For almost a century, we handed our money to a professional and trusted them with it. We wired our assets into a fund and received a receipt establishing our claim on a pool of funds. We didn’t own the company’s shares directly.

These fund houses charged a fee to hold our assets and rebalance them whenever asset weights drifted.

This packaged deal of ownership and management had a few problems. First, the investors couldn’t split them apart and claim custody of underlying assets. Second, the fund houses rebalanced them at set intervals and placed constraints on how investors could use them as collateral.

Blockchains make unbundling the fund possible and change how people hold their assets, while still letting fund houses rebalance the investor portfolios, albeit differently.

In today’s piece, I will explain how this works and who captures value in this unbundled work of fund management.

On to the story…

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The Fault in Our System

Consider an investor in Mumbai who wants exposure to the Magnificent 7 stocks. Because these are among the most liquid on Earth, it may seem like an easy thing to do. But reality is complicated.

The investor would need a US brokerage account that allows Indians to participate, or a local broker that charges a commission on every trade, plus a currency spread each time she converts her Indian rupee to US dollar. The real challenge is accessibility.

Most fund management houses take custody of your funds and manage your portfolio. But some let you keep your assets in a separately managed account, where the manager trades using the account without taking custody of your funds. But this option is gated behind minimum thresholds.

So an average investor picked a managed fund that came with a surrendered ownership model. That brought with it two constraints.

The first is how the fund rebalances the investor portfolios. When the market moves and holdings drift from their target weights, the fund trades the whole pool on its schedule. Some rebalance quarterly, others do it semi-annually. You don’t get to choose the cadence, see the trades or hold a position for a little longer - if you wanted to. Some funds rebalance daily, but those tend to have a problem (more on that later).

The second constraint in this model is the utility of what you hold. These funds let you borrow against your portfolio, but the loan runs through the broker or bank that custodies your shares. The rate and terms depend on their approval. Open-end fund units that are rebalanced daily are often refused as collateral or heavily discounted.

The bundled fund was a reasonable equilibrium in a world where custody remained expensive and specialised funds had high entry barriers. Paying extra fees to access an exclusively managed fund for self-custody might not be affordable to everyone.

But blockchains let you unbundle the entire model.

Unbundling the Fund

Blockchains cut the incremental cost of holding your assets in your wallet. So, irrespective of how much a wallet holds, $50 or $5 million, the cost of holding that wallet remains the same. That is why fund management is being unbundled at this layer of the stack.

Two weeks ago, Bitwise, Coinbase and Glider came together to do just this.

As part of this partnership, Bitwise would design the strategy and set the weights. Coinbase would issue each holding as a tokenised US stock, backed 1:1 by a real share.

Meanwhile, Glider’s automated on-chain tool rebalances your holdings back to Bitwise’s weights. They do this by buying and selling every time the prices drift, even as your tokens stay in your wallet all the time. The startup, backed by a16z, Coinbase Ventures, and Uniswap Ventures, calls this tool Automated Token Portfolio (ATP). It recently launched its first one that holds the Magnificent 7 plus SpaceX.

Unlike the traditional fund houses, Glider doesn’t rebalance your wallet using a fixed ratio. It rebalances daily toward the target weights whenever prices pull the portfolio away. Using a pre-approved session key, the ATP trades only when needed and charges 0.30% on the volume of those trades.

Investors can hand over the pre-approved session key as a limited-time authority signature that Glider can use to trade inside your wallet. The key is programmed to prevent Glider from withdrawing any funds from the wallet. This retains custody. The key is also programmed to act like a switch that can be revoked at any time by turning it off. This stops all future rebalancing instantly.

The flexibility such an automated platform affords is what sets it apart from a traditional fund house, which charges a premium for the same or similar features.

Rebalancing bots are not new in crypto. We have had them for years; think Stoic and Shrimpy. But these bots run through API keys on our exchange account. The exchange still holds the assets. Glider rebalances tokenised stocks held in your self-custodied wallet. The assets don’t have to move.

But why care so much about custody?

Since you hold the tokens rather than a claim on a pool of assets, Glider also changes the way you use your portfolio. When you had to borrow against your traditional fund, the broker had to approve your collateral, set terms, and, worse, could refuse your units if they were priced once a day because of liquidation fears. Tokenised stock in the wallet doesn’t need a fund house to approve any of this. You can post your position as collateral in any lending protocol directly, or even sell one position to set off a loss against gains elsewhere.

The Effect of Unbundling

The traditional fund bundled asset selection, holding, and investor retention. It offered all of this in a single wrapped product. Now this bundle is being split into a token, a rebalancing engine, and a strategy, with each layer handled by a different player.

The payoff from unbundling the fund mirrors unbundling many other stacks in the financial system. We explained how each layer got cheaper and more contestable when the IPO stack and private-company cap table unbundled.

In each case, value migrated to the layer that was hardest to replace. The same logic turned integrated brokerages like BlackRock and Fidelity into interchangeable parts. But now, with blockchains bringing universal accessibility and flexible rebalancing, this value is migrating again.

Giving investors the flexibility to manage their portfolios at the click of a button seems like the hardest part. So, that’s where the value is now accruing.

But there are no free lunches.

Consider establishing a $10,000 position using the unbundled model. You’d pay between $45 and $60 in fees, depending on whether you use Glider’s 0.30% or Bitwise’s 0.15%. Compare that with Vanguard’s S&P 500 ETF, which charges 0.03% a year. That’d come up to just $3, 1/15th of the new approach.

So why care about the unbundled model?

The unbundled model isn’t a utopian fix to replace the traditional funds. It brings accessibility and flexibility to those who value these features, albeit at a higher cost. An investor with a good brokerage account and simple index needs should still opt for a traditional ETF bundle.

The unbundled model is a better alternative compared with the balance-based fees of robo-advisors and licensed managers. Some investment platforms still charge 0.15% to 0.60% a year, every year, whether or not anything trades.

Even those who want to manage their portfolios without giving up their keys would adopt an unbundled model.

Glider can benefit from this adoption in two ways. It has already built the consumer layer that lets users grant revocable permission and make rebalancing discretionary. But the bigger takeaway is that it doubles down as a B2B interface for any wallet, exchange or fintech that wants to plug into 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 165,000+ 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.

Although we see a “Transaction Successful” message and hear a beep, nothing moves from our bank account when we tap our card. At that instant, the only thing that happens is a bank promising a merchant it will settle the payment later.

The bank charges a fee for facilitating this trust layer that vouches for someone’s ability to pay. From our neighbourhood shopkeeper who lets us run a tab to the banks that vouch for thousands of businesses to honour a payment, they all run on this trust layer. It is one of the most valuable parts of the financial system, yet the least visible.

Without the trust layer, no kind of commerce or financial system can function. I wrote about this last week, on how companies are building the trust and identity layer even for machines transacting in the agentic economy.

Read: The Business of Trust

Crypto rails, coupled with stablecoins, remove intermediaries from the monetary system - be it for holding money, moving it or earning more through compounding it. We now have crypto cards that let us use our digital assets to pay for day-to-day expenses. Here, too, this new form of payment requires guaranteeing a wallet holder’s ability to honour the payment.

But since crypto payments settle much faster than bank-routed card payments, we need a faster vouching mechanism for this wallet holder’s ability to settle payments. In today’s piece, I explore this.

On to the story…

The Anatomy of a Card Payment

When you dissect the anatomy of a card payment, you find five parties and a moment of trust. There’s you - the buyer, a merchant (the seller), the merchant’s bank, the card network infrastructure (Visa or Mastercard) and your bank (issuing bank).

When you tap, a payment request moves from the POS terminal, through the merchant’s bank, across the network, to your bank, and back. All of this happens in seconds.

Your bank (issuing bank) checks whether you have the money, ensures the transaction isn’t fraudulent, and gives the green signal. It then places a hold on your balance to ensure the merchant gets paid before money moves from your account. The money eventually changes hands on a one-to-two-day delay.

Until then, the merchant has only the bank’s certainty that the buyer will honour the payment. The issuing bank fills the gap between certainty and settlement by bearing the risk that the buyer fails to honour the payment. For this, it charges a handsome fee.

In the United States alone, merchants handed over a record $198 billion in card fees in 2025. The largest slice of these fees (interchange fees) flowed to the banks that vouched for the transaction, as shown in the chart below.

Here, the bank that vouched for the buyer’s ability to pay, and not the card network (Visa/Mastercard) whose infrastructure facilitated the transaction, captures the lion’s share of the fees. This is because it is the most scarce layer in the payment stack. Vouching requires the bank to employ its resources - technology, systems and humans- to ensure that the buyer has the liquidity and that liquidity is blocked for honouring the payment.

Too Fast to Vouch

For more than half a century, this system has been working. But crypto rails challenged this by moving money faster and cheaper.

A stablecoin transfer can settle in seconds, for a fraction of the cost banks charge, and doesn’t care about geographical borders, time, or day. For businesses that pay suppliers regularly across borders or pay employees, blockchains offer major time and cost savings.

This preference to choose crypto rails to move money is only picking up pace.

Roughly $33 trillion in stablecoins moved in 2025, about a third ($10.8 trillion) of which was adjusted transaction volume after filtering activity from automated smart contracts and bots. This year, the adjusted stablecoin transaction volume has surpassed $11 trillion in just eight months.

Companies are enabling this movement by introducing crypto cards that let stablecoin holders spend the digital currencies in their wallets.

But this faster, better payment infrastructure creates new problems. The existing vouching system in card payments can afford to be slow because settlement occurs with a one-to-two-day delay. Blockchains collapse settlement to a few seconds.

If the vouching for crypto card transactions still takes days, then the entire point of choosing a faster payment infrastructure is defeated. The merchant who prefers blockchain-enabled payments over the centralised banking route does so for faster and cheaper settlement. But a self-custody wallet, whose entire purpose is that no institution stands between you and your money, has no banking authority in the position to give the merchant the guarantee of honouring a payment.

But friction in new technologies and systems also creates opportunities to capture value by building solutions that solve it.

The Race to Vouch Faster

Crypto card companies are approaching this problem in different ways.

Gnosis Pay settles the payment on-chain without requiring your money to ever leave your wallet. It achieves this by integrating Gnosis Safe, a smart-contract wallet deployed on Gnosis Chain, with two modules.

The Roles Module restricts what the card can do. This lets users set rules to limit spending to only one approved stablecoin, set a daily spend limit and add a whitelist of authorised settlement addresses. The Delay Module places a three-minute buffer on any transaction you initiate.

When you tap a Gnosis Pay card, it receives the authorisation request from Visa, checks your balance in the Gnosis Safe account and replies with a ‘yes’ or ‘no’ immediately. If yes, it simultaneously moves your stablecoin to the issuer’s account through the Roles Module, and the issuer settles with Visa off-chain at the end of the business day. The three-minute delay on your withdrawals ensures the user can’t pull the funds that Gnosis just approved for a Visa transaction out from under it before that on-chain debit clears.

Merchant settlement still takes about 24 hours, but the non-custodial wallet lets the buyer keep control of their funds and earn yield.

Gnosis captures value like a bank by reserving settlement liquidity and taking a slice of every transaction it guarantees.

Ether.fi lets you borrow against your staked ether and spend the loan so that the underlying asset can keep earning yield. It uses Rain’s underlying stablecoin issuing and settlement infrastructure for its Cash programme to issue a non-custodial, cash-back credit card for its users.

While Ether.fi built the borrowing engine, it uses Rain’s infrastructure to vouch for settlement, letting Rain capture the value it creates.

Bleap also keeps your money in your own wallet until the instant you tap. When you pay, its issuer, Unlimit, pulls the exact amount straight from your wallet and converts it to euros in real time. Tria does the same across many chains, and its cards run through Rain, the same firm that supports Ether.fi.

In both these cases, your money stays with you in a non-custodial wallet until the moment you tap. When your money sits in a bank, the bank holds it, lends it out, and keeps most of the earnings. A savings account may pay you back a little, but the bank sets that rate and pockets the spread, and you carry the risk if the bank fails. In a crypto non-custodial wallet, you hold your money. The edge here is that until the money leaves your wallet, it is unfreezable and untouched by anyone else.

All four of these cards — Gnosis, Ether.fi, Bleap, Tria — keep the money in your wallet and still let a licensed firm vouch for your payments the moment you tap.

However, these approaches only solve the buyer’s side. Payment is instant the moment the stablecoin leaves your wallet. The money reaches the merchant’s account based on what they accept. If they accept stablecoin, it can reach in seconds. But if they only accept fiat, it still moves on Visa’s clock.

Then there are the biggest players, KAST and RedotPay, who are resolving the vouching problem by replacing it altogether.

They do this by holding your money. You load your cash into their account first, and only then can you spend. Once a firm holds your balance, it can vouch instantly. It is simpler and faster, but the trade-off is losing self-custody. But it works nevertheless.

RedotPay alone accounted for roughly half of all crypto card spending in mid-2026. People don’t care whether the money is in their custody or with a fiduciary. As long as the payment and settlement happen with the least friction, they are willing to pay a cost.

Show Me the Money

When you track money through all of this, it drifts away from all the commoditised layers. Stablecoin issuers make nothing from the card payment stack.

The wallet owns the distribution of users, but still rents out everything underneath - including the licence, the guarantee and the settlement. This limits the margins a wallet can make out of the vouching process.

The value settles with the licensed firms doing the unenviable, risky and regulated work of vouching. They cannot go wrong with this job. Rain holds the card-network membership, settles volume in stablecoins, and provides the actual guarantee for Ether.fi, Tria, and others. Rain, the infrastructure provider, raised at a valuation near $2 billion, much more than what several of the apps (Bleap, ether.fi, Tria) built on top of it were valued at.

Above them all looms the incumbent. Visa continues to run stablecoin settlement at a multi-billion-dollar annual pace and pockets a spread that might seem inconsequential but adds up quickly with the volume it processes.

This is a pattern you can see whenever crypto merges with fintech. All the value does not accrue at the front end. Instead, it accumulates at the infrastructure layer. It’s where irreplaceable, non-commoditised layers form, calling for specialised solutions from builders to solve existing or emerging problems.

In the traditional banking system, settlement is slow because banks moved money in overnight batches through a chain of intermediaries. This slow process also has a benefit. If an incorrect payment is made or if the customer doesn’t receive the goods or services, they can claim a chargeback. Since the payments are controlled by the banks, they could could always reverse it after sufficient inquiry. Crypto made settlement fast and irreversible. It traded off guardrails for speed. This faster settlement made vouching more valuable because it has to happen instantly and is more susceptible to failures and risks. This necessitates a licensed, well-capitalised firm to do that. Crypto compressed and commoditised the settlement layer by making it faster and cheaper to move money. But in the process, it created more value to capture at the vouching layer.

Those who can combine the scarce job of instant vouching with self-custody will capture the most value.

Both Rain and RedotPay are approaching this from different ends. Rain holds the licence, settlement liquidity, and the guarantee, and earns by renting this infrastructure to everyone else. RedotPay gave up self-custody entirely, holds the balance itself, and bets on its distribution edge. It knows most people care about friction, not custody, and is capitalising on that by making users pay to avoid friction and get a user-friendly interface to move and manage their money.

Every wave of financial technology promises to cut out the intermediary. But each attempt has inevitably introduced new friction, attracting more players to capture the value created by solving it. In the card payment ecosystem, that friction occurs at the vouching layer. Whoever removes it inherits the money that was stuck behind 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.

Money that doesn’t move is the worst kind. The global economy has lots of money like that that doesn’t need to be blocked. Consider a scenario where Jane owes Sally $100, Sally owes Maria $100, and Maria owes Jane $100. These three debts could cancel out, but the problem is that Sally doesn’t know Maria owes Jane $100. So each of them needs to hold $100 or set aside that amount, assuming they intend to clear their dues. In real life, the debts might not match perfectly, but they can still be simplified to free up extra money they need to hold.

Among individuals, the problem might not add up to a significant amount, but when you stack it among businesses, it could swell to the size of national economies.

In 2019, U.S. non-financial firms carried about $4.5 trillion in trade credit, which includes the 30-, 60-, and 90-day IOUs suppliers extend to customers. That sum alone would rank trade credit 4th among the largest economies. The figure was more than three times the aggregate loans these non-financial firms owed banks - $1.1 trillion.

This is a real problem because each firm must set aside money to pay its obligations when they are due. This requires high-level treasury planning and management. It can lead to delayed payments, disputes, and, worse, bankruptcies—all of which can be avoided.

In today’s story, I will explain how blockchains can help unlock more working capital and reduce avoidable bad debts and bankruptcies.

An Invisible Web

In 2025, Atradius, a global provider of trade credit insurance, found that 43% of credit-based B2B sales are overdue, primarily due to customer cash flow pressures. Creditors also spend more money chasing these overdue payments. The European Payment Report 2023 found that European businesses spend 29% of the working year (74 days) chasing late payments. It adds up to €275 billion a year in costs, far more than the entire GDP of Finland.

Working capital is the most expensive money most companies can cut. What stops businesses from optimising it is a lack of visibility into the circular network of debts.

In most industries, a web of circular debts exists. Often the web transcends multiple industries. For instance, a cargo ship business may owe the shipmaker for the components. The ship manufacturer might owe iron and steel suppliers for raw materials. In turn, the iron and steel makers may owe the shipmaker for shipping iron and steel to their customers. These debts form a loop, where they might overlap. Only if someone could zoom out, look at the network of debts, and see all three obligations at once can the debts, or at least a portion of them, be cleared without moving a single dollar.

But the problem is that each firm only knows its part of the obligation. There’s a clear incentive to keep the loop hidden. Companies won’t be comfortable sharing their supplier and customer lists with the world.

Nevertheless, this bottleneck makes company treasuries set aside a lot of money. Liquid money that’s set aside for short-term payments is dead money. It earns little interest. The cost of doing business compounds when the creditor awaiting a late payment is forced to fund its own operations using a credit line.

A 2025 report by The Hackett Group analysed the top 1,000 U.S. publicly traded non-financial companies and found that $1.7 trillion remains trapped in excess working capital.

The problem gets worse for smaller businesses. A delayed account receivable could become a matter of survival.

But is this problem even solvable?

An Existing Precedent

We have solved this exact problem for different groups of people.

The Splitwise mobile app has been my saviour on every friends’ trip, untangling who paid for dinner, who covered the fuel, and who paid the car rental deposit. The app simplifies debts by netting the circular who-owes-whom.

At a larger scale, banks have commercialised this idea more than 60 years ago. When Wall Street choked on its paperwork and trading volumes, it came up with a fix to stop settling every trade individually. Instead, it began netting them all through a central clearinghouse. Today, the Depository Trust & Clearing Corporation (DTCC) nets roughly 98% of the value of daily US securities settlement.

The lesson is that a large fraction of what businesses owe each other is structurally redundant and can be avoided if you map the entire network of debts.

But if this idea has worked for more than half a century, then why haven’t we replicated this for businesses? That’s because aggregating stock exchange trades on a centralised clearing platform is different from companies publicly disclosing their suppliers and customers and giving away their competitive edge.

This is where blockchains come into use.

How Blockchains Help

Netting off debts in a loop only works if everyone in it settles at the same instant. All parties in the loop must agree to list their obligations on the network and intend to clear them around the same time.

Blockchains and modern cryptography address both. The disclosure problem we spoke about is handled by cryptographic privacy. A trusted execution environment, or TEE, is a sealed compartment inside a computer’s processor that can hold sensitive data without letting the machine’s owner, or anyone else, see what’s inside.

To simplify circular debts, the obligation map can be encrypted and the looped debts are found within the sealed enclosure. Zero-knowledge proofs, or ZKs, complement this by letting the system mathematically prove that the settlement is accurate and that the party’s consent was acquired before settlement.

The blockchain underneath ensures that every leg of a looped debt settles together atomically, or, if there aren’t enough matching loops, it stalls the settlement altogether until enough looped debts are found.

Cycles, an open peer-to-peer electronic clearing system, is building something similar. The protocol was spun out of Informal Systems, a firm known for building core infrastructure in the Cosmos ecosystem, and is backed by ~$8.7 million from investors including Coinbase Ventures and Blockchange. Its algorithm models the economy as a graph of obligations and hunts for the settlement flow that discharges the most debt with the least money. It does this without inserting itself as a middleman or shifting anyone’s risk onto a central counterparty - unlike in the case of the DTCC, where it becomes the buyer to every seller. Cycles nets the loops and retains every relationship as it was.

Cycles has built its first product for crypto trading firms since they have a dense, tightly interconnected cluster. That’s a perfect ecosystem for finding the thickest loop and is optimal for netting.

It uses ZK proofs and TEEs to keep obligations private on-chain.

Protocols like Huma Finance work in adjacent domains. It has processed over $17 billion by advancing cash against tokenised invoices to finance receivables. But it still doesn’t net obligations. The clearing-specific approach adjusts the overlapping obligations first and finances only the remainder. This maximises the savings in financing costs and working capital. This is where the value accrues in this domain of operations.

The payoffs from simplifying circular debts vary by scale.

An individual business that joins the network could find a slice of its payables and receivables cancelled against another obligation on the network. This could happen without any cash movement and without having to chase any customer. This could lower working capital needs and reduce dependence on expensive factoring and overdrafts.

As the number of participants on the network swells, the payoffs also amplify. It could ripple through the broader economy. It could help address the late-payment epidemic to some extent.

Intrum found that 62% of businesses pay their own suppliers late because their customers paid them late. Circular debt could propagate down the chain and distress businesses. Clearing overlapping debts could sever the looping obligations at the source.

Less gridlock means fewer solvent firms tipped into insolvency by a cash-flow gap that nets to nothing. As more firms join the network, the entire web becomes more valuable for those already there, because it increases the likelihood of finding a matching obligation one’s debt could be netted off against.

While crypto fixes the netting and privacy problems, two bigger constraints prevent these attempts from taking off. Ironically, both of them are related to us - humans.

A clearing network is only as good as the density of firms inside it. If only a few companies submit their debts, the probability of looping debts is lower. But if the entire trading community, or groups of small or medium businesses, jump on the bandwagon, the likelihood of finding adjustable obligations goes up.

Another problem is that joining the debt network requires businesses to trust a relatively new cryptographic technology they barely understand. The only way to ease their fears is to convince businesses that a competitor can’t really reconstruct their supplier list and that a cancelled debt is legally settled in their jurisdiction.

Almost all recent attempts to solve this problem have ended up in a graveyard.

Over the past decade, Marco Polo, we.trade, Contour, TradeLens and a bank-led blockchain trade-finance consortium have all collapsed or needed restructuring. The fact that almost none of them failed because of the poor technology reveals where the problem lies. They failed because a handful of companies drove a thin list of obligations.

Nothing dismisses the problem or the possible solution. But whether the solution will work depends on open protocols like Cycles’ ability to coax the world’s businesses onto the debt map.

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.

Every major publicly listed bitcoin miner has spent the last four quarters facing an existential crisis. A look at their earnings releases over the past year shows they are moving away from their identities as miners of magic money.

They are now recategorising themselves as “energy infrastructure platforms,” “vertically integrated AI Cloud providers,” or “digital infrastructure companies built around power, land, and compute.”

The rebranding is backed by a shifting revenue mix and a growing market cap that has surpassed what these companies were worth as bitcoin miners.

It looks like a story of struggling miners finally finding their salvation by upgrading to meet the growing demand for compute and AI inference. Except that it isn’t as simple when you zoom out and look at what they are forgoing.

In today’s piece, I will explain why miners’ 180-degree pivot away from bitcoin mining could come back to bite them.

What Drove the Pivot?

First, the halving of block rewards in April 2024 pushed miners to either hold their mined bitcoin and sell it at a higher price, or diversify by using their processors for High-Performance Computing (HPC). But bitcoin’s rally from under $70,000 in October 2024 to $124,000 in October 2025 drove some miners to keep mining and stack their mined bitcoin.

But the October 10 liquidation event, which wiped out $19 billion of the crypto market cap in 24 hours, led to a market downturn the industry has yet to recover from.

Today, bitcoin price is down almost 50% from October’s peak at ~$63,000. At these levels, it’s almost impossible to mine BTC and sell it at a profit. Bitcoin mining costs vary with electricity costs and the Bitcoin network’s difficulty. Yet the average BTC mining cost rose from about $40,000 in February 2024 to $90,000-$110,000 between October 2025 and July 2026. In August, the all-in cost of BTC mining shot up to an all-time high of $140,000.

The unfavourable environment for BTC mining over the past year has coincided with the capital glut flowing into AI and inference markets.

Bitcoin miners use ASIC mining equipment that runs complex algorithms to win bitcoin as block rewards. This equipment is similar to what is needed for HPC and AI inferencing. This made the pivot from bitcoin mining to AI inferencing easier than starting from scratch. It is also a no-brainer for most miners looking to use their equipment for a profitable cause.

Nearly the entire listed mining sector moved at once, in the same direction. The scale of the shift is evident in how their revenue mix has shifted in the past few quarters.

Consider Core Scientific. In Q2 2025, revenue from colocation, the business of renting out data-centre capacity for AI and HPC, totalled $10.6 million a quarter. In the same quarter, revenue from mining and selling bitcoin stood at $62.4 million from mining bitcoin. Twelve months later, those numbers have almost exactly swapped. In Q2 2026, revenue from colocation is $136.7 million, while revenue from mining has shrunk 65% to $21.5 million.

Colocation now makes up roughly 83% of the company’s revenue, up from 14% last year.

TeraWulf’s HPC lease revenue is already 71% of its total. Its HPC leasing revenue rose from nonexistent this time last year to $32 million in Q2 2026. During the same period, its digital asset revenue shrunk about 75% to $13 million.

The shift is also apparent in how many of these miners have repurposed their existing mining buildings and equipment for AI or HPC operations.

The Worrisome Land Grab

The pivot from bitcoin mining to AI and HPC operations looks like a stampede. Beyond just reallocating existing capacity to AI, these erstwhile BTC miners are also racing to acquire as much power, land and contracted demand as they can.

The contracts already signed run into the tens of billions.

Core Scientific has committed up to 2.5 gigawatts of capacity to AMD and CoreWeave, deals worth north of $24 billion over their terms. Hut 8 has 949 megawatts under contract at a base-term value of $26.6 billion, backed by $7.5 billion in fresh project financing.

TeraWulf signed a 20-year lease with Anthropic for ~$19 billion and acquired a gigawatt-scale campus in Kentucky to meet compute demand.

In the last six months, Riot Platforms has executed leases totalling 241 megawatts of capacity for about $10 billion. Just last week, IREN delivered its first of four AI Cloud deployments to Microsoft under a five-year, $9.7 billion services contract announced in November 2025. It also has a five-gigawatt partnership with Nvidia and is buying power sites in Texas and Spain to feed it.

These deals and contracts explain the excitement around the AI landscape. A 20-year lease with a reputed hyperscaler tenant signals a more stable revenue pipeline than what these companies ever had before. After a year of mining BTC at a loss, a decade and a half of contracted cash flow feels like solid ground.

Except that there are caveats that many of the commentators are underestimating.

Bitcoin mining, for all its pain, has a property that AI hosting does not. Bitcoin mining has a self-restoring feature. When mining becomes unprofitable, miners switch off their machines. When enough of them switch off, the Bitcoin network difficulty drops, so whoever is still mining earns more per machine by spending less to run their equipment.

If enough miners exit the BTC mining landscape, those who remain may find it relatively cheaper to mine. As miners defect to AI, network difficulty has fallen sharply from its 2025 peak of ~156 trillion to 127.5 trillion.

Every company rushing out of mining is making mining more profitable for whoever stays back.

AI compute has no such mechanism. If the industry crowds with too many players offering compute power, the supply eventually overshoots and brings prices down.

Although the demand for AI and compute power is going up, the prices are likely to fall down - contrary to economics 101. In fact, AI companies are already slashing prices. That’s because in a nascent industry, resources are scarce, and so are those building and offering these resources. Scarcity creates a case for charging a premium. Today, the prices these AI companies are locking in carry a premium because compute is scarce. Today, GPU orders are placed even when they are temporarily out of stock. Every hyperscaler on earth is bidding for the same megawatts. This scarcity is driving more BTC miners and data centre providers to ramp up supply. But once this ramped-up capacity tightens the demand-supply gap and compute power becomes more readily available, prices will fall faster.

When those prices fall, the same 15- to 20-year lease that these miners are signing at today’s rates will seem overpriced.

The worrying part about the pivot away from mining to AI and compute processing is that the shift is easy to make only one way. Turning a mining setup into an AI campus is straightforward since the power is already there. But once they replace their ASICs with H100s and sign 20-year leases, those commitments will bind them for the next two decades and prevent them from switching back.

Bitcoin mining will inevitably swing back to profitability, driven by lower network difficulty and BTC’s price recovery from the $60,000 lows once the market downturn flips. When that happens, the fully pivoted erstwhile miners, bound by the multi-year leases, will have to watch it happen from the sidelines. It would hurt them even more if the AI and HPC prices they get out of their deals aren’t as attractive as they are now.

So should the miners not pivot to AI and simply wait for the mining equation to flip? I don’t think so. For most of them, the pivot was driven by survival. Mining at a $140,000 all-in cost against a $63,000 coin doesn’t make business sense. AI money was the only lifeline within reach. But the question of survival can often drive businesses to take extreme measures. Here, too, the problem is with those who completely went all-in on AI. Driven by desperation, these businesses fled BTC mining entirely, repurposed all their ASICs, and locked themselves into decades-long deals in a nascent industry already seeing price corrections across the sector.

But even as most miners did a full 180-degree pivot, some others are treading carefully.

Hedgers Hold an Edge

Marathon Digital, the BTC miner with the largest BTC treasury, is treading carefully. In Q2 2026, the company sold 30% of its BTC holdings to cut its debt obligations. But it chose a different approach to fund its AI expansion instead of scrapping its BTC mining rigs.

MARA drew $150 million under the 2026 Line of Credit using its remaining BTC holdings as collateral. As of June 30, 2026, the company still holds more than 35,000 BTC on its balance sheet and is planning to keep mining alive on a flexible load.

Hut 8 is also not abandoning BTC mining. It is spinning out its BTC mining business into a separate, majority-owned subsidiary called American Bitcoin Corp., allowing the parent company to pivot its core focus toward high-performance computing and AI infrastructure.

By keeping rigs warm and treasury intact, these operators hold an option the all-in converters liquidated. When mining turns profitable, they can redirect power back to it. The fully pivoted can only watch.

Miners going all-in on AI and treating their old BTC mining business as dead weight are betting on a future few have seen. But the trend is not difficult to predict. Every nascent technology, including chips, computers and smartphones, got cheaper as the industry and ecosystem matured. AI and compute industry is already seeing this happen.

Companies like MARA and Hut8 aren’t entirely out of the AI opportunity. But by retaining some mining capacity and BTC treasury instead of liquidating completely to buy GPUs, they are treating AI as a diversification play rather than committing all capital to an industry that hasn’t fully matured or been repriced accordingly. The stocked ASICs let them switch the load back to mining BTC when it pays the best and the compute premium thins.

When you zoom out, all these companies are essentially power companies that are topped with either ASICs or H100s. But those that can redirect power between mining and AI compute, depending on what pays best, will not be completely at the mercy of market cycles and narratives.

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.

In the last 10 weeks, Cloudflare built an entire internet stack to rewire commerce end-to-end for non-human players. The infrastructure of the San Francisco-headquartered company claims to power 1 in 5 web requests across the globe and 42% of the Fortune 500 companies. The same company that built its reputation by offering us, humans, a range of internet solutions like content delivery network services and cloud cybersecurity is now betting on an AI-dominated internet.

So much so that Cloudflare has rebranded its website to explicitly state that it is now building for an era where AI agents capture the majority of activity on the internet.

Since the start of July, the company has shipped a browser, a wallet and a storefront for machines specifically. This rewires every layer of the commerce stack, including surfing, identity, settlement, and holding money in a way that is far from being native to how humans do commerce and transact.

Cloudflare isn’t the first one to build for an agentic–first internet and commerce world. But its series of launches focusing on the agentic era calls for a closer look at how the entire journey of buying something is being taken apart and reassembled for machines.

In today’s piece, I will explain layer by layer who captures the value in this new stack as more companies rush to rebuild commerce for agents.

The Browser for Bots

To understand why AI agents need a different infrastructure than the current one, you need to first understand how they function.

An AI agent is just a piece of software that does a task for you. It could be something as simple as booking a flight or renewing your streaming platform subscription. To do these jobs, the agent needs to move around the web, prove its identity and pay for the services or products it shops for you. But the shopping journey of these machines is not similar to humans. They don’t open a flight booking website and stop scrolling at a fancy-looking ad or well-written copy. So internet infrastructure companies must rebuild each of those steps in the internet journey.

Last week, Cloudflare launched Kitesurf, a browser that they built specifically for AI agents. The interesting part about the browser is the features they stripped off an average browser that’s made for human users.

Normal browser builders spend enormous effort and time making a page pleasant for a human. They need to focus on fonts, colours, animations, where and how the little tabs stack, and the extensions you can install. Kitesurf drops all of it and keeps only the underlying information that a machine can read. AI doesn’t care about tabs or themes. All that matters to your bot is the cost of getting its query resolved and the speed at which it can find answers.

So, a browser built for agents rewires the surfing aspect. Such a browser lets the agents seamlessly surf the web for the services they need to buy or find for their masters. Then, we move to the buying aspect.

What Buying Entails

Let’s play back how we buy anything online.

We first discover it either through a search, an ad, or a shop we usually shop from. Sometimes we get persuaded to buy something we were not originally looking to buy. It could be a brand placement, a review, a discount, or a nicer-looking product on the shopping page. Then comes the difficult part of making a decision. Once we move ahead with the cart, we prove our human identity (to a machine, ironically) using a login or a captcha and use our saved cards or other methods to pay.

When we hand over this entire journey to an agent, a lot of steps become irrelevant, while some new ones take over.

An agent does none of the scrolling and discovering interesting products through ads or fancy landing pages like we humans do. Instead, it prefers to read through a clean, structured list of products and prices, pick a few that match the instructions it was given, and hand its master a shortlist of products that make the cut.

As humans, you could jump to page 2, 3 and so on of the Google search if you were not satisfied with the results on the first page. But the agent’s shortlist cuts all that crawling and gives you a shortlist that might be most relevant to your instructions. We have already started using this at scale. A survey of over 1,000 US consumers found that 57% of them leverage AI for product research at least weekly.

This shows that AI agents significantly cut the seller out of the shopper’s decision-influencing process. That influence and power now move to the agent’s shortlist. But who influences what the agent selects in its shortlist? It all depends on the format of the information that the agent reads before choosing the products, and a handful of companies are racing to control that format.

The Discovery War

In September 2025, OpenAI and Stripe launched Agentic Commerce Protocol (ACP), which now runs shopping inside ChatGPT. In this, a merchant shares its catalogue with OpenAI. When the buyer searches for their requirement through a prompt on OpenAI’s native chat interface, these catalogues surface and can be used to place an order and close the sale within the same chat window.

The shopper never visits the merchant’s website. All the discovery and purchase happen in the chat interface. To cut the noise of excess and irrelevant choices and drive buyers to shop for what they were looking for, OpenAI charges the merchants 4% of every order. It’s also a toll for putting the seller’s product in front of OpenAI’s distribution.

This 4% is what came back to bite OpenAI. The protocol never took off. Although Etsy went live on day one, only about 30 Shopify merchants out of the millions in its network had bothered to plug in even months after its launch. The blow made OpenAI retreat from its strategy by early 2026 and now reroutes shoppers back to the retailer’s site to finish the purchase, handing merchants back the control the original design took away.

Google and Shopify learned from this and joined hands for a contrasting bet.

Their Universal Commerce Protocol (UCP), launched in January 2026, let the merchant keep the catalogue on its own site from day one. The UCP neither plays an intermediate warehouse of catalogues, nor does it charge any commission to facilitate a sale. That’s because UCP isn’t a centralised marketplace like OpenAI and Stripe’s ACP. Instead, it chose to run an open, decentralised standard and make the communication layer entirely open.

Then, how does Google make money? Through ads and paid placements of products by retailers.

By April 2026, Amazon, Microsoft, Meta, Salesforce and even Stripe had joined Google’s UCP. Walmart, Target, Best Buy, Visa and Mastercard have also signed on.

Both models change the incumbent commerce model, which was built specifically for human-driven discovery. The human-centric model required merchants to come up with appealing advertisements and landing pages to win human attention. The new agent-driven commerce world needs merchants to satisfy a query that both shoppers and merchants will rarely see.

The Dying Layer

A huge share of commerce spending goes to persuasion through advertising, branding, and loyalty points. The whole craft of nudging an undecided human toward buying a product or service is a capital-intensive task. It could cost up to hundreds of billions of dollars a year. But the spending makes sense for humans because it depends on the assumption that the buyer can be moved. That assumption is based on proven science about human behaviour that has significant empirical backing.

On the contrary, an agent doesn’t feel emotional about an advertisement or a brand story. The only thing it cares about is the product specifications and the instructions it has been given.

So this layer gets deleted altogether in the commerce stack that’s being rewired for agents.

The new layer is already selling brands a way onto the agent’s shortlist, just the way search-optimisation firms once sold an inorganic climb up Google’s results pages. It’s just that the nudging is no longer aimed at a person, but is in the form of a paid listing or a discounted offer to grab the agent’s attention.

But what’s clear is that the profitable business of changing a human’s mind at the moment of purchase will cease to exist. There’s no more value left in this layer to capture.

Where Does the Value Accrue Next?

When an agent shows up to buy, the shop has a new problem. Who sent this thing? Is it a real assistant or a bot here to cause trouble? Is it allowed to spend this person’s money, and how much? A human has autonomy and identity. An agent is just software and a few lines of code that could be representing anyone. It is still representing a human (hopefully), but could be acting in bad faith. So somebody has to vouch for it, keep the list of trusted agents, and let shops check that identity at the first step.

That job is the most valuable layer in the stack. Think about why Visa is worth more than almost any bank. It does not lend money and barely moves it. Yet it facilitates the moment of trust. Every time a stranger’s card clears, Visa is the one certifying and differentiating bad actors from the good ones. Each time it does that, it takes a thin sliver of the transaction it facilitates.

The same Visa has already built a registry to vouch for these agents. This certification helps merchants trust the agent and let it spend.

Cloudflare is also chasing the value this layer generates. Its cloudflare.pay accounts give an agent an identifiable name. Cloudflare holds an account edge others don’t. It already has a distribution base accounting for a fifth of the global internet. That allows the company leverage to restrict agents that don’t verify themselves by inserting friction. It could become for agents what the domain name system (DNS) is for websites.

How This Evolves

Those watching this space will be most interested in a few key aspects. Will the agent identity become a whitelist that Visa or Cloudflare owns and charges for? Or will it remain an open standard that belongs to no one, like how Google and Mastercard are pushing?

Cloudflare holds the edge because of its presence across several layers at once. The company offers a browser the agent can surf with, the name it identifies the agents by, and the wallet it enables the agents to pay from. All of these sit on one network which already services 42% of the Fortune 500. Owning multiple layers across this stack lets Cloudflare charge a fee at each of them, while undercutting its competitors by offering a subsidised rate collectively for all its services.

But Cloudflare will face stiff competition from Google because of the loyalty and data bank it already possesses. Shopify integrates millions of merchants into Google’s standard, and Amazon, Walmart, Target and Best Buy collectively bring the retail might of merchants

While Cloudflare controls the infrastructure the agents travel through, Google holds an edge in hosting the merchant catalogues the agents shop from. An identity standard is only as strong as the merchants who honour it, and Google has the loyalty of those merchants here.

It will be a close fight to watch.

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.

Before this, I had read a lot of articles and understood nothing. Distributed ledger, Immutable, I knew, but I could not have told you what any of it meant if you had pushed me even slightly.

Then I read this in 2021; I was like, woah, blockchain can save the world, dammit!

Still a believer, for what it counts. But I now recognise that financialised systems are easily co-opted by major capital. Achieving decentralisation requires more than mere technical solutions.

This is how he describes decentralisation:

I saw the beauty of the thing if it works, and reading it the first time felt like freedom. Maybe because it involved birds, but yeah.

Stephen P. Williams is a journalist, not a tech guy. In 2015, he read a piece about coltan mining in the Congo, the mineral in every smartphone. It mentioned that blockchain could track it from the forest to the factory. The selling point was that a buyer in America would know their phone was clean. Williams thought about the miner instead, who hands over what he dug and never finds out where it went or what it sold for. He went down the hole and came out with this book - Blockchain: The Next Everything

It’s 2026 now, and I've been writing about this for a living since 2021, so I can finally mark his homework.

It helps to remember what 2019 felt like. The 2017 bubble had popped, everyone was embarrassed about bitcoin, and the respectable line was that the coin barely mattered and the ledger underneath it was the prize. Big companies were standing up a blockchain team.

Williams opens the second part of the book with a Gartner forecast. Blockchain would add $176 billion in business value by 2025, and pass $3.1 trillion by 2030.

That $176 billion can never be graded. It isn’t revenue or sales, which you could count. Business value-add is Gartner’s own private measure, and no company reports it. So look at Gartner instead. Every year Gartner publishes a chart ranking new technologies from overhyped to genuinely useful. In July 2024, they filed most blockchain projects in the disappointing zone, then said they might stop making the chart for blockchain at all, because too few people were still asking about it. One of their analysts, Adrian Leow, said the real payoff was maybe five years away. People had been saying five years away since 2016.

Williams quoted the most trusted research firm in the business, same as we all do to date.

Williams' big supply chain example is Maersk and IBM. IBM told him that shipping one container of flowers from East Africa to Europe produces a couple hundred paper documents. If you put everyone on one shared record, the paperwork goes away. Every company was citing this example in 2019. The product was called TradeLens. Maersk and IBM shut it down in 2023. Maersk said the system needed the whole industry to join; not enough companies did, and the business never paid for itself. Five of the six largest ocean carriers had signed up. Still not enough. Rival shipping companies would not share their data with each other.

Voting is the second one. In May 2018, a few dozen West Virginia soldiers posted overseas voted from their phones using an app called Voatz. Williams calls it a promising test and lists what blockchain voting would fix, including his claim that miscounts become impossible. In early 2020, MIT researchers audited the app and found an attacker could change a vote, block a vote, or find out how someone voted. West Virginia dropped it and went back to paper.

Williams calls the ledger unhackable. Now that I think about it, it’s a dangerous word to put in a beginner’s book. Technically, that’s true for the core Bitcoin network; no one has managed to hack the database itself. But hackers still steal billions of dollars by targeting the exchanges, apps, and websites connected to it. In the first half of 2026 alone, security firms logged nearly $1 billion stolen across more than 200 attacks. So much for unhackable. Every other way of losing money is still open. Someone gets into your account, or the exchange holding your coins collapses, or you sign a transaction you didn’t understand, or a stranger talks you into sending it.

Holding on to the optimism it gave me back then, there’s a chapter in the middle about the Internet of Things (IoT) that fascinated me the most.

His idea is that as more objects get connected- a fridge, a gas meter, an electric car- they can hold a blockchain too. And once they can hold one, they can pay each other. Your fridge notices you’re low on milk and orders it. Your car’s battery has extra power stored and sells it back to the grid while you sleep. No human involved in any of it. He calls all these connected devices linking up the Milky Way of computers, which is a lovely way to put it.

Money that moves without a person deciding, every time, in tiny amounts, between machines. It made the whole rest of the technology feel small. But fridge ordering milk did happen, though.

Amazon has run Dash Replenishment since 2016, where connected devices automatically reorder their supplies, like washing machines that order your detergent, or printers that order your ink. On fridges specifically, Amazon Your Essentials and Alexa Smart Reorders are now available on Samsung Family Hub refrigerators, and LG’s model automates orders via Instacart or Amazon Fresh. Samsung shipped an update in May 2026 where the fridge proactively alerts users when frequently consumed items need to be replenished. None of this needed a blockchain.

But the idea still materialised in an unexpected way. AI agents are now paying other machines directly. Coinbase created the x402 standard, which repurposes HTTP 402 (”Payment Required”), an old web status code that had gone unused for decades. Under this system, when an AI agent requests data from a server, the server quotes a small price, the agent pays instantly in stablecoins, and the server delivers the data. Coinbase transferred governance of the standard to the Linux Foundation. Major companies like Google, Visa, Mastercard, AWS, Cloudflare, and Stripe are now working with the same concept.

AI agents have made roughly 176 million of these payments totalling $73 million. This means the average transfer is just 40 cents, and most are under 10 cents. That’s why this has to run on crypto rails. Visa charges around thirty cents just to process a transaction, so it can’t profitably move three cents. On a crypto layer-2, sending that same three cents costs a fraction of a penny.

Near the end, he writes about visiting refugees in Rwanda, and wonders if one day the ID someone gets entering a camp might sit on a blockchain and still mean something when they leave. Well, we know that out of this entire book, that soft little hope is the thing that scaled.

It’s called Building Blocks, and the World Food Programme runs it. Started in 2017 with a hundred people in Pakistan. It has now supported around six million people, moved more than $760 million in aid across over 40 million transactions, and saved more than $3.5 million in bank fees by cutting the banks out. In Jordan, a Syrian refugee buys food by looking into an iris scanner. It’s a database that cuts bank fees, run by an organisation that badly needed to cut bank fees.

Similarly, Bhutan became the first nation to run self-sovereign digital identity on Ethereum, giving 800,000 citizens total control over their personal data.

Read: The Fortress and the Phone - by Thejaswini M A

Williams argues bitcoin was only the first thing anyone built with this. The useful part is the shared record itself, and it doesn’t have to hold money. It could hold anything people need to agree on. Who owns which piece of land. Which diamond came from where. Whether your degree is real. Who won an election.

Half right. Half no.

The ledger got freed from money and mostly lost the demand there. TradeLens died. Australia’s stock exchange was trying to replace its settlement system with a distributed ledger and wrote off up to A$255 million. Companies kept building chains anyway. Ondo killed its own in July. dYdX had 73% of decentralised perps volume in 2023 and now has under 3%. Swellchain, Mint and Polygon’s zkEVM all shut this year.

Money went the other way. Stablecoins market cap passed $300 billion. On Base alone, stablecoin volume is up sevenfold in a year. BlackRock and JPMorgan tokenised Treasury bills.

Shared databases fail when direct competitors refuse to share their data, like the ships, but they succeed when neutral organisations use them to coordinate without anyone taking control. We can say that, but it’s seventeen years of evidence on a technology that will be around for a lot longer, so I’d hold it loosely. I still think blockchain grows out of most of these constraints.

I’ve been hard on a book I love, so let me end straight. If I could send a note to the person who read this in 2021, I wouldn’t say the book was wrong. I’d tell her the instinct was right and the examples were not, and that she should have let go of the examples years earlier than she did. It took me a long time to stop assuming a good idea wins because it’s good. Williams assumes that on every page. It makes the book generous, and it’s why so much of it has aged badly.

—Thejaswini

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.

Difficult because of facing the permanent loss of the path not taken, accepting that time is linear, and living with the grief of unchosen potential.

Wasting 20 minutes in the supermarket aisle holding a tub of protein powder, Googling the difference between isolate and concentrate while running price-per-scoop math against a 5lb bag on Amazon. All of that, and the commitment issues of picking a flavour!! I pick a Snickers bar at checkout instead, decision-making postponed.

Similarly, the obvious decisions are easy. If a project runs out of money or the tech completely crashes, the call is already made.

Time is the one thing you can’t buy more of, and every month spent building the wrong thing is a month gone. Taking it back means writing off things you already put in.

Ondo had to write off a year and a half. They had a working testnet and a tokenised Treasury settlement that JPMorgan had already run across it. That was not an easy kill, so we dig in.

On July 27, Ondo Finance released a blog post introducing the Ondo Network. It is a lot different from what they announced 17 months ago.

Ondo had announced its Ondo Chain. A layer 1 for tokenised real-world assets, with permissioned validators, staking for passive income, and native bridging. Big backers including Franklin Templeton, WisdomTree and Wellington. JPMorgan’s Kinexys settled tokenised Treasuries on the testnet with Chainlink.

But now, CEO Ian De Bode confirmed the company will not run both systems side by side. They scrapped the blockchain.

They pulled out the Execution and verification and kept Ethereum as the settlement layer.

Execution runs inside hardware enclaves, also called trusted execution environments. These are sealed compartments on a server chip. Code runs inside them without the server operator being able to read or modify it. Each enclave generates a hardware fingerprint of its active code. Changing a single byte alters this fingerprint and fails verification.

Verification relies on a quorum of independent attestors. Before an enclave starts, they check its fingerprint against approved code. They also hold split key shards, meaning no single operator (including Ondo) holds a full key. The key can only be reassembled inside an enclave that has verified its code.

Settlement stays on Ethereum. Asset transfers land on a public chain, the same as before.

Ondo argues that blockchains bundle four separate functions, such as consensus, replication, transparency, and final settlement of state. Consensus and replication slow a system down, while transparency exposes everything publicly. Those trade-offs are an unnecessary tax for matching orders. So Ondo moved execution off-chain and kept settlement on the blockchain.

They say: “A matching engine wants one deterministic sequencer, and replication adds latency to every order.”

I don’t know about you, but I remember when Accenture said this back in 2022.

For over spent seven years, the Australian Securities Exchange tried to replace CHESS, its clearing and settlement system. They tried replacing it with a distributed ledger from Digital Asset, even buying 8.5% of the company in 2016. The launch target moved beyond 2021 and kept getting pushed back. By late 2022, an Accenture audit found the software was only 63% complete with no launch date in sight.

It said: “Distributed systems introduce higher latency.”

ASX wrote off up to A$255 million, while ASIC (Australian Securities and Investments Commission) sued the exchange over misleading market updates as the project collapsed. Market brokers lost tens of millions more after building connections to a system that was never deployed.

The NYSE and Nasdaq use private matching engines run by single companies. They don’t copy order books across hundreds of computers, and traders don’t want their live orders visible to the whole market. Then the trade goes to DTCC, which is slow, shared by the whole industry, and settles more value than anything else on earth. DTCC’s subsidiaries processed $4.7 quadrillion in securities transactions in 2025.

They say that no blockchain today can carry those volumes. DTCC is doing tokenisation anyway because settlement only runs on weekdays. It went live with production trades on July 15 and scales up in October. The tokens layer on top of existing post-trade rails.

Crypto promised that you could merge execution and settlement into one machine and keep the good parts of both. Rollups have been kind of doing what Ondo did.

Speed is a bad way to decide whether you need a chain. Every venue wants to be fast, and most of them can buy it. The better test is to see if anyone besides you needs to write to this ledger?

Ondo runs a venue. It matches perpetual futures on Nvidia, oil and the S&P 500, contracts that track a price and settle in cash, so nobody ever receives a share. The tokenised part is the collateral. You post tokenised Treasuries as margin. They hold the order book, and no outside party needs write access to their margin engine. Putting it on a blockchain would have meant running multiple copies of a database they only need one of, exposing a public order book their market makers would hate, and managing a validator set.

Instead, without any blockchain, the platform hit $6 billion in total perps volume in three weeks, averaging over $300 million a day.

Ondo fails that test, which is why the chain made no sense for it. Some companies pass it. The difference is who they’re building for. If your users are the only people touching the ledger, you’re running a venue. If strangers build things on your ledger without asking, you’re running a market, and a market needs a chain because the whole product is the part you don’t control.

Base is a different animal. Coinbase is selling blockspace for other people to build on. That’s why the numbers Coinbase quotes are about other people’s activity. In Q2 2026, more than 90% of agentic stablecoin volume ran on Base, and 97% of onchain agentic transactions used x402, which has handled 160 million payments in the past year. Stablecoin volume on Base is up 7x year over year, at $19 trillion so far in 2026. Hardly any of that belongs to Coinbase itself.

If Coinbase moved Base’s execution off-chain into a private enclave, the product it’s selling wouldn’t exist.

Robinhood stands in an inherently awkward position, which is the middle. The Chain went live July 1. An Arbitrum Orbit rollup, Stock Tokens live in more than 120 countries. But Stock Tokens are debt instruments issued by Robinhood Assets Jersey Limited, not shares, however you hold them. That puts Robinhood on the wrong side of the SEC’s January 2026 guidance, which drew a line favouring issuer-backed tokenised stocks over third-party synthetics. Self-custody protects you from Robinhood losing your token, not from Robinhood failing.

Read: The World Is Flat, and So Is Your Claim - by Thejaswini M A

What the chain does buy Robinhood is distribution. Uniswap put its token launch platform, pools.trade, on Robinhood Chain on August 5. A place where other people’s apps land next to your 23 million users is still good business.

Companies have been building their own chains for three years, and the results don’t favour the idea.

dYdX tested the app-chain concept at scale. In late 2023, the protocol left StarkEx to launch its own Cosmos chain, placing order matching directly on a decentralised validator set. Architecturally, it won the debate, but market share was a different story.

In early 2023, dYdX commanded 73% of total decentralised perpetual futures volume. By 2026, its market share fell below 3%. The platform now processes roughly $25 billion to $30 billion in monthly volume, compared to Hyperliquid’s $180 billion to $208 billion. Its total value locked stands at $100 million to $150 million, trailing Hyperliquid’s $6.2 billion.

Talking about Hyperliquid, it is the best argument for owning your chain. Its matching engine, HyperCore, runs consensus directly. It uses 27 validators, up from five at launch, with no slashing. Instead of publishing the source code, the repo publishes the finished program. You can run it. You can’t read what it does. Joining the active validator set requires over a million HYPE.

You have 27 validators running publicly unreadable code processing $200 billion monthly, versus one enclave running audited code checked by attestors. Both models rely on a tight circle of operators and cryptography. Though calling one a “blockchain” and the other “off-chain” makes them feel different than they are.

Unichain exists to capture Uniswap’s trading volume and send sequencer fees to UNI holders. But Uniswap processes roughly $15 billion a week across existing networks, and Unichain holds only $532 million of its $5.76 billion total TVL. Besides that, Uniswap’s fee switch already burns $90 million in UNI a year without needing its own chain.

If you look at the broader landscape, out of all L2s, three hold 91% of TVL while twenty hold any TVL at all. Ethereum alone holds 65% of the L1 total, and Base holds 53% of the L2 total.

Chain closures are accelerating: Swell ended Swellchain in June, Mint Blockchain folded in April, and Polygon shut down its zkEVM sequencer on July 1. RootData logged roughly 100 dead crypto projects in early 2026, with networks representing a massive chunk of that body count.

Why is everyone launching anyway?

Until recently, apps were priced on revenue; chains were priced on potential.

When Ondo announced a chain with staking rewards, its token popped 11%. When the network actually launched, nothing changed. ONDO pays no yield, and rising protocol volume creates zero direct demand for it. Management says token utility comes later with proof-of-stake and slashing.

But enclaves are not free. Secure chip hardware took a beating this past year. Hackers repeatedly bypassed Intel and AMD security using cheap hardware. First using a $50 tool to break memory protections, then a $1,000 device to steal Intel’s master security key. Last October, researchers released TEE.fail, an attack named after the security failure of TEEs (Trusted Execution Environments, or “enclaves”). Enclaves only work because the chip promises no one can look inside. The researchers broke that guarantee using a $1,000 circuit board attached to the computer’s RAM memory, eavesdropping on plain-text data as it travelled down the wires between the memory and the processor.

They stole Intel’s signing key, the digital stamp of authenticity that proves code is running safely inside a real enclave. Using that stolen key, they created a fake safety certificate on BuilderNet (an Ethereum system for organising pending crypto transactions). This allowed them to secretly view private transaction orders while the system’s automated checks reported that everything was completely secure.

These attacks need physical access to the machine. So Ondo’s top-tier security basically boils down to physical security such as who installed the box, which warehouse it is in, and who delivered it. Is it worse than trusting 27 validators who can’t be punished? Maybe not. But it’s physical security, a real-world risk, and it should be priced like that.

Ondo has been facing the truth and plans to open attestations to bonded operators, while splitting code verification, key custody, and server hosting across separate entities. The final state gets posted onchain so outside watchers can challenge bad transactions, with proof-of-stake and slashing added later.

Might as well just build Ondo Chain….

Have a good day!

—Thejaswini

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Running a lending business is a two-part job. The first moves the money, using the accounts, infrastructure, and software that bring the dollar from a saver to a borrower and back. The second part is deciding whether the money should be lent in the first place. The first part is an engineering aspect, while the second involves judgment.

For over a decade, crypto has been improving the infrastructure to address the first aspect. That infrastructure has evolved well enough to replace the job that required a banking charter with a simple, tailor-made API that can be plugged and played. Yet, a lot of work remains on the second aspect of the lending process.

Both these halves are evolving in our banks’ savings accounts. When you tap “earn” inside your fintech app, your dollars pass through a smart contract that you will not even realise exists and get lent to a stranger. They will then earn interest without even knowing about how blockchain powered this entire process. All you care about is the familiar app you have been using all along.

In today’s piece, I will explain how curated vaults powered by blockchains can serve as backends to optimise your savings accounts and where they still fall short.

Vaults as Software

Almost every fintech we use wants to pay its customers a return, because that’s what stops us from leaving for a better app. A savings balance is the perfect sticky product to do this. The problem is that paying interest historically required you to become a bank, which could take years of paperwork and lobbying. The shortcut was to rent a bank’s balance sheet through a partner, or integrate with a money-market fund. Both these options are still slow and permissioned.

A curated vault that runs on blockchains removes these obstacles. But what is a vault? It is a pool of deposited assets run by a smart contract. Think of it as a traditional fund, except here, a curator instead of a fund manager is the one who decides where the pool gets lent. Every vault is wired into a tokenised vault standard, ERC-4626, which lays out how any app can plug into any vault the way it plugs into Stripe.

Aave Labs turned this into a shelf product in July 2026 with Stable Vaults. This product offered predictable stablecoin yield any business can embed without building the machinery underneath. The operator of the vaults picks the rate it offers and keeps whatever the strategy earns above it. The spread is the business model. It is a net interest margin business, except the fintech here never had to build a bank to earn it.

The recent momentum in this business shows there is enough demand.

Deposits across 60 curated vaults reached $8.9 billion in August 2026, up 33% in a year, while the rest of on-chain lending shrank 40% over the same stretch.

This tells us that capital didn’t merely pour into vaults from some other industries. It actually moved out of raw DeFi lending pools, where you deposit directly into a protocol and accept whatever yield the market pays, and into curated vaults where a curator decides how your deposit is lent.

This is evident from many front-end platforms integrating with curated vaults to offer an “earn” feature to their customers. Coinbase runs its in-app USDC lending through a Steakhouse-curated Morpho vault; Robinhood’s Earn uses the same infrastructure; Kraken’s DeFi Earn routes exchange balances into Sentora-curated vaults and has cleared $600 million in balances, surpassing 80,000 active depositors within six months. Deel, a payroll company, now sends contractor stablecoin balances into a Sentora-curated Morpho programme.

The Commodification of Vaults

Running these vaults seems like the difficult part because the smart contracts are audited and their isolated-market design seals each pool so that the risk doesn’t spread to the other pools. But none of this makes managing these vaults the difficult part. The more challenging part of the job is the judgement about whether the loan is any good in the first place. When you strip away the contracts, a curator is the one who does the unenviable job similar to what a fundhouse manager does. They pick which loans to make, set the exposure caps, rebalance the portfolio and take a fee. While the software that moves money is commoditised, thanks to the curated vaults, it’s the judgement of curators that is still valued. This is evident in how the market pays for each part of lending.

Anyone can deploy a vault in a day because the code is open. Yet the top three curators — Steakhouse, Sentora and Gauntlet — account for $6.8 billion, which is over 75% of all curated deposits. The fourth-largest curator, K3 Capital, manages a whole billion dollars less than the third with ~$400 million in its vaults. If the vault were the moat, deposits would spread across everyone who can deploy one. Instead, they keep piling into vaults managed by three players. This tells us that deposits chase the manager and not the vaults.

In an increasingly commoditising world, what’s rare is the most valuable. Judgement remains the most valued here, just as it is elsewhere. We have reflected similarly on countless occasions in our editorial calls at The Token Dispatch too: ‘What separates what we write from what our competitors do?’ ‘How are we writing a different story about the same half a dozen protocols, chains and projects?’ We come back to the same answer for all these questions: human judgement.

Consumers stop paying premiums for services offered by multiple sellers with minimal difference in quality. The premium is reserved for the judgement that’s rare and unique to one or two such sellers.

This is reflected in how managers of fundhouses and curators of these vaults get paid.

The top three curators generated over $12 million cumulatively in fees over 30 days, of which they retained only $880,000 (averaging 7.3% conversion) as revenue. This begs a simple question: Why would a firm managing a couple of billion in funds offer the vault for such low margins? The answer is where the real value is accruing in this ecosystem.

These vault providers charge almost nothing to run these vaults so they can become the embedded default inside platforms like Coinbase or Robinhood. Curators underbid each other to serve these platforms because once an app integrates its earn feature with a vault in its backend, letting them go to save a few basis points means re-integrating with a new partner, re-auditing their systems and re-underwriting their model. So, forgoing the fee on selling vaults as a product buys an expensive seat at the backend that is difficult to replace. Once this is achieved, there will be little resistance to paying for their credit judgment.

But there’s a problem here. Safe lending doesn’t reward the vaults that are fastest to integrate and offer the best price, but those who underwrite the best. We saw others who did this shut their shops.

In November 2025, a project called Stream Finance came apart. It all started when the company’s curators accepted xUSD as safe collateral across DeFi vaults. Except that it wasn’t. An outside manager running the strategy behind it lost about $93 million worth of assets, triggering a rapid sell-off and causing xUSD to lose its dollar peg. The stablecoin became worth less than a quarter of a dollar.

The isolated-market design did its job and stopped the damage from spreading to other vaults. But isolation only contains a bad decision and cannot undo the original mistake of accepting xUSD as safe collateral. That call had already been made, and money had already been lent out against it. So the loss was borne by the depositors and not the curators who had approved the collateral in the first place.

What happened with Stream Finance is the consequence of renting a risk engine with no credit desk attached. A vault is software that can only promise to isolate our risk. How our money is managed still needs to be promised by a human curator.

So, somebody has to be right about the borrower before the money leaves, and it’s this part where the utmost value currently accrues. This is reshaping how certain players do business in this space.

The Opportunity

Over the past three years, Qiro Finance went from tokenised marketplace to underwriter for hire to vault operator. It started as a marketplace, then realised the scarce input there was not deal flow but judgment. So, it put its judgment up for hire. It underwrote other platforms’ deals with its name on the report, in public, where a single bad call would have ended its business. Huma Finance, a payments network that has moved billions without a credit default, partnered with Qiro in January 2026 to underwrite up to $250 million in deals.

Take its public report on mGLOBAL, a token backed by a $1.1 billion fund run by Fasanara. Qiro’s review put the exposure right at the top, where it disclosed that the fund’s loan defaults had more than doubled since 2022, and the cost of protecting against currency swings was eating up nearly a fifth of what the fund earned.

This is precisely what a good credit desk is expected to do.

By July 2026, Qiro had underwritten more than $50 million across payment financing, trade finance and fintech lending with zero defaults, and it now runs its own vaults. But it lends only to borrowers it sources and judges itself. The vault software is the same commodity everyone else uses, but the work that goes behind it is where Qiro contrasts with its competitors.

Most players in the lending chain get paid whether or not the loan is recovered. A curator earns their cut on the deposits they gather. A ratings firm earns its buck for its opinion and walks away long before the loan matures. But Qiro’s fortunes are tied to the health of the loans it underwrites. If a loan is defaulted on, it impacts Qiro’s income in the same quarter. This model may not make much business sense. But the skin in the game Qiro has is what would make investors trust it to allocate their money.

The scale of Qiro’s business is still tiny, with $50 million underwritten so far against the roughly $9 billion parked in curated vaults. Running the underwriter and the lender under one roof also poses a problem, precisely the one that a credit desk is supposed to remove. Yet, Qiro has picked up the right fight by vying for a place where the value accrues.

Renting these curated vaults as yield engines is a great start. Especially for fintechs like neobanks, which can offer a savings rate today with no charter, no partner bank and no fund. Traditional finance was structurally never able to offer such an integration. But for curated vaults to become the perfect backend for your savings, offering a plug-and-play solution isn’t enough. A lot will depend on who is underwriting the risk behind the strategies that run through these vaults.

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.

Last week, I spent half a dozen hours across two days staring at quarterly earnings of two similar, yet so different companies. The first, Robinhood, inspired confidence in how it was offering all that any trader or investor would want to do in the world of finance. The second, Coinbase, made me contemplate what lay ahead for it in a not-so-optimistic sense.

Coinbase’s Q2 earnings disclosed two sets of numbers that give you mixed feelings about its trajectory. Coinbase captured an all-time high 10.3% market share of global crypto trading volume, its third straight quarter of a record share. That’s precisely what the “everything exchange” vision was expected to produce. Yet, the overall business recorded a net loss for the third straight quarter.

This is where the art of curating an earnings deck comes into play: emphasising favourable data and downplaying unfavourable numbers. Management would like its stakeholders to focus on the first set of numbers and that 88% of its revenue no longer comes from the highly cyclical Bitcoin-related spot trading. But when you dig deeper, you understand that Coinbase hasn’t escaped its dependence on market cycles. It is still heavily dependent on two market-driven businesses — the Federal Reserve and altcoin prices.

In today’s piece, I’ll explain why the machines the company is betting on don’t inspire enough confidence and why the customer Coinbase was designed for may be the wrong one for the world crypto is becoming.

On to the story…

The Warning Bells

Coinbase’s legacy business of letting retail people buy and sell crypto on the app is going through a structural decline. Revenue from consumer transactions fell over 30% year-on-year (YoY) to about $452 million. Consumer spot volume shrank from $41.5 billion to $25.8 billion. The record-high market share of 10.3% conceals the fact that Coinbase is winning a bigger slice of a shrinking pie.

Overall, the company made a net loss of $359 million in Q2 2026, its third straight quarter in the red. In the same period last year, Coinbase recorded $1.4 billion in net profit, its second-best quarter ever.

The deeper problem is when you look one line below the net loss this quarter. Coinbase attributes most of its net loss to unrealised mark-to-market on-paper losses on the crypto it holds. Although that’s a valid explanation, there’s still a problem. The company’s adjusted EBITDA (earnings before interest, depreciation and amortisation), which excludes non-cash items, isn’t reflecting a healthy trend either. This quarter the company’s adjusted EBITDA stood at $208 million.

Coinbase said the metric recorded its 14th consecutive positive quarter. But what the company doesn’t disclose is that this quarter’s performance was also the worst in the last 11 quarters.

The company’s operating profit, which reflects the health of the business before a single cryptocurrency was marked down, has also been in the red for the second straight quarter. Coinbase’s operating income dropped from $481 million in Q3 2025 to an operating loss of $114 million in Q2 2026. Even on a year-on-year performance, the company’s performance was 4.5 times worse than the same period last year (Q2 2025).

When you piece together the above trends, you see that Coinbase’s shrinking top-line numbers in its core business are biting into its bottom line. One reason is the cost base built for a bigger company. Through the 2025 market rally, Coinbase scaled up with its headcount climbing to nearly 5,000. But those costs didn’t shrink as fast as revenue did once the market turned down later last year. In Q2, operating expenses of $1.33 billion exceeded net revenue of $1.15 billion. The company spent more running the business than the business brought in, before a single coin was marked down.

In May, Coinbase responded by announcing it would cut about 700 jobs or 14% of its global workforce.

Coinbase also claims to be tackling the problem of overdependence on its core business by growing its other businesses that are not linked to market cycles. It said more than 88% of its revenue is now decoupled from BTC spot trading. It also cited the increasing share of Subscriptions and Services (S&S) revenue, which accounted for almost half (48%) of the company’s total revenue. That’s the highest share the segment has recorded in the last 11 quarters. But the good news lasts only until you start dissecting the S&S revenue across the past few quarters. Coinbase’s $555 million in S&S revenue this quarter is the second-lowest in eight quarters.

S&S revenue comprises blockchain rewards, stablecoin revenue, interest & finance fee income, and other residual revenue. Among these, the float business on stablecoins held by Coinbase accounts for more than half of the total S&S revenue. This item is still heavily linked to the macro environment and is at the mercy of how the Fed moves the rates. This is reflected in the irony that despite Coinbase holding an all-time high record of $20 billion in USDC on its platform this quarter, the stablecoin revenue still fell to $292 million from $309 million in the same period last year.

More float, yet less money made.

In November last year, I had flagged that a one-point rate cut could shave around $70 million off quarterly stablecoin revenue. Coinbase is living through that reality today.

Even the second largest single line item in S&S revenue shows similar vulnerable dependencies.

Blockchain rewards, which represent the income earned by staking cryptocurrencies, have shrunk over 40% from $145 million in Q2 2025 to $83 million in Q2 2026. This revenue also rises and falls with cryptocurrency market prices.

Between stablecoin revenue and blockchain rewards, more than two-thirds of the “diversified, non-trading” business is still linked to the macro environment and altcoin prices. Only a fifth of S&S services includes Coinbase One and custody fees, which resembles a genuine, recurring product income.

So, the revenue mix has changed, but not in the direction that inspires confidence. What has diversified is its dependence on a single crypto trading market, which is now linked to a US Fed that seems uninterested in hiking rates in the near future.

The Silver Linings

Despite all these warnings, Coinbase earnings revealed some green shoots.

The first takeaway from Q2 2026 for the company must be the performance of its prediction markets business. It crossed $100 million in annualised revenue rate (ARR) in Q2 2026, more than double what it did the preceding quarter.

The demand in this business is incremental and is only expected to go further up with the momentum prediction markets are enjoying. Sports did the heavy lifting, through the NBA playoffs and the football World Cup.

In mid June, Coinbase launched a new crypto-binaries product that allows traders to trade predictions on the price outcomes of assets like BTC, ETH and SOL, across 15-minute, hourly, daily, monthly, and annual intervals. This drove three times the daily traders and four times the daily revenue by the end of the quarter. Coinbase had built this on top of its existing funded-account base without cannibalising spot trading.

The second is the surge in its institutional and infrastructure-led business. Coinbase still custodies more crypto than any other platform on the earth. It has consistently held over 11% of the world’s total crypto assets in terms of market cap.

It also custodies the majority of the underlying crypto assets of the US spot ETFs.

The company also posted an all-time-high derivatives market share, where its volume held roughly flat even when the broader market fell 12%. Its Deribit acquisition gave it a bridge into global options that no other US-listed exchange can boast of.

I find this the biggest advantage that Coinbase should leverage moving forward, given the growing interest that institutions are showing in using crypto as a backend infrastructure rather than as a mere speculative tool.

Read: Crypto as the Backend

But there are still aspects of these silver linings that Coinbase needs to be concerned about.

Prediction markets are booming, but Coinbase is merely providing a distribution platform to sell Kalshi’s event contracts. It shares the economics with Kalshi. Compare this to Robinhood, where the company owns its prediction markets exchange outright and can mint its own contracts year-round. Coinbase has no in-house exchange licence. Its volumes and the money it makes off those contracts are heavily dependent and constrained by the contracts that Kalshi launches.

Even the two biggest bets Coinbase is excited about are still in their early stages.

Coinbase’s x402 payment protocol for agentic finance just recorded another all-time high month in agent-to-agent transaction volume.

Yet, by Coinbase CFO Aleia Haas’ own admission, it’s still “very early days” for Coinbase to think about monetising its agentic finance business via x402 protocol. Despite the protocol having processed more than 100 million transactions, nearly all in USDC, it currently earns zero protocol fees from them.

The USDC demand it generates and the ability to cross-sell Coinbase’s other products can lead to indirect revenue. But this has not been committed to a fixed timeline yet.

The Shaky Road Ahead

When you zoom out from these metrics and look at how the crypto space this company aspired to conquer has evolved, it exposes structural concerns that Coinbase needs to address.

Coinbase was built for crypto natives in a world where crypto was envisioned to become a separate, parallel financial universe with its own citizens. I still remember how Base launched Onchain Summer to bring together artists, engineers and all others interested in creating using blockchain. Today, that idea of crypto is being left behind by the broader world of finance. Financial institutions, including legacy giants and relatively new fintechs, are warming up to the idea of using crypto as a backend infrastructure. Think stablecoin transfers and sub-minute settlements on blockchains moving the ordinary, decades- and century-old financial products. In that world, a company with the most-crypto native identity will be left behind. Those with an edge are the businesses that already own mainstream customers and can route crypto underneath them without them ever having to think about it.

We saw Robinhood do this with their retail distribution base of almost 30 million funded accounts. The distribution positions such companies to run away with the riches in the new world of Web 2.5.

Read: Who Captures Value in Web 2.5?

Robinhood’s position helps it hold on to the same funded customer across a dozen businesses it owns and make higher average revenue per user. For Coinbase, the crypto-native identity that gave the company an edge in the last cycle is now turning into a liability.

That leaves Coinbase with institutional opportunity. That is the ground it can hold on to and build on fast. Coinbase’s “everything exchange” vision may still give an impression that it can sell every financial product there is. But it needs to ensure that when it does so, it can make enough margins across those products to help its business thrive.

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.

Every company treasury must regularly decide where to park spare cash overnight. More often than not, the cash goes into money market funds, Treasury bills, commercial paper or overnight repo.

All these instruments are default options for two reasons: the treasurer knows the rate (of interest) and date (of maturity). Certainty is what makes these instruments work. They let a finance team plan knowing how much interest to expect and over what tenure.

On-chain lending has seldom offered certainty. Rates there float by the hour, which is fine for traders and useless for a treasurer. This is why the biggest market in finance, the $60 trillion world of corporate credit that runs on fixed rates and dates, has stayed almost entirely off-chain.

In today’s story, I explore if Morpho’s new Midnight protocol can change that and make DeFi lending attractive for corporate lending and borrowing.

On to the story…

The Need for Fixed Rates

Companies borrowed roughly $13.7 trillion in 2025, the highest annual figure on record, and about $60 trillion of corporate debt sits outstanding today. This machinery funds factories, acquisitions, and payrolls. It runs almost entirely on fixed rates and fixed maturities, because no business can plan around a borrowing cost that changes frequently.

For a decade, a parallel version of this market has been trying to form on public blockchains. It never made a dent in the traditional instruments for this precise reason. Almost all on-chain lending has been built on floating rates. The interest you earn or pay varies continuously with the amount of the shared pool being borrowed at any given moment. That design works well for crypto traders, which is a niche, limited group. It is useless for corporates.

But why is the on-chain credit market not offering fixed-rate lending and borrowing? It had, on many occasions in the past. But all those who offered fixed rates hit the same wall.

Yield Protocol wound down in October 2023 after peaking near $22 million in deposits. Notional Finance’s TVL climbed above $975 million in November 2021 before falling 90% within two years.

To promise a fixed rate for a fixed term, these protocols asked lenders to lock their money to a chosen maturity up front. That capital then was frozen, waiting for a borrower to take the other side. Much worse, that frozen capital was split across pools with different maturity dates, making liquidity thin in each. Thin markets set bad prices, bad prices drive users away, and the market starves to a slow death.

The problem was the steep cost of providing certainty. Each of those protocols was designed to keep every dollar passive until it was deployed.

This is the problem Morpho’s Midnight wants to solve.

Morpho is already one of the largest lending networks in crypto, with more than $11 billion in deposits.

Morpho’s infrastructure powers many consumer products, from Coinbase to Robinhood. Most users of those apps never know it is there, and that is its biggest moat.

On July 21, Morpho launched Midnight, a protocol built specifically for lending at a fixed rate for a fixed term. Instead of a shared pool with a rate set by a formula, Midnight works as a market of offers. A lender posts the rate it wants along with the maturity. A borrower posts what it is willing to pay. When two offers meet, the terms lock. Just as it would happen with a bond or a term loan.

But what happens to the lender’s money while it waits to be matched with a borrower with similar rate and term preferences? While the earlier protocols froze the funds, Midnight is designed to allow those funds to continue earning a floating return on Blue, Morpho’s legacy lending primitive. The capital doesn’t sit idle here.

This is a promising upgrade for every corporate treasurer who wants a known rate, a certain maturity and a defined counterparty. But this works only with scale.

The Time is Ripe

For the first time, an on-chain instrument is designed with a corporate treasury’s preference for a fixed rate and maturity in mind, rather than expecting the treasury to adopt a product centred around crypto traders.

The timing of a few other catalysts makes DeFi lending more practical for corporate treasuries this time.

Firstly, starting in 2024, the FASB Accounting rules let companies mark qualifying digital assets at fair value rather than treating every dip as a permanent writedown. Under the old rule, a treasury had to write down its digital assets each time their prices dipped. But a price recovery wouldn’t let them mark the asset back up. This meant that a bad quarter could permanently dent their balance sheet. This discouraged companies from holding digital assets altogether. The new rule lets the company record fair value to reflect both unrealised gains and losses.

Secondly, new stablecoin legislation has given corporate finance teams a clearer legal footing for holding these instruments.

The distribution Morpho has already put in place helps it gain adoption from the existing institutional networks of those platforms.

Coinbase has originated more than a billion dollars in loans through Morpho’s infrastructure.

Robinhood routes its savings product through Morpho. Société Générale’s digital arm, FORGE, runs lending markets on it. These establish Morpho’s credibility as a reliable integration via on-ramp platforms that corporate treasuries are familiar with.

But the DeFi mechanism isn’t as perfect when you swap the corporate treasury use-case with that of corporate debt.

The Corporate Borrower

The same DeFi lending protocols can even be used by corporates for borrowing on-chain. Except that it has some structural issues to fix before on-chain corporate debt becomes attractive.

Corporate debt is largely unsecured. When a company issues a bond, lenders are betting on its business, which is a function of its cashflows and its ability to pay. The company does not pledge assets worth more than it borrows. That is the entire point of corporate debt. It is raising money precisely because it does not already have that kind of money.

On-chain lending, including Midnight, works the opposite way. It is overcollateralised. No corporate treasurer will want to pledge $100 to raise $70. That resembles a margin loan more than a corporate financing. Corporate bonds work because it is a borrowing secured against the company’s future, not its present. This is what Morpho or any other DeFi lending protocol cannot do yet.

If Morpho Midnight wants corporates to prefer raising debt on-chain over their time-tested traditional channels, then it has to close this gap with unsecured, credit-based lending.

Why the Infrastructure Is Still Promising

Traditional public bonds need scale to make sense. Only when they scale up to at least a few hundred million dollars can they grab the attention of underwriters, rating agencies, lawyers, and roadshows. All-in issuance cost via public bonds can eat several percentage points of the money raised and weeks of time. A market on Midnight can be created by anyone, with protocol fees measured in fractions of a percentage. That removes the gatekeepers who price small and mid-sized companies out of public debt entirely.

Speed and liquidity are the next advantages. A leveraged loan can take twenty days or more to settle, and most corporate bonds are barely tradable once issued. A loan made on Morpho Midnight settles in a single step, and the position becomes a tradable unit instantly. A lender who needs cash early does not need to break the loan or hunt for a bilateral buyer. They can simply sell the units. Similarly, a borrower who wants out can buy units back. Credit that was locked until maturity becomes liquid without a secondary-market desk taking a cut in the middle.

Enforcement is another aspect in which on-chain lending contrasts with off-chain lending. Traditional default is slow and expensive, moving through breach, negotiation, restructuring, and sometimes bankruptcy. On-chain, a position remains healthy as long as its collateral covers its debt; the moment it does not, liquidation occurs automatically. On-chain lending cuts the entire manual procedure.

But faster, automatic liquidation comes with a price. Liquidation can be instant only because the borrower has already posted more than what they took.

Another advantage is composability, a feature traditional credit lacks. An on-chain position is much more valuable than a traditional loan entry on a balance sheet. A tokenised credit position can be moved, sold, or posted as collateral somewhere else. A fixed-rate credit unit can become the raw material for the next product built on top of it. Traditional corporate debt sits still until maturity.

None of this makes Midnight a viable substitute for the corporate bond market today. But it still makes it a prospective candidate that can offer a better set of rails than the one corporate credit currently runs on.

On top of the advantages I mentioned above, the whole thing plugs into the distribution that treasuries already use through Coinbase, Robinhood, and a regulated bank like Société Générale.

The one missing piece is DeFi’s ability to price a borrower’s creditworthiness in addition to its collateral. The infrastructure is ahead of the use case. That’s all the more reason I believe it should be further developed rather than written off.

The Case for Being Optimistic

Many crypto protocols already offer bitcoin-backed loans. But I think the path to making DeFi borrowing and lending credible substitutes to their traditional counterparts runs through tokenised real-world assets as collateral.

A corporate treasury is more likely to deposit a tokenised money market fund, a tokenised pool of receivables, or a tokenised slice of private credit, and borrow against it at a fixed rate than post a volatile crypto token as collateral. This is already happening as you read this. A tokenised version of an Apollo credit fund has been used as collateral inside Morpho’s markets. It’s evidence of a ready infrastructure. Yet the pool of tokenised real-world assets that a treasury could actually pledge is still only a few billion dollars, compared with a $60-trillion debt market. That’s because tokenised collateral is still overcollateralised borrowing. So, the main part of the puzzle to fix remains the overcollateralisation problem.

The closest historical parallel is the Eurobond market, which began in 1963 when borrowers went offshore to raise money faster and with fewer constraints than their home markets allowed. A parallel credit market formed outside the gated incumbent, the same move Morpho Midnight is making now by building credit rails outside the slow, permissioned machinery of traditional debt. But the Eurobond market took decades and an enormous amount of rigid settlement infrastructure to grow into the multi-trillion-dollar system it is today.

On-chain credit is at the same early stage. A corporate treasury can lend on-chain at fixed terms today, and Morpho Midnight can be the biggest beneficiary in enabling that. But for it to become a preferred substitute to off-chain corporate borrowing, it will have to resolve the overcollateralisation problem as a priority.

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.

Last year, a single company settled about $4.7 quadrillion in securities transactions. That’s more than 35 times the global GDP. This month, that company - the Depository Trust & Clearing Corporation (DTCC) - began using blockchain to process these transactions.

One of the biggest upgrades happening in global finance right now involves an infrastructure swap. The clearing house isn’t the only one. Messaging cooperatives that connect more than 10,000 banks globally and card networks that reach 200 million merchants are all rebuilding the infrastructure that moves assets with blockchains as the central part of this upgrade.

Crypto’s rails are being adopted faster by some of those very industries that spent a long time dismissing them.

In today’s story, I explain why they are warming up to using crypto as their backend and the role crypto companies are playing in this upgrade.

On to the story…

The Cost Problem

A share of Microsoft you pay for today on the New York Stock Exchange (NYSE) will still take a full day to legally be handed in your name. That’s because the infrastructure that moves share ownership was designed for an era involving paper certificates. Humans have spent over 60 years dematerialising shares and speeding up everything in a stock market. Yet, the part where money and assets change hands is still designed around the infrastructure that existed from the paper era.

It’d be naive to presume that this is just a convenience problem. Delays in processing asset and cash movements always incur a financial cost.

Consider a cross-border bank payment. Most global banks pre-fund accounts in different countries and currencies so that payments can clear in other time zones. They use local deposits and central bank reserves to settle cross-border transactions without waiting for real-time funding during different local business hours.

Even when stock market traders post collateral, that money sits idle and earns nothing. Settlement stops on Friday evening and resumes on Monday, following office hours, even when humans function and live their lives on weekends. Although none of this was initially intended to be an inconvenience, we all continue to pay a tax for using this infrastructure, even as faster and cheaper alternatives have emerged.

Meanwhile, exchanges are responding by expanding their trading hours. The London Stock Exchange just announced LSE 24, a venue that will trade for 23.5 hours from Monday to Friday starting from H1 2027. CME took its crypto futures 24/7 in May. Nasdaq has also planned to enable 23-hour trading days later this year.

Although trading is expanding its office hours, settlement of these trades still lags behind. This further punishes the trader by blocking capital.

This tax has grown to the point where it accounts for more than a fifth of global GDP.

Global corporates alone transferred over $30 trillion in cross-border payments last year. They incur transaction costs of more than $120 billion per annum.

This is the cost of this problem that the operators of the legacy financial infrastructure are beginning to take notice of.

In July 2026, they began taking first concrete steps to replace the legacy infrastructure with crypto rails.

The Infra Swap

On July 15, the DTCC, the backbone of the U.S. financial markets, ran its first live production trades of tokenised securities. The trades involved tokenised versions of the original underlying listed company shares, Treasuries, and ETFs.

As part of DTCC’s first on-chain trades, JPMorgan converted holdings of the Invesco QQQ Trust (QQQ), one of the world’s most actively traded and liquid ETFs, into tokenised form and posted them as margin at CME. Goldman Sachs, BlackRock, Vanguard and the NYSE were among more than 30 firms in the room. These tokens moved through repo, collateral pledges, securities lending and clearinghouse margin on production infrastructure.

This comes just months before the scheduled launch of the DTCC Tokenization Service in October 2026.

This single infrastructure move gives us a quantifiable magnitude of the economic benefit more efficient systems could bring to capital markets. In May 2024, US equities moved from settling in two days to settling in one. That single day cut in the settlement cycle reduced the margin that members must park at the clearinghouse by $3 billion, or 23%, from a three-month average of $12.8 billion in the T+2 cycle to $9.8 billion in the T+1 cycle.

If one day saved in one country’s equity market could free $3 billion in collateral, the value of collapsing settlement to minutes across equities, Treasuries, repo and FX, across borders and over weekends can blow up exponentially.

This is what blockchains commoditise. A stablecoin transfer settles in seconds for a few cents in cost, at any hour, on any day. On the other hand, a tokenised security can change hands and simultaneously serve as collateral without waiting for the infrastructure to open on Monday.

This is why operators of legacy infrastructure are warming up to the idea of using crypto rails as their backend. Because if they don’t, they risk losing business to their competitor who offers its clients the same services at much lower prices and faster speeds.

Crypto infrastructure allows customers to put their money to work more efficiently by eliminating idle time. A security that settles tomorrow cannot be used as collateral today. A tokenised security can be pledged and lent in minutes, around the clock. Collateral mobility is the difference between capital working in parts and capital working continuously.

Nine days earlier, SWIFT, the cooperative whose messages coordinate payments between more than 11,500 institutions, said 17 banks from six continents, including Citi, HSBC, UBS, Standard Chartered, and MUFG, are preparing to pilot tokenised deposits on its new shared ledger.

Tokenised deposits are bank money sans time barriers. Blockchains move funds overnight and on weekends while still remaining as a claim on a regulated bank. This is the perfect alternative for those who avoid bank-issued stablecoins due to the lack of FDIC coverage. Tokenised deposits give users the same convenience as stablecoins, while keeping their money within their own regulatory perimeters.

I wrote about this last month, in Defending the Deposit.

Even card networks like Visa are adopting crypto infrastructure.

On July 16, Cuy Sheffield, Head of Visa Crypto Labs, announced the launch of a platform that lets banks mint, move, and redeem stablecoins within the treasury systems they already run, hiding every key, gas fee, and chain from the client.

The biggest appeal for traditional finance giants in adopting crypto infrastructure as their backend is the ability to pass on cost and time efficiencies across their wide distribution. Roughly 15,000 financial institutions and more than 200 million merchants already sit on Visa’s network.

Its competitor, Mastercard, has built on its earlier pilots and initial live deployments by expanding stablecoin settlement options for banks across six regulated stablecoins.

Mastercard now supports settlement across Circle’s USDC, Paxos’s PYUSD, USDG and USDP, Ripple’s RLUSD and SoFi’s SoFiUSD. These stablecoins will be enabled across a range of supported blockchain networks including Arbitrum, Base, Canton, Ethereum, Polygon, Solana, Tempo and XRPL.

The proof that this class of infrastructure works at scale already exists inside a bank. JPMorgan’s Kinexys has processed over $4 trillion in cumulative volume and now moves more than $7 billion a day, every day, including on days when the rest of the financial sector is closed.

Those still unconvinced and resistant to crypto infrastructure need to look no further than how money market funds have adopted blockchains. BlackRock’s BUIDL, a tokenised Treasury fund with roughly $2.5 billion in assets, is now accepted as collateral for derivatives at major venues. Standard Chartered and OKX, a fintech and crypto trading platform, came together to build that framework.

This is the real-world utility of adopting crypto as a backend. It has enabled collateral to earn Treasury yields while posted as margin.

This is the strongest pitch I’d make to anyone who asks “Why should anyone choose crypto rails?”

The single most important job of any new financial innovation should be to help you move, grow and store your money more efficiently.

By enabling these innovations, incumbent crypto companies are finding new roles.

Joining Them, Instead of Fighting Them

Instead of replacing traditional financial companies, as many crypto ideologues had envisioned, crypto companies are becoming the builders of the infrastructure that traditional companies demand.

Half a dozen crypto companies came together to make the DTCC’s July a reality. Chainlink wired the networks together; Digital Asset’s Canton network carried the Treasuries; Fireblocks and BitGo supported custody; and Circle and Ondo designed the service for the entire working group.

Some of these firms spent a decade building for a parallel financial system, but are now supporting traditional financial companies in building faster, cheaper infrastructure to move money and assets. Their revenue model has changed from replacing Wall Street to invoicing its companies.

These invoices are also stretching halfway across the globe.

On July 16, Ondo Finance, the largest tokeniser of equities, announced a partnership with Japan’s SBI Group to tokenise Japanese stocks. The tokenised equities will be distributed across SBI’s ecosystem and settled with JPYSC, SBI’s yen stablecoin.

SBI manages over $250 billion in assets. If it had to build tokenisation capability in-house, it’d have to start from scratch. Instead, it just procured the technology from a vendor that already runs on blockchains and paid rent for its expertise. Ondo already accounts for more than 70% of the tokenised equity issuer market and has a distribution arrangement with Deutsche Börse’s Clearstream in Europe.

Securitize plays the same role by supporting the issuance of BlackRock’s BUIDL.

What Happens Next?

There’s a precedent for what follows.

In 1956, a trucker named Malcom McLean put cargo in a standard metal box. This reduced loading costs from $5.86 per ton to $0.16 per ton. World trade reorganised around the container. Ironically, the carriers who owned the ships captured almost none of the value. That’s because the container box became a commodity and freight became a price war. The riches went to the firms that rebuilt their operations around cheap, reliable shipping. The great beneficiary of the container innovation was the retail giant Walmart, and not logistics giant Maersk.

A similar format could repeat in fintech.

For the container innovation to transform the logistics industry, an entire ecosystem of cranes, ports, chassis and customs had to be rebuilt around it. Similarly, tokenisation works only once custody, compliance and interoperability are rebuilt around it. This is where the value accrues as the settlement layer in banks and financial institutions gets commoditised. It’s this precise ecosystem that Chainlink, Fireblocks and Digital Asset are now targeting.

Tokens or chains will no longer capture significant value. Instead, value will pool in two places.

The first is in the utilities that adopt the crypto rails. DTCC, SWIFT, and Visa will charge for tokenised settlement, deposits, and stablecoins, just as they do for traditional, non-crypto systems. But there’s larger value elsewhere to capture. There will be institutions that reorganise their operations around continuous, atomic settlement by running treasury intraday, making collateral work more efficiently, and offering round-the-clock access to working capital. Think of the BUIDL fund that lets you earn Treasury yields on collateral posted as margin.

Crypto has already spent more than 15 years building a parallel, better financial product. I think crypto builders with foresight will stop building such products. Because crypto’s bigger triumph is being the backstage protagonist that makes your money move more cheaply and faster.

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.

When you own a share of a company, you have a residual claim on whatever is left after the company pays everyone else. The company pays off employees first, bondholders and lenders next, then creditors, taxes, and preferred stock. Then comes equity, which is owned by the shareholders.

But that residual claim comes with exclusive privileges too. You get a vote on who runs the company, a share of any dividends the company distributes, and a claim on anything left over if the company is sold or wound down.

For a long time now, a token holder in a crypto protocol has been offered a similar deal, at least in language. If you held a token, you could participate in the network’s decision-making and get a share in its eventual success and earnings. But the deal has always been one-sided. Nobody in crypto admitted it all this while because they didn’t face the conflict. Except until now.

While crypto protocols have found a way to keep their token holders happy due to the lack of regulation, the passage of the CLARITY Act (which is underway) could close that leeway. Some crypto protocols that issue equity shares, even while having a class of investors holding their tokens, have further exposed the distinction between shareholders and token holders.

In today’s story, I will explain what could change for token holders of crypto companies that choose to issue equity.

On to the story…

What Ownership Entails

It’s not the return that makes equity the most durable financial instrument. Bonds often outperform equity with higher returns and lower volatility. Yet, equity is attractive to many because of its structure. It is a contractual claim to own a part of the company. If the company earns a profit, the board may pay a dividend, and shareholders receive it. If the board refuses, shareholders can vote for a new board. If a majority want to sell the company, they can. None of this solely depends on the CEO’s goodwill.

Over the past century, the corporate world has continually adjusted the extent of shareholders’ control over a company’s operations. Yet, the right to economic claims has largely remained untouched.

Google’s 2004 IPO gave founders Larry Page and Sergey Brin and then-CEO Eric Schmidt 10 times the voting power of public shareholders by creating two classes of equity shares. Yet, the economic rights these public shareholders had were on par with those of founders and insiders. Snap Inc., the maker of Snapchat, issued shares with no voting rights in 2017. Berkshire Hathaway has run dual-class shares since 1996.

Although each of these experiments changed how classical shareholding was defined, they all preserved the part that makes equity equity - the legal, court-enforceable claim on the residual value of the business.

A token holder in a crypto protocol has none of this. They have neither a right to receive dividends nor a residual claim on the proceeds of the company’s sale. It is the whole difference between owning something and being told you own something. Every legal system built around ownership assumes the owner can enforce the claim. A token holder cannot enforce anything. All they have is a token whose price the protocol tries to support by using some portion of revenue to buy back the token on the open market and burn it. What’s worse? Even this isn’t set in a contract. The protocol can change it, pause it, or stop it without any board approval. You cannot call a lawyer if you are aggrieved.

But why are we talking about this now? This gap in the nature of ownership and rights was always there. But it didn’t matter for most of crypto’s history because there was no separate class of owners to compare against. The token was the only one that existed. All this while, the incentives of everyone who holds tokens, be it the community or the founding and leadership teams, are aligned in the same direction.

But that’s changing now.

When successful crypto protocols begin to operate like companies, actual revenue, product, and users begin to matter much more. Sooner or later, they will need more capital to scale, and the best way to raise serious money is still to seek it in wider markets. Just like how Google and Snap did when they went public, or like how Tesla and SpaceX did before they went public.

On July 1, Venice AI closed a $65 million Series A round led by Dragonfly and Coinbase Ventures, valuing the company at $1 billion. Investors got 8.98% equity plus a token grant. This changes how the ownership structure works. It exposed a structural flaw crypto has been ignoring for a decade, just because nobody decided to point it out.

Before the raise, Venice had one class of owners. Now it has two. First are the equity investors with contracts, board rights, information rights, anti-dilution protection, and a legally protected claim on 8.98% of the company. Second are the VVV (Venice’s native token) holders, with a burn programme the company runs voluntarily and can stop whenever it wants.

The fundraise puts an official price on Venice’s equity. When the company grows from here, the equity shareholders capture the growth through a legal, contractual mechanism. None of that directly accrues to the token holders. They benefit only if Venice keeps choosing to buy back and burn its tokens. This means that every dollar of future revenue has to be split between the two, that is, if Venice’s leadership decides to be fair to both classes of shareholders. They can always choose not to buy back.

Venice isn’t the only one. Aave routes 100% of protocol income into AAVE buybacks. Hyperliquid runs the largest buyback in crypto, with over $1.2 billion of protocol revenue allocated to HYPE, 97% of fees, and roughly 5-6% of market cap annually. None of these protocols has done a Venice-style equity raise yet. But all of them face the same underlying question. The buyback mechanism sits at the team’s discretion. Nothing prevents Hyperliquid’s team from redirecting the Assistance Fund.

For a small example of how this ends, Sol Strategies acquired Houdini Swap for $18 million in May 2026. The acquirer paid the founders and equity holders. Token holders of Houdini Swap’s LOCK received nothing. The token’s chart flatlined at zero.

In each case, the mechanism meant to protect token holders’ interests turned out to be one the protocol controlled. This meant that what they expected from holding tokens was just at the mercy of the protocol’s management changing its mind.

This is what happens when the acquirer isn’t legally required to buy anyone else.

The Legal Bind

The CLARITY Act, passed by the US House in July 2025 and stalled in the Senate as of July 2026, is likely to make this conflict even more pronounced by using its legal teeth. The legislation plans to sort every crypto token into one of two boxes. Digital commodities will be overseen by the CFTC, the agency that regulates oil, wheat, gold and other commodities. Under investment contract assets, the token will be categorised as a security and will be regulated by the SEC, the agency that regulates stocks and bonds. Almost every protocol wants its token to be in the first category because it allows the token to trade freely on public exchanges. The second would collapse liquidity and impose compliance costs that most tokens can’t survive.

The problem arises when you look at what comes bundled with each category.

The bill explicitly allows commodity tokens to have governance rights, staking rewards, and value that rises with the extent of use of the underlying protocol. It doesn’t allow any issuer to grant its token holders a legal claim to the issuer’s revenues, profits, assets, or debts. It means a token can capture value from the network, but cannot capture the value from the company that runs the network.

This doesn’t stop a protocol from designing a token whose value accrues based on trading activity. But the token cannot be designed to have its value accrue based on the revenue generated by the corporate entity behind the protocol. Buybacks and burns fall in this grey zone. So far, the SEC hasn’t clarified which side of the fence it falls on. But nothing forces the SEC to draw a line in favour of the token holders.

In the status quo, protocols existed in a legal fog where they could claim tokens were something like informal shares. It’s a case exploiting the absence of clarity. But wait, would you even call it exploitation where there is no law yet? There’s no CLARITY Act right now to outlaw the story that protocols continue telling their token holders. But once the Act comes into force, it will make it legally impossible to offer ownership rights to token holders while keeping it in the commodities category.

Some protocols are already trying to bridge the gap without crossing the line. Aave activated Aavenomics 3.0 on June 27, replacing its committee-directed buyback with an automated, non-discretionary on-chain mechanism that routes 100% of protocol and GHO (Aave’s decentralised, overcollateralised stablecoin) revenue into open-market AAVE purchases.

Stani Kulechov, Aave’s founder, called the mechanism immutable and automated. It is probably the farthest any DeFi protocol has gone to make a promise on record.

But Aavenomics 3.0 is still just code doing the job a contract ought to do. Aave’s governance team can still vote to halt the mechanism. An aggrieved token holder cannot sue for breach of promise. At best, it is a policy that most holders trust the governance team to uphold. Every protocol that has tried to build value accrual without securities registration is likely to face the same restraint imposed by the CLARITY Act.

In fact, Aave is also about to face the question Venice just faced. In late June, reports emerged stating Kraken’s parent, Payward, is negotiating a 15% equity stake in Aave Group at a $385 million valuation. But Kulechov disputed the consideration involved in the deal.

However, he didn’t deny that talks were underway. If this deal closes, Aave becomes the second major protocol to add a real equity class on top of a live token.

Is there any way crypto protocols can justify these dual structures?

The industry’s standard defence is often tokens that hold some genuine utility. Venice’s DIEM, a mint credit that buys a dollar of daily AI compute, is an example of a utility token. Fee tokens on trading venues are another example. But the problem here is that tokens whose value is linked to utility cannot appreciate. It’s like the chips a casino sells you so you can use them to play and cash out when you're done. Even if someone chose to hold these chips, they cannot serve as a store of value beyond their utility for playing in the casino. A DIEM that buys a dollar’s worth of compute should also be treated similarly. It can gain temporary value due to demand being higher than supply, but that cannot compound over time.

But the moment the primary pitch for selling a token is that the protocol will use its earnings to make the token more valuable, then it is nothing more than a pseudo-equity. And this instrument will be unable to evade CLARITY’s excluded categories.

The better alternative for protocols is to choose. They should accept that the token is a commodity and stop marketing it as a claim on the company’s success. The other option is to issue actual economic rights to token holders, register the token as a security, and bear the compliance cost.

For a decade, the capital asset framing worked because nobody insisted on reading the fine print. But it worked so long as everyone in the room was at peace with how it worked. Once equity shareholders arrive with signed papers, the act will stop. Aave’s automated buyback could be one of the best ways to reassure the tokenholders. But that will only last until the governance decides to change the rules they play by. That moment is just one term sheet away.

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.

Tokenisation is stitching together two contrasting worlds: the always-on, permissionless DeFi protocols where prices move every few seconds, and traditional funds where settlement follows administrative time blocks for a set of permissioned holders.

Bringing the two together involves an unenviable orchestration. But it comes with a value to capture for those who can pull it off. In today’s piece, I will explore who is orchestrating the layer connecting the two worlds and who captures the value it provides.

On to the story…

The tokenised real-world asset (RWA) pool sits above $33 billion, with tokenised US Treasuries accounting for roughly $15 billion. Interestingly, though, its share has slipped from 55% to less than 45% in just a year. There’s been a rise in other tokenised funds, including institutional credit (eg: Apollo’s ACRED) and private credit (eg: Janus Henderson’s JAAA).

This coming-of-age of tokenisation has opened up a spectrum of options across risk profiles for a treasurer or a CFO managing corporate cash. Those seeking lower risk, lower yield, but higher liquidity can opt for treasury funds, while those seeking higher yield and greater programmability can pursue riskier options. The safety of the yield is no longer the problem it once was. These are Treasury-backed instruments audited by the same firms that audit their traditional cousins.

This is the strongest pitch for why tokenisation of real-world assets is ready to blow up among institutional investors.

If someone asked me what separates off-chain money from on-chain money, I’d say composability. It is what lets a dollar do much more across many avenues, helping it compound more. Instant redemption and the ability to make your money work harder make it look like funds on steroids.

Traditional finance made us pick between yield, liquidity, and mobility. Tokenised funds, if managed well, let us keep all three.

But the “managed well” part isn’t as easy. Composability with a fund involves an engineering problem.

Stitching Two Contrasting Worlds

Blockchains bring speed, cost efficiency and fast settlements to tokenised RWAs. But a tokenised money market fund is still a fund, not a stablecoin. It still has to update the NAV once per business day, according to the fund administrator’s clock. It still has to maintain a KYC’d set of holders. For example, BlackRock’s BUIDL has a minimum investment threshold of $5 million, and Circle’s USYC is limited to non-US persons. It still has to honour redemption cutoffs because the T-bills underneath settle on the off-chain infrastructure that closes at 5 pm Eastern Time.

This is the legal substance of the product that cannot be eliminated. If you kill the NAV daily strike, then it isn’t a money market fund anymore. If you do away with the whitelist, then the SEC will come knocking on your door with questions.

So how do you let a fund keep its clock, its holder set, and its redemption windows, while the token representing a share of that fund moves at internet speed? Funds need purpose-built infrastructure that maintains the NAV at period-end, supports epoch-based settlement, and upholds strict legal boundaries when moving assets across blockchains. It’s a tricky coexistence problem to solve.

A recent joint report from LayerZero and Centrifuge describes how they solve it.

Read LayerZero x Centrifuge report

Solving the Conflict Points

Three points of conflict determine whether the coexistence works. If the orchestration layer gets them right, the fund can move at internet speed without violating legal boundaries.

First is the price.

What is the token worth between NAV strikes? Some issuers freeze it at yesterday’s mark and accept the staleness. A frozen price is easy to game when interest rates move mid-day. A continuous price is harder to game but harder to reconcile with the fund’s actual accounting.

Second is the compliance factor.

Where does the whitelist verification layer run? If it runs on every transfer, the token can’t touch open DeFi and can move only between approved wallets. If the layer moves into a vault wrapper, the vault holds the regulated share and issues a freely-circulating receipt token to holders who have cleared KYC once. This receipt becomes composable via DeFi, with compliance embedded in the vault rather than checked on every transfer. Centrifuge’s deRWA framework is a good example of this.

The third conflict arises while moving assets cross-chain.

When a tokenised fund is deployed across nine chains, you need a single source of truth for who owns what and what it’s worth. Although on-chain infrastructure can be updated in real time, it still requires updates and reconciliation across nine chains in the event of discrepancies. The more points of failure there are, the more likely an error is to creep in.

LayerZero and Centrifuge addressed this by building a hub-and-spoke model. In this, a single authoritative chain covers NAV, accounting, and compliance. A messaging layer, orchestrated by LayerZero in this case, pushes those updates to the spoke chains where the token actually gets used.

Centrifuge’s V3 architecture is built on this model, in which each pool selects a hub chain as its source of truth, spokes serve as distribution endpoints for deposits, and DeFi composability is enabled. LayerZero carries the operational data between them that ensures NAV updates, compliance instructions, and cross-chain balance state.

It’s this unenviable orchestration that I was referring to earlier, one that accrues value to those who can carry it out. Whoever runs the infrastructure that keeps a fund’s authoritative state consistent across chains becomes hard to replace. While the fund administrator still holds the clock and the chain holds composability, a single player in the middle has to make both possible at once.

The most fragile part of moving assets is accounting for assets in flight.

When an asset is moving between chains, it can temporarily fall outside the fund’s visible balance sheet. Centrifuge V3 issues tokenised acknowledgements for in-flight assets, so the fund’s balance sheet remains continuous even while the underlying token is in transit. It’s the on-chain equivalent of trade-date accounting. Although boring, but essential.

Why should an institutional investor consider tokenised funds despite these conflicts?

One of the biggest optimisations of idle cash via tokenisation is the looping trade. A treasurer can deposit a tokenised Treasury fund and pledge it as collateral to borrow stablecoin. If the borrowing rate is below the fund’s yield, the position pays the treasurer to hold it. They can then redeploy the stablecoin funds into another yield source and repeat the cycle.

The entire looping trade works only if the above conflict points are addressed. That’s the next challenge facing those building the infrastructure for tokenisation. These points of conflict have been exploited in the past. For instance, if the on-chain NAV price remains stale on smaller tokenised products for even two to four hours and lags the underlying asset, it creates arbitrage opportunities before the next NAV strike.

Redemption-gate collisions can happen when off-chain NAV triggers a liquidity limit, while independent on-chain smart contracts attempt to process token redemptions instantly. This could leave smart contracts holding “orphaned” or unexecuted token transactions that attempt to continuously execute simultaneously against the off-chain cap.

Giant private credit funds and business development companies (BDCs) are currently experiencing this. Two weeks ago, Apollo Global’s $26 billion private credit fund, Apollo Debt Solutions (ADS), ‌had to curb redemptions at 5% of its shares after investors sought to withdraw approximately 16.8% of the total. If such an instance occurred for a fund with a tokenised version trading simultaneously, a redemption-gate collision would be hard to dismiss. In the second quarter, investors requested $15.6 billion in withdrawals from widely held private-credit funds, up from roughly $13.9 billion in the prior quarter.

Cross-chain messages can fail mid-flight, leaving positions half-settled. Trust from institutional allocators will have to be earned when each of these failure modes is monitored and accountable to someone with a licence.

If tokenisation needs to scale to the potential it shows, this is what it will have to deal with. It’s not merely about putting US Treasuries on a blockchain or creating a new asset class. Those building the infrastructure will have to end the archaic rule that forces investors to choose among yield, liquidity, and mobility. If tokenisation offers a way to make a dollar do more than one job at once without compromising on the credibility that comes with the guardrails, then the institutions running billions in cash are definitely going to notice.

I wrote last week about how SWIFT, as an orchestration layer today, is more valuable and powerful than the parties on both sides of the network it serves. How Visa is more valuable than every bank it serves worldwide, except J.P. Morgan.

Read: Who Captures Value in Web 2.5?

This is the incentive for being the orchestration layer in the evolving world of finance. It offers the player a seat at the table for the next decade of capital markets. Centrifuge is defining what the fund side of that seat looks like, and LayerZero is laying its hands on the connective layer between chains.

Read LayerZero x Centrifuge report

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.

On May 21, I said in Strategy’s Alchemy of Capital that the corporate BTC treasury giant’s STRC preferred debt instrument bends before it breaks. I wrote that STRC was engineered to trade at $100 and that it could strain in unfavourable conditions, but is likely to hold.

Five weeks later, STRC trades at $74 today, down 26% from par. I’d admit that’s more than just bending, especially when I look at the other metrics around the debt instrument.

Just 10 days after I wrote that piece, Michael Saylor sold 32 bitcoin, worth ~$2.5 million at the time. That was the first time Strategy sold anything from its bitcoin stack in years. Although that barely dented its $65 billion stack, a lot has changed in the market in which Strategy operates. And that also changes a lot of things for Strategy.

In my last piece, I stress-tested scenarios that could undermine the thesis behind the debt instrument and the self-feeding reflexive loop that ensures STRC trades at par. But some of those scenarios unwound sooner and more aggressively than I’d expected.

In today’s piece, I look at what exactly happened and where STRC could go from here.

On to the story…

Even after adding 3,600 BTC in the last four weeks, Strategy’s bitcoin stack is worth 25% less. During this time, both the crypto market and bitcoin, which implicitly powered the market’s belief in STRC, have seen about 20% of their market cap erode.

STRC, whose price had never dropped below $90 since its launch, has slipped every single day from $99 on June 1 to $74 on June 26.

Its implied volatility, a forward-looking metric reflecting market sentiment and expectations, had crossed the 10% mark only on seven occasions in the three months before it sold its first BTC. That has shot up almost tenfold, from 8.22% to 78%, in 19 trading days.

Stripping out the numbers shows how the market’s perception of STRC has changed drastically over the last month. STRC was supposed to behave like a calm, boring instrument, in contrast to bitcoin. Strategy pitched it as a credit instrument that traded near $100 and paid a dividend. For months, it traded just like that. In the last 30 days, though, STRC has been closing lower every single day. The instrument that traded at about $100 consistently for months now trades at $74. Its 30-day historical volatility has risen from 4.3% to 34.6% over the last month.

Although Strategy has yet to miss a dividend payment on the outstanding STRC instruments, what’s changed drastically is that its price now fluctuates more wildly than the risky asset it was supposed to shield people from. While the prospective investors were promised predictability, that’s the one thing the instrument can no longer offer.

Implications for Strategy

The most immediate consequence is that Strategy’s funding machine is stressed.

When STRC traded at or near $100, Strategy could issue new shares through its at-the-market programme, collect the proceeds, and buy more bitcoin. That loop powered everything. But issuing a share with a $100 par value when the market will only pay $74 for it means Strategy must still pay an 11.5% dividend on $100 while receiving just $74 in cash. No company does that voluntarily. So the ATM issuance has paused, and the bitcoin-buying flywheel that ran on preferred capital has gone quiet.

The notional value of outstanding STRC preferred shares more than doubled, from $5 billion to $10.5 billion, between March 18 and May 18 this year. But Strategy hasn’t issued a single share ever since.

In my last piece, I described the loop running forward: issue STRC, buy bitcoin, bitcoin rises, confidence grows, issue more STRC. I treated the reverse as a tail scenario, where if the belief in the loop failed, the loop could unwind. That was less than six weeks ago.

But since STRC holders have a preferred right to receive their dividends, the company will still have to pay them out of its cash reserves or, worse, by liquidating its BTC stack.

In May, Strategy’s cash reserve had fallen to $871 million, down 60% from where it stood ($2.25 billion) when I wrote the last piece. That was after the company repurchased $1.5 billion in aggregate principal amount of convertible notes expiring in 2029, for approximately $1.38 billion in cash. It has since been rebuilt to around $1.4 billion, including expected cash proceeds from shares sold under Strategy’s ATM that had not yet settled as of that date.

Set that against annualised preferred dividend obligations that have climbed past $1.2 billion across STRC instruments. That figure swells even further when you add payment obligations toward other instruments.

Although Strategy is far from insolvency, thanks to its BTC stack that it can partly liquidate, the bigger trouble is not the math but the slipping investor confidence in its instruments.

Reviving Investor Confidence

There is a growing debate on crypto forums arguing that Strategy should sell a meaningful chunk of its bitcoin stack to rebuild confidence. But it’s a double-edged sword.

STRC was designed to trade at its par value of $100, and the entire loop of raising additional funds to pay off dividend obligations revolved around its ability to keep the trading price close to par.

If Strategy has to revive investor confidence in STRC and bring its par value back to $100 from $74, it must raise its dividend rate to make it more attractive. But raising the interest rate would mean a larger dividend payout. At the current level of outstanding STRC instruments, a 50-basis-point dividend hike would add about $50 million in annual obligations.

The interest rate hike might still attract enough buyers for STRC. In that case, it will be forced to repeat what it did on June 1: sell more of its BTC stack to pay its dividends.

The payment obligation is a math problem. But selling a portion of its BTC stack could pose a psychological and larger dilemma for Strategy.

In 2025, dozens of companies copied Strategy’s digital asset treasury playbook. They issued stock, bought bitcoin, traded at a premium to their net asset value, and used that premium to raise more capital. Nearly all of them stopped buying when bitcoin slumped, and premiums vanished.

Strategy survived that episode specifically because it did not sell. The “never sell” commitment was what held up the investors’ belief in the entire capital structure.

But that commitment has now taken a U-turn. Although Strategy remains a net buyer of BTC, Michael Saylor explicitly admitted during Strategy’s Q1 earnings call that the company will consider selling its BTC stack to fund its dividend payments.

That statement didn’t trigger investor concerns for over a month. But the single act of selling just 32 BTC, which is less than 0.004% of its BTC stack, on June 1, has done considerable damage to the investor confidence.

The STRC price has dropped by 25%, while the price of common equity stock MSTR has slumped by 45% since the day Strategy sold 32 BTC. In fact, MSTR’s price has slipped below $100 for the first time in more than two years.

This is where the psychological dilemma arises for prospective investors.

Strategy can solve the near-term payment problem by selling bitcoin. In accounting terms, that is possible. The company has a large BTC stack, and selling a small portion of it to fund preferred dividends doesn’t threaten solvency. But no public company is valued only on accounting logic. The story that the company tells the world plays an important role in deciding how the public values it. Strategy sold the story of being a company that buys through cycles, refuses to sell into weakness and uses capital markets to accumulate more BTC.

Once that selling line is crossed at scale, every future dip in Strategy’s cash reserves and every fall in STRC’s price will invite the same question: “Will they sell again?”

This question is the dilemma. If Strategy does not sell, investors may worry about how it will fund its dividend payments. If it does sell, investors will worry that the story of the BTC stack being untouchable is no longer true. The first stresses the cash-flow fundamentals, while the other tests the company’s story that the investors bought into.

This is the reflexive loop that I spoke about in my last piece. The same belief that helps a model like STRC sustain could lead to its downfall, even when the fundamentals seem healthy. Even now, Strategy’s reserves and BTC stack will keep it safe from bankruptcy, but eroding investor confidence alone can lead to reduced interest in buying more STRC and a free-falling STRC price.

We saw this exact pattern kill the DAT copycats. The moment a treasury company starts selling into weakness, the premium disappears, the issuance window closes, and the stock re-rates to a discount. With STRC, Strategy would be repeating 2025, but with its own capital structure at stake this time.

Looking beyond Strategy’s Stretch

When you step back from the company, this episode tells us what it could mean for the industry beyond this one instrument.

The broader crypto market shed roughly 20% of its market cap over the last month. Bitcoin ETFs have recorded seven straight weeks of net outflows, their longest streak ever since launch. The Fed has turned hawkish, and the May PCE inflation print was 4.1%. While none of these was about Strategy, the unwinding of STRC is happening inside this environment. It’s hard to deny that the two don’t feed off each other.

With exchanges making it easier for retail investors to gain BTC exposure, it could also be a case of capital rotation from high-cost or less stable Bitcoin instruments like ETFs, DATs, and proxy holdings like Strategy.

The rise of perpetual contracts and the ease with which retail investors can use leverage on these contracts, with minimal margin risk, allow them to do what they once could only do with MSTR. The wavering correlation between MSTR/STRC and BTC price is less trustworthy than the near-perfect correlation a BTC perp contract has to the spot BTC price. This makes it a no-brainer for an investor to prefer a perpetual contract over a proxy for BTC exposure.

But STRC failing is its own undoing. The instrument is struggling to find demand because its credit story has broken down. The investors have lost confidence in Strategy’s ability to sustain a loop around a credit instrument whose dividend payouts had to be sourced by issuing the same instrument. When that loop broke down, it dragged MSTR’s price down with it. MSTR’s premium to net asset value has compressed to near-parity, implying the market doesn’t value the company above its underlying assets.

This completely inverts the structure that Strategy relied on. For years, the BTC price drove Strategy’s stock, which in turn drove its ability to raise capital. This capital funded its bitcoin purchases. Now the instrument’s credibility is driving the stock price, which in turn feeds back into perceptions of bitcoin exposure. A tale of tail wagging the dog.

This raises a question I did not expect to be asking when I wrote the last piece. If STRC’s fate is increasingly about Strategy’s credit and less about bitcoin’s price, what does that mean for the dozens of other bitcoin treasury instruments that launched in its wake?

Strive’s SATA preferred stock, the closest structural clone of STRC, hit an all-time low of $79 the same week. SATA holders are paid a 13% annualised dividend daily. Strive holds roughly 19,800 BTC at a cost basis of $96,000, which is 60% above the current price levels. Strive has zero debt, no convertible overhang and no maturity-cliff risk. Yet, it broke below par.

Metaplanet in Tokyo holds over 40,000 bitcoin and has issued its own preferred instrument, MARS.

The fact that even a debt-free, structurally cleaner instrument like SATA could not hold par shows us that this is not a Strategy-specific problem. This might mean that the market is repricing the entire asset class for what they are. Not bitcoin proxies and crypto bets, but as credit instruments with all the fragility that comes with credit.

Strategy may recover from here if it were all about fundamentals. If BTC climbs back to $80,000, the collateral story revives in theory, and the ATM window reopens. But only if it were all that easy.

Strategically selling more of its BTC stack in the days to come might technically be far less than what the market’s daily trading volume can absorb. But a broken belief among investors alone can trigger a panic and lead to a market-wide sell-off.

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.

There’s a hidden currency risk in today’s global payroll systems. A contractor in India, Argentina or Turkey may earn in dollars from a US company, but their rent, groceries and taxes are still paid in their local currency. The current payroll system assumes that the paycheck should be converted to the local currency immediately. That’s not practical in most cases and costs people money whose currencies fall quickly against the US dollar.

What if the worker could save in US dollars and spend locally? This is what stablecoin-enabled payrolls can offer.

If a designer in Mumbai converts the full paycheck into rupees on day one, they have exited the dollar. If the rupee weakens over the next few months, the designer does not benefit and is instead left holding money in a weaker currency. In fact, the Indian designer lost more than a tenth of their purchasing power over the last year simply because they couldn’t hold the money in USD. Instead, if the designer had been able to hold part of that paycheck in dollars or a dollar-like stablecoin, they could have avoided the loss due to currency devaluation.

In today’s piece, I will explain why global workers are increasingly choosing to be paid in dollars or stablecoins and what they actually gain from doing it.

On to the story…

The Currency Risk

A worker who lives in one country but works for an employer in another earns in one currency and spends in another. How they handle the conversion decides whether they quietly lose or gain.

If an Indian contractor earns $2,000 a month and spends it all within a few days, there is no currency benefit because nothing remains to be held. But if the contractor saves 25% of that monthly income, that small dollar position over time could lead to a sizable benefit to the worker. How big a benefit are we talking about?

Over the last 12 months, the rupee moved from roughly ₹85.6 per dollar to around ₹94.7 per dollar. That is a depreciation of over 10%.

This is how much an Indian contractor can save across different scenarios

On a monthly savings of 25% on $2,000 of earnings, that could add up to $600 of avoidable loss (10% depreciation avoided on $6,000 of annual savings). Sure, it’s not a life-changing amount. But in a metro Indian city, that avoidable loss could pay a month’s rent for a well-furnished two-bedroom apartment.

If that saved money had been converted into rupees every month, it would have sat in local currency and gradually lost its purchasing power.

The contrast gets starker as the local currency the contractor spends in performs worse against the US dollar. Consider an Argentine worker who was paid in dollars but held the entire money in pesos. The peso lost 25% of its value against the US dollar in the last 12 months.

By letting the earnings sit in dollars, the worker could have been a third richer. This is not a random, hypothetical abstraction that I came up with. It’s been the reality for many contract workers in Buenos Aires. About 85% of surveyed Argentinian workers chose to be paid in USD rather than their local currency, Deel’s State of Global Hiring report showed.

But the benefit of getting paid in dollars depends entirely on what the worker does with the money. The dollar advantage only appears when the money sits. The longer it sits, and the more of it that sits, the wider the gap grows.

For India, holding dollars could equate to optimising one’s earnings. But for Argentina, it’s more about insuring oneself against the erosion of local currency. The same is true for most struggling economies that face rising inflation and see their currencies devalue against the US dollar.

The Stablecoin Factor

Everything to this point is an argument for dollars. But it isn’t as easy to hold a US dollar in a foreign bank account.

Every bank takes a cut to hand you your own dollars. An inbound international transfer arrives after a flat wire fee, a correspondent bank’s slice, and a conversion spread that most contract workers are unaware of. The global average cost of moving money across a border still sits around ~6.5%. For a contractor billing $2,000 a month, the cross-border fee of moving that money could eat away more than half the currency depreciation cost they could avoid by holding the money in dollars. A stablecoin transfer sidesteps most of it: a couple of dollars in cost, settled in seconds rather than the three-to-five days it takes a wire to clear.

An Indian resident can’t freely keep a balance in dollars. The rules route dollar holdings through specific account types and cap how much you can hold each year; a normal inbound payment is expected to arrive in rupees. The designer who wants to keep three months’ pay in dollars has to comply with these regulations. Struggling economies with devaluing currencies could also restrict their citizens from holding US dollars to avoid hyperinflation and capital flight. Countries like Venezuela, Iran and Afghanistan have all done this in the past.

A set of self-custodial stablecoin accounts has emerged to fill this gap. Platforms like Altitude, built on Squads’ smart-account infrastructure, hold workers’ balances in stablecoins issued by regulated dollar issuers like Circle and Bridge, backed one-to-one by dollar reserves, and store them in a wallet the worker controls with a private key. The platform never assumes custody. The worker holds the dollars on-chain, and no institution stands between them and the decision to keep them in dollars. But self-custody cuts both ways; there is no bank to call if a key is lost, and the balance is not insured the way a bank deposit is.

These accounts let the worker off-ramp just enough to pay rent and utilities, and keep the rest in dollars. It also solves the access problem in places where a dollar account is capped or unavailable. The contract worker doesn’t need the bank’s permission to hold a dollar balance.

This dollar balance does more than just sit there. These accounts integrate the stablecoin balance with yield-generating products like on-chain lending and short-term US Treasuries. This money would have lost value in a local bank account.

That’s not all. These balances can be spent using the card layer built on top of them. Stablecoins move from the worker to the vendor in seconds, regardless of the on-ramp and off-ramp infrastructure each side uses. Multi-currency accounts, an FX engine, payments across 150-plus countries, the savings account, and the debit card all collapse into a single balance that the worker controls.

But I won’t sell this to you like a clean product.

The stablecoin balance is not yet an insured bank deposit. There are emerging versions of tokenised deposits (Read: Defending the Deposit) that could bridge the gap, but they haven’t yet achieved mass adoption. Contract workers still might be unclear about the grey zone in which digital assets and stablecoins operate in their countries. Yet the direction of where this is headed is hard to miss.

The same state of hiring report claimed that contractors in high-inflation markets are increasingly choosing USD or stablecoins over local currencies. In 2025, five of the 10 most common country-currency combinations globally featured USD.

Interestingly, this is not a new behaviour. For most of the last century, everyone wanted to hold the world’s reserve currency. Except that for a majority of that century, doing that was a privilege that didn’t come easy. You needed a foreign account, a broker, a tolerance for paperwork and to part with a bank’s cut. The worker in Istanbul, Buenos Aires, or Mumbai wanted dollars and was told, in various ways, that holding dollars was not for them. Stablecoin payroll inverts that and makes it possible. The dollar now arrives as income, on a rail that doesn’t care where the worker lives, and the act of holding it requires no one’s permission.

You don’t have to look hard to see why this is a big shift

Governments might be tempted to consider this as a leakage and attempt to plug it with their regulatory teeth. But the intent behind what the idea enables is hard to dismiss.

Any infrastructure that moves money cheaply and efficiently is bound to receive its due recognition and validation. The IMF recently told Nigeria not to ban dollar stablecoins, but to manage their risks. It was the same monetary fund that had, for years, maintained a strict stance against stablecoins. This shift in winds shows the mainstream credibility that stablecoins have earned in recent years.

Within the payroll industry, stablecoin infrastructure unbundles the unit of pay, the place it’s stored, the yield it earns, the card it’s spent from, and the border it crosses.

Just what money is supposed to offer: freedom and agility.

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.

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.

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.

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.

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

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New technologies rarely come as clean replacements. They usually attach themselves to the infrastructure people already trust. That’s where teething troubles often emerge.

Cards did not eliminate cash overnight. Neither did mobile payments. Now, stablecoins are learning the same lesson.

One of the hardest parts of transitioning from older to newer rails for moving money is making that technology usable within the systems where people already live, shop, travel, and get paid. That’s where the value leaks, but it’s also where great businesses find opportunity.

At a pharmacy in Buenos Aires, a customer can hold USDT or USDC in a wallet, but the cashier still wants a card that can move those stablecoins and make a payment. The merchant doesn’t care about Tron, Base, gas fees or settlement finality.

Stablecoins only solved part of the problem by giving people access to hold dollars. Crypto cards help move digital dollars between the holder and the merchant. But when all cards offer similar rewards and move money between the same players, the differentiation lies in owning the deeper payment stack behind every swipe.

In today’s analysis, I will explain why crypto cards must vertically integrate across the payment stack.

Onto the story,
Prathik

The Anatomy of a Swipe

A card swipe is one of my favourite things about finance. It looks so simple yet conceals a dozen actors orchestrating a complex chain of tasks. On the face of it, you just tap or swipe the card, the terminal approves, and the merchant hands you the receipt. But underneath it is a stack that includes an issuing partner, a processing gateway, a card network, a compliance partner, and a fraud monitoring body. The process also has to maintain custody of funds and process the FX when the user’s balance and the merchant’s currency differ.

When stablecoins enter the picture, you must address additional questions: Who holds the stablecoins, who converts them, who manages the routing, and who covers the volatility and settlement risk?

A crypto card solves the user’s problem at the surface. If you have USDT or USDC in a wallet, the card lets you spend it without forcing the merchant to touch crypto.

But as a business, the card is the least interesting part. In a world where everyone is offering cards to spend your crypto with similar rewards stacked on top, the only differentiation is owning enough of the stack so that every transaction creates value in more than one place.

Every layer of the payment stack charges the merchant a fee to pass the money along to the next layer. The best way to optimise such a stack is for a player to vertically integrate multiple layers and undercut other players by charging the user a substantially lower fee for moving the money.

Saurabh explains how this works for cross-border payments in his Stripe piece for Decentralised.co.

Crypto cards sit at a similar intersection.

A report by Memento Research notes that most cards today have similar propositions, usually built around prepaid balances, cashback or points. The moat in this environment is no longer the card itself.

Read report here

How do you differentiate in such an industry? By operating across different layers of the stack underneath. One card may own more of the API orchestration, settlement logic and compliance stack. Another may mainly own the consumer relationship. How deep each one goes determines how much it earns.

Consider a crypto-native case of Rain cards. Rain powers stablecoin cards and global money movement for platforms, fintechs, and institutions. It makes tokenised money like stablecoin usable in the real world through cards, wallets and everyday payments.

The Rain Case: Depth as Moat

Rain is a Visa Principal Member, which is the regulatory wedge that lets it issue cards or card programmes directly on Visa rails rather than renting infrastructure from an issuing bank.

When it offers a crypto card to its users, it also provides backend infrastructure spanning APIs, compliance layers, and settlement logic. This allows fintechs and wallets to launch stablecoin-linked card programmes.

Rain cannot afford to focus solely on winning customers who can tap their cards at stores. In that case, it will be competing with half a dozen other card providers trying to do the same thing. Instead, it is branding itself as a product that coordinates accounts, cards and global money movement through a unified API. Rain’s status as a Visa Principal Member allows it to help its partner wallets launch card programmes in just six weeks. Without a platform like Rain, a wallet would have to separately coordinate for months with an issuing bank, a processor, a compliance vendor, a settlement partner and local payment providers. Rain compresses all these into one single infrastructure layer.

Joel’s piece on vertical integration is useful here. In this, he argues how durable crypto businesses are those that control the supply side, demand side and distribution together. A similar argument can also be applied for cards in payments.

Here, the user’s stablecoin balance is the supply, the desire to spend it is the demand and wallet or fintech integrations form the distribution. Rain shows how owning the layers across these three layers helps in standing out.

The numbers in Memento’s report validate the vertical integration thesis for cards.

It shows that Rain-based cards consistently led in deposit volumes because Rain offered the underlying infrastructure for multiple card programmes, including EtherFi Cash, KAST, Offramp, and the Avalanche Card. From the second half of 2025, a wave of new card programmes launched with Rain as their core infrastructure partner, helping Rain-based cards gain deposit-share leadership.

Building across multiple layers of the stack also gives a distribution advantage.

A normal card brand has to acquire customers one by one through ads, referrals, rewards or community campaigns. Rain can acquire them in batches by becoming the card infrastructure inside wallets and fintech apps that already have users. If EtherFi Cash, KAST, Offramp and Avalanche Card all run on Rain, each partner brings its own community and distribution, while Rain sits underneath the transaction flow.

The front-end brand may still belong to the wallet, but the programme operations, compliance, settlement and orchestration sit deeper in Rain’s stack. So the pharmacy in Buenos Aires may never know that the Avalanche card being used at the counter is powered by Rain. The user may not know either. But Rain still benefits because the swipe runs through infrastructure it helped build.

This is why comparing crypto card brands at face value is misleading.

A RedotPay card and a Rain-powered card may both let a user spend stablecoins at a merchant terminal. But from a business-model perspective, the value they capture depends on how many layers in the stack they operate on.

Better Risk Control and Higher Ceiling

The more of the underlying stack a card company owns, the more it can shape the user experience and the economics. If the business is only a front-end, it is fragile and vulnerable to changes made underneath.

It could lead to the problem of over-dependency and create a single point of failure.

A crypto card brand can promise cashback, points, metal-card aesthetics and instant spending. But if the issuing partner changes its risk rules, the card can stop onboarding users. If a processor tightens merchant category restrictions, some payments may fail. If a banking partner pulls out, off-ramp availability can shrink. If a card network changes compliance requirements, the business has to adjust overnight.

The user experiences the most disruption. Uncertainty around the terms of using the card can lead to frustration, which in turn leads to a customer-support nightmare. The rented infrastructure comes back to bite the card providers.

Memento’s report also notes that most card programmes sit on top of issuers, processors and a few crypto card-as-a-service providers. This could leave the card providers at the mercy of others who own various layers across the stack. We have seen this happen before.

In October 2023, Binance ceased its debit card services in the European Economic Area (EEA) after Paysafe, its banking partner in the region, ended offering its embedded wallet solution to the crypto exchange.

It also acts as an economic ceiling.

If a crypto card company rents issuing, processing, compliance, FX and settlement, then its room to monetise is limited to what remains after all those partners take their cut. It may still grow fast, but its ceiling is capped at the number of customers it can sell its cards to. This doesn’t give it control over the most important cost lines in the transaction.

The more fragmented the stack, the harder it becomes to offer lower fees, better rewards or more reliable settlement without going underwater on every transaction.

Vertical integration changes that equation.

A company that owns more of the stack can decide where to undercut its competitors with compressed fees. A vertically integrated brand can subsidise the front-end card because it earns from settlement and orchestration layers on the back-end. It can offer better rewards because it captures economics across multiple layers. The multi-layer presence even allows the company to move faster into new markets because it is not busy stitching together the compliance, issuer and processor stack in each new country across different geographies.

When half a dozen other card providers offer cashback and rewards to acquire customers, Rain can subsidise deeper and make money by coordinating the movement of stablecoins from wallets to merchants across compliance, orchestration and settlement layers.

This is the journey I see more crypto cards heading toward.

Card providers can still choose to continue building branded card programmes to acquire more users. Some might even build successful businesses by packing an attractive reward structure with intuitive design and token incentives. But their margins will still depend heavily on the infrastructure providers that they will have little control over.

On the other hand, there will be card companies that serve as the infrastructure underneath. These brands might still be less visible to the end users, but more important to the market. When five wallets launch cards on top of the same provider and compete for the same consumer, the infrastructure provider will be sitting cross-legged in the background, earning from all of them, irrespective of who wins the race.

This is how any industry matures. Swiping a card will remain the simplest activity in finance, and so the least profitable. The value for capturing will be in running the stack that coordinates the complex web of tasks underneath the swipe or tap of the card.

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.