convergence of crypto and fintech. So, we deemed it timely to publish this guest op-ed, in which Nikshep argues that crypto no longer needs Bitcoin. He explains why Bitcoin lost two jobs this year and why it bodes well for the larger industry. Nikshep invests and builds at the intersection of AI and crypto. He has previously worked with Kalshi and Coinbase.

On to Nikshep’s story,
Prathik

Follow Nikshep on X

AI took its job as the market’s risk trade. The dollar took its job as crypto’s money. And the thing quietly tying a fragmenting, multi-chain economy together isn’t Bitcoin anymore. This is the most bullish thing that’s happened to crypto in years — and almost nobody is framing it right.

Bitcoin broke below $70,000 this week, down roughly 45% from its October high, and the timeline filled with tombstones. Record ETF outflows. The longest redemption streak since the funds launched. “Digital gold” that somehow forgot how to be gold while actual gold ripped 89% and blew past $5,000.

They’re mourning the wrong thing.

Because while Bitcoin bled, an on-chain exchange most people have never opened did more trading volume last year than Coinbase. A prediction market hit a $20 billion valuation, printing a $365 million fee run-rate. A privacy coin everyone wrote off ran 70% in a week — going up while Bitcoin went sideways. And a network you’ve probably underrated made it possible to move value privately across any chain without having to buy its token.

Crypto isn’t dying with Bitcoin. Crypto stopped needing Bitcoin.

That sentence sounds bearish. It’s the opposite. What’s actually happening is a coming-of-age: crypto is graduating from a single-asset momentum casino, where every coin was just leveraged Bitcoin-beta, into a real, dollar-denominated economy where businesses live or die by their own fundamentals, and where a new connective layer, not Bitcoin, holds the whole thing together.

Bitcoin lost two jobs this year. Here’s who took them, and here’s what’s being built in the space it left behind.

Job one: AI ate the risk capital

Bitcoin has no cash flow — no earnings, no dividend, no coupon. Its price is almost purely a function of how much money is hunting for risk and how willing people are to take it. That makes it a liquidity sponge: it swells when money is loose, gets wrung out when money is tight. In 2026, one rival is wringing it dry.

AI infrastructure spending is heading toward $700–830 billion this year, about half of the entire US investment-grade bond market, on its way to $7 trillion by 2030. It’s roughly 5% of US GDP and has recently added more to American growth than consumer spending. Nvidia alone is ~8% of the S&P 500. This isn’t a sector competing for capital. It’s a gravity well bending the price of capital for everyone.

It starves Bitcoin through three doors at once.

It took the story. Bitcoin’s deepest pitch was “the asymmetric bet on the future.” AI offered a better version — one with real revenue, demand it can’t build fast enough, and government backing — bought through the index you already own. Allocators now lump Bitcoin in with the most speculative tech; its correlation with unprofitable “story” stocks hit the 97th percentile. When two things share a risk bucket, and one suddenly has earnings, money rotates. That’s the outflow streak in a sentence.

It took the capital. The build-out is increasingly debt-financed — hyperscaler bond issuance already past all of last year, private credit to AI over $200 billion. When the best borrowers on earth flood the market with paper, capital gets absorbed from the top down, long before it reaches the speculative frontier where Bitcoin lives.

It took the rate cut. AI is physically inflationary — electricity and water up ~5%, memory up double digits. That helps pin inflation near 3.8%, which keeps a hawkish Fed at 3.50–3.75% and markets pricing in zero cuts this year. So AI doesn’t just outbid Bitcoin for capital; it manufactures the high-rate regime where liquidity can’t reach Bitcoin anyway. It suppresses it twice.

And then it got physical. AI and Bitcoin mining are the same business — turning electricity into compute, fighting over identical megawatts. AI won because a watt is worth far more in an Nvidia rack than a hashing rig. The average public miner spent ~$80,000 to make one bitcoin last quarter while bitcoin traded near $70,000 — a $19,000 loss per coin. So miners are defecting to the predator: over $70 billion in AI/HPC contracts have been signed, with listed miners on track to generate up to 70% of revenue from AI by year-end. Core Scientific is converting a 300-megawatt bitcoin site into AI data centres as part of a $10.2 billion deal. Riot leased to AMD and sold its bitcoin to buy the land. They’re dumping treasuries to fund the pivot — and they’re the same firms that secure the network.

Here’s why this is structural, not a dip. Compare it to the threat everyone fears: quantum computing. A powerful enough quantum machine could crack Bitcoin’s cryptography in minutes, maybe by 2029. Terrifying — but quantum attacks the machine, and you can change the machine: post-quantum standards are finalised, the migration soft forks are drafted, the roadmap is years. Quantum is a deadline, not a death sentence. You patch the lock. AI attacks what you can’t patch — the reasons to own Bitcoin, the capital that prices it, the power that secures it. There’s no soft fork for “something better took your narrative, your money, and your electricity.” Job one, gone.

Job two: the dollar replaced Bitcoin as crypto’s money

This is the part nobody connects, and it’s the keystone.

For most of crypto’s history, Bitcoin was the reserve asset — the on-ramp and the base pair. Fiat became Bitcoin; Bitcoin became everything else. Every coin was quoted in BTC. Every inflow hit Bitcoin first. That gravitational role is why alts used to rise and fall with it.

The stablecoin cut that cord. USDC just flipped Tether in transaction volume for the first time since 2019. Annual stablecoin volume crossed $30 trillion. The on-ramp is now fiat → USDC → whatever you want, and Bitcoin is nowhere in that path. When Polymarket rebuilt its exchange this spring, it launched its own dollar — Polymarket USD, backed 1:1 by USDC. Hyperliquid settles in dollars. The dollar has become, in one analyst’s phrase, money beneath app-level money — the reserve collateral under everything, with each app stamping its own label on top.

So when the market turns risk-off, the dominance charts show Bitcoin’s share falling while stablecoin share rises. Money isn’t fleeing crypto. It’s rotating into the dollar — inside crypto. You no longer have to hold Bitcoin to “be in crypto.” The dollar does that job now. Bitcoin can fall forever and never get a bid from on-chain activity, because on-chain activity runs on dollars. Job two, gone.

Follow Nikshep on X

What’s Thriving without BTC: Real Businesses

Strip Bitcoin out and look at what people actually use. These aren’t lottery tickets waiting for a BTC pump. They’re businesses.

Hyperliquid is the proof that should end the “crypto is dying” conversation. An on-chain exchange that trades like Binance — deep books, fast fills, self-custody — it did roughly $2.6 trillion in volume last year, more than Coinbase’s $1.4 trillion, generating $0.8–1.3 billion in annualised revenue. It routes 97% of fees into buying its own token on the open market — about $1.3 billion so far, ~7% of market cap a year, four to five times Ethereum’s burn rate, fourteen times Solana’s. No VC. A community airdrop and a buyback funded entirely by people using the thing. Its demand driver — traders trading — is bidirectional and BTC-agnostic. Volume can climb while Bitcoin falls.

Polymarket is the second: a $20 billion valuation, $25–30 billion in annual volume, a ~$365 million fee run rate, ~150,000 daily users (2.5x in five months), its own dollar, and a token coming. Its product is betting on elections, sports, and world events. None of that demand needs Bitcoin to go up.

These are now valued like companies: by revenue, users, and multiples. That is what a maturing market looks like.

The new differentiator: privacy — and two ways to get it

If Bitcoin’s transparent, surveilled ledger was the old default, privacy is the new premium. Something you can only get on-chain -- sovereign, untraceable money. But there are two completely different ways to buy it, and the difference is the whole point.

Privacy you own. That’s Zcash. ZEC ran ~70% in a week toward a ~$10 billion cap, up over 4,500% from its 2024 low — decoupled from Bitcoin, as its own move while BTC sat flat. It’s backed by mechanics, not hype: shielded supply has crossed 30% of all ZEC (from ~11% a year ago), and shielded coins tend to stay shielded, shrinking float as demand rises. The regulatory pressure that was supposed to kill privacy coins is the thing fueling them. Robinhood listed it; Grayscale filed the first privacy-coin spot ETF. Privacy went from use case to thesis.

But ZEC is still a coin you buy and a chain you move to. Which brings us to the more important model.

Privacy you use — anywhere. That’s NEAR, and it’s the most underrated idea in this entire shift.

NEAR isn’t asking you to buy a privacy coin or migrate your assets. Through chain signatures, a single NEAR account can sign native transactions on Bitcoin, Ethereum, and Solana — real BTC, real ETH, no bridges, no wrapped tokens — controlled by a decentralised MPC network. Layer on confidential intents, and you can move value across any chain privately, with counterparties and routing hidden, executed through a private shard. You keep your assets on your chains and get usable privacy as a layer on top.

That’s a categorically bigger claim than any single privacy coin. You don’t need ZEC. You don’t need to leave Ethereum or Solana or Bitcoin itself. Privacy stops being an asset you hold and becomes a property of how you transact, everywhere at once.

The unifying layer for an economy Bitcoin no longer dictates

Step back and look at the shape of the thing. The crypto economy isn’t consolidating — it’s expanding and fragmenting. Dozens of chains. A dollar base layer underneath all of them. And now a new class of participant entirely: AI agents that hold credentials, call APIs, and move money on their own.

A sprawling, multi-chain, agent-inhabited economy needs connective tissue. For a decade, that connector was Bitcoin — the reserve asset everything routed through. That role is now vacant. And the thing filling it isn’t another store of value. It’s a coordination-and-privacy layer: sign anything on any chain, settle in dollars, transact without broadcasting your every move, and let agents do the same.

NEAR is positioning to be that layer. It already lets agents pay each other in USDC with the counterparties hidden, runs confidential compute inside hardware enclaves nobody — not even NEAR — can see into, and turns its signing network into a key-management service for the agent economy. It’s usable privacy and cross-chain control for humans and machines, without forcing anyone onto a single chain or coin.

The consumer face of the same shift is Venice — a privacy-first, uncensored AI app with actual web2 users who just want private AI, wrapped in a token economy where staking VVV earns a share of inference via locking VVV and minting DIEM, tokens that represent a dollar a day of compute in perpetuity. It’s burned over 40% of its supply through usage-funded buybacks. Its demand curve is the number of people using AI. Bitcoin’s price is not an input. The token price and product growth clearly show it’s decoupling.

This is the new centre of gravity. Not a coin. A layer — and an economy that hangs off it, along with real businesses driving real value.

The Reframe

Put it together, and it resolves cleanly. The dollar is the cash. Protocol tokens — HYPE, POLY, ZEC, NEAR, VVV — are the equities. Coordination and privacy layers are the infrastructure connecting it all. And Bitcoin? Bitcoin is one node. The “digital gold” node is currently out of favour, because AI took the macro trade, gold took the safe-haven trade, and the dollar took the reserve trade.

For ten years, the only question in crypto was “what is Bitcoin doing?” because everything was Bitcoin-beta. That era is over. The new question is the one you’d ask about any company: does it have revenue, users, and a token that actually captures the value it creates?

The Takeaway

Stop watching Bitcoin to read crypto’s health. You’re staring at the wrong instrument.

Watch revenue. Watch users. Watch which networks are becoming the rails everything else runs on — the layers that let value move across any chain, privately, settled in dollars, usable by humans and agents alike.

Bitcoin lost two jobs this year. AI took the macro. The dollar took the money. And the connective tissue of everything left is being built by protocols Bitcoin can no longer dictate.

Bitcoin breaking $70,000 isn’t the end of crypto.

It’s the moment crypto stopped needing it.

Not financial advice. Small-cap narrative tokens are exactly where the gap between “great network” and “the token captures the value” is widest — and where the losses concentrate. Do your own work.

P.S. This piece was originally published here.

Follow Nikshep on X

We will be featuring good writing and writers we love from time to time. If you have recommendations, send them our way.

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000 subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

We look at a giant in any industry and see a failure of antitrust law. That view is shallow. Midnight brainrot, maybe, but look at it like gravity, functioning perfectly.

A massive system creates an inevitable pull. In physics, matter attracts matter. In markets, volume attracts volume. This is why tearing down a monopoly by force rarely works. You can partition the entity and declare the market free, but you cannot legislate away the physics. The broken fragments still feel the original pull. They float in the same space under identical economic pressures, destined to fuse back together.

How do you destroy a black hole? The gravity remains. Yeah, I just watched Interstellar for the 9th time.

Standard Oil controlled 91% of US oil refining by 1904. The government broke it into 34 companies in 1911. Within a decade, several of those pieces, such as Standard Oil of New Jersey and Standard Oil of New York, had grown back into giants on their own.

Exxon and Mobil, two of the biggest companies in the world, a century later, both trace directly back to that breakup.

Sometimes breaking a monopoly just creates the conditions for new ones to grow in its place.

Monopolies in finance and infrastructure are notoriously hard to dent, let alone end. AT&T’s 1984 breakup split the company into seven regional providers. By 2005, AT&T had reassembled most of itself through acquisitions. ‘In 2005, one of the Baby Bells, SBC, absorbed AT&T Corp itself, taking back the brand. The economics had never changed. High startup costs and user networks kept the original monopoly intact.

On May 27, 2026, the SEC approved Paxos Securities Settlement Company as a clearing agency. DTCC, through its NSCC and FICC subsidiaries, has been the only securities settlement utility in the United States since the 1970s. The first blockchain-native firm ever approved to provide clearing and settlement services as a central securities depository in the US.

Before we say “monopoly broken.” Now that I’ve read Tim Wu’s The Age of Extraction, I believe that it’s rarely true. How platforms that look unavoidable usually stay that way even after the legal barriers come down, because the barrier was not always the legal ones.

What does Paxos need to actually compete?

The fight comes down to netting. I’ll explain it like you are dumb.

You owe X $100. X owes Y $100. Y owes you $100. Without netting, three payments happen. $300 moves. When we apply netting, everyone realises it’s circular. The net effect is that nobody owes anybody anything, and nothing needs to move.

DTCC does this at the scale of the entire US stock market. Thousands of brokers and banks generate millions of trades per day. If Goldman Sachs buys 10,000 Apple shares and sells 9,000 shares on the same day, DTCC completely ignores those 19,000 individual movements. Goldman is a net buyer of 1,000 shares. Only that final balance settles, because… netting.

DTCC’s equities clearing arm processes 214 million broker-to-broker transactions daily, worth $2.08 trillion. DTCC’s own language is blunt about the alternative. Without netting, the company says, ‘trillions of dollars in cash and securities must move through the financial system on a continual basis throughout the trading day.’ Multilateral netting is what prevents that. DTCC’s own white paper calls it one of the ‘enormous benefits’ that any move toward faster settlement has to preserve.

That’s where atomic settlement, the thing Paxos is built on, runs into this.

Atomic settlement means every individual trade settles instantly and all at once. This eliminates counterparty risk because there is no delay between trade and settlement.

But if every trade settles instantly, there’s no chance to net anything. Each trade is a complete transaction, so full value changes hands every time. For example, if Goldman buys 10,000 Apple shares and sells 9,000 instantly, that counts as two transactions. 10,000 shares worth of capital moves one way, then 9,000 shares worth move back. This contrasts with DTCC, which nets the same activity down to 1,000 shares worth of actual movement.

The capital that must be set aside for the total amount, rather than the net amount, cannot be used for anything else. It can’t be lent, invested, or deployed in other ways. For a single trader making a few trades, this is just a minor issue. For a large broker-dealer processing thousands of trades each day with hundreds of counterparties, that idle capital requirement turns into a high cost, even if each individual trade settles more quickly.

Speed per trade versus capital efficiency across the whole book. Different optimisations, and for the big players in the market, the second one might matter more. That’s where they go back to the monopoly.

Paxos is well aware of this, too. Multilateral netting is part of their design. In fact, the company has built the platform to support it across any settlement cycle, from T+2 down to intraday. The constraint right now is scale.

Right now, Paxos only nets trades between two direct parties. Multi-party netting (what DTCC does) across the entire market will come later. The SEC’s approval caps initial operations at 10 participants. DTCC nets across thousands. Netting requires a massive volume to work. If only five banks trade with each other, they rarely owe each other matching amounts. Five hundred banks trading together create endless overlapping debts that cancel out perfectly. The big firms that need this efficiency are already hooked on DTCC’s massive network. They hardly have any reason to switch first.

For Paxos to build the netting efficiency that would attract those broker-dealers, it needs the broker-dealers. For broker-dealers to come, netting efficiency needs to already exist.

To make matters more complicated, PSSC’s registration is temporary. It lasts 18 months. Operations will start about 10 months after approval, which means the earliest live activity will be around Q1 2027. The target launch date for the DLT-based clearing agency is “March 2027 at the earliest.”

Can you expect DTCC to remain passive? They raised formal concerns in a comment letter regarding PSSC’s proposed netting plan and its overall recovery strategy. That’s what monopolies do.

Separately, DTCC partnered with the Stellar Development Foundation to put real-world assets on a public blockchain. They plan to tokenise US Treasuries and major stocks, including Russell 1000 equities, on Stellar’s network by the first half of 2027. As the incumbent with a net moat, DTCC is now also building blockchain infrastructure.

So what actually has to go right for Paxos?

Participant count needs to grow well past the initial 10, and it needs broker-dealers with real volume, not just pilot participants testing the rails. Multilateral netting needs to go from “planned” to “live” within that 18-month window, because a temporary registration that can’t demonstrate its core economic claim won’t be renewed. And Paxos needs all of this to happen while DTCC is simultaneously building its own blockchain rails on Stellar.

None of this is impossible. We will see if Paxos can actually break the cycle, or if DTCC’s gravity pulls them right into the centre.

—Thejaswini

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

After the 2008 financial crisis, banks pulled back from middle-market lending. Private credit filled that void with pooled capital from pension funds, insurers and wealthy individuals, and lent it directly to borrowers. The private credit industry grew almost tenfold from 2007 to approximately $2.4 trillion by 2023.

The problem, though, has been that these lenders retained all of banking’s frictions. Think of the multi-day settlement windows, agent banks reconciling positions over email, and the “2 and 20” fee model that survived intact.

The new system is larger than the one it replaced, but also more susceptible to risk due to its high leverage.

The stress is already showing. In Q1 2026, redemption requests at non-traded BDCs exceeded new fundraising for the first time in the sector’s history. Blue Owl had to sell $500 million in bonds and restrict redemptions across its retail vehicles to address rising redemption activity. Blackstone’s flagship BCRED fund has already received $4.4 billion in redemption requests in the second quarter, accounting for 10% of its outstanding shares, compared with 7.9% in the preceding quarter. Capital is moving from smaller, software-heavy lenders to larger balance sheets. Ares Capital and Blackstone’s BXSL have held up. The rest are bleeding.

Blockchains can help address some of these frictions, and the world has begun to take notice.

In January this year, Apollo, the world’s largest private credit manager, put a slice of its diversified credit fund on six blockchains. The product, ACRED, settles redemptions daily. The traditional version settles quarterly, on paper, through a transfer agent.

In today’s edition, I look at how private credit’s $2.4 trillion empire is being rewired and who gets to capture the value from the new infrastructure.

Onto the story,
Prathik

What Concerns Private Credit?

After the 2008 financial crisis, regulatory guardrails were put in place to protect the banking industry from future financial shocks. The Dodd-Frank regulation in 2010, the Volcker Rule, and Basel III’s capital framework required banks to hold more capital against leveraged loans, while interagency guidance discouraged such deals.

The lending business is dominated by half a dozen key players. Apollo manages over $1 trillion in assets, with ~80% in credit. Ares has $422 billion in AUM. Blackstone’s Blackstone Private Credit Fund (BCRED) holds roughly $79 billion in assets. Blue Owl manages roughly $160 billion

Most of these institutions retained the old “2 and 20” fee structure, in which the banks charged a 2% management fee on AUM and a 20% carried interest above a predetermined profit threshold.

The mechanics behind processing a direct lending transaction are worse. The Loan Syndications and Trading Association (LSTA) targets seven business days to settle par syndicated loans and twenty for distressed loans. In reality, it often takes longer due to time-consuming paperwork.

In its market practice documentation, the International Securities Association for Institutional Trade Communication (ISITC) calls the process “highly manual (fax, email).” NAV calculations are performed quarterly by fund administrators, who are paid specifically for this.

At some levels, this system looks worse than the 2008 banking system. In 2008, the failing assets on bank balance sheets were backed by FDIC insurance. The US Fed’s emergency liquidity facilities (TAF, PDCF, TALF) plus TARP capital injections were available as the last resort. The problematic securities were still being traded, so the market priced in the stress as it unfolded.

Today’s private credit risk is entirely different.

The IMF’s October 2025 Global Financial Stability Report flagged that more than 40% of companies that borrowed from private lenders had negative cash flow from operations at the end of 2024. US life insurers are roughly 33% allocated to private credit.

This is the core problem that worries the private credit industry today. The system that replaced banks is bigger than the banks it replaced, more leveraged to insurance capital, and yet regulators have done little to change it.

Moving the Plumbing On-Chain

Lending has five layers: origination, underwriting, capital, servicing and distribution. A private credit fund collects a single fee for doing all five. Blockchains force them apart. Once they’re apart, you can see which ones still earn their fee.

Consider Maple Finance, an on-chain asset manager. Maple started five years ago as an undercollateralised institutional lender on-chain. When FTX collapsed in late 2022, so did Maple. Its largest borrowers walked away from loans they couldn’t repay. Active deposits fell by over 90% in a matter of months.

But Maple rebuilt. It brought underwriting in-house, tightened collateral and disclosure rules, and put walls between pool delegates and borrowers. By the end of 2025, it had originated over $20 billion in loans on-chain, with withdrawals settling in under five minutes.

Compare this with a 20-business-day window in the traditional market. Maple’s rise from a near-death experience shows that on-chain lending is not necessarily fragile. If on-chain lending adopts the same institutional safeguards as traditional credit, a robust model is achievable. Maple showed this by rebuilding its underwriting layer while skipping the agent bank, correspondence via fax or email, and the 20-day wait.

Securitize is experimenting at the distribution layer. Its tokenised feeder for Hamilton Lane’s Senior Credit Opportunities Fund cut the minimum investment from $2 million to $10,000. That opens up lending opportunities to a much wider range of investors. The product still requires a qualified purchaser status, but the operational cost of qualifying has been compressed.

In traditional rails, a private credit position is an inefficient, passive position on the balance sheet. The company holds it to maturity, sells it at a discount, or worse, pledges it through paperwork that could take weeks. On Aave’s Horizon, a private credit position can be used as live collateral. An institution can borrow stablecoins against it on the same day. This is because NAV updates flow through an oracle without waiting for an agent bank to apply them manually once a quarter.

There’s one caveat to all this, though. Most institutional tokenisation today is just a wrapper around traditional permissioned rails. Only two out of every 10 dollars in tokenised credit is distributed through blockchains. The remaining eight dollars is represented and recorded on-chain only for reconciliation, but is distributed using traditional lending mechanisms.

But the trend over the past 12 months indicates that the proportion is increasing rapidly. While the represented value of tokenised credit doubled in the last year, loans originating on-chain more than tripled, from $1.7 billion to $5.3 billion.

Capturing Value On-Chain

For decades, banks charged fees for ‘features’ that should have been considered as frictions. Think of the time-consuming paperwork, 20-day processing windows and the human labour involved to manoeuvre all the procedures. Blockchains promise to eliminate most of these frictions. So, where will the lending protocols earn from once blockchain commoditises the lending infrastructure?

Consider Charles Schwab, the financial services and brokerage firm. For decades, Schwab undercut every full-service brokerage in the US on trading commissions. Eventually, it charged nothing at all. Yet, Schwab didn’t get poorer. It made money elsewhere. Revenue from commissions got replaced by net interest income on idle customer cash.

BlackRock built a trillion-dollar empire on this very trade. The asset manager built Aladdin as the tech platform that unifies the investment management process. This platform became a moat for BlackRock.

In private credit, too, Apollo’s relationships, Ares’ workout expertise, and Blackstone’s deal flow remain unique to each firm. No matter what aspect of private credit tokenises, these aspects won’t. Blockchains unbundle different layers of lending. So protocols that can bundle these layers on-chain by vertically integrating across the stack can capture maximum value across the lending infrastructure.

Securitize is mimicking what transfer agents like SS&C Technologies and Apex Group did in the traditional private credit industry. They act as intermediary between the fund or lender and its investors. For decades, they have maintained investor records, processed subscriptions and redemptions, paid distributions and handled the tax paperwork. Without them, no private credit fund could operate. But that’s also why this was the largest cost centre. With Securitize, the transfer agent is turned into a smart contract.

Aave Horizon is acting like a prime broker for on-chain lending. They provide secured financing, leverage facilities, asset custody, and liquidity solutions to help funds optimise their capital structure and execute complex lending structures. Maple gives us an early peek into what an on-chain BlackRock might look like.

We are seeing similar patterns emerge with the dollar deposits. Earlier this week, I discussed how banks are reinventing to defend their deposit.

Read: Defending the Deposit

The deposit is being unbundled into yield, settlement, insurance, and convertibility, and those who can bundle those layers back again using blockchain at the lowest cost can capture maximum value from their customers.

Private credit is in the same place now. Blockchains split the single fee that used to pay for both underwriting judgment and back-office procedures into two parts. The value emerging from capturing the back-office half is what the new infrastructure will fight for.

But there is one counterargument here. One reason investors hold private credit is that it doesn’t trade frequently. Quarterly NAVs make it seem like the volatility doesn’t exist. Once blockchains make the asset liquid, volatility returns. So blockchain does not make all private credit better. It compresses the operational layer. But that’s where it offers advantages. Blockchains can affect how the asset behaves by making it less likely to default or more likely to recover.

Consider the First Brands and Tricolor bankruptcies from last September. They were cases of fraud where executives pledged the same collateral to several lenders at once. The traditional lenders overlooked the duplicate pledges. On-chain collateral records make that mechanically impossible. The IMF, the FSB, and the Fed have all flagged opacity as the central systemic risk in private credit. Transparency is the feature regulators should demand the most from private credit.

As an industry, private credit was supposed to be a better alternative to the loopholes in banking. Now, an alternative to traditional private credit is emerging in on-chain credit.

This pattern will keep repeating wherever there are inefficiencies to address and value to capture. We saw it with banks that were equivalent to deposit businesses until Merrill Lynch unbundled them and offered much more than just a savings-account-level return; exchanges were synonymous with the trading business until perpetual and event contracts forced them to become multi-asset brokerages.

The impact of blockchain infrastructure on lending extends beyond the asset class itself.

Lending is one of the oldest businesses in the world. Most of what makes it expensive is not the lender’s judgment but the friction around it, including agent banks, transfer agents, lawyers, and quarterly cycles. Once you compress these, lending gets cheaper to deliver.

Additionally, on-chain dollars can be routed to a tokenised loan book that earns the holders far more than 0.6% in a savings account. This is a big win for a retail user with dollars.

The infrastructure that rests between the underwriter and the borrower is up for grabs. Whoever expands across different layers of that infrastructure will stand to gain the most.

Securitize already owns the distribution layer, with BlackRock, Apollo and Hamilton Lane using its infrastructure. Aave Horizon operates on the composability layer. But Maple is the only on-chain native that already does credit underwriting at scale. It is also the only one of these three that owns both judgment and infrastructure. Its in-house credit team underwrites the loans, its smart contracts settle them, and its syrupUSDC product distributes the returns across DeFi pools at Aave, Pendle, Kamino and Sky. This is similar to what BlackRock does with capital, judgment and platform under one roof. Maple’s balance sheet is also the only one that has been stress-tested in the aftermath of the FTX collapse. That episode has forced Maple to build institutional discipline that others have not yet had to develop.

That’s it for today. I will be back with the next one.

Until next time, stay curious,
Prathik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

I hear that phrase and imagine a relentless war of all against all, where the fiercest predator wins by crowding out everyone else.

But now I doubt that is how lasting ecosystems actually form. At the turn of the twentieth century, the naturalist and philosopher Peter Kropotkin challenged this view in his evolutionary essays on mutual aid. Kropotkin saw that species surviving severe climate shifts succeeded through sophisticated patterns of collective cooperation. Mutual support is infinitely more powerful than individual warfare in long-term evolutionary progress. The truly “fittest” are those that learn to cooperate and build stable, shared frameworks to handle an unpredictable environment.

The principle spans everywhere.

Every crypto project is figuring out what it actually is right now, and the protocols that survived are each making a defining call about what comes next.

Some development teams are retreating to original ideological principles like absolute censorship resistance and pure decentralisation. Others are integrating centralised overrides to maintain basic solvency. A few are focusing entirely on proprietary ecosystems, pulling their internal liquidity into isolated rollups.

ZKsync made a different call, a mutually aided one. It’s building for banks.

BCG projects the tokenised asset market moving onto blockchain rails, hitting $10-16 trillion by 2030. Every major bank is running pilots. Some have moved past pilots into live production. The infrastructure decisions being made right now will determine how that money moves and who controls the rails it moves through.

ZKsync is currently a serious public blockchain candidate for those rails. That’s why it matters even if you haven’t thought about L2s since the last bull run.

Why are banks even here? Why ZKsync specifically?

Deutsche Bank isn’t on the same ZKSync as regular crypto users. They’re on the Memento ZK Chain, a private, permissioned Layer 2 that Memento built using ZKsync’s Prividium stack.

Prividium is ZKsync’s institutional product. This offers private transactions, controlled access, built-in compliance tools, and final proof that everything settles on Ethereum. After testing five different blockchain ecosystems, Memento picked ZKsync. Fund deployment now takes 2-3 weeks instead of 2-3 months.

Banks love zero-knowledge tech because it proves a statement is true without revealing the private details behind it. A bank verifies a transaction without showing the public the names, the dollar amounts, or the assets involved. This private setup gives the bank total control over who sees what, providing privacy for corporate strategy and clarity for regulators. It fits how Wall Street actually operates.

Tradable has $1.7 billion in private credit sitting on ZKsync. Nearly 30 institutional positions targeting yields between 8% and 15.5%. And in October 2024, Buenos Aires quietly moved its entire digital identity system onto ZKsync Era. 3.6 million residents got cryptographically secured government credentials overnight. Local government can’t track that. The city became the first in the world to do this.

The global private credit market reached $3.5 trillion by late 2025. Tradable’s share is under 0.05% of that pie. Tokenised credit could grow into a meaningful share, or stay marginal, though the current situation says it is growing. Either way, the difference between the on-chain money today and the total available market cap is gigantic.

Think about the choice a corporate risk team faces here. They must decide between an isolated network that they completely control, a corporate group bound by contracts, or a public network managed by an online community.

JPMorgan is a private network under absolute internal control. It has run its own internal blockchain setup through its Kinexys unit since 2019. They handle repo trades and cross-border payments, as well as asset settlements, with partners such as BlackRock and Siemens. JPMorgan hosts the machines and manages the ledger while maintaining zero exposure to public online forums. Fees never change because a token holder voted, and system upgrades follow internal calendars. JPMorgan is the governance.

The catch is in their own numbers. Kinexys processes around $5 billion daily. JPMorgan’s payments division processes $10 trillion a day. Their own blockchain unit handles about 0.05% of their own payment flows, five years in. The bank that has the most control over its blockchain infrastructure also has the least adoption of it. Full control didn’t solve the hard part.

Then you have R3 Corda, which cleared $10 billion in tokenised real-world assets. It processes a million transactions daily. Corda functions as a consortium of over 200 financial institutions that built their rules upfront through contracts. When a feature changes, it changes because the members collectively signed off on it. The banks secured a seat at the table before the first transaction ever settled.

These platforms are ZKsync’s competitors. Yet ZKsync delivers a specific benefit that proprietary or consortium networks cannot replicate. Public verifiability without data exposure, paired with a settlement layer independent of any single corporation’s survival. If a single institution terminates its internal blockchain unit, the assets hosted on that network face immediate operational danger. Assets anchored via ZKsync settle to the Ethereum mainnet, which lacks a chief executive to order a shutdown. This separation remains the primary differentiator, and balancing it against governance exposure is a live debate.

Before ZKsync committed fully to the institutional strategy, it ran an incentive program called Ignite, paying DeFi protocols to stay active on the network. When the strategy shifted, they ended Ignite, citing a shift to enterprise. The activity followed the incentives.

Around the same time, ZKsync Lite, the original network from 2020, shut down permanently. Matter Labs had been signalling this since December 2025 and gave a confirmed date in late February. Funds remained claimable indefinitely, and none of the institutional deployments was on Lite anyway.

Aave, the massive DeFi lending protocol, voted to pull the plug on its ZKsync Era market. The motivation came down to raw numbers. ZKsync generated just $714 in fee revenue for Aave over a 30-day window. Compare that to Base, which brought in $300,000, or the Ethereum mainnet at $7.7 million. The voting forum concluded the chain lacked true product-market fit, proposing that any future deployment on any network must hit a $2 million annual revenue floor before Aave even considers launching there.

At the height of the retail layer-rollup boom, ZKsync Era regularly held hundreds of millions of dollars in locked DeFi value. Today, the total value locked across its public DeFi ecosystem is roughly $15 million. For context, top-tier retail networks maintain billions.

If this stalls, the ecosystem depends entirely on your thesis. Are L2S supposed to be consumer-crypto havens that banks are co-opting, or just corporate rails that happen to settle on Ethereum?

Matter Labs explained this to you earlier this year. CEO Alex Gluchowski released a roadmap that shifts the focus to building heavy-duty financial infrastructure for traditional markets.

Look at the product releases themselves. They rolled out Prividium to give banks an isolated space where transactions stay locked away from public view. Then they introduced the Bank Stack, partnering with entities such as the Cari Network to onboard regional banks that manage billions in traditional deposits. So, Aave’s departure did not shock the developers.

Talking about the Cari Network deployment. It was started by a former US Comptroller of the Currency, and they are planning a pilot next quarter with five regional banks. These banks hold over 600 billion dollars in total deposits.

If that pilot works out, nobody will care that retail DeFi apps left the chain. The transaction volume from banks at that scale replaces the loss. But if it fails, ZKsync is a good piece of tech with no users, running a few corporate experiments.

The v31 protocol upgrade, passed through ZKsync’s governance forum, went live in early May.

Under v31, every cross-chain call between ZKsync chains costs a flat 10 $ZK. That number was set by a DAO vote. Banks deal with volatile costs all the time, such as gas fees, cloud compute, and FX spreads. That is part of doing business.

The fee structure itself, not just the price, but the entire mechanism of how fees work, can be rewritten by the same forum. There’s no obligation to tell the institutions running on top of it.

The ZK Nation forum is already working on what comes next. They are debating node operator transaction fees, staking rules, and custom pricing for checking proofs. Each one of those is a live research thread that could become a vote that changes the economics of every cross-chain operation Deutsche Bank or Tradable runs. Anyone can read this on forum.zknation.io, publicly available.

Compare that to Kinexys, where JPMorgan holds the absolute keys to the system. Or Corda, where a formal contract dictates how adjustments happen and under what circumstances.

So, why would a bank ever choose ZKsync over JPMorgan? Because ZKsync gives you public proof that your transactions are valid without revealing your private data.

If JPMorgan decides to shut down its blockchain unit tomorrow, any assets on it are stuck. If Matter Labs (the company behind ZKsync) goes out of business, ZKsync keeps running because it settles on the public Ethereum network. But to get that, you have to accept that the network isn’t owned by anyone. A network that isn’t owned by anyone is governed by whoever shows up to vote.

$ZK is currently trading around $0.01. At its all-time high in June 2024, it was $0.3285. That’s a 96% drop. At 10 $ZK per interop call, that same cross-chain transaction costs roughly $3.28 at peak. Today it costs $0.10. The asset price volatility can be managed, but relying on an online community vote makes long-term budgeting entirely unpredictable for corporate planners.

L2Beat categorises ZKsync Era as a Stage 0 network, meaning an independent Security Council can pause or modify smart contracts without waiting for a full DAO vote. Mature Stage 1 networks, such as Arbitrum, lack this type of central intervention mechanism. Corporate risk managers often value emergency stop buttons to reduce the damage from smart contract exploits. However, this particular control belongs to a Web3 Security Council that functions outside traditional corporate structures.

Sygnum tokenised $50 million of Matter Labs’ corporate treasury into a Fidelity liquidity fund on ZKsync. Fidelity subsequently launched an institutional money market fund on the network. The builders kick-started ecosystem volume by placing their own capital into the product, establishing the core enterprise case study. The application processes live assets smoothly, yet the arrangement directly serves the founding team.

The core infrastructure remains tethered to an independent Security Council holding the keys to the system. During an emergency, this entity can bypass the standard delay mechanism completely, modifying smart contract parameters or freezing functions with zero advance notice. Control of the live system rests with this council and the active token forum, meaning participating banks operate under an organic, shifting governance structure rather than a fixed enterprise agreement.

ZKsync is betting its survival on a group that has never kept a crypto project alive before, that is, regulated financial institutions. Banks don’t care about tokens or post on governance forums.

Banks do, occasionally, build their core infrastructure on something and then never leave. That way of survival is lower to arrive, harder to dislodge.

ZKsync is either the first crypto project to achieve that, or the most expensive proof that banks will always eventually build their own version and walk away. The difference between those two outcomes is probably decided in the next 18 months.

The graveyard is full of projects that were right about the technology and wrong about the governance and the sustainability. The ZKsync governance test is still running.

—Thejaswini

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

OpenAI’s ChatGPT, launched in late 2022, has come so far that it has spawned an entire ecosystem of AI agents that now generate more web traffic than all humans on the internet combined. And these agents don’t do any of the things a human on the web does. They don’t watch ads, click links, or shop online. They scrape the internet for whatever they need to complete a task and leave.

The entire internet was built around human behaviour and intent, but now most of the time, there isn’t a human, and the web is pissed with it! They have started to block out these agents - 2.5 million sites are blocking AI crawlers, and there are lawsuits against platforms like Perplexity. Cloudflare even started building honeypot mazes that trap scrapers in an infinite loop of AI-generated gibberish.

But some of these agents are already smart enough to bypass this, and so the internet is losing its sh*t trying to build something more concrete called a ‘proof of humanhood’. A way to verify that the thing on the other end actually hesitates, mistypes, and moves its cursor with the micro-jitter of a real nervous system. In this piece, I’ll get into why this is happening, who’s building that proof layer, and what it means when the choice comes down to centralised biometric surveillance or cryptographic proof of humanity.

Follow the money

The reason websites started blocking AI agents is that AI has broken the web’s business model from both sides simultaneously. The entire model was built on human attention: you visit a website, you see an ad, and the publisher gets paid for it. An AI agent shopping for shoes on your behalf today searches 5,000 websites instead of the 4 or 5 you’d visit yourself.

It can read everything faster than your eyes can blink, compare every price, and even make the purchase for you in a matter of minutes, all without registering an ad impression, leaving the publisher to cover server costs and get nothing in return.

On the other end, AI search is eating into reader traffic. When Google shows an AI summary (AI Mode) at the top of the search results, only 8% of users ever bother to click through to the actual website. Google traffic to publishers has dropped 33%. In just one year after its debut,AI Mode has surpassed one billion monthly users, with queries more than doubling every quarter since launch.

Remember Chegg? It had its whole business built on being the first result for homework help, but it’s now shut down! The company officially ended its Q&A platform operations and blamed ChatGPT for it. Publishers are getting squeezed from both ends at the same time, with bots stripping away their content from the bottom and AI summaries intercepting their readers even before they ever arrive at the website.

The extraction ratios are crazy: for every referral OpenAI sends back to a website, its crawlers first visit 400 pages. Anthropic’s number is 38,000 to 1. These companies have trained their models on the open web without compensating anyone, and then deployed them to intercept traffic that once reached the same sites they scraped.

It’s quite funny, actually. In any other industry, an extraction ratio like that can get you lawsuits. But in AI, it gets you a trillion-dollar valuation.

Your body is the new password

For the last 25 years, the only way for the internet to know if you’re a human was the CAPTCHA. You clicked the traffic lights, typed some wobbly letters, and it was working because machines were terrible at visual recognition.

Today, that’s not the case. OpenAI’s Operator agent now surpasses Google’s reCAPTCHA with an exceptionally high human score, all while doing perfectly centred clicks and copy-pasting texts into forms. AI-generated selfies are fooling ID verification systems, and there are cases where Deepfake video calls have been used to authorise real wire transfers. All these tests assumed that machines were worse than humans at the tasks they performed.

The only way for the web to solve this is to double down on what AI still can’t replicate: how a human body physically moves when it operates a screen. This is called behavioural biometrics. Companies like IBM and BioCatch are building systems that can now check not just your identity at login but your entire session. This includes your cursor speed, how you scroll, your typing rhythm, which keys you press harder, whether you delete and retype words, and the angle at which you hold your phone; all of this is measured by a gyroscope.

It can also track which hand you use, how your thumbs arc when you swipe something. IBM needs about 8 sessions to build this behavioural profile of you, and once done, every action gets scored against your baseline in real time.

BioCatch can even tell when someone is being scammed online. Their system picks up the fragmented typing of a person reading out account numbers while a fraudster dictates them over the phone.

They have flagged about 2 million mule accounts across 257 banks in a single year. The European Union is piloting gait recognition at border crossings. We’re barely three years into the agentic era and already have EU border guards profiling how you walk.

There’s also a body of research on the Stroop effect. When you see the word “BLUE” printed in green ink, your brain takes noticeably longer to name the colour because the meaning and the visual conflict with each other. But an AI can still respond at the same speed.

Researchers found that this kind of cognitive interference actually correlates with typing dynamics. The system might not even need to run an explicit test on you. It’ll figure out whether you’re human just from the way your keystrokes land, because the way you type carries measurable traces of how your brain processes information.

Every previous way of online surveillance tracked your choices, like which sites you visit, what you clicked or bought, and you could always stop this by blocking cookies or using a VPN, and even turn off location sharing if needed. But behavioural biometrics reads your body. You can’t opt out of moving the cursor the way you move it, you can’t type with someone else’s rhythm.

Your behavioural profile is as unique as a fingerprint, and unlike a password or key, you can’t change or rotate it. And once this gets built, each platform will force the others to match and adapt to it. In fact, browsers are just the beginning; voice models already pass as human on phone calls, and video is next. So if this is the future, the most important question is who ends up owning that data?

Who holds the proof?

There are two camps building proof of humanhood right now.

The first is Sam Altman’s World (formerly Worldcoin). Here, you basically have to walk up to a chrome sphere called the Orb, which scans your retina and generates a cryptographic proof that you’re a unique human. 18 million people across 160 countries have already done it. In April 2026, World even signed a deal with Tinder, Zoom, and DocuSign to verify their users. They also partnered with Coinbase to build AgentKit, which lets you register your AI agents to your verified identity so the platform can confirm that an agent is backed by a real person without knowing who that person is.

But with that are also countries that do not support World’s iris scans and have completely banned them. All because of concerns around collecting biometric data from people who don’t fully understand what they are giving up. An MIT Technology Review investigation even found that World was collecting more than just iris scans, including heart rate, breathing, and other vital signs, without meaningful consent.

The second camp is crypto-based zk-proofs that let you prove you’re a human without actually revealing who you are, where you are, or what your face looks like. Vitalik Buterin laid this out in 2023 and argued that without a working decentralised proof of personhood, the internet will always default to centralised identity. Someone has to verify you, and if crypto doesn’t build that tool, governments and corporations will, and it’ll come with surveillance built into the foundation.

But Decentralised proof of personhood has already been tried at scale, and it collapsed. The Idena network was one of the first proof-of-personhood blockchains that gave every human an equal identity. But within two years, 23 entities had captured 40% of all accounts and 48% of all rewards on the network. Pool operators in Indonesia and Russia paid workers less than a dollar per hour to hand over their verified identities and pocketed upto 55x the return. Researchers also found photos of children used as identity puppets.

Vitalik had predicted this. He wrote that “the cheapest attack on any proof-of-humanhood system isn’t a deepfake or a sophisticated hack, it’s paying someone in a low-income country to lend you their identity.” The problem of building proof of humanhood is that there needs to be a financial incentive behind it. Somebody has to fund the Orbs, fund the blockchain for verification.

But the moment you attach financial value to a unique identity, you actually create a market for identity rental. And in a world with such massive wealth inequality, the market always gets captured by whoever has the most capital.

“Forcing one-person-one-vote into a system with real economic incentives always conjures failed experiments in 20th-century communism.”

So both paths are kind of broken. The centralised path works at scale, but puts your biometric data in the hands of a company that already overcollects it and benefits directly from the bot problem persisting. The crypto path protects privacy in theory, but gets eaten by the same economic power imbalances it was built to escape.

If I had to bet, I’d still bet on crypto. Because behavioural biometrics and centralised iris scanning create a permanent record of your body that belongs to whoever deploys the system. And once they have your data, you can’t delete or port it; it will be locked with the company that captured it.

A zero-knowledge proof that confirms you’re a human without telling anyone anything more is still worth building, even knowing it’ll get gamed. Because the alternative to it is a web where every site you visit has your body’s movements on file. And that corporate version is already shipping faster than the crypto one.

That’s all for today!

Vaidik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

For most of banking history, depositors have had no leverage. You’d park your money, which the banks would then lend out for a return that would be multiple times what they would pass on to you. Depositors accepted this arrangement because the alternative was worse; try saving your money from its worst enemy - time.

The national average savings account in America pays 0.6% interest, while the money parked in US Treasuries and money market funds earns at least 4%. This model survived so long because depositors didn’t have an easy alternative. Except, every once in a few decades, they do have one.

Stablecoins offer a dollar that moves 24/7 on the blockchain, settles in seconds, and costs a fraction of a cent to transfer. Although the law prevents stablecoin issuers from passing interest on directly to holders, DeFi composability allows a stablecoin holder to route funds into a lending protocol and earn 5-8% APY. This has given depositors an exit that doesn’t require them to trade off convenience for something new.

In today’s deep dive, we explore what banks are doing to stop the flight of deposits and how this will change the way world banks and moves their money.

Onto the story,
Prathik

How Depositors Behave

In 1977, wealth management and investment firm Merrill Lynch launched the Cash Management Account (CMA). At that time, Regulation Q had capped the interest US banks could pay on deposits at 5.25%. The US Treasuries yielded over 7%. Merrill found the loophole and used the CMA feature to sweep its users’ idle brokerage cash into money market funds every night. It also gave its clients check-writing and debit card access. Combined together, this let its clients earn interest at superior market rates while being able to use it as a checking account to withdraw money whenever they need.

Money market funds grew 55 times from ~$4 billion in 1977 to $220 billion in 1982, mostly at the expense of bank deposits.

The banks revolted. Eventually, Congress repealed the rate caps set by Regulation Q. Banks regained deposits by creating Money Market Deposit Accounts that offered higher yields. But it took nine years for this to happen, from the CMA’s launch to the repeal of the interest rate caps.

Depositors don’t wait as long anymore, especially with the evolution of technology that allows them to move money in minutes, if not faster.

When Silicon Valley Bank collapsed on March 8, 2023, customers initiated withdrawal requests worth $42 billion in less than eight hours. That’s roughly $1.5 million per second. More than 85% of the SVB deposits were uninsured. That explains the flight of deposits.

A prudent depositor will always move their money to a safer place, where it is likely to at least retain its value if not grow further.

Two Kinds of Digital Dollar

The response to this problem has led to two competing digital-dollar instruments. One sucks dollars out of the banking system, while the other retains them, albeit in a different form.

First is the stablecoin route.

When Circle issues USDC, it takes a customer’s dollar and parks it in US Treasuries. This dollar leaves the bank’s balance sheet. That’s one less dollar for the bank to loan out and earn interest income on. On the flip side, that dollar is no longer insured by the FDIC. If the stablecoin issuer shuts shop, the holder can no longer claim the dollar back.

The GENIUS Act, signed in July 2025 to regulate the issuance and use of stablecoins, bans stablecoin issuers from paying interest to holders. That’s similar to what Regulation Q did by capping deposit rates. But just as Merrill circumvented Reg Q through money market funds, issuers circumvent the yield ban by offering rewards. This is still being debated in the proposed CLARITY Act. A holder can also deposit their stablecoins into a lending protocol and earn yield.

This is an existential threat to the banking industry, which saw billions of dollars in deposits withdrawn within hours of the SVB collapse. Standard Chartered estimates that $500 billion in deposits could migrate to stablecoins by 2028, with US regional banks bearing the brunt due to their excessive dependence on net interest margin.

Although these projections may or may not materialise, the direction cannot be argued with. This is clear from the fact that the four largest US banks have joined hands for the first time in decades to tackle this problem in a different way.

Enter tokenised deposits.

One of the biggest USPs of stablecoins is the low-cost transfers and sub-second settlements. So, the banks decided to solve this.

Using tokenised deposits, a bank can issue a tokenised form of user deposits that can be moved on the blockchain at low cost and high speed. At the same time, the original dollar deposits remain on the bank’s balance sheet, allowing it to lend and earn interest income. These tokenised deposits still carry FDIC insurance.

Two banking consortia have emerged to operate using this approach.

First is the Clearing House network, where JPMorgan, Citi, Bank of America, Wells Fargo and more than a dozen other banks are building a shared tokenised deposit platform targeting H1 2027. This consortium will be wholesale-focused and offer 24/7 settlement, programmable treasury settlement, and cross-border payments.

This tackles what the competition from stablecoins head-on.

The second is the Cari Network, formed by five regional banks including Huntington, M&T, KeyCorp, First Horizon, and Old National. Collectively holding about $780 billion in assets, this network is building a retail-facing tokenised deposit platform on ZKsync’s Prividium stack and plans to launch in Q4 2026. This move by regional banks explains the intensity of the risk they face from the flight of deposits to stablecoins and their disproportionate dependence on net interest margin to keep the lights on.

But what will depositors prefer?

In theory, depositors rarely choose the best product. Instead, they pick the product that offers them the least painful escape from the constraint they face at that moment.

In the late 1970s, that constraint was yield maximisation. Regulation Q made deposits safe but uncompetitive once market rates moved beyond what banks were allowed to pay. Merrill’s edge was that it unbundled the bank account into two things people wanted: market yield and everyday access. Banks eventually copied the bundle through MMDAs once regulation allowed them to pay market rates.

Stablecoins have the same edge as Merrill. They sit outside the traditional deposit stack, move money globally, plug into crypto venues, and make idle dollars more programmable. Their weakness is also similar to the weakness that money funds had relative to bank deposits. They are not insured bank liabilities. Trust depends on the issuer, the reserve stack, the redemption venue and the broader regulatory perimeter around them.

Tokenised deposits have the same edge as banks had in the 1980s. They keep the dollar inside the regulated banking system, preserve the bank’s lending economics, and attach the familiar comfort of deposit protection. But, the same guardrails that make tokenised deposits bank-like also make them less open, less portable and less composable than stablecoins. A bank deposit can become faster and more programmable. But the moment it becomes as open as stablecoins, the bank loses the control that made it a bank deposit in the first place.

This makes the competition more about who controls convertibility.

So, a third route has emerged, something that gives us a sneak peek into what the future of banking and money could look like.

The Bridge

On May 27, SoFi Bank launched SoFiUSD, the first stablecoin issued by a US national bank. SoFiUSD is available on Ethereum and Solana and is issued via a mobile application to its 15 million members. It moves like any stablecoin around the clock and enables cross-border and sub-second settlements at a few cents in fees.

At the same time, SoFi also plans to let members convert SoFiUSD into tokenised deposits that earn interest and carry FDIC insurance within the same app. So users can choose to move their money as a stablecoin while holding it as tokenised deposits to get the best of both worlds. If they are not happy with the yields offered by banks, they can switch their tokenised deposits back to a stablecoin and deploy them across lending protocols to earn a higher yield.

SoFi may never become more decentralised than Circle or systematically more important than JPMorgan. But it has an edge in that it can collapse three user choices into one interface: a bank account, a stablecoin wallet, and, eventually, a tokenised deposit wrapper.

That is closer to what Merrill did than what a pure stablecoin issuer or a pure bank consortium is doing. SoFi is trying to get customers to stop choosing between the convenience of blockchain technology and the interest-earning potential of bank deposits.

The evolution of these products tells us why, when it comes to holding and moving money, the form of the product matters less than the convertibility it offers.

When stablecoins gave the depositors an alternative way to hold and move their money, banks first responded by lobbying to ban stablecoin yield and rewards. But I don’t see the banks winning this battle by lobbying. The only way they win this is by evolving to offer what crypto products deliver. Offer what stablecoins promise, but better. Let users move their money at the same lightning speed, with the same programmability, plus interest and insurance. Interestingly, the path to that evolution runs through blockchains.

This is the beauty of markets. They force incumbents to keep evolving until the system is optimised for its participants. Merrill’s CMA forced banks to repeal Reg Q and create Money Market Deposit Accounts. Stablecoins are forcing banks to tokenise deposits and build 24/7 settlement. In both cases, the incumbent didn’t die. It had to pick lessons from the innovators and evolve to stay relevant.

This evolution will have the sharpest impact on regional banks. They depend more heavily on net interest margin and have less room to absorb deposit flight than the largest banks. If they offer only a better bank account, they lose the dollars that want mobility. If they offer only crypto-like speed, they give up the protection and lending economics that made them banks in the first place. Cari is their attempt to defend both. The Clearing House consortium is the large-bank version of the same defence. SoFi is the more aggressive version: turn the bank into the bridge before someone else builds a bridge around it.

In the past financial cycles, the first entrant usually wins by exposing an inefficiency. The incumbent survives by absorbing the feature once the inefficiency becomes too important to ignore. Merrill exposed the gap between capped deposit rates and market yield. Banks eventually absorbed that feature through MMDAs. Stablecoins exposed the gap between banking-hour settlement and internet-hour money movement. Banks are now absorbing that feature through tokenised deposits and 24/7 settlement.

The edge keeps moving from the product that first reveals the problem to the institution that can bundle, regulate and distribute the solution at scale.

We have been writing lately about how crypto, or blockchain, if I were to be more politically correct, is emerging as fintech infrastructure.

Read: Every Exchange is an ‘Everything Exchange’

That thesis holds here, too. Crypto is not replacing bank deposits as much as it is forcing them to reveal what each part of the product is worth. Yield is one layer. Settlement is another. Insurance is another. Convertibility may be the most valuable layer of all.

Either way, the deposit won’t die. It will just get unbundled and rebuilt. The winner will be the one who lets money move between safety, yield and speed with the least friction.

That’s it for today. I will be back with the next one.

Until next time, stay curious,
Prathik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

Saint-Domingue, in its prime, was the ultimate jewel of the Caribbean.

It’s a small island that by the late 1770s was the wealthiest place in the Western Hemisphere. The “pearl of the Antilles,” they called it.

By 1780, it produced 40% of all the sugar and 60% of all the coffee consumed in Europe. The economy functioned well, if you didn’t examine closely who was doing the work and the conditions they faced.

In August 1791, the enslaved workers rose in revolt. Fourteen years of civil war. Independence in 1804. And then France (France!) demanded reparations from Haiti, not to the formerly enslaved, but to their former owners. Those payments lasted until 1947 and, at times, consumed 80% of Haiti’s national revenue.

The place that was once the wealthiest in the Western Hemisphere is today the poorest.

France was the birthplace of the Enlightenment, the French Revolution, and the famous slogan: “Liberty, Equality, Fraternity.” They were supposed to be the global champions of human rights and freedom. Yet, when black slaves embraced that slogan and freed themselves, France responded by financially suffocating them for the next 150 years.

Wu uses this story to make a point that unequal economies are fragile. The more you concentrate wealth, the more brittle the system becomes. And at some point, the brittleness resolves itself through a catastrophe that everybody paid for.

First, giant companies choke out all competition and drain people’s wallets. That financial pressure turns into deep public rage because people feel the game is rigged. That rage is what kills a democracy.

Once the average person realises their vote can’t change their bank account, they throw their hands up and look for a dictator to reset the board. History shows us this exact script, tracking all the way through the industrial monopolies of Weimar Germany.

For me, that hits right in the gut when I look at our current political circus. You watch these politicians spend an entire year talking a big game on television about making the ultra-wealthy pay their fair share. Then, the very second they take office, the script flips, and they are signing tax breaks for real estate giants and bailing out massive corporate banks. It leaves you sitting there with a higher rent bill, and this cynical realisation that the voting booths are just a distraction while the donor class runs the actual country. We are watching a hostile corporate takeover where oligarchs and big tech executives see massive returns on their political investments while working people are left to bear the cost.

That’s the thing that historically precedes the strongman.

Wu calls this a sequence, which implies it can be interrupted. Well, I don’t buy it. Everything he describes looks exactly like what the system was built to do from day one.

Private equity firms didn’t stumble into owning our hospitals by mistake. This is raw capital doing what it always does when there are no rules to stop it, most times. Wu knows this. But his background as a reform capitalist means he is structurally committed to the belief that the system can be repaired from within. I’m just not sure I share that faith.

The Denmark part is the one I’d make everyone read.

In the 1780s, Denmark was feudal, poor, and run by a small class of lords who owned 98-99% of the arable land. A nineteen-year-old prince regent took power and, with an advisor named Bernstorff who had spent his whole career thinking about land distribution, abolished serfdom and converted peasants into landowners over the following decade. Grain production went up 40%. The peasant class became a political force. The core of what Denmark is today as one of the wealthiest, most equal countries on earth traces back to those ten years.

Russia had the exact same opportunity but blew it. Catherine the Great also wanted everyone to think she was a hip, enlightened intellectual. She debated freeing the serfs in her Nakaz, but her circle of wealthy buddies hated it, so she let it die. Instead of fighting for her people, she spent her reign collecting masterpieces and writing to Voltaire while the feudal system grew more toxic. When Russia tried to fix things a hundred years later, the damage was irreversible. The whole system ended up burning to the ground.

The entire Denmark comparison depends on ownership of the productive base. 200 years ago, that meant soil. Today, we think it is digital infrastructure and data pools. The monopolies controlling this matrix decide if we build a fair society or devolve into corporate feudalism.

Crypto was supposed to take economic power out of corporate hands and put it in the hands of regular people.

It didn’t work out that way. Part of the reason it failed is that the initial, radical premise was unrealistic. I used to write some pretty harsh things against corporate centralisation, but I am learning to understand exactly why it happens. We have essentially matured as an industry and prepared ourselves to live with a completely new era and a different promise.

Read: Vertically Integrated Capital Aggregators - by Joel John

BlackRock is running multi-billion-dollar crypto funds while Fidelity dominates the custody market. The institutional giants that the early developers were trying to destroy are now funding the ecosystem. Andy Bromberg, the CEO of Eco, pointed out that Wall Street is on track to own 70% of all Bitcoin. We all know what that means.

Wu sees that crypto hasn’t solved global wealth inequality, and basically calls it a failure. Fair, it hasn’t moved the needle there. But Bitcoin emerged as a response to the 2008 banking crisis; it aimed to create a trustless infrastructure. The claim of redistribution came later, mainly from those trying to sell tokens. Judging the original technology by its promoters’ promises completely misses the point. The better measure is if the infrastructure being built could outlast the current extractive order, the corporate banking system. Whether the alternative settlement rails and cross-border plumbing retain enough of the original architecture to function differently from what they are replacing. On that, the answer is genuinely open. Wu can’t close it yet.

Think about when they invented the shipping container back in the fifties. It didn’t cure world poverty, and every day, people weren’t out buying containers.

But by standardising how freight moved, it rewired global trade networks and broke the monopoly of traditional port bosses. So, the backend infrastructure is supposed to change the machinery running in the background of the world, not the storefronts.

Wu’s actual solutions feel way too polite for the mess we are in.

He talks about basic fixes like bringing back antitrust lawsuits and forcing tech platforms to act like neutral public utilities. It’s an old concept from the fourteenth century. Back then, if you ran an essential inn, the law said you couldn’t turn people away.

He also suggests capping corporate junk fees. For example, Europe caps credit card swipe fees at 0.3%, while America leaves them uncapped at 3%, which lets banks drain $135.75 billion in hidden fees in 2023 alone. Another fix is to use line-of-business restrictions to prevent monopolies from taking over adjacent markets. That’s how the government blocked AT&T from entering the computing space decades ago, which is the only reason an independent tech industry had room to breathe.

That has maybe worked in the past. All of his fixes require a functioning government that isn’t completely bought and paid for by the exact corporations it’s supposed to regulate = non-existent.

He uses this metaphor about a gardener pruning back overgrown corporate weeds so the rest of the ecosystem can catch some light.

But that assumes the gardener is independent and has the right tools. In reality, the gardener has spent the last 40 years being defunded and captured. Politicians never forgot about antitrust laws. Instead, billionaires spent decades buying politicians and economists who needed to make monopolies look acceptable.

The metaphor falls apart if the weeds have already grown so high that you can’t even find the garden gate anymore.

I picked up this book just looking for something solid to read. Three weeks later, I have his five-step cycle out of my head, running through it again and again, and it explains a lot of things that have crossed my mind lately.

Monopoly triggers extraction. Extraction breeds public resentment. Resentment breaks down institutional guardrails. Finally, institutional failure paves the way for the strongman.

Wu is more patient than I am. He still believes in institutions, in the slow grind of regulatory reform, and in the idea that the gardener will eventually show up. But he knows his history well enough to remember that the Danish miracle actually happened. A brilliant advisor named Bernstorff managed to get a teenage prince to sign a decree. Ten years of focused execution turned a broke feudal estate into one of the most stable, equal societies on earth.

Bernstorff spent his whole life learning the details of land distribution before he got close to the levers of power. And he got lucky with the kid on the throne.

At this point, I’d take a gardener over another billionaire trying to tell me what freedom looks like.

—Thejaswini

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

I think one of the hardest things to do in a market like this is to simply step back. Not step away, but just step back. There’s a difference, and unfortunately, few understand it. Stepping back requires you to still be aware, not shut down and see the whole canvas instead of the close-up view in front of your face.

Right now, the close-up view is incredibly loud. AI is reshaping entire job categories in real time. Companies that were private-market darlings are finally filing to go public, and the world is busy pricing them. Every other week, there’s a new headline about what AI will replace next. But there’s also the debate if this wave of technological disruption is the most important thing to happen in a generation or another metaverse moment that burns bright before it fades away . Remember when the entire conversation was about the metaverse? Major banks from DBS to JPMorgan were buying virtual land. That wasn’t very long ago.

The problem with these phases is that market excitement makes everything feel urgent and permanent. That makes it nearly impossible to separate what’s here to stay from what’s just passing through. The instinct to zoom out and get a bird’s-eye view of what’s happening is the hard thing to do, but it’s also the most crucial thing.

In today’s piece, Smac, a partner at Compound, offers a useful framework for understanding why these rolling waves of conviction keep forming using an excellent weather analogy (my favourite part of the piece). This weekend’s op-ed is unusually long, but that also explains why we carried it nevertheless.

On to Smac’s story,
Prathik

P.S.: This piece was originally published on Semi-Lucid Thoughts.

Follow Smac on X

Weather is a uniquely interesting field because all of the tools we use to accurately forecast the future have improved over the last 50 years. And as you’d expect, our ability to predict the weather has similarly improved. Today’s 5-day forecasts are now equally as accurate as 1-day forecasts were 30 years ago.

I think most people imagine weather as one big system that passes through. Clouds roll in, it rains, it stops raining, the sky clears out. I’d guess if I told you to imagine a winter front coming in, you’d picture some big, wide grey ceiling that lowers itself over a few hundred miles and lays down a blanket of snow. Meteorologists call this stratiform. Basically, layer-cake weather, with everything underneath getting the same treatment.

But this isn’t the only type of weather pattern. If you’ve ever watched a thunderstorm form over the plains in the summer, it behaves quite differently. Instead, what happens is you’ll get a single cell that builds (i.e. warm humid air at the ground rises into colder air above, the moisture condenses, and you get these crazy localised cloud towers) and within an hour there’s hail/lightening/rain so heavy you can’t see 100 feet in front of you.

That cell matures, dumps its energy, and then, importantly, it dies. The downdraft (cold, dense air falling out of the storm) fans out across the ground in every direction, moving as fast as 40mph, and when it slams into the surrounding, warm, humid air that hasn’t stormed yet, it acts like a wedge that shoves the warm air upward.

If there’s enough instability in the atmosphere, the wedge is exactly what’s needed to ignite the next storm cell, some ten or fifteen miles away from the first one.

The new cell was never going to form on its own. Sure, the energy was already loaded and waiting, but what it needed was a trigger, which is exactly what the dying storm provides. Then the new cell just does the same thing.

When you string these cells together, it forms what’s called a mesoscale convective system. From the ground, you experience one storm at a time, each one feeling like the entire weather system. One side of you is dead calm, completely oblivious to what’s about to come, while the other side has already cleared out. If you looked at this from a satellite, though, you’d see what looks more like a chain of events with a glowing line of separate cells, each at different phases of its life cycle, walking across the plain until they run out of warm air to feast on.

What makes these types of chains possible and different from single storm fronts is a symptom of the atmospheric conditions. Specifically:

• A boundary layer at the ground that is warm & wet (i.e. fuel)

• Cold & dry air above that makes warm air want to rise into it (i.e. instability)

• Winds at different altitudes blowing in different directions, which gives the storms rotation to move sideways (i.e. shear)

When you get all three of these, you get the procession-style storm I talked about.

Ok, so why did I just talk about the weather for 500 words?

I think the phenomenon described above is almost exactly what’s happened to financial markets today.

We used to live under a stratiform weather regime: one bull market, one bear market, slow rotations of leadership inside of it, with a few years of each. We had a secular bull market from 1982 to 2000. A dot-com bubble after this. A housing and credit cycle from 2003 to 2007. These were all long, layered and mostly legible from the ground in such a way that you could be wrong about timing for years and still come out fine if you understood the regime.

That’s just not the world we live in anymore. Today, we live under a convective chain regime: a procession of storm cells where each one feels total and unrelenting to whoever’s standing underneath it. Capital flows out of the dying narrative and ignites the next surge elsewhere (often in an adjacent area). The regime itself jumps from sector to sector on much shorter timescales, measured in even shorter time bands. AI infrastructure¹. GLP-1s. Stablecoins. Quantum. Nuclear. DATs. Robotics. Space. Each of these has its own complete weather event, with its own complete community of true believers, its own complete narrative arc and inevitably its own complete decompression. The cold downdraft then fans out and lights up the next cell a few miles away².

It’s almost silly to pretend this isn’t the reality we live in. People love to poke fun at anyone who says “this time is different”, but I think failing to acknowledge that the atmosphere of financial markets has shifted in a permanent way is either (i) intellectually lazy or (ii) a stubbornness of wanting the world to be one way rather than acknowledging the way it is.

Not Your Daddy’s Weather

For most of the post-war period, American financial markets operated like one very slow weather system. Bull markets lasted 10, 15, or 20 years, and sectoral leadership rotated within those secular trends.

The distinction here is that those rotations occurred within a coherent macro regime that only really flipped on specific generational pivot points.

The end of Bretton Woods. Volcker’s disinflation. The dot-com peak. The GFC.

I don’t necessarily think it’s a secret that there were structural conditions that made this the case. Trading was expensive³ which kept retail participation small and forced them to be patient. Pensions dominated household retirement⁴. The S&P 500 was a pretty balanced mix of manufacturing, energy, banks, retailers and a handful of media and tech names; the largest businesses produced earnings that grew with the economy in roughly linear and more predictable ways. Information also moved slowly. The gap between a 10-K filing and most investors knowing what was in it was measured in weeks.

At the same time, volatility was more symmetric. Bull markets were followed by significant corrections with drawdowns that flushed out leverage and reset positioning over longer periods of time. We didn’t see nearly the same degree of these kinds of violent sell-offs and V-bottoms. Bear markets similarly had long rallies that took time to play out. The market frequently spent meaningful time at different levels of agitation, and ~generally~ the transitions between regimes were measured in quarters or years.

If we revisit the atmosphere analogy, there was modest fuel, moderate instability and low shear. Broad, slow, layered weather that you could plan around. Every one of those conditions has now shifted with several actually inverting, and the result is a structural transformation of the conditions themselves.

What Changed?

A lot of these shifts ultimately overlap and amplify one another, but, to be honest, I think each has been large enough to reshape markets on its own. Taken together, they explain much of what has taken many smart people a long time to digest (some still haven’t, we will get to them later).

I count 8.

• The democratisation of the speculator class

• The infinite bid

• Passive investing & the inelastic counterparty

• Pod shops, HFTs & the hollowing of the middle

• Volatility suppression

• Composition mix

• The collapse of information lag

• Fiscal & monetary regime change

The democratisation of the speculator class

These aren’t necessarily in order of importance, but at the top of my mind lately has been the undeniable shift of who is actually in the market. In the 1990s, retail accounted for ~10% of US equity volume. There are a lot of reasons for this, but most retail investors held individual stocks for years. If they ever traded, it was through full-service brokers who charged commissions that made anything resembling active speculation pretty prohibitive. Robinhood famously introduced zero commission trading and pioneered the payment-for-order-flow model that made the economics work. But even that has been misremembered a bit because Schwab didn’t cut its commission to zero until the fall of 2019, and this was the real domino, as we saw Fidelity, TD Ameritrade & E*Trade, all follow suit within weeks.

Obviously, the pandemic accelerated the trend: stimmy checks, bored people stuck at home, and mobile-first trading apps intentionally designed to gamify the experience. Retail share of US equity volume jumped to 25% in 2020-21. Although many people thought this was a temporary blip at that time, it has remained elevated ever since. JPMorgan reported a record 48% of total order flow on April 29, 2025, during the tariff-driven volatility spike. On a normal day now, retail accounts for more than double its pre-2020 share, and on especially volatile days, it can reach as high as 35% of volume.

A related, and perhaps deeper, shift is what retail actually trades. Single-name options have become their expression of choice, and we all know the insane explosion of 0DTEs. The marginal new participant is younger, more concentrated, more thematic and maybe(?), most importantly, both (i) more leveraged in convex ways that don’t show up in margin debt statistics & (ii) far more reactive to price action than to fundamentals. They’re also way more likely to be tailing someone else⁵.

The boundary layer is wetter and hotter than it’s ever been, meaning the potential energy at the ground swells in a way that it never did before.

The infinite bid

This particular shift is one I’ve written about before. For more context, you can read that blog, but the TL;DR is that U.S. retirement plans have shifted from defined-benefit pension plans to defined-contribution ones. The individual, for better or worse, is now responsible for their own retirement in a way they weren’t historically. At the market level, this just means that every pay period, there’s a huge, mechanical, price-insensitive bid for equities. It’s autopilot flow.

Pensions didn’t work like this because defined-benefit pensions were managed against liabilities, which means managing duration risk. In practice, this meant that the people managing pension plans had to decide at times that “hey, equities look expensive here, we should shift the mix toward bonds”. Even if the flows were slow here, they were still more active than the passive infinite bid we see today.

This matters because we’re mostly interested in understanding what the marginal active dollar is doing, and today’s marginal dollar has more leverage on price-setting than it did in the past.

Passive investing and the inelastic counterparty

Passive investing by construction is an inelastic counterparty in the sense that it doesn’t care about price. It buys the index in proportion to weight, full stop. As a stock gets larger, passive buys more of it, and vice versa. The weird thing about this construction is that it sort of embeds momentum as infrastructure. The things working best get the largest mechanical bid moving forward, and this is at least partly how we end up with the Mag7 phenomenon⁶.

Plenty of people have written a lot about the concentration at the top of the indices and how much it has swelled over the last decade⁷. But I don’t know that the concentration is necessarily unjustified⁸. The point is that passive flows don’t really have a natural off-switch.

Pod shops, HFTs & the hollowing of the middle

So the market has introduced a permanent, passive price-insensitive bid. At the same time, we’ve seen the active layer transform in important ways, the defining structural change being the rise of the multi-strat pod shop. Citadel, Millennium, Point72, Balyasny, etc. These places house hundreds of independent PMs, each running a specialised strategy and operating on strict, tight risk leashes. AUM growth for these entities has been hilarious, and honestly, capital is concentrating in the top names here, much as it has at the equity index level.

Combine this with the fact that High-frequency trading (HFTs) now accounts for 50-60% of U.S. equity trading volume and 75% of futures volume, and you get a uniquely fragile environment. Intermediaries trading with themselves aren’t functioning as a price discovery mechanism. So a lot of the “volume” we see on the tape is just plumbing. The ultimate effect of this dynamic is that you get extremely tight spreads in normal conditions, which is obviously a good thing. But when something actually moves, i.e. a narrative cracks or positioning has built up too far in one direction, or when a pod shop’s risk limits start tripping in correlated ways⁹, the microstructure basically gets out of the way. The pod shop structure makes this worse in a very specific way because every PM across every platform is running the same factor exposures and has the same drawdown limits. So when one team is forced to de-gross, everybody else is too. February 2018. August 2019. March 2020. August 2024. These will keep happening because the structure that produces them is now baked into the financial system.

In a lot of ways, the guys who got squeezed out in this world are the traditional fundamental L/S managers who have some theses, a 20-40 name book and multi-quarter time horizons. That model got pushed either up into the platforms or drifted sideways into private markets, family offices or concentrated single-strat funds. I’m biased, but there is likely meaningful alpha to be generated by understanding the narrative shifts and having the patience to sit between marginal new flow and the marginal new exit.

Volatility suppression

Ok, so we’ve got these 4 ingredients:

• how wet boundary layer (democratising speculative class)

• perpetual passive bid

• inelastic passive counterparty

• pod-shop microstructure with synchronised risk discipline

Now the volatility regime almost has to look the way it does today. Empirically, we know the VIX spends most of its time at low levels: somewhere around two-thirds of trading days since 1990 have closed with a VIX below 20. Day-to-day autocorrelation of VIX is up to ~85%, meaning that today’s volatility looks almost exactly like yesterday’s. But the transitions are now violent and asymmetric. There are studies that suggest most of the volatility explosion occurs in the days immediately following a compression break (duh!), but that the decay back downwards takes much longer and is spread over a handful of weeks.

There are some structural reasons for this: a huge industry now exists for selling volalitity¹⁰. But inevitably, tail risk shows up, and everyone unwinds all at once. The 0DTE proliferation makes this even more complicated because dealer hedging of these products creates gamma profiles that further suppress intraday volatility.

This was a lot of words that really just say the distribution of volatility has gotten worse. So the market spendsmore time in compression phases and then pays for that with bigger, more violent releases.

Composition mix

The sixth shift is the actual composition of the market. In 1980, the S&P 500 was a manufacturing-heavy index. Industrials, materials, energy, financials and consumer staples made up the bulk of it. These companies produced earnings that grew at roughly the rate of GDP and in an almost linear way, which meant they could be valued using approximately mean-reverting multiples. Estimating the 5-year forward earnings of Proctor & Gamble was not exactly something you could be orders of magnitude off on.

Compare that to today…

Information Technology + Communications Services + some of the tech-adjacent slices of Consumer Discretionary (Amazon, Tesla) account for more than 40% of the S&P 500. Many of these companies don’t operate on linear economics. Software was lauded famously for having near-zero marginal cost of distribution. AI is even more of a Rorschach test: AI labs are either enormous capex sinks that turn into the most valuable economic infrastructure of the next half-century or they’re some kind of delusional money pit, doomed for disaster. Estimating short-term earnings is difficult enough for these companies, let alone terminal value math, where uncertainty is the highest and prone to the most violent swings in valuation. In many ways, these companies have shifted from P&L exercises to narrative ones. Again, this means there’s alpha for investors who can take a view on the trajectory of a frontier technology, the durability of emerging (and existing) moats and the shape of markets that don’t really exist yet.

Widget factories used to add capacity in linear chunks, so the discounting cash flow models mostly converged on reasonably stable estimates. Multiples mean-reverted far more often in that paradigm. An increasing share of today’s multiples is a function of how much investors believe the story that is being told. And, for what it’s worth, I don’t actually think this means valuation frameworks are broken, but it’s just the reality of the types of companies that exist in 2026.

The new financial market indices are full of these long-duration, narrative-driven businesses. Each of these has a much steeper lapse rate¹¹. The steeper the gradient, the more potential energy is locked in the system and, by extension, the more violently that energy converts to motion when something triggers it.

The collapse of information lag

Everyone has lived through this in some way and probably, intuitively, understands it. So, it’s perhaps less interesting but also maybe now under-appreciated. Throughout most of financial history, any kind of market-relevant information was rate-limited by some speed-of-publication bottleneck. Today, information latency is literally zero.

Positioning information, in particular, seems to propagate faster than anything, as investors immediately see how every “smart” person they respect reacts to news in real time (more than ever, a lot of people are disclosing positions as well). Part of this onslaught of real-time information is a constant buzz of comparison brewing under the surface. PnL screenshots are everywhere, stories of someone turning $1K into $5M regularly go viral. There’s a permanent engine of FOMO roaring louder every day.

Fiscal & monetary regime change

I actually don’t think this needs to be explained in detail at this point. So the cliff notes are

• US monetary policy is structurally easy with real rates near zero for a long time

• QE expanding Fed balance sheet by trillions

• Every duration-sensitive asset traded at a premium, with the discount rate so low

• Then, fiscal added to this with stimmy checks, PPP, Inflation Reduction Act, CHIPS Act

• War-time deficits while at full employment

• K-shaped economy dynamic, as stimulating financial markets & stimulating the main street economy are very different things

How The Storm Forms

It’s much easier, given all the above, to now visualise how these rolling bubbles become inevitable.

I won’t go through all these stages individually because they’re reasonably self-explanatory, but let me call some things out.

The compression stage is something we’ve uniquely seen at Compound investing across a bunch of (seemingly) disparate areas for a long time. Categories/sectors/industries come in and out of favour all the time. With that comes a lack of attention and interest. But there are always talented people building regardless of the outside perception, and the reality is that most of the time they’re not going to be in the spotlight.

Eventually, some legitimate change happens that brings the interest back around, be that a real technological breakthrough, a regulatory shift, or an earnings surprise that changes the scale of the underlying business reality. The domain specialists will should notice this first.

At some point, the narrative is crystallised (AKA, the story gets a name), which does a few things. One of which is that it flattens what’s actually happening. Some people find this annoying because they hate memes or think it’s bastardising something they hold dear, but the reality is this makes the narrative easier to understand (and, importantly, to share). It becomes way more legible to a broader audience who can’t necessarily evaluate the entirety of it on merit alone (even with LLM help).

At some point, you reach a stage where youwe see bifurcation. The modern context of this is that the marginal buyer outside “the believer cohort” shrinks to zero. You reach a point where the valuation gap between believers and sceptics becomes too large such that even those people chasing the narrative fall off as marginal buyers.

The crack is always obvious in hindsight, though in 2026, people are way too quick to try to call this ahead of time. This again is just the reality of the hyper-online, comparison, and clout-chasing world we live in. But this crack gives way to the de-grossing as factor exposure unwinds for everyone, and the outflow then goes searching for a new pocket of warm, humid air to trigger a new cell.

Future Forecast

The downstream effects of this regime are significant. And I think this is more an acknowledegment that the shape of the weather is, in theory, more predictable without necessarily knowing the exact location of any given storm.

But what does this mean about the future?

One argument that a lot of people made just after COVID was that “this is an anomaly” or “[redacted] was a zero interest-rate phenomenon”. Some of this was obviously true. But to me, it’s become clearer that the broader regime shift is permanent. How permanent is a debate for another day. But each of the shifts I described above is pretty one-directional…

• trading commissions are not going back up

• passive investing doesn’t just unwind

• defined-benefit pensions are gone forever

• social media isn’t going to get slower in the future

• pod shops — maybe these dissolve quicker than I appreciate, but given the parabolic growth and how much money they’re making, that seems unlikely

• information lag isn’t going to lengthen

You can almost think of these conditions as the new climate we live in. Candidly, I think anyone expecting us to return to the previous stratiform regime of the 80s or 90s is just in denial.

Another claim that’s maybe(?) finding some kind of local maxima is the idea that these rolling bubbles will keep compressing in duration. This is one of those things that I think is tougher to say just because it turns into a never-ending meta game of “I know that you know that I know that you know…”. But the simplest lesson is that each cycle teaches participants what the pattern looks like, which in theory speeds up the next one. Crypto participants now feel comfortable trading TradFi assets because many of the survivors there have so many reps already with these types of behaviours. And while I don’t necessarily subscribe to the idea that crypto traders are best suited for this new world, I understand the argument. Some probably are. To me, though, there is some half-life of narrative-driven markets that can only be compressed so much.

Maybe the most critical claim I’ll make about what the implications are is that this new rolling bubble world rewards a couple of types of investors. Domain specialists who actually understand what would need to be true for the narrative to deliver on its priced-in promises (or exceed them). But this means understanding true technical bottlenecks, regulatory nuance, manufacturing supply chain dependencies, and competitive dynamics, all the way down to unit economics. Realistically, this is not where most people will sit. I think AI models probably make people believe they live in this category more than they actually do, which is especially dangerous¹². The reality is most actually sit in an adjacent seat where they are trying to understand how the next-most-informed participant will react. There’s probably a completely separate piece on why the combination of these two is likely to become an even more rare trait over the years, but this blog is already long enough.

One thing that’s clear is we are certainly not at a loss for future narratives:

• AI infrastructure & applications

• Robotics

• Physical AI

• Precision medicine

• Crypto

• Materials science

• Fusion, advanced fission, grid storage

• Space

• BCI

• Quantum

Even within these, we’ll see ripples form and dissipate as investors move up and down the supply chain and tech stack within these.

Retail’s biggest advantages in financial markets have always been time and flexibility. That is to say, they don’t need a few days to schedule investment committee decisions or convene on allocation sizing. They also aren’t beholden to the same shorter-term pressure that many institutional managers face (i.e. there’s no quarterly redemption in your PA). This may explain some of the outperformance retail has enjoyed. Decades of BTFD working also probably helps. So, in some sense, retail participants who can manage risk are in a great position.

The View From Above

A lot of what I’ve (too verbosely) written above may leave the impression that I care one way or another about the things that have led us to the market structure we have today. Sure, I have opinions on some of those things. And when investing on the private side, I still think there are plenty of ways to make money without funding things that accelerate net-bad societal outcomes. But one of the most common mistakes many people make in public markets is making decisions based on how they want the world to be¹³. I get this. We’re all humans with emotional triggers that have been hard-coded into our DNA for centuries. It’s why Newton re-entered with a lot.

But emotional triggers are a huge barrier to performance. For years, we’ve seen asset managers and hedge fund guys come on TV and talk about why markets are wrong or wax poetic about impending recessions. Much like our friend Sisyphus, these guys do not come on TV for charitable purposes. Ray Dalio has been calling for a debt crash throughout this historic bull market.

The world is not going back to your father’s market. Is this convective regime a more degenerate version of the old stratiform one? I’m not actually sure, to be honest. Potentially? But at the same time, a lot of the shifts that are producing it I actually think are net-good things: democratised access¹⁴, automated retirement saving, passive ownership, more real-time information. All of these things reflect a market that is way more available to ordinary people than it was in the past.

An aside that I tweeted about the other day (there’s a more philosophical piece to be written here):

From the ground, every storm is total. The world narrows to whatever is happening to you right now. This is the experience of market participants in any of these sector cycles. On the ground, it feels like a black hole of liquidity sucking up everything around it. Only if you are able to step back and move to an altitude, are you able to actually see the chain. One cell after another, lighting up. Each of them at different phases and each of them feeling total and complete to the people underneath them.

Markets are so intoxicating because they are simultaneously always changing, and yet, at least today, humans still have control over price discovery. And humans are inherently emotional beings that can’t help but make the same mistakes over and over. That tension helps create the conditions we experience each day, which ~feels~ quite frenetic in the moment but, taking a step back looks a lot more like rolling bubbles.

Really, the point of all this is to try to drift above the immediate storm and operate at a higher system level to allow yourself space to recognise which way the front is moving, and to detach yourself as much as possible from the immediate sensory-overload effects of any individual cell underneath.

As with most things that require immense discipline, this is simple but not easy.

References

1 which within itself has its own rolling narratives

2 one of the funniest things about this is seeing people on Twitter say things like “nobody is even talking about xyz yet” and it’s an entire massive sector that has tons of people talking about it they just don’t happen to overlap at all with this random narrative trader

3 a round-trip stock trade through a full-service broker costs roughly the equivalent of a steak dinner in real terms

4 in 1980, almost ⅔ of private retirement contributions still went to defined-benefit plans which meant most of the wealth being saved for retirement was deployed by professional fiduciaries operating on multi-decade liability horizons

5 https://www.finra.org/media-center/newsreleases/2026/finra-foundation-research-examines-characteristics-behaviors-outcomes

6 obviously, these companies are also exceptional at making money and growing earnings

7 there is some truth to it, but i also think it’s not necessarily that fair to think of some of these companies as 1 company

8 guy who thinks you’re not allowed to use em dashes anymore bc AI’s corrupted it

9 btw these guys are in all the same trades

10 covered call ETFs are a massive category, dispersion trades (short index vol, long single-name vol) are a core book at every multi-strat, structured products from banks systematically harvest premium. all of these things just manufacture the calm by collecting income in exchange for taking tail risk

11 the steepness of the temperature gradient between the surface and the upper atmosphere is the lapse rate

12

13

14 fwiw Robinhood is one of my least favourite companies in the world. I think the fact that they pretend they’re helping people on some type of financial journey, but in fact design the entire company/product around turning their users into degenerate gamblers is gross.

Disclaimer: This piece was originally published here.

We will be featuring good writing and writers we love from time to time. If you have recommendations, send them our way.

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000 subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

Welcome to Edition 10 of The Reading List — your fortnightly antidote to the noise. Every two weeks, I share my favourite reads across crypto, finance, technology, culture, and beyond. I also share what I’m watching and reading, because a newsletter that only talks about charts is a slow way to kill the will to live.

This fortnight, though, the charts were hard to ignore.

We will take a quick look at how the markets moved over the last two weeks before I share with you how we at Token Dispatch are keeping our minds sane during the ongoing market downturn.

Let’s get the painful part out of the way first.

The Fortnight That Was

Bitcoin slipped below $60,000 this week, touching its lowest level since October 2024. Most of the broader crypto market followed it down. As much as $1.3 billion was liquidated out of crypto markets across long and short positions.

BTC, ETH and SOL, all lost approximately a fifth of their market cap in the past two weeks.

Depending on how closely you tracked these prices, this either felt like a bad dream, a familiar cycle, or the point where the weak hands start quietly leaving.

But I am an eternal optimist. I look for the good news even when the going is tough (Primarily because it acts as a consolation to my bleeding portfolio). I think downturns are useful in a way. It helps clear the industry of those who don’t care enough about its fate. Every narrative sounds profound when the charts are green. But only the true advocates hang in irrespective of which ways the candles move.

Just as any other industry, crypto has a section that keeps working, earning, building and shipping whether BTC is at $60,000 or $100,000.

While prices were bleeding, the U.S. approved the first regulated Bitcoin perpetual futures. Crypto exchanges kept expanding into stocks, commodities, private-company pricing, and prediction markets. Perp DEXs kept processing volume and stablecoins kept moving money.

It’s easy to overlook these developments in a red market.

Bear markets can hurt investor motivation, stop people from opening dashboards, make investment in the entire industry seem delusional.

But the actual industry was doing something else, and we covered it extensively at Token Dispatch.

What We Covered Last Fortnight

We started with Everything is a data centre now, where Thejaswini followed the noise in Rockdale, Texas, and found the bigger story underneath. Old aluminium plants became Bitcoin mines, which are now turning into AI data centres.

I then wrote Pricing the Private, in which I examined how crypto is building a parallel pricing stack for private companies. SpaceX perps on Hyperliquid, Polymarket contracts around IPO milestones, and tokenised access products are all doing something similar. They are letting public markets financialise their opinions about companies that are yet to list on public exchanges.

Thejaswini then took us into institutional money with Meet Me at the Agorá. Project Agorá is a permissioned, compliance-heavy system in which tokenised deposits and central bank reserves move only after the rules allow it. TJ explains the impact of programmable money when coupled with a gatekeeper at the door.

Vaidik wrote America Finally Gets Perps, explaining why the CFTC’s approval of regulated Bitcoin perpetual futures is a watershed movement. The piece is a culmination of what we have been seeing in crypto markets for a little over a year now. The piece tells us the impact this could have on U.S. institutions which were largely been locked out of a market that’s too big to ignore.

I closed the fortnight with ‘Every Exchange is an ‘Everything Exchange’, in which I argued that crypto exchanges are becoming full-stack fintech platforms. They started with tokens, but the infrastructure now supports trading perp contracts, tokenised RWAs, pre-IPO equities and even event contracts. I flirt with the idea of what happens when every exchange becomes a multi-asset brokerage and how do they stand apart in such a world.

At Token Dispatch, we are focusing heavily on how crypto infrastructure (read ‘blockchain’) is capitalising on the inefficiencies of traditional financial systems. There’s a lot we are working on that we are excited to send your way in the coming days, especially around the metamorphosis of crypto into fintech.

Until then, here’s a reading list that will keep you in good company.

Regulation & Policy

• Anthropic Hits Pause?: The Claude-developer has warned that frontier AI may need a coordinated slowdown if self-improvement risks move faster than society can govern them.

• Banks Answer Stablecoins: JPMorgan, Citi and other big banks explore tokenised deposits as TradFi’s more regulated response to crypto-native money rails.

Crypto & Tech

• Continuous Probability Markets: A smart prediction-market design piece on why real hedging needs price ranges, not just binary yes-or-no contracts.

• AI Needs Blockchains: Pantera’s Paul Veradittakit makes the case that AI agents need crypto rails for payments, identity, open systems and resource coordination.

• Bitcoin vs Ethereum Money: A structural audit of Bitcoin and Ethereum’s monetary claims, arguing that first-mover advantage is not the same thing as superiority.

• Stablecoins Go Invisible: A useful stablecoin distribution essay on why the winning rails may disappear into treasury dashboards, checkout flows and existing workflows.

• Crypto Price Discovery: Arrakis’ thread on how Hyperliquid and on-chain perps are becoming a new venue for price discovery beyond just crypto-native assets.

• Crypto Without Bitcoin?: A provocative thread/article arguing that crypto may be entering a cycle where Bitcoin is no longer the only asset setting the market’s direction.

• The Agentic Future: 0xSammy curates three early crypto-AI mechanisms, from compute-within-consensus to tokens that behave like LP positions.

• Private Money Is Fine: Nic Carter pushes back against the “stablecoins are dangerous private money” critique by revisiting the free-banking history people often misread.

Finance & Economy

• Fake Money Built America: Byron Gilliam uses America’s counterfeit-banknote era to show how messy private credit helped build a young financial system.

• Hormuz, Oil, Fragility: A timely NYT opinion piece on why the Strait of Hormuz remains one of the world’s most dangerous energy chokepoints.

• Copper Has a Problem: A commodity scarcity piece arguing that the world needs far more copper than current mining capacity is prepared to deliver.

• a16z, Pre-IPO: A sharp read on why a16z’s media, platform and multi-strategy buildout increasingly makes it look like a public company before the listing.

• Management Fee Machine: Dan Gray explains how venture capital’s incentive structure rewards scaling assets and fees, even when larger funds produce worse exits.

• Prediction Markets, Tested: Asterisk asks the uncomfortable question: are prediction markets actually useful information machines, or mostly better-packaged casinos?

• Opting Out of AI: Bloomberg looks at what it means to sit outside an AI boom that increasingly feels impossible for companies and investors to ignore.

AI & Innovation

• Google’s AI War Chest: Google’s reported AI infrastructure raise shows how frontier AI is turning into a capital markets story as much as a technology story.

• Search as Code: Perplexity reframes search for agents as something models should compose through code, not just call through fixed query boxes.

• China’s AI Valuation Race: A look at China’s “Six Little Tigers” of AI and whether their billion-dollar valuations have enough substance underneath.

• AI Sticker Shock: Axios tracks the growing corporate panic over AI bills, unclear ROI and the very real cost of letting employees use models without limits.

• AI Has No ROI: Ed Zitron expresses scepticism on enterprise AI economics, arguing that hidden token costs and vague productivity claims are finally colliding.

• The Messy Middle: Molly Kinder writes about the politically difficult transition between today’s labour market and the post-AGI abundance story Silicon Valley prefers to jump to.

• Robot Training Homes: The Verge reports on Shift’s offer to clean homes for free in exchange for footage that trains future household robots.

• Pig Organs, Human Body: A striking xenotransplantation milestone where scientists tested pig liver and kidney transplants in a brain-dead person.

Culture & Beyond

• The Burden of Discernment: Palladium uses Galileo, science and AI-era knowledge systems to ask how societies separate real dissent from weak contrarianism.

• Retreat Yo Self: A funny, self-aware essay on meditation retreats, silence, self-improvement and why stillness is easier to admire than actually practise.

• Metrics Maxxing: Scott Galloway takes aim at optimisation culture and the way metrics can slowly replace the actual thing we were trying to improve.

• Can Ecosystems Malfunction?: Aeon questions whether ecosystems really “fail” like machines, or whether that language says more about human expectations than nature.

• Flickering Enlightenment: A defence of the Enlightenment that does not ignore its failures, but argues its best legacy is permanent critique.

What I Am Reading & Watching

This fortnight, I am starting Debt: The First 5,000 Years by David Graeber.

I’ve wanted to read it for a while because debt is one of those words finance uses every day without considering its moral, political and historical weight. We talk about credit, leverage, money and repayment almost everyday. But I wanted to dive deeper into how debt became a way of organising human relationships long before modern banking took over.

On the watching front, I am waiting to watch Obsession. I usually try not to let hype decide my weekend plans, mostly because it has let me down too many times. But this one has been loud enough.

So that’s the plan: one book about 5,000 years of debt, one horror-thriller, and hopefully fewer red candles by the time the next edition goes out - that’s my ask of the…(no context spoiler ahead)...One Wish Willow.

That’s all for this fortnight. Catch you in the next edition.

Until then, happy reading!
Prathik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

Markets continuously evolve. It’s what they do. They eventually outgrow the product they were initially built for. What started as a Chicago butter-and-egg exchange in 1898 became the world’s largest derivatives market (CME). Amazon started by building warehouses and payment rails to ship paperbacks. Today, the same systems don’t care what they ship. Books are probably a footnote in Amazon’s revenue now.

This pattern stays relevant today. You start by building infrastructure for one thing, discover that it works for many other things, and then you keep expanding your business to absorb everything your infrastructure can support.

Crypto exchanges are living this moment.

The infrastructure they built to trade tokens works just as well for trading crude oil, silver, equity indices, pre-IPO stocks or event contracts. Non-crypto perpetual contracts accounted for 99% of all trading volume over the past seven months on a permissionless market that didn’t exist two years ago.

You can see this market playbook happening everywhere. Every exchange is racing to become a multi-asset brokerage, and blockchain rails are providing the cheapest path to get there.

Onto the story,
Prathik

The Cheapest Path

A perpetual futures contract or a prediction market contract doesn’t care whether the underlying is bitcoin or crude oil. All you need is a stablecoin-funded wallet to buy a futures contract on a memecoin or place a bet on the outcome of Apple’s quarterly earnings. The rails are asset-agnostic. Just as the internet and logistics networks were agnostic to what was traded on Amazon’s marketplace.

But why would traders abandon their current venues to trade silver and stocks on an exchange that has barely existed for a couple of years? The same things that drove people to choose online commerce: convenience and cost savings.

Amazon cut the intermediaries and allowed distant sellers to ship directly to buyers. This enabled the sellers to undercut their competitors by offering subsidised prices. It also allowed buyers to browse a host of options, add items to their shopping carts, and make payments from the comfort of their homes (or anywhere else).

Although the cost advantage that blockchains offer was originally built for crypto transactions, it applies equally to equities settlement, commodity clearing and cross-border stock access.

The 24/7 live markets on the blockchain also allow traders around the globe to price events at any time. We saw their impact on non-crypto assets multiple times in the past few months.

Since October 2025, Hyperliquid’s permissionless markets (HIP-3) have processed ~$270 billion across seven builder-deployed venues. Of this, 99% of trading came from commodities, equities, FX, equity indices, and pre-IPO contracts. Crypto stayed below 1% throughout. And the asset mix continues to diversify each month.

When the US-Israel conflict with Iran escalated over the last weekend of February this year, the world’s largest commodity exchange (CME) was closed. Hyperliquid’s WTI perpetual wasn’t. Trading volume on the platform surged from $25 million to over $550 million in three weekends. Hyperliquid had priced in roughly 80% of the subsequent WTI crude move before CME reopened on Monday, according to a recent report by TD Securities.

Even the perpetual contracts on silver hit nearly $1 billion in daily volume during the precious metals rally earlier this year. Trading on blockchain-enabled venues continued even when traditional markets were shut.

This isn’t limited to perps. The same behaviour is seen in equities trading.

US equities represent more than 60% of global equity market capitalisation. For most of the world’s investors, buying them requires intermediaries, foreign exchange conversion, minimum balances, and restricted account types.

Everyone wants a taste of the world’s largest economy and a place in its growth story. This explains why almost every crypto exchange wants to let its traders buy and sell U.S. equities or derivatives with U.S. equities as the underlying.

On June 1, Binance announced zero-commission access to 7,000 U.S.-listed shares and fractional ownership starting at $5 for all its 300 million registered users. The vast majority of them are outside the U.S. and can now gain exposure to U.S. equities using their stablecoin-funded wallets.

Kraken’s xStocks has already shown how tokenisation can impact access to public equities. The platform has tokenised over 100 public equities, generating $25 billion in trading volume with 80,000 on-chain holders.

Blockchains also unlock pre-IPO price discovery for traditional markets. SpaceX is preparing what could be the largest IPO in history by raising roughly $75 billion. On June 1, Anthropic confidentially filed its IPO papers. OpenAI is likely to follow. Before these companies go public, price discovery is opaque and restricted to accredited investors.

In Pricing the Private, I explained how the market is interested in pricing assets that behave like public companies.

Companies like OpenAI and Anthropic have brand recognition, revenue at scale, and hundreds of millions of users. They have everything a public company has except public shareholders. Their marketing has ensured that everyone has an opinion about them. In fact, there has never been a wider gap between everyone having an opinion on SpaceX, and yet almost nobody being able to price it.

Blockchain enables multiple tools to let the market price these private companies.

For instance, many platforms that started as crypto exchanges now offer pre-IPO perpetuals, prediction-market contracts, and tokenised IPO access for companies that have yet to go public.

Multiple market makers have offered perpetual contracts on Hyperliquid for companies such as SpaceX, Cerebras, and Anthropic. The trading volume on these contracts has jumped about 300 times over the last six months, from $16 million to $4.7 billion. The perp contracts on pre-IPO stocks accounted for 7.7% of all HIP-3 activity in May, up from 0.2% in December 2025.

These venues are not just always on and cheaper, they also provide deep liquidity traders can trust.

During the Iran escalation, Hyperliquid’s WTI contract handled hundreds of millions in daily volume at tight spreads. Between January and April 2026, the open interest in a WTI Oil perp contract rose from $1.8 million to $560 million.

Traditional exchanges can also offer users cross-margin and deep liquidity by tapping into their user deposits. Binance offers its users access to pre-IPO stocks through its integration with PreStocks, while Payward (Kraken’s parent firm) allows its users to invest in tokenised IPO.

Less than 24 hours ago, Coinbase also joined Kraken and Binance by launching perp contracts on pre-IPO stocks, starting with SpaceX.

Building a Full-Stack Fintech

The convergence of traditional finance and crypto from both directions is creating a full-stack fintech platform for many of these companies. While crypto-native platforms are adding traditional asset classes, traditional exchanges are rapidly adopting blockchain infrastructure.

On the crypto side, Kraken spent over $2.7 billion on acquisitions in the past 12 months to turn into a multi-asset brokerage. In March 2025, it bought NinjaTrader for $1.5 billion — the largest deal ever to secure a CFTC-registered futures commission merchant.

It followed that up by acquiring Backed Finance to control xStocks issuance, trading and settlement in-house. Its product grew from 60 tokenised equities to 100 by early 2026. Five more acquisitions followed across payments, clearing and automated trading infrastructure.

It then launched Krak, a payments app supporting 300+ assets across 160 countries, that helps users spend, send and earn yield on their crypto.

Coinbase has lined up a similar stack.

At its December 2025 product event, Coinbase launched commission-free stock trading across all 50 states and prediction markets via Kalshi.

In August 2025, it acquired Deribit for $2.9 billion, giving it control of the largest crypto options market. Coinbase is now positioning USDC and its Layer-2 chain Base as settlement rails for everything from agentic payments to equity trades.

Each of these platforms entered finance through crypto and now boasts a distribution network that incumbents spent decades building. Binance has 300 million registered users. Kraken serves 15 million clients across 190 countries. These user bases are their biggest moats as they expand into multi-asset brokerages.

When Binance adds 7,000 US stocks, it doesn’t have to build demand from scratch. Access to these equities and pre-IPO stocks is being offered to people who have already topped up their wallets with stablecoins multiple times and have verified identities. The marginal cost of adding equities to an existing crypto brokerage is a fraction of what a traditional broker spends to acquire a single new customer.

The traditional incumbents are also adapting aggressively to stay relevant.

The same day Binance launched US stocks, the CME Group, the world’s largest derivatives exchange, announced 24/7 trading for all its crypto futures and options.

DTCC, which custodies $114 trillion in assets, will pilot tokenised securities this July and move to full production in October. The pilot covers Russell 1000 stocks, major index ETFs, and US Treasuries. More than 50 firms joined the effort, including BlackRock, JPMorgan and Circle.

NYSE partnered with Securitize to build a 24/7 tokenised stock venue. Nasdaq received SEC approval in March to trade tokenised equities within its existing rails.

It’s an interesting convergence. CME and other legacy institutions are adopting 24/7 operations because crypto has shown markets don’t need to close. Crypto exchanges are adopting traditional assets — oil, silver, indices — because users have shown that demand will shift to any platform that offers deep liquidity and a cheaper way to price information.

Blockchains are serving as a common bridge between the two.

Crypto’s Evolution as Fintech

As with any technology, online forums have defaulted to binaries about crypto’s use case. They expect crypto to either build a new, separate financial world or crumble under its own weight. But crypto is evolving in the area in between. The same happened with the internet.

While people were busy either writing it off or celebrating it as a new world, the internet, over time, became commoditised to the point where it is now invisible. Pretty much the entire world runs on it. Nobody argues anymore about the internet’s use case. It has become the common denominator enabling newer technologies on top of it.

This is exactly what I see unfolding for crypto. The technologies that come with crypto may not be achieving what the founding cypherpunks expected. I doubt most of them would even care; at least I don’t.

While the endogenous markets are busy debating BTC cycles and downturn narratives, a parallel exogenous side to the market is steadily expanding across multiple layers of the finance stack. Payment infrastructure, agentic commerce, integrated price discovery platforms, and now multi-asset brokerages. These businesses are thriving independent of whether BTC is at $60,000 or $100,000.

Hepworth Iron Capital’s Charlie Booth explains the endogenous-exogenous market evolution beautifully in his guest op-ed on Token Dispatch last week.

What interests me the most here is that a technology built to trade tokens is being used to give a retail investor $5 worth of access to Apple stock on a Saturday, settled in stablecoins with sub-cent fees, on infrastructure originally built for memecoins.

These possibilities happen only when the new infrastructure is significantly better than what it replaced. We all know old habits die hard. And the world is discovering blockchains as the magic pill to make finance work better. In some cases, by lubricating the legacy financial systems; in others, by altogether replacing the old, dilapidated systems. There is no wisdom in resisting change for the sake of it.

It’d also be suicidal for any industry run by humans to resist change that improves how existing systems work. That’s because of humans’ innate desire to improve inefficient systems. Things that make inefficient systems efficient are always adopted. No matter how new and how radical they might seem. Blockchains have evolved in a space with plenty of room to reduce such inefficiencies. The fact that legacy institutions and markets like Nasdaq, NYSE, and CME are adopting blockchain technology is a testament to blockchain’s evolving role in the future of finance.

Every exchange is a brokerage now (or will soon become one). Not all would have planned it, but that’s what they want to become. But what unfolds next? Who wins when every platform offers stocks, derivatives, prediction markets and crypto on the same app? It will come down to how well they integrate these assets across their platforms and enable their users to carry out some of the most fundamental tasks in the world of finance: spending, sending, receiving, and earning money.

That’s it for today. I will be back with the next one.

Until next time, stay curious,
Prathik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

“Sofalarity.” There’s my favourite word of the month/year (depending on what I read next).

I conveniently realised that my own exhaustion is exactly how the system needs me to behave to keep working, not a personal failure. Slouched on my bamboo sofa in a position guaranteed to cause back pain, I asked Alexa to brighten the lights. Because the reading was getting a bit uncomfortable and personal.

You know the singularity, that is, the theoretical point where AI surpasses human intelligence, everything changes forever. We are not there yet, but sofalarity, it’s here in this room with us.

It’s the point where convenience itself becomes so complete that leaving a platform feels roughly as plausible as moving to another country where you might not find a bamboo sofa.

The ecosystem you choose to stay in seems free of drama or friction, offering a level of convenience that actively improves your day. But you can see friction everywhere else; that is how we keep making the same choices. But did you make the choice yourself, or was the choice already made for you?

The book describes something I think most of us know but don’t have the language for. The (comfortable) weight of staying on a platform you’re still not even sure you like. The way switching feels is not impossible, but somehow exhausting in advance, before you’ve even started. He borrows a phrase from stoner culture for it. “couch lock.” It pretty much explains itself.

As always, my brain immediately drifted back to crypto. Are we ever going to build a product slick enough to give people couch lock? Or did we already make that promise, try it, and fail miserably? Are we operating entirely beyond a cosy consumer haven, or are we just stuck below it?

Look at how these apps keep us hooked using what psychologists call a variable reward schedule. It’s the slot-machine effect that makes gambling addictive, which is something you can easily find in crypto. Price volatility acts like one of the most powerful slot machines ever created. Most positions don’t move much. Occasionally, something increases tenfold. This unpredictability triggers the compulsive checking behaviour linked to Instagram notifications and TikTok scrolling.

Crypto’s variable reward system skips the platform entirely, pulling people straight to a price chart where the dopamine builds for traders. It lacks the habitual system reliance that large tech platforms profit from. This likely explains why, after fifteen years, speculation remains the only consumer product that crypto consistently provides.

Wu explains why platforms spend billions on things that seem unrelated to their core business. Google paid $17 billion for NFL streaming rights, or Amazon spent $11 billion on Thursday Night Football. The goal was hours. They wanted to control enough of your Sunday that your week would naturally revolve around one company’s interface.

Every hour you spend inside a platform’s ecosystem is an hour you don’t spend wondering if something better exists elsewhere.

For someone in India, there are two options to watch “The Office”. Netflix and Amazon Prime. Amazon offers benefits that make it a good choice, and it’s got a lot of perks for Prime subscribers.

“If it’s easy, it wins,” says Wu.

Borderless money, self-custody, and transparent systems are all great. The pitch requires you to first convince someone that something they don’t consider broken is actually broken. Most people didn’t walk around thinking about how to fix correspondent banking.

The internet’s convenience gap was visible to everyone. “You don’t have to drive to the post office anymore.” Okay, convinced.

The before-and-after was obvious, immediate. Crypto’s chasm is just as real but almost entirely invisible to the people living inside it. The inefficiency lies within institutions, within settlement layers, within the correspondent banking system that most people will never have to know about. “Replaced all of it with blockchain.” sounds completely alien to the average user.

The internet replaced something that bothered everyone. Driving to a travel agent to book a flight was annoying. Going to a video store to rent a movie was annoying; if you were late, someone else had already taken it. When the internet removed those barriers, people felt the difference immediately because it made their lives comfortable. Explaining the solutions to all of this, people were okay with.

Crypto is replacing something most people have never had to think about. The average person sending money to family in another country knows it takes a few days and costs money. They likely don’t know what a correspondent bank is. They don’t care that their $200 transfer goes through three or four intermediary banks before reaching its destination, each taking a fee. They just know it worked for them, more or less, and they’ll use it again next month.

If you switch that entire system to blockchain technology, the person sending the money experiences roughly the same feelings. It might be faster. The fee might be lower. However, nothing about their life visibly changes. They don’t have a moment of realisation like, “Oh, I don’t have to do that anymore.” That’s the issue.

Adoption has always been a challenge for the industry, not the users. As long as crypto requires explanation for people to understand it, it will remain in the nerd category, regardless of how good the technology is.

What else is missing from crypto? The data chapter requires a fresh perspective on this issue.

Google and Facebook made $360 billion in combined ad revenue in 2024 because they spent two decades collecting data on everything you do. Every single scroll or long pause on a post helped them build a machine that predicts your next move. Brands pay billions for that prediction. We built that engine for them, completely free of charge, starting from when we opened our first accounts.

Wu compares it to a poker game where your opponent has watched every hand you’ve ever played. They remember your bluffs and your worst calls. They are playing completely within the rules, but they know your mind. That exact advantage compounds over billions of separate rounds, ultimately generating a massive corporate empire.

I circled back to check if crypto has anything like this. No, I’m not referring to prediction markets.

Bitcoin’s entire blockchain, which includes every transaction since 2009, is about 611 GB. Meta processes more data than that every few hours. Ethereum’s on-chain data is richer, but it captures only financial behaviour: wallet addresses, transaction amounts, and protocol interactions. It shows what someone did with money but offers no insight into why. It misses the countless small daily choices that make behavioural prediction commercially valuable.

900 million people use ChatGPT weekly and share work documents, medical questions, their anxieties, and business strategies. It helps them. They don’t see the privacy trade-off when they use it.

People routinely surrender their private search histories and location data to Big Tech in exchange for daily convenience. Turning around and asking that same audience to suddenly care deeply about financial autonomy and transparent ledgers is a big stretch. Some people do care. Some care, but are busy. The pitch appeals to people who are already convinced. This approach is not effective for growth if you want to achieve mass adoption and create “everything apps.”

Wu engages with Shoshana Zuboff’s argument about surveillance capitalism. She claims platforms have created Skinner boxes. They act like little games, tricking our brains into checking them over and over by giving us surprise rewards. He counters that mass attention manipulation existed long before big data. I agree with him on this point.

Goebbels didn’t need a recommendation algorithm. Yes, the “totalitarian control” framing is overcooked.

Look at the variable reward schedule. Crypto has them too, just like we talked about at the start of this article. The way prices constantly go up and down is like a giant, exciting game of surprise. But that excited feeling never locks you inside a helpful everyday app.

The more you rely on a tool, the worse you get at doing the thing without it. That’s fine when the tool is a calculator. It gets complicated when the tool is an infrastructure that someone else owns and controls.

Crypto keeps rebuilding this problem. Developers build on top of sequencers they don’t control. Protocols depend on liquidity providers who can leave. Apps sit on top of chains run by a handful of validators. Each layer feels like progress, but it’s not entirely. You built something on someone else’s foundation, and now you can’t move without their permission. Web2 had the same shape. AWS goes down, and half the internet goes with it.

Now that’s where we go back to the IBM analogy. IBM dominated its era by building elite enterprise infrastructure and letting the application layer run on top of it, entirely bypassing the fight for consumer couch lock.

Crypto’s realistic best-case outcome might look more like that, which we recently realised as well. Settlement rails, institutional clearing, cross-border infrastructure, nobody wants to rebuild from scratch.

That is a major achievement, even if it is completely different from the consumer super-app dream.

Further down the pages, the book pivots away from technology to expose how the exact same corporate playbook dominates healthcare and housing. I felt it was important to mention that.

Welsh, Carson, Anderson and Stowe bought anesthesiology practices across cities because patients under anaesthesia don’t shop around. Prices rose 26% between 2012 and 2017. One patient got a bill for $108,951.

Invitation Homes spent $150 million a week buying foreclosed homes from 2012, now owns 110,000+ properties, paid a $48 million FTC settlement in 2024, and mailed refund checks averaging $106 to 444,131 tenants. Rents grew 4.5% the quarter after the settlement.

We discuss Real World Asset (RWA) tokenisation as the best tool for financial inclusion, arguing that fractionalised real estate will make wealth more accessible to more people. Does breaking a house into digital tokens help the local buyer compete against a firm spending $150 million a week on acquisitions?

What it does is digitise the inventory for giant corporations. Big firms own 1% of housing nationally, but they control 25% of housing in Atlanta and 21% in Jacksonville.

A more liquid crypto layer makes these exact markets even easier for Wall Street to buy up. Tokenisation fails to stop corporate landlords; it builds them a faster ledger for collecting rent. Crypto functions as a tool that cuts both ways here, entirely neutral rather than an automatic saviour.

The platform model merely accelerates extraction, making the process hyper-efficient and inescapable. A private equity firm owning a single anesthesiology practice operates as an isolated business. The game changes completely when a single entity buys up every practice across major metropolitan hubs. Coordinated through shared software, corporate owners apply fee increases uniformly across hundreds of healthcare providers. Individual doctors operate blind, unable to see the full shape of the trap. It is old greed running on superior infrastructure.

Wu stays careful about where he draws the line. I’m less careful. The deeper mechanics of these sectors reveal a slow-moving process of primitive accumulation within the American middle class. The corporate shift effectively forces doctors back into a standard labour pool and locks homeowners into a lifetime of renting.

The corporate platform model depends entirely on captive audiences and centralised gates. We have a technology built from the ground up to smash those gates. It gives sovereign individuals the tools to build their own systems, entirely outside the extractor class’s reach. That’s the moat.

Part 3 next week, until then, stay curious.

—Thejaswini

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

Perps, or perpetual futures, processed over $90 trillion in trading volume last year. For scale, that’s more than the combined GDP of the top 10 countries in the world. Today, perps account for about three-quarters of all crypto derivative trading and have been growing faster than almost any other financial product in history.

And even with all that happening, no American institution could legally trade them, at least until last Friday. On May 29, the CFTC approved Kalshi to list the first regulated Bitcoin perpetual futures contract in U.S. history. And on the same day, it also gave Coinbase a green light to route its customers to global perps and options through Deribit.

HYPE, Hyperliquid’s token, jumped 30% after that news. For context, Hyperliquid is currently the largest on-chain perpetual exchange, and it does not serve American users. CFTC Chairman Michael Selig wrote an op-ed in Coindesk, calling perps “a foundational risk management and price discovery tool in the global crypto asset markets.” If you have been in crypto for a while, seeing all this happening in real time is a bit wild. Let me explain why it matters.

How Did Perps Get to $90T

It started in 1993, when Nobel-winning economist Robert Shiller published a paper proposing a futures contract that could never expire. His idea was that homeowners could use this to hedge against falling property prices without ever having to sell their house.

The concept was interesting, but it had no practical use at the time because the entire derivatives market operated on expiry, with clearing houses and margin models all settled on a fixed date. For example, agricultural contracts would settle on a fixed date each month, while bond futures would have coupon dates. There simply wasn’t the infrastructure for it, so it remained an idea in academic journals for decades.

Then, in May 2016, three founders in a Hong Kong office decided to experiment with it. Arthur Hayes, Ben Delo, and Sam Reed launched BitMEX with a modified version of Shiller’s original concept. They built a futures contract on Bitcoin with no expiration date and added a mechanism to keep its price tethered to the underlying market, allowing people to trade it with up to 100x leverage. Within 18 months, BitMEX became the largest derivative crypto exchange.

So, what actually is a perp, and how does it work?

In a regular futures contract, you bet on where the price of something will be on a specific date. For example, a Bitcoin June 2026 futures contract will settle when June arrives, at whatever the price is, and if you want to keep your position open, you will have to buy the next contract. The problem is that every time the rollover occurs, it costs you money and leaves gaps in your exposure.

A perp, on the other hand, removes the expiration entirely. You can open a position, and it stays open until you close it. It could be as small as five minutes or as long as five months. The catch here is that a regular futures contract naturally snaps to the real price when it expires. But a perp never does, so it needs something else to keep it honest about pricing. For that, it uses the funding rate.

One reason perpetual exchanges became so popular is that, compared to traditional exchanges, which split liquidity across quarterly contracts (March, June, September, December), perps put everything in one place. There is a single order book. This made them among the most efficient venues for trading, and in financial markets, efficiency compounds. The more traders show up, the tighter the spreads get, leading to even more traders showing up.

Offshore perps grew from $28 trillion in annual volume in 2023 to over $90 trillion in 2025. On-chain perps on decentralised exchanges grew even faster, up 346% in 2025 alone to $6.7 trillion. And on any given day, perp volumes run roughly 10 to 15 times larger than spot volume. That means the price discovery of an asset has now moved from spot to derivatives. When Bitcoin moves 5% on a Tuesday afternoon, the move almost always starts in perps. A cascade of leveraged positions triggers liquidations that force buying and selling, which spot follows.

The tail wags the dog, and this entire market, the part of crypto that actually sets the price, was completely off-limits to American institutions until now.

What Does This Mean for the U.S.?

America finally has access to perps, but just not to the same product that the rest of the world trades. Even Coinbase’s own operations will route through a subsidiary in Bermuda to Deribit in Dubai, because liquidity was built offshore over years of regulatory hostility and is not coming back overnight.

U.S. perps are capped at around 10x leverage with full CFTC segregation protections; by comparison, offshore traders use 50x to 100x leverage. At 100x, one dollar controls a hundred dollars of exposure. A 10% price move returns 10x your capital. An options contract on the same move pays far less because the premium you pay upfront already prices in some of that expected move, and time decay chips away at the position every day you hold it. A typical one-month Bitcoin call nets you around 3x on that same 10% move. The leverage is the product here, and the American version is still the tame one.

This is why HYPE went up the day the CFTC legalised perps in America. The immediate take from many people was that volume would now migrate from Hyperliquid to Kalshi and Coinbase, and that regulated venues with institutional capital would eat into what Hyperliquid had built.

Hyperliquid made $907 million in revenue last year without a single American user. Think about who actually trades on these platforms. The person opening a 50x short on a memecoin at 3 am will never open a Kalshi account for 10x on bitcoin. The institutional allocator who needs regulated access with proper segregation was never going to use Hyperliquid anyway. These are different products for completely different sets of people. What it did was, the CFTC just confirmed that the product category Hyperliquid dominates is legitimate. And for Hyperliquid, that’s pure validation.

And while American exchanges are still limited to Bitcoin perps under regulatory guardrails, Hyperliquid has already surpassed crypto entirely. Through HIP-3, anyone can launch a perp on any asset, and many are already live. Silver perps had hit $4 billion in daily volume during the February spike, and oil perps briefly surpassed Bitcoin’s perp volume in April.

Jeffrey Sprecher, CEO of Intercontinental Exchange, the company behind the New York Stock Exchange, said this at a Bernstein conference two days before the CFTC approval: “This Hyperliquid that we’re talking about, if you haven’t heard about it, it’s bigger than NASDAQ, okay?” Today, ICE is talking to Hyperliquid, learning about their model, and asking regulators why traditional venues cannot offer the same products. The direction of learning has shifted: Wall Street is studying a two-year-old decentralised exchange with zero VC funding because it has built a trading infrastructure that the world’s largest exchanges now want to replicate.

Perps Are Going to Eat Everything

The reason I think this moment is bigger than anything is that perps are no longer staying just in crypto.

They started as a tool for trading on Bitcoin and then expanded to every altcoin. And from there to now into commodities like gold, silver, oil, and natural gas. Then to equities like NVIDIA, Tesla, etc., to then pre-IPO companies like SpaceX, OpenAI, and now also including prediction markets through HIP-4.

In two years, perps have gone from a crypto-native hack to a financial instrument that can reference any asset in the world, trade 24/7, and have no expiration or clearing intermediary. Traditional derivatives were built for when markets closed at night, and they made sense for as long as trading happened on physical exchange floors and settlement required paperwork.

But in today’s global digital infrastructure, when assets move around the clock, session-based markets can leave gaps. An oil trader who wants to position around a weekend geopolitical event has no option on any regulated exchange. On Hyperliquid, that trade is already happening. And the CFTC just acknowledged this. The agency’s staff advisory on 24/7 trading explicitly said: “Derivatives referencing crypto assets may be well-suited for 24/7 trading due to digital infrastructure and global reach.”

The real race now is whether American-regulated venues can move fast enough to matter. For instance, the average centralised exchange charges around 4 basis points on futures, whereas Hyperliquid charges just 2 basis points. On spot, the difference is wider: 15 basis points versus 5. When switching platforms takes only minutes, traders will go only where fees are lower.

Compass Point’s analyst assigned a sell rating to Coinbase the week of the CFTC’s approval, arguing that a wave of competition in derivatives will erode pricing power and squeeze margins. Coinbase earned $50 million in perps revenue in Q1 2026, while retail trading revenue fell to its lowest level since Q3 2024. Perps are growing, but they are also cannibalising higher-margin spot trading.

In fact, the compression shows up in many areas. If you can achieve leveraged directional exposure on any asset, at any time, without an expiration date, then traditional derivative products feel insignificant. For instance, why roll a quarterly futures contract when a perpetual contract provides continuous exposure? Yes, funding rates in a crowded trade can run higher than the cost of a roll, sometimes 2% every eight hours. And exchanges have every incentive to keep quarterlies alive because rolling means two extra trades and two extra rounds of fees. But most retail traders hold positions for hours or days. For them, no expiry is just simpler.

Why buy a short-dated option when a perp gives similar directional leverage? Yes, with options, your downside is capped at the premium. But look at where the volume actually sits. 0DTE SPX options averaged 2.3 million contracts a day in 2025, and most of that is pure directional betting. For that use case, perps are simpler.

I am not saying perps will fully replace options or traditional futures because options give defined risk and convex payoffs that perps cannot replicate. However, for the vast majority of trading activity focused purely on directional leverage, perps are a far better and cheaper alternative. And ultimately, the product has proved to be successful, at least $90 trillion a year says so.

That’s all for today.

Vaidik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

Loans are bets on collateral. For over a decade, the SaaS companies enjoyed excellent access to debt by using their revenues as collateral. These subscription revenues were predictable and recurring, which made the collateral strong and reliable.

In the past decade, private credit funds have turned their $8-billion loan book into a $500-billion one, backed by this revenue. It seemed like a perfect model until AI arrived and disrupted it, rendering these subscriptions redundant. A customer paying $50,000 a year for enterprise software can now choose AI agents instead.

These SaaS revenues are no longer reliable and are being replaced by the chips that run the AI computation. The $40,000 chip, which sits in a data centre and loses about a third of its value every year, is now being used as collateral to secure debt.

It’s not the ideal collateral, but the shift is happening nevertheless.

The shift inverts a century of credit logic. Normally, you’d lend against a company’s cash flows rather than against its equipment. A going concern with predictable revenue is any day safer than a depreciating machine. But with AI, software revenue has become less predictable than the chip that’s rendering the business redundant.

This shift has built an entire financing stack, from Wall Street futures to DeFi protocols, around that inversion.

Onto the story,
Prathik

This is not the first time physical equipment has been considered more creditworthy than the company using it. We have seen it happen during the American railroad era.

In the 19th century, railroads needed enormous capital to scale. But because of their speculative and overleveraged nature, no bank wanted to underwrite such credit risk. There was no problem with locomotives. They were tangible and carried resale value. If the railroad went bankrupt, you could repossess the engine and sell it to the next operator to recover the value.

The Philadelphia Plan created an entire debt product to address this gap. A trustee held title to specific rolling stock and allowed investors to fund about 80% of the railroad cost. The railroad made lease payments, and if it defaulted, the trustee took back the equipment.

The takeaway was that by separating the asset from the entity, you could finance an unreliable industry by betting on its most reliable component. The system was so efficient that when Penn Central collapsed (America’s largest bankruptcy until then) in 1970, the equipment obligations were honoured at 100% face value without having to seize and shut down the rails.

Later, aircraft finance also adopted the same trustee structure. The structure also laid the foundation for the principle behind modern secured lending: when the company is risky but the asset is essential, lend against the asset.

GPUs follow the same principle. Here, too, the entities using them are largely fragile competitors like AI labs, neocloud operators and inference providers. Their only moat is the generation of chips they have access to’. A better model on better hardware can displace their market position overnight. Just like the locomotives of the railroad era, the chip here is the essential asset. It sits in a secure facility and generates measurable revenue.

GPUs are also unwinding the old collateral regime.

The Bank for International Settlements (BIS) published data showing that private credit’s SaaS loan book grew from almost nothing to a fifth of all direct lending in a decade. The rush to service SaaS companies with debt was built on the assumption that software revenue will be durable. That assumption cracked when AI agents offered a cheaper alternative. Software stocks fell 30% in four months, and UBS warned that private credit defaults could hit 13% in an aggressive disruption scenario.

SaaS subscription revenues are no longer the best collateral in tech.

But lending against GPUs has some inherent issues.

If you want to lend against a house, there’s an appraisal industry, comparable sales data, and a century of price indices. But until May 2026, a GPU had no equivalent data. GPU rental rates were scattered across bilateral deals, opaque broker markets, and DePIN protocol dashboards that most bank credit committees had never heard of.

But that changed three weeks ago. On May 12, the CME Group announced GPU compute futures with Silicon Data. CME’s pivot tells you traders want exposure to compute the same way they want exposure to oil and corn. A week later, Intercontinental Exchange (ICE) announced a competing product with Ornn.

These derivatives add a price-discovery layer to GPU lending, helping scale the credit market. But there’s another problem here. Traditional asset-backed securitisation involves bundling loans, tranching and risk-rating them, and getting them to trade. This takes 2-3 years for a new asset class. That’s too long a timeline for hardware that becomes obsolete in 3-4 years.

Computing assets also differ fundamentally from other traditional assets in how their values move. Over time, a house tends to be worth more than you paid for it. So the collateral appreciates. On the other hand, a GPU declines from the moment it is installed.

The day NVIDIA ships Vera Rubin chips, the resale value of its Blackwell chips falls. Today, there is no direct depreciation hedge. Maybe the market could develop GPU depreciation derivatives. But we are not there yet.

So, time is of the essence when you want to issue a loan against an asset that depreciates rapidly.

Enter crypto. Permian Labs’ USD.AI lends against individual GPU chips through special-purpose vehicles (SPVs), covers the loan risk through Barker’s collateral warranty, is fully reinsured by Munich Re, and tokenises the debt the moment the loan is created. So far, it has approved over $1.28 billion in GPU-backed facilities. This cuts the timeline for securitising a loan from years in traditional cases to near-instant deployment using on-chain credit products.

The USD.AI model changes who can access compute.

Today, the GPU financing market is skewed in favour of the big players. If you’re Meta, you borrow $27 billion at investment-grade rates. A mid-sized AI company is forced to go to a private credit fund that could charge as high as 25% interest, Permian Labs CEO and co-founder David Choi said on a DCo podcast last week. If you run a small AI firm, you must rent compute by paying roughly three times the ownership cost over the chip’s life.

USD.AI lends against the chip itself, not the company. A $100,000 deal for a handful of RTX Pro 6000s gets the same underwriting process as a $300 million facility. The borrower’s corporate profile is less important than the hardware, the revenue it generates, and its insurance coverage.

Asset-backed loans work only when the financial system moves as fast as the collateral depreciates. On-chain issuance is one way to do that.

But can GPU-backed debt hold up during a market downturn? Nobody knows. The market hasn’t been tested yet. Lenders have not been forced to repossess and bulk-sell a rack of H100 chips because the next-generation chip got shipped. Even the insurance backstop hasn’t been tested yet, although being live since February 2026. The secondary market for used GPUs is yet to mature.

But the industry isn’t waiting. It has already started building the pricing infrastructure around the asset.

Architect, which started as a trading technology company, is now turning compute into a tradeable commodity through an exchange platform. Its American Innovation Exchange is a U.S. derivatives market built specifically for the AI economy, with contracts tied to GPU compute costs and other AI supply-chain inputs such as energy, power and metals.

Architect offers futures and options across H100, H200, B200, and B300 chips, with contracts ranging from monthly to yearly. Its target customers include traders, neoclouds, hyperscalers, model labs and lenders trying to hedge long or short compute exposure.

Although there is no resale market here, a derivative contract on a used H100 chip indicates its value after its first use. A futures market on computing power tells us what the market thinks a chip’s earning power may be worth.

These contracts don’t solve the problem altogether. If a borrower defaults, somebody still has to take custody of the machines, verify the hardware, find a buyer and sell the chips to recover value. But it adds a market price for depreciation and future compute demand, which the GPU credit currently lacks.

So, should we abandon GPU-backed credit markets? It isn’t an option. The old market built on SaaS cash flows is deteriorating rapidly. The hyperscalers, including Microsoft, Google, Amazon, Meta, and Oracle, are spending a combined ~$800 billion on AI infrastructure in 2026. All this needs financing.

None of these problems is unique to GPU-backed loans. Every collateral regime in financial history faced a version of this problem. Mortgage-backed securities had to survive the 2008 crisis. Auto loan asset-backed securities (ABS) faced subprime stress. But there is a pattern in this. Once a debt market emerges, it scales, encounters a downturn that tests its recovery assumptions, and then either reforms or contracts.

GPU credit is still being built in real time. While CME futures help in price discovery, DeFi protocols provide speed, and private credit funds provide scale.

Right now, most AI companies rent compute because they can’t get a loan to buy it. Renting often accounts for 80% or more of their total costs without offering them any ownership. It’s as good as paying rent for an apartment forever because no bank will give you a mortgage. USD.AI’s thesis is that once chip-level lending scales, every AI company can own compute the same way home ownership expanded once mortgage securitisation made housing debt tradeable.

Historically, the company was the most fundamental unit around which finance was organised. Banks lent to the company, investors invested in it, valuation was derived based on its cashflows, and the world trusted its durability. The entire credit system, from leveraged loans to SaaS-backed private credit, was built on the assumption that a well-run business outlasts its equipment. The AI company may not have brand value, but the hardware it uses may have a resale market. This shift can alter what the financial system treats as the fundamental unit of value. The chip could outlive the company.

That’s it for today. I will be back with the next one.

Until next time, stay curious,
Prathik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

The BIS chose the name intentionally, or maybe not. It’s hard to tell.

Project Agorá, the experiment the Bank for International Settlements just completed with seven central banks and over 40 private institutions, is almost the opposite of what the word suggests.

A system where money knows which country it belongs to before it moves. Smart contracts enforce AML checks and sanctions screening at the token level. Each central bank keeps full control over its own reserves, and no cross-border movement happens without passing through the compliance layer embedded in the token itself.

Programmable money that asks permission first.

The seven central banks are: the Federal Reserve Bank of New York, the Bank of England, the Bank of Japan, the Bank of Korea, the Bank of Mexico, the Swiss National Bank, and the Banque de France, representing the Eurozone. The Bank of Canada just joined four days ago.

The project includes major financial giants such as JPMorgan, HSBC, Deutsche Bank, UBS, Mastercard, Visa, and SWIFT, as well as more than 40 other firms.

It’s a massive amount of institutional firepower for a single project, and that’s why I decided to sit with it.

The architecture relies on a basic two-layer split. One layer is controlled entirely by the central banks to handle the core money, while the other is run by commercial banks to handle daily customer transactions.

Tokenised commercial deposits are held on a shared platform, where multiple private institutions manage cross-currency coordination.

At the same time, central bank reserves are stored on separate local ledgers, each controlled entirely by one of the seven domestic central banks.

By combining commercial banking into a single ledger and linking sovereign reserves to domestic control, the BIS aims to create a smooth state monopoly. They are racing to build a compliant, regulated system before independent stablecoins like Tether completely separate global commerce from traditional banking.

This removes the slow friction of global banking. Currently, international payments operate like a disjointed relay race, with messaging, manual compliance checks, and ledger settlements running on separate corporate systems at varying speeds. Project Agorá simplifies this multi-day coordination challenge into a single, immediate network action. The BIS completed this prototype phase on May 27, 2026, with the Bank of Canada joining right after.

While the organisers stress that this is still a trial to assess the infrastructure rather than an immediate rollout plan, the next phase will focus on real-value testing. There is no official timeline for production.

Project Agora marks a change from typical central bank research papers. Seven major monetary authorities spent two years building and testing instant cross-currency settlement. The code works as intended. The remaining obstacles are focusing on how these different governments will regulate and oversee a shared network. Those administrative challenges are substantial, but the main technical debate is settled.

SWIFT, the messaging system that currently runs international banking, moved at the same time, one layer below.

On March 30, 2026, SWIFT completed the design phase of its blockchain-based shared ledger and entered MVP development, aiming to launch live transactions before the end of 2026. The ledger runs on Hyperledger Besu, an EVM-compatible platform. Settlement stays off-chain through existing RTGS systems.

But SWIFT is not really competing with Agorá. While SWIFT’s ledger synchronises tokenised deposits among commercial banks, Agorá handles the heavy-duty final settlement layer for sovereign central bank reserves. The BIS built Agorá to be explicitly compatible with SWIFT standards. This is the legacy system converting global correspondent banking into a programmable matrix in two perfectly coordinated phases.

Look at the overlapping rosters. Deutsche Bank is a core participant in Project Agorá. It is also part of the global consortium (nine-bank coalition) alongside Goldman Sachs, Bank of America, Barclays, and Santander, exploring a joint 1:1 reserve-backed token on public blockchains. UBS and Citi are on both lists too. JPMorgan is inside Agorá, handles JPM Coin, and just used the public XRP Ledger for a settlement pilot.

This level of overlap is uncommon. Typically, companies allocate serious engineering resources to a single standard and wait. Sending top developer teams to work on competing structures at the same time shows that the leadership is divided. The people with the best data and the most financial stakes cannot predict which governance model will prevail. They understand the technology, but they are uncertain about the politics.

Ripple spent ten years claiming that blockchain-based atomic settlement was the right approach for cross-border payments. Atomic means all or nothing. Either the entire transaction completes or nothing happens. The BIS agreed and created what Ripple described, using tokenised central bank reserves instead of XRP as the settlement asset. This undermines the idea that XRP’s role as a bridge asset is essential for institutional settlement.

The XRP Ledger is still making its way into institutional systems. On May 6, JPMorgan’s Kinexys, Mastercard, Ripple, and Ondo Finance completed the first cross-border redemption of tokenised US Treasuries on XRPL, settling in under five seconds.

Ripple’s dollar stablecoin, RLUSD, reached a market cap of $1.4 billion. The XRPL surpassed $2 billion in tokenised assets in January 2026.

Société Générale launched its euro stablecoin on XRPL in February. Ripple even received conditional approval for a national trust bank charter from the OCC in December 2025.

Ripple’s argument about the architecture was sound, but their claim about the necessity of a specific asset was less compelling. Still, XRPL is being integrated into institutional settlement systems, which is a bigger deal for the long-term outlook than the debate over XRP versus central bank reserves.

Let’s skip the usual marketing points. On the XRPL, transaction fees are very low and are permanently removed rather than going to node operators. Higher institutional volume doesn’t generate cash flow for validator nodes or token holders, unlike gas fees on Ethereum. It just slightly reduces the existing XRP supply. Also, if a bank like JPMorgan transfers a tokenised asset to another institution on the XRPL, it uses its own private capital pools. They do not rely on public XRP liquidity pools to carry out those transactions. The network just provides speed and cryptographic security, not the money itself.

The benefit here is ecosystem lock-in. If institutions trust the network to manage tokenised fiat or stablecoins, the technology becomes embedded in the global financial system. This drives the development of bank-grade node infrastructure and makes the ledger a trusted, permanent financial tool. In the long run, integrating your code into the core of global banking is much more important.

All of this lands on stablecoins with real weight. Tether easily clears $40 billion to $50 billion on an average day. The total stablecoin market is $320 billion. Agorá is moving toward real-value testing, but there is no production timeline. SpaceX didn’t wait for Agorá to finalise cross-border treasury operations in stablecoins. Western Union didn’t wait for Agorá to launch on Solana. It’s the competitive dynamic that counts.

Agorá aims for wholesale institutional cross-border settlement. If it launches and grows, it will address a problem that stablecoins currently handle for institutions moving money between countries.

That market is huge, but it’s not the entire stablecoin market. When the Central Bank of Brazil issued Resolution 561 to prevent local fintechs from using stablecoins for cross-border payments, it didn’t stop millions of ordinary Brazilians from holding digital dollars as a simple savings tool. Likewise, a Turkish retail investor buying USDT on a phone app to avoid lira inflation is not the type of user Agorá is designed for. Those everyday use cases remain unchanged whether Agorá launches or not.

Stablecoins and Agorá are currently more complementary than competitive, but they may collide in the medium term, depending on unresolved factors.

For now, they hardly intersect. Agorá functions as a closed wholesale system. To use it, you must be a central bank or a bank approved by a central bank. A Brazilian holding USDT to safeguard savings from the real, or a fintech managing remittances through Solana, would not fall within Agorá’s reach. Public stablecoins cannot provide the finality that a central bank requires. Agorá cannot keep up with the onboarding speed of a public network. They don’t compete because they do not operate in the same space.

The medium term is more complicated. Corporate treasury teams now use USDC and USDT for cross-border transactions because correspondent banking takes days and is more expensive.

If Agorá launches with real liquidity, which is uncertain, some of that volume could shift. CFOs prefer to avoid non-sovereign counterparty risk on the balance sheet if a regulated alternative operates at the same speed.

For Agora, getting seven sovereign central banks to agree on shared governance is a complex issue, and that’s where these projects have historically stalled. Meanwhile, corporate treasury teams already have established USDC integrations, risk frameworks, and workflows. These will not be discarded simply because a theoretically better option exists.

The segmentation outcome will be Agorá taking institutional corridors, and public networks keeping retail margins. Sounds like a draw. It isn’t. If that’s how it plays out, it means sovereign infrastructure successfully contained public networks to the parts of the market that don’t threaten the existing intermediary model. Remittances, retail savings, and emerging market payments. These are large, but they’re not where the leverage in global finance sits.

We are about to see this theory tested in real time. The EU’s Pontes framework will connect distributed ledger platforms directly to Europe’s main TARGET settlement infrastructure in September 2026. That’s just three months away. If this integration works as planned, it will give tokenised institutional payments in Europe direct access to central bank money. This will mark the official start of the battle between state-controlled pipelines and the open web.

The agora in Athens only failed when people stopped showing up. That’s the ultimate baseline for any network.

—Thejaswini

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

Our team at Token Dispatch has Friday editorial calls, where we talk a little bit about a lot of things. We also discuss what’s exciting and worth writing about in the upcoming weeks. Lately, the conversations sound less and less like crypto conversations. We end up talking about lending businesses, AI subscription models and payment rails that Stripe and Mastercard are fighting over. Last Friday, we spoke about how the upcoming trillion-dollar IPOs of OpenAI, SpaceX and Anthropic will shape the broader financial markets. Even if someone brings up a crypto project, halfway through the discussion, you’d realise nobody has mentioned ‘token price’ even once.

This shift is also reflected in what we have been publishing lately. In the last couple of fortnights at Token Dispatch, we have moved toward stories that sit at the edges of crypto. Think of fintech that uses blockchains as plumbing, consumer products where the token is a distribution mechanism rather than the product itself, infrastructure companies getting acquired at valuations that have nothing to do with the cycle. The developments that keep moving, whether BTC is at $100k or $70k.

Originally published by Hepworth Iron Capital, this week’s piece puts a framework in place for this phenomenon. Charlie Booth argues that crypto’s era as a single Bitcoin-sensitive factor is ending, paving the way for a cycle driven more by non-crypto factors and not cryptocurrency prices.

Onto Charlie’s story,
Prathik

Follow Charlie

Follow Hepworth Iron Capital

Historically, crypto has traded as one Bitcoin-sensitive factor. That era is ending.

The crypto economy is bifurcating into two groups: endogenous and exogenous.

The former is the crypto of old: tokens and projects whose value depends on crypto prices. The latter is crypto in name only, with value increasingly exogenous to crypto prices.

Bitcoin’s value comes from its properties and reflexively from its price. A rising price reinforces the perception of the properties. At the peak of a bull market, Bitcoin is perceived to be interplanetary money, the scarcest digital bearer instrument known to mankind. At a bear market bottom, it’s dismissed as a digital collectable without any cashflow.

Hyperliquid sits in between these endogenous and exogenous groups. Much of its business still depends on crypto prices, but both the supply and demand sides are broadening. A lot of on-chain financial infrastructure sits here, with the assets underneath shifting toward tokenised real-world assets.

HIP-3 Open Interest is a rough proxy for non-crypto-related Open Interest. The percentage of total Hyperliquid Open Interest attributable to HIP-3 sits at ~30%, up from ~4% in November 2025. HIP-4 (outcome markets) should further boost this, pulling in new demand (traders) and new supply (markets, assets) at once.

On the purely exogenous side, the driving forces behind a project like Venice are completely exterior to the crypto market. Customer profiles overlap, but the business model looks a lot more like consumer AI than Uniswap. The latter still largely relies on users trading assets with endogenous value, making its business a function of those asset prices. Venice packages private multi-modal inference into a usage-plus-subscription model.

The only crypto connection is the choice of a token as the instrument that captures business value, plus the fact that some of its inference suppliers happen to wear crypto labels. Perhaps also the crypto-native understanding of Venice’s steward Erik Voorhees that tokens can be an excellent marketing tool when done well.

Figure is an easy example on the listed equity side, a fintech lender using its own chain to cut home equity approvals to under five minutes. The blockchain is incidental; the business is the point.

The emergence and growth of the exogenous class at scale in listed equity and token markets is meaningful. Historically, pure bottom-up investing has been difficult given the high sensitivity of most business models to crypto prices. It’s not as though crypto hasn’t had exogenous narratives before; every “blockchain, not Bitcoin” cycle promised them. In most cases, they collapsed back into crypto-beta because demand never materialised, revenue wasn’t there (if it was, it was not captured by the token), and once the token stopped going up, there was nothing underneath.

What’s different this time is that you can answer who pays and why, that demand is measurable and less reflexive in many cases, and that the token as an instrument is slowly improving (more on that later). Venice’s signup revenue is real money from users buying inference. There’s no obvious reason it reverses when crypto draws down, because it was never a function of prices. You have two things that prior cycles lacked: usage that persists, and buyers underwriting on fundamentals rather than solely on narrative.

Consider the stablecoin corner of private markets. In March 2026, Mastercard agreed to buy BVNK for up to $1.8 billion, 15 months after BVNK’s Series B closed at a $750 million valuation. Bridge (acquired by Stripe for $1.1 billion in February 2025) is growing fourfold year-on-year within Stripe, according to Stripe’s annual letter. None of these tracks the crypto cycle.

This isn’t a bearish call on the endogenous category. Just as gold and even junior gold miners might have their time and place in a portfolio, there’s a time and place for something like BTC and the endogenous class. But fundamentally different drivers will likely continue to drive performance and correlations. You can see both relationships in the data:

The analogy made literal: Junior gold miners track gold at a correlation that never really leaves the ~0.75 region. That’s how crypto broadly trades today: junior miners to Bitcoin’s gold, and levered bets on the same underlying. The blue line is the other relationship. Gold and the S&P share some macroeconomic correlation but trade on their own drivers. That’s the destination for the exogenous class. Over time, these names should migrate from the gold line to the blue line, from levered proxy to independent assets that occasionally share the weather.

These exogenous names are tokens, both illustrating the point and serving as exceptions to it.

Much of the “endogenous class” still moves closely with Bitcoin. A few exogenous names sit lower, but the window’s too short to mean anything yet. Fundamentals change first; the correlations follow.

This changes the analytical approach. The exogenous class needs underwriting like a normal business: who pays for the product, how the unit economics work, and where the moat sits. BTC price stops being the most important variable, and you start sounding like a fintech investor with weird custody.

Exciting “exogenous” categories, in no particular order and with miscellaneous notes attached:

• on-chain exchanges and brokers

• credit/redemption solutions for longer-tail tokenisation (Grove Basin looks interesting here)

• real crypto x AI (private inference, distributed open-source model training à la Psyche by Nous Research)

• neobanks (I tend to like the more privacy-focused players like Payy and Raycash, the programmable privacy infrastructure, Aztec and Zama, that enables them is also interesting)

• lending (Morpho is becoming the institutional standard for repo-like markets, smaller names like Valinor and 3jane target interesting niches in private credit)

• stablecoin and real-world asset/tokenisation issuers

• payment rails (Stripe with Tempo is the incumbent to beat in broad payment rails; in agentic payments, it’s Coinbase, for now)

• non-finance consumer crypto (products like Venice and Collector Crypt come to mind, unique cases where imbuing a token with value derived from a non-crypto business can drive marketing value and adoption)

• agentic economy (the prize is agent<>vendor/creator coordination at the access layer, which is less substitutable than the rail. Cloudflare is well placed, but whether it taxes the flow or just sells the toggle is the open question)

Most durable exposure to this theme is equity today, not tokens. Good tokens are the exception and will only earn a larger role if the instrument improves, which regulators and industry have to deal with. There’s progress on both, the CLARITY Act on the regulatory side and transparency efforts from the likes of Blockworks on the other. The token has a lot of work to do.

None of that changes the main point. The driver is shifting from one factor to many; the work is no longer reading the Bitcoin chart but underwriting businesses. Don’t spend the next decade confused about why “crypto” stopped moving as one.

Follow Charlie

Follow Hepworth Iron Capital

Disclaimer: This piece was originally published here.

We will be featuring good writing and writers we love from time to time. If you have recommendations, send them our way.

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000 subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

Keep aside the dry bureaucratic nonsense behind that, but still, nobody seems to care enough. That’s how bad the world is right now. When people are stretched thin by rising costs, widening wealth gaps, and institutions they no longer trust, there is simply nothing left in reserve for a revelation, however historic.

There’s no better time than now to “call for a fairer economy.” Tracking the history of platform power and wealth extraction is the best preparation you can get before going back to the grind on Monday.

So I did the obvious thing and read Tim Wu.

If you don’t know him, Wu is the Columbia Law School professor who coined the phrase “net neutrality.” He built his career mapping out the levers of corporate dominance and spent years inside the White House as a tech advisor, taking on monopolists. We are reading his latest text, The Age of Extraction (2025).

Every month, a stack of electronic statements arrives in my inbox. Every month, it makes less sense. We are told by the financial press that the economy is robust and that productivity has reached a materialist nirvana. Yet on the ground, things are different.

Look at how we move value now. We thought stablecoins would liberate us by turning money into an open, borderless protocol. But if you step back and look at it, Money was always a social contract tied to a state. Money was a messy, human construct bound by laws, politics, and at least some public accountability. By turning dollars into private stables, did we liberate money or privatise the concept of trust itself?

Think about what happens when you remove that human messiness. If a state mismanages currency, people can vote, protest, or cause a riot. When a private issuer changes the rules of a ledger, freezes an address, or tweaks the code, there is no public square to complain in. There is only a customer support ticket. Is that enough?

Crypto owns an infrastructure that legacy finance is trying to infiltrate. Wall Street is clawing to co-opt. It is not too late to direct economic gravity toward human value rather than institutional extraction.

Wu traces these very corporate pipelines to show us where that bleeding cash is actually ending up.

The hero concept is wealth extraction.

Extraction refers to the ability to take money from everyone else by becoming an essential and unavoidable host for economic transactions. As you might have already noticed, big tech platforms are not neutral, public-spirited town squares like in the old times.

They are sophisticated tools that suck attention, margins, and data out of the broader economy. Once they become essential to everything, they split society into a two-class system, split between the extractors and the dependent class.

This part reminded me immediately of the brutal app store taxes. Apple and Google have a stranglehold on the mobile application ecosystem. It does not matter how brilliant the developer’s code is, or how much capital they risked to build the app; the operating system hosts sit back and slice off up to 30% of the revenue, because they own the choke point.

If you think this problem will solve itself through more innovation, you are buying into a fairytale.

OpenAI chief Sam Altman tells us that once we get generalised AI, global poverty will just end. Marc Andreessen writes manifestos claiming that there is no material problem that cannot be solved with more technology. Wu calls these declarations statements of faith.

Technology reflects the economic structure of the society that builds it. The agricultural plough spread wealth to property owners everywhere, but the cotton gin took a bad situation and fortified plantation slavery in the American South.

The book anchors this analysis by examining historical marketplaces. Historically, a town square didn’t care if you were selling shoes, vegetables, or hats; it just provided the space and let you do your thing.

Wu lists four hurdles every platform must clear to own the market. First, they have to solve the matching problem by connecting strangers who have something to trade. Second, they have to manufacture trust in an environment where no one knows each other. Third, they need to lower the barrier to entry for small businesses. Finally, they have to promise a future that looks like constant innovation. It is a cynical, effective playbook for control.

After the platform wins, the game shifts to extraction.

The early internet was built on that same promise of a neutral, open highway where anyone could set up shop and grow without someone else hovering over them, waiting to take a cut. We all remember when Google started, preaching “Don’t be evil” and promising they were in it for the long haul. But that is the problem with big corporations. They might start with good intentions, but they eventually have to answer to Wall Street shareholders who only care about quarterly profits. Eventually, the public space we were promised was replaced by a pay-to-play system in which ads, not results, decide who actually gets seen.

Read: How the Internet Happened

Then I started looking into how payment gateways work. They are actually the one piece of infrastructure that could pull crypto out of its current existential crisis.

While Stripe originally presented itself as the “developer-first” champion of the internet, it has increasingly used its role as the industry standard to become a gatekeeper. As they have strengthened their grip on the market, they now push businesses into a closed ecosystem. This includes bundling extra services like “Stripe Radar” for fraud detection and “Stripe Atlas” for company formation.

Payment gateways should serve as a neutral way to transfer money from a customer’s bank to a business’s account. That’s all they should do. But when a payment company grows large enough to dominate the market, it begins to act like a private tax collector. They start adding complicated fees, taking larger cuts for international payments, and imposing confusing penalties. Small businesses can’t just walk away because their customers want to use that specific service. As a result, the payment company gradually siphons off the business owner’s profits, leading to wealth extraction.

At some point, these platforms realise they don’t need to worry about competitors if they just buy them.

In his analysis, Wu describes these corporate buyouts as a planned strategy of “market foreclosure” instead of natural growth. He argues that once a platform reaches a certain size, it stops competing based on its own product and starts viewing the market as something to conquer or absorb. Wu believes this is a defensive tactic aimed at preventing any innovation that could threaten their dominance. From the early marketplaces of antiquity to today’s digital giants, the entity that controls the infrastructure, roads, rails, or software protocols eventually realises it is more profitable to act as a landlord than a merchant.

When Microsoft gutted Inflexion AI or Google stripped Character.ai of its founders and top talent, we saw them just buy the fighters before the bell even rang.

The ultimate goal of this strategy is similar to what Amazon did with its Marketplace. They attracted independent sellers with promises of low logistics costs and shared resources, creating a large group of dependent merchants. Once these sellers were cornered by Amazon's control of the customer base, the platform became a money-making machine. They raised their cut to 30%, pushed down organic search results, and added “sponsored listings.” Now, independent sellers must compete against each other in a forced bidding war just to reclaim visibility with their own customers.

This advertising strategy earned Amazon $$68 billion in 2025 alone. That amount is double the total advertising revenue of the entire newspaper industry combined.

By 2023, Amazon’s fees took over 50 per cent of the average item’s sale price, with some sellers giving up to 70 per cent of their revenue. Independent businesses have found themselves in a tight spot where they cannot afford to stay but can’t leave either, since Amazon controls the customer base. To make things even worse, Amazon regularly monitors its own ecosystem.

Though corporate lawyers said under oath that they do not use individual seller data to compete, former staff admitted that the company regularly reviews the sales, margins, and ad spends of successful independent products to create its own corporate replicas under the Amazon Basics brand.

These changes mean that money is moving away from small business owners and into the pockets of giant companies. A barber in Michigan named Doug Mrdeza found out that when a website takes a little bit of money here and a little bit there, it becomes impossible for a small shop to make any profit. It got so bad that he had to let his workers go and close his shop for good in 2022. It is very hard to have a strong group of small, successful businesses when the website they rely on acts like a tax collector, taking all their money.

This is how new LLMs treat open-source software and creative communities today. The closed-source labs gather billions of lines of open code and human writing. They claim they will use them as training data. Then, they turn that knowledge into a subscription tool that competes with the engineers and writers who originally built the foundation. The host keeps the benefits.

The crypto world knows this trap pretty well. Look at the design of Layer-2 blockchain networks. They attract developers with promises of low transaction costs and open code. Once a decentralised app becomes popular, the platform owner takes control of the centralised sequencer.

This group has full control over the order of transactions. They can carry out “MEV extraction” (Maximal Extractable Value) by reordering, front-running, or blocking user transactions for profit. Sequencers earn money from the difference between the L2 gas fees charged to users and the lower costs paid to send batch data to Ethereum L1. As of mid-2026, despite various efforts to decentralise, every major L2 still largely relies on the centralised server model.

I love Wu’s skill in identifying how these systems operate. I mean, that has been his career, but it’s interesting to see it all laid out so clearly.

We can clearly see the problems in the system as they happen. At the same time, we are noticing the first signs of an alternative structure. It’s impressive to consider the freedom that comes with trial and error. We are also seeing the first glimmers of a ‘counter-architecture’ that refuses this extractive mandate. For example, protocols like Morpho prove that we can build financial rails that don’t need to sit in the middle to skim margins from every interaction.

Read: Morpho Is Becoming the Backend - by Thejaswini M A

I’m here trying to intellectually dismantle the platform landlord, and my bank account is automatically paying rent to five of them at once. I had an Apple TV subscription. I didn’t even know that. But maybe that’s the lesson. We don’t have to be perfect rebels to be conscious ones. We can’t quit the internet; that’s not an option in 2026. What is to be done is to recognise that the ‘convenience’ we pay for is, in fact, free. It costs us our freedom. So, I’ll keep the apps, but I’m staying alert, too. It’s a start, even if the landlord still gets his share for now.

Part 2 is next week, where Wu investigates how this herding model is spreading off the internet into real-world medicine and corporate housing, turning independent professionals back into a labouring class.

Until then... we wait.

—Thejaswini

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 200,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.

In March this year, OpenAI shut down a feature that let AI agents shop on your behalf. Barely 30 Shopify merchants used the feature in five months since its launch. There was nothing wrong with the payments infrastructure. The problem was that there were no rules in place to ensure a seamless shopping experience. What the agent could buy, who collected sales tax, how fraud was caught, who handled returns — none of it was settled.

Giving an agent a wallet or building payment infrastructure has been easy to crack. But allowing individuals or businesses a trusted and governed way to use an agent to spend their money is tricky. Only programmability and rules can ensure a trusted environment. This gap in the governance layer has become an opportunity in the agentic economy.

Last year, AI agents settled $73 million across 176 million transactions. The number might seem insignificant now, McKinsey projects that AI agents will mediate $3-5 trillion in global consumer commerce by 2030.

Companies building this economy are racing to own the governance layer, including spending controls, identity checks, and policy enforcement that determine which agents are trusted with budgets.

Today, we map out who is building the banking layer for the bots and what’s in it for those who dominate it.

Onto the story,
Prathik

Why Own Multiple Layers

The economics of processing agent payments are brutal. The average payment made by AI agents over the last 12 months was 31 cents.

Consider what a 31-cent payment would leave behind for those orchestrating the transaction across several layers in the background. Stripe’s standard pricing of 2.9% plus 30 cents in fixed fees leaves the merchant with less than a tenth of a cent. Visa interchange swallows a third of it. On the other hand, Layer-2 stablecoin rails process the same transaction for $0.0001.

These economics established the case for crypto’s use across the settlement layer.

The payment infrastructure across the settlement layer is largely solved. Coinbase’s x402 protocol processed the vast majority of last year’s 176 million transactions, with around 3,900 merchants now accepting agent payments. Stripe and Tempo co-authored a competing protocol, Machine Payments Protocol (MPP), that launched in March with over 100 integrated services. Google, Visa and Mastercard all shipped agent payment products in the same window. That’s five competing payment architectures in 12 months.

But the problem with agentic payments is that nobody will get rich by processing 31-cent payments. So, the value concentrates in the float and in enforcing the rules around how agents make the payments.

Last week, we explained how businesses could capture value by owning the wallet layer that holds the stablecoin balances for AI agents. But the float is only one of many such value layers worth capturing. The other is the rules governing how that float gets spent.

These rules include spending controls, agent identity, policy enforcement, audit trails, and liability allocation when transactions fail. This layer is wide open.

In April, American Express launched Agent Purchase Protection, an insurance product that covers erroneous purchases made by AI agents. This is an implied admission of the state of the governance layer across AI agents. There’s value to be captured here by addressing the missing governance in an industry expected to grow to $3-5 trillion in less than five years.

This is why the incumbents are now racing to capture the governance layer.

But at what level should this layer be built? It can be a bank, a developer API or even a wallet.

Wallet as the Governance Layer

Every dollar that an agent spends passes through the wallet. This makes it the best point to enforce spending limits, identity checks and human approvals. Once you control the wallet, you control the governance. Stripe, the payments infrastructure company, learned this early on.

In June 2025, Stripe acquired Privy, a company that built embedded wallets for consumer crypto apps. Through the acquisition, Stripe inherited 75 million wallets across 1,000+ developer teams. These wallets now sit at the very chokepoint where every policy, spending limit, and human approval can be enforced before any money moves.

Stripe has also assembled an entire agentic payments stack. It acquired Bridge to handle stablecoin orchestration and fiat conversion. It also partnered with Paradigm to incubate Tempo, a payments-focused Layer 1 blockchain. Stripe and Tempo co-authored the Machine Payments Protocol (MPP), an open standard for how agents request, authorise and settle payments.

Read: Why Stripe built its own chain

Stripe’s agent-ready financial stack now lets software check balances, pay invoices, store funds, create virtual cards and send money. An agent can execute routine payments on its own, but escalates anything outside its policy parameters for human review. Treasury balances are backed by noncustodial Privy wallets across more than 150 markets.

Even when Amazon had to allow its developers to give AI agents the ability to spend money, it chose two wallet companies - Privy and Coinbase. Not seasoned financial players like banks or card networks, but a wallet provider that is barely five years old.

This is because the wallet serves as the ideal checkpoint, allowing the right level of human intervention to ensure the necessary checks and balances.

In its report ‘Who Pays the Agent’, Keyrock argued the agentic commerce market will “settle in the middle, where agents operate with significant autonomy but within cryptographically enforced boundaries that humans can audit and revoke.”

Read Keyrock's Report

This is the position Privy occupies inside Stripe’s stack. The wallet enforces the boundaries within which the agent has to operate.

Here’s how the governance strategies on this stack function.

Privy offers two models for agentic wallets. In the first, the agent controls the wallet entirely and executes transactions within policy constraints without requiring human approval. This model works best for fully autonomous agents like trading bots and portfolio managers. In the second, users retain ownership of the wallet but grant the agent restricted permissions to operate as a signer. Users can revoke access at any time.

Stripe’s MPP follows a similar governance strategy.

MPP introduced a feature called sessions for high-frequency agent tasks. Under sessions, an agent pre-authorises a spending budget and then streams payments within that limit continuously without needing a separate request for each individual on-chain transaction. The MPP has implemented sub-cent billing for LLM inference and per-query pricing for data APIs.

This is the governance granularity that card networks cannot support.

Vertically Expanding the Stack

Although Coinbase’s x402 leads AI agentic payments today, Privy has an advantage that has little to do with crypto. It’s the distribution moat via Stripe.

Coinbase has 3,900 merchants that accept agentic payments. For every Coinbase merchant accepting agent payments, Stripe has roughly a thousand. In February, Privy said that if every Stripe merchant chose to accept machine payments, agentic commerce could scale through Privy wallets today. Stripe merchants don’t need to build bespoke crypto infrastructure.

While the race between Stripe and Coinbase is tightening, other traditional giants are also joining the race to expand vertically across the stack.

Keyrock mapped 179 projects across six layers of the agent payments stack: settlement, wallets, routing, protocols, governance and applications.

Coinbase and Stripe each span five of those six layers. Circle covers four. Despite their scale, Google covers two layers and Visa just one.

The incumbents spent over $8 billion in twelve months filling gaps in their stacks. Capital One acquired Brex, an AI-native software platform, for $5.15 billion. Mastercard acquired BVNK for $1.8 billion. Among these, the wallet layer and the AI software layer attracted the most aggressive acquisition activity. Stripe bought Privy, Fireblocks bought Dynamic, and Arbitrum bought ZeroDev. In each case, payment infrastructure bought a standalone wallet provider.

These deals collectively suggest that the market has picked a scarce layer. Settlement has become cheap and interchangeable, but programming permissions, budgets, and liability are where the value lies.

Vertically integrating across multiple layers also has a compounding effect.

Whoever owns this checkpoint can set the rules for spending, capture the float before it moves, decide which merchants, agents, and applications get trusted access and earn a fee to enable all these things. We saw it with the Privy-Stripe distribution moat.

Even Coinbase’s position shows how this works. Every x402 payment creates USDC demand on Base, its Layer 2. That generates revenue on float. That revenue funds more agent tooling through AgentKit, which ships with session caps, per-transaction limits, and allowlists that restrict transfers to vetted contracts. More agents on AgentKit means more x402 payments. Every layer feeds into the other.

There’s a lot more investment activity by the incumbents.

Coinbase Ventures has also invested in Catena Labs, Skyfire and Payman, the three most prominent standalone governance startups. Circle’s cofounder Sean Neville founded Catena, and Circle invested in Skyfire. a16z led rounds for both. Visa backed Payman and partnered with Skyfire.

The same names that built the payment settlement infrastructure are funding the governance layer. The idea is that if governance remains a feature within the existing infrastructure, as Privy has built it with its two models, then incumbents can maximise their revenues. If governance becomes a standalone layer, they win through their portfolios.

What’s in Owning the Governance Layer?

Processing payments has never been the most valuable position because, at some point, financial rails commoditise. Once that happens, the margin shifts toward the layers that decide whether a transaction is allowed to happen and under what conditions.

Historically, many industries have gone through the same commoditisation.

Consider what happened when the internet commoditised cable. All internet service providers (ISPs) became indistinguishable and interchangeable. So the telecoms had to expand vertically to stay competitive.

India’s top telecom networks - Jio and Airtel - started bundling hundreds of TV channels, subscriptions to half a dozen OTT platforms, unlimited voice calling, a set-top box and a free router into a single broadband plan. Similarly, AT&T acquired Time Warner for $85 billion to become an integrated media and telecom giant. The idea was to combine Time Warner’s premium content, like HBO, Warner Bros., and CNN, with AT&T’s massive distribution network to compete with streaming platforms like Netflix and Amazon.

When broadband connection - the underlying infrastructure - became the least valuable part of the package, the value shifted to the content, the relationship and the bundle of offers that best attracted customers.

We saw this play out in crypto, too.

Settlement was supposed to be at the protocol level. Think of Ethereum as the shared ledger everyone settles on. When Coinbase launched Base as a faster, less congested Layer-2 chain, the company began earning money from gas fees on every transaction it settled on its own chain. Coinbase now earns roughly $60 million in annualised sequencer revenue by processing transactions on Base.

The players building agent payment rails have learned from watching this.

In The Agentic Float, we explained how an economy can emerge by controlling the stablecoin balances agents hold between transactions. This allows the companies that capture the wallet layer in the stack to add a revenue stream.

The governance layer adds another revenue stream, and possibly a larger one.

Visa earned 0.28% on $14.2 trillion of its annual payment volume. That take rate not only includes a processing fee but also an implicit governance fee for the trust the payments company has built by preventing fraud, resolving disputes, and enforcing network rules.

Applying even a fraction of that take rate to agentic commerce, it tells us the magnitude of value it adds to the companies building on the governance layer. At McKinsey’s projection of $3 trillion in agentic commerce by 2030, a governance take rate of just 0.1% (about 35% of what Visa charges) would generate $3 billion a year. For context, Coinbase’s entire subscription and services revenue stood at ~$2.8 billion in 2025. The revenue from the governance layer on agent transactions alone could rival what Coinbase currently earns from staking, custody, and Coinbase One combined.

A company that has a presence across the wallet, settlement and governance layers of the agentic finance stack can earn yield on idle agent balances (revenue on float), fees from settlement (sequencer revenue on every transaction), and compliance fees (from enforcing the governance).

This is why vertical integration across the stack will be the only business model that lets a company remain competitive in the agentic era.

That’s it for today. I will be back with the next one.

Until next time, stay curious,
Prathik

Token Dispatch is a daily crypto newsletter handpicked and crafted with love by human bots. If you want to reach out to 170,000+ subscriber community of the Token Dispatch, you can explore the partnership opportunities with us 🙌

📩 Fill out this form to submit your details and book a meeting with us directly.

Disclaimer: This newsletter contains analysis and opinions of the author. Content is for informational purposes only, not financial advice. Trading crypto involves substantial risk - your capital is at risk. Do your own research.