The financial infrastructure across Latin America has gone largely unchanged for decades, still running on domestic ACH networks that close at night and settle in days. Those systems were built for a pre-digital economy. They were not built for what commerce is becoming.

Enter Minteo.

The Problem

Latin America is home to over 660 million people and a regional economy approaching $5 trillion, yet the financial infrastructure underlying this scale is fragmented, costly, and largely closed outside business hours. Most countries rely on ACH-based domestic payment networks that cannot support real-time commerce or cross-border settlement at a meaningful level of efficiency.

The region processes over $150 billion in annual remittances with fees around 6%, among the highest globally. More than 15 distinct national currencies create persistent friction for regional trade, raising FX costs and settlement delays at every transaction boundary.

Confidence in financial institutions remains structurally low. Banking systems are highly concentrated, with a small number of institutions controlling access to payment networks and foreign-exchange liquidity, limiting competition and restricting access to modern financial services.

USD-based stablecoins, while useful for savings and trading, fail to address this problem at its core because most economic activity in the region occurs in local currency. The infrastructure gap is not about the existence of stablecoins. It is about their inability to connect with the systems where money actually moves.

The Solution: Local-Currency Stablecoin Infrastructure

Minteo is addressing this gap by building financial infrastructure that connects blockchain-based settlement with local banking and payment systems.

The platform enables the issuance of fully fiat-backed local-currency stablecoins and provides the integrations required for these assets to function within existing financial networks. Rather than focusing solely on token issuance, Minteo is building the underlying rails that allow funds to move seamlessly between on-chain and off-chain environments.

This includes banking integrations, foreign exchange connectivity, and payment infrastructure that together enable stablecoins to be used for real-world transactions. By combining these components, Minteo enables local-currency stablecoins to function as a medium of exchange rather than solely as a store of value.

The platform is designed as backend infrastructure for fintech platforms, payment providers, exchanges, and enterprise clients, enabling them to access reliable local-currency liquidity without altering their existing workflows.

Building a Regional Settlement Network

Minteo’s long-term objective is to establish a multi-currency settlement network across Latin America.

The company operates within a jurisdiction-specific framework that allows it to comply with local regulatory requirements while enabling cross-border interoperability. This structure allows Minteo to integrate with domestic banking systems in each market while maintaining a consistent core infrastructure.

By combining regulated issuance, banking integrations, and foreign exchange connectivity, the platform lays the foundation for efficiently moving value across different economies in the region.

Early Product-Market Fit

Stablecoin adoption has historically been concentrated in trading and savings. The next phase of adoption is defined not by issuance volume but by the depth and reliability of the infrastructure connecting stablecoins to real economic activity. Minteo is purpose-built for this transition.

The platform's early traction in Colombia — where it has onboarded payment providers, exchanges, and enterprise clients handling over $200 million in monthly volume — validates that demand for local-currency settlement infrastructure is real and immediate. Expansion into Mexico, Brazil, and ongoing discussions in Panama, Guatemala, Costa Rica, and Honduras signals that the model is repeatable across the region's diverse regulatory environments.

The business model reflects this fit directly. Revenue is generated through transaction fees on pay-in and pay-out flows, FX spreads on local currency conversions, and yield on stablecoin balances held on-platform — three streams that scale naturally with volume, not with speculation.

Why Varys Capital Invested

At Varys Capital, we believe stablecoins are entering a new phase of adoption, where infrastructure will play a defining role.

The initial wave of growth was driven by trading and on-chain liquidity. The next phase will be driven by real-world applications, including payments, cross-border settlement, and enterprise financial operations.

In regions such as Latin America, where financial infrastructure is fragmented and inefficient, the need for alternative settlement systems is particularly pronounced. However, for stablecoins to be widely adopted, they must operate within the constraints of local financial systems rather than outside of them.

Minteo addresses this challenge by building infrastructure that connects blockchain-based settlement with existing banking networks, foreign exchange systems, and payment rails. This approach enables businesses and financial institutions to adopt stablecoins without disrupting their operational or regulatory frameworks.

Varys Capital invested in Minteo's Seed round because we believe that local-currency stablecoins will play a critical role in expanding the use of blockchain-based financial systems in emerging markets. Platforms that provide the infrastructure to support this transition are well-positioned to capture significant value as adoption increases.

Minteo is building this infrastructure layer, and we are pleased to support the team as they scale their platform across Latin America.

About Varys Capital

Varys Capital is a global, multi-strategy digital asset fund that invests in and supports early-stage companies building blockchain-enabled businesses. We are a highly differentiated capital partner with a deep understanding of the digital asset ecosystem and a proven track record of success as investors and operators. We provide our portfolio companies with access to capital, expertise, and a network of relationships to help them scale and succeed. Varys Capital was established in 2018 and is headquartered in Abu Dhabi, UAE, and Bangkok, Thailand.

Twitter | Linkedin For more information, visit: https://varys.capital/

The infrastructure governing how data moves across blockchain networks has gone largely unchanged since the earliest peer-to-peer architectures. Those systems were built for secure value transfer. They were not built for what blockchain networks are becoming.

Enter Optimum.

Investing in Optimum

At Varys Capital, we spend significant time analyzing the infrastructure layers that underpin decentralized systems. While much of the industry focuses on new chains, rollups, and applications, one foundational layer remains underdeveloped: how data moves across blockchain networks.

Optimum is building a new networking and memory layer designed to upgrade this core part of blockchain architecture.

The Problem: Blockchain Networking Bottlenecks

Most blockchains today rely on peer-to-peer gossip networks to propagate data between nodes. These architectures were originally designed for secure value transfer, not high-performance distributed computing. As networks grow and transaction volumes increase, they introduce several structural inefficiencies.

Key limitations today include:

• Slow data propagation across validator networks

• High bandwidth redundancy from repeated packet broadcasts

• Rising hardware requirements for validators

• Latency constraints for real-time applications

At the same time, the broader technology landscape is rapidly shifting toward data-intensive systems.

The rise of AI models, autonomous agents, and real-time analytics has dramatically increased the value of data and the infrastructure required to move it efficiently. Modern computing environments depend on the ability to transmit, access, and update information quickly across distributed systems.

Blockchain networks are beginning to support similar workloads. Applications such as on-chain trading infrastructure, AI-driven agents, gaming environments, and decentralized social systems all require fast access to shared state and efficient data propagation.

Yet today’s networking infrastructure was not designed for this level of demand. As a result, many blockchains still behave more like slow replicated ledgers than modern distributed computing systems.

The Solution: A New Networking Layer for Web3

Optimum is addressing this challenge by redesigning how data propagates across decentralized networks.

Incubated at MIT and Harvard, Optimum is building what it describes as the fastest decentralized internet protocol for Web3 — a high-throughput, low-latency networking system powered by Random Linear Network Coding (RLNC).

Rather than broadcasting full packets repeatedly across nodes, RLNC encodes information into fragments that can be reconstructed from multiple sources across the network. This approach significantly improves the efficiency with which data travels through decentralized systems.

The result is a networking layer that enables:

• Faster block propagation

• Reduced network congestion

• Improved bandwidth efficiency

• Lower latency across validator networks

Optimum’s first product, OptimumP2P, replaces legacy gossip networks with a coded propagation protocol designed specifically for blockchain infrastructure.

Beyond networking, Optimum is also building a decentralized memory architecture that improves how applications access blockchain state, enabling faster interaction with on-chain data and supporting more demanding real-time applications.

Product Market Fit & Traction

Despite being an early-stage infrastructure protocol, Optimum has already gained traction among some of the most performance-sensitive participants in the ecosystem.

Early proof points include:

• 20+ Ethereum validators onboarded, including 9 of the top 15 by stake

• Validators securing over $30B in combined TVL

• Integrations with Titan Builder (top Ethereum block builder)

• Integration with BlockRazor, a leading BNB ecosystem builder

• Partnerships with multiple emerging L1 networks including Tether-backed Stablechain

Benchmarks conducted with early validator partners show propagation speeds more than 20× faster than Ethereum’s existing networking layer under stress conditions.

For validators and builders, these improvements translate directly into economic benefits such as faster block inclusion, reduced orphan rates, and improved MEV capture.

Why Varys Capital Invested

At Varys Capital, we believe the next phase of blockchain scalability will be driven not only by improvements in execution environments or consensus mechanisms, but by upgrades to the networking and data layers that power decentralized systems.

At the same time, the rapid rise of AI-driven systems has made data one of the most valuable resources in modern computing. As AI models, autonomous agents, and real-time applications become more integrated with digital infrastructure, the ability to move and access data efficiently becomes increasingly critical.

Blockchain networks are evolving from simple value transfer systems into distributed computing environments where applications, agents, and markets interact in real time. In this context, the speed and efficiency with which data propagates across the network become just as important as the execution layer itself.

Optimum addresses this challenge by upgrading the infrastructure that governs how blockchain networks transmit and access information. By applying RLNC-based propagation and introducing a decentralized memory infrastructure, the protocol significantly improves how data flows across validator networks and how applications interact with blockchain state.

As decentralized systems continue to support more complex and data-intensive applications, we believe protocols that improve data propagation and state access will become critical components of the Web3 stack.

Optimum is building precisely that layer.

Varys Capital invested in Optimum's Series A round.

About Varys Capital

Varys Capital is a global, multi-strategy digital asset fund that invests in and supports early-stage companies building blockchain-enabled businesses. We are a highly differentiated capital partner with a deep understanding of the digital asset ecosystem and a proven track record of success as investors and operators. We provide our portfolio companies with access to capital, expertise, and a network of relationships to help them scale and succeed. Varys Capital was established in 2018 and is headquartered in Abu Dhabi, UAE, and Bangkok, Thailand.

Twitter | Linkedin For more information, visit: https://varys.capital/

Lulubit is fixing it.

Founded by Ianir Sonis, Lulubit has built a fully licensed, bank-integrated crypto exchange across Panama, Guatemala, Costa Rica, and Honduras — with the Dominican Republic next. Think of it as the Coinbase for Central America, but purpose-built for the region's real financial needs: remittances, on/off ramps, stablecoin yield, and a MasterCard debit card (Lulucard) that lets users spend crypto anywhere.

Crypto adoption in Central America sits at just 2% compared to ~10% across broader Latin America. That's 5x growth headroom, and as the region's remittance corridors continue to expand and stablecoin usage accelerates across LATAM (up 63% YoY according to Chainalysis), Lulubit is positioned at the center of this wave.

Lulubit isn't just following the hype. They're competing on well-built infrastructure and deep local connections. Exclusive local bank API integrations that take 18–24 months to establish. Fees at ~1% versus the 3–5% charged by competitors. Compliance-first approach with KYC/AML baked in. The product suite is driving real retention. 50% of volume now stays on-platform thanks to the card and yield products.

Key Insights

Across Central America, remittances represent one of the most significant sources of economic inflows, in many cases rivaling or exceeding traditional export sectors. In countries such as Honduras, Nicaragua, and El Salvador, remittance flows account for approximately 24–27% of national GDP, illustrating how deeply cross-border payments are embedded within the region’s economic structure. Guatemala, the region’s largest economy, still receives remittances equivalent to roughly 20% of GDP, while even relatively more diversified economies like Costa Rica maintain meaningful inflows.

This extraordinary reliance on remittance flows creates a structural demand for efficient and low-cost payment infrastructure. Traditional remittance rails—often dominated by legacy money transfer operators—typically impose fees ranging from 5–8% per transaction, particularly for smaller transfers. As a result, digital payment platforms and crypto-enabled financial services are increasingly viewed as a way to reduce friction, improve settlement speed, and expand financial access. For companies like Lulubit, which operate at the intersection of digital assets and cross-border payments, this macroeconomic reality presents a significant opportunity.¹

• Remittances account for 19–26% of GDP in countries like El Salvador, Guatemala, Nicaragua, and Honduras.

• In Honduras alone, remittances reach ~26% of GDP, illustrating how deeply cross-border payments support the economy.

• Across the region, remittance flows exceed $45 billion annually and represent a major financial inflow tied primarily to migrants in the United States.

• On average, remittances represent ~21% of GDP across Central American economies, far higher than in South America (~2%).

There's clearly a structural demand for remittance rails, wallets, and cross-border payment infrastructure.

Product Market Fit

Remittance flows into Central America have expanded dramatically over the past several years, reaching an estimated $45–50 billion annually across the region. This growth has been driven primarily by migrant labor in the United States, where millions of Central American workers send funds home to support families and local communities.

Despite macroeconomic volatility, remittances have proven remarkably resilient. Even during periods of economic disruption, flows to countries such as Guatemala, El Salvador, and Honduras have continued to rise, reflecting the essential role these payments play in household consumption and economic stability. The consistency of these transfers makes remittances one of the most predictable and reliable financial inflows in the region.

For fintech and crypto companies, this growing payment volume represents a substantial market opportunity. Digital asset infrastructure has the potential to dramatically reduce settlement times and transaction costs compared to traditional remittance channels. As blockchain-based payments mature, platforms such as Lulubit are positioned to capture a meaningful share of this expanding financial corridor.

Growth Metrics

• Monthly volumes scaled from six figures in early 2024 to eight figures today.

• 70,000+ users with ~50% six-month retention.

• 2,500+ Lulucards used daily for everything from groceries to tax payments.

• Seven figures in ARR with single-digit customer acquisition cost.

• 100+ businesses using Lulubit.

Varys Capital invested in Lulubit's seed round.

About Varys Capital

Varys Capital is a global, multi-strategy digital asset fund that invests in and supports early-stage companies building blockchain-enabled businesses. We are a highly differentiated capital partner with a deep understanding of the digital asset ecosystem and a proven track record of success as investors and operators. We provide our portfolio companies with access to capital, expertise, and a network of relationships to help them scale and succeed. Varys Capital was established in 2018 and is headquartered in Abu Dhabi, UAE, and Bangkok, Thailand. Twitter | Linkedin For more information, visit: https://varys.capital/

1. Source: World Bank – Personal Remittances Received (% of GDP)

Building the Liquidity Engine for the Move Ecosystem

Momentum delivers institutional-grade performance with retail accessibility. Its architecture combines three major primitives, Momentum DEX, xSUI (liquid staking), and MSafe (treasury and vesting infrastructure) to create the foundation for seamless on-chain trading, staking, and capital management.

Since Varys Capital invested, Momentum DEX has achieved several notable milestones:

• Total Swap Volume: $26B (+$14.9B / +134% YoY)

• TVL: $264.93M (+$107.93M / +69% YoY) *(Peaked at $608M)*

• Users: 2.18M (+180K / +9% MoM)

• Add Liquidity Users: 1.4M (+100K / +8% MoM)

• Last Month Trading Fees: $3.5M (+$1M / +40% MoM)

• Last Month Protocol Revenue: $694k (+$256k / +58% MoM)

Built on a concentrated liquidity market maker (CLMM) design, Momentum DEX offers tighter spreads, lower slippage, and faster execution by leveraging Sui’s high-performance architecture and programmable transaction blocks (PTBs), allowing multi-step DeFi operations (swap, stake, and claim) to be executed in a single, atomic transaction.

For users, this means a CEX-level experience with DeFi transparency and composability, while for institutions, it provides secure, self-custodied access to Sui’s growing markets.

The First ve(3,3) Model on Sui

Momentum is the first ve(3,3) governance and liquidity design on the Move-VM, introducing an incentive structure that rewards long-term participation over short-term speculation.By locking MMT tokens to receive veMMT, holders gain governance rights, 100% of trading fee distributions, and influence over emissions and pool incentives, aligning traders, LPs, and token holders in a single economic flywheel.

This model sets a new standard for sustainable liquidity within Move’s DeFi landscape and will be fully rolled out within 3–6 months post-TGE, transitioning Momentum into an actual community-governed protocol.

Our Investment in Momentum

We invested in Momentum because we see it as the first true liquidity and infrastructure leader within the Sui ecosystem and a team capable of executing on that vision. Momentum’s first-mover advantage in deploying the ve(3,3) model on Sui gives it a structural edge in capturing early liquidity and governance share across a rapidly expanding network of assets.

What stood out to us is the strength and depth of their ecosystem approach: combining Momentum DEX for liquidity, xSUI for liquid staking, and MSafe for institutional-grade treasury management, all integrated into a single on-chain operating system. This architecture not only drives capital efficiency and user stickiness but positions Momentum as the core settlement layer for DeFi activity on Sui.

The team’s execution speaks for itself: deep institutional integrations through MSafe, a robust product pipeline (TGL, Vaults, Perp DEX), and an already engaged user base of over 2 million participants.

Looking Ahead

Following its TGE, Momentum will roll out veMMT staking, expand its Token Generation Lab (TGL) for blue-chip launches, and introduce Vaults and Perp DEX in early 2026. Together, these developments will further entrench its role as the liquidity and governance backbone of Sui and the broader Move ecosystem. We look forward to the continued growth of this strong product and fantastic team of operators.

A Digital Asset Treasury (DAT) is a strategy where public companies hold cryptocurrencies like Bitcoin and Ethereum on their balance sheets as reserve assets or long-term investments. This approach was pioneered by MicroStrategy in 2020 and has since become a global trend, allowing firms direct exposure to digital assets through their brokerage accounts. By mid-2025, over 150 publicly listed companies worldwide had adopted DAT strategies, collectively holding about 791,000 BTC—nearly four percent of the total BTC circulating supply—and more than 1.3 million ETH, roughly one percent of the supply. Recently, new strategies involving longer-tail assets such as SOL, BNB, IP, and SUI have begun to emerge.

Institutions are increasingly interested in DATs because they offer a regulated and liquid way to gain exposure to cryptocurrencies. Many pension funds, endowments, and sovereign wealth funds are limited in their ability to purchase tokens directly; however, they can invest in publicly traded stocks. DATs act as a compliant proxy, allowing large capital allocators to participate in crypto upside within their existing mandates. Unlike passive products like ETFs, treasury companies can actively raise capital and invest it into digital assets, often trading at a premium to the net asset value of their holdings. This enables them to operate a sort of compounding strategy: issuing stock at a premium, purchasing more crypto, and thereby increasing the net asset value per share. For assets like Ethereum or Solana, treasuries can also generate staking or DeFi yields, providing an additional income stream that further distinguishes them from traditional passive vehicles. Several high-profile examples demonstrate how this model functions in practice.

• MicroStrategy remains the leading Bitcoin treasury holder, with an incredible 628,791 BTC valued at over $74 billion, and it continues to grow through equity and debt issuance.

• Metaplanet has been likened to “Japan’s MicroStrategy” due to its aggressive accumulation of Bitcoin, primarily funded through at-the-market offerings.

• BitMine Immersion Technologies emerged in 2025 as the largest ETH treasury, accumulating over 833,000 ETH in just over a month of operation.

• SharpLink Gaming, which initially ran a sports betting data platform, shifted to build an ETH treasury that now exceeds 740,000 ETH.

• Other companies, like Verb Technology, have diversified into alternative treasuries, with Verb rebranding as “TON Strategy Co.” after raising over $500 million to acquire Toncoin.

How DAT Companies Operate: Valuation and Funding Mechanics

The valuation of a Digital Asset Treasury (DAT) company can be understood as the product of three factors: the amount of crypto per share held, the market price of that crypto, and a multiple to net asset value (mNAV) that reflects market sentiment, management quality, and growth prospects. In practice, most DAT stocks trade at a premium (mNAV > 1), with larger, established firms like MicroStrategy valued around 1.5× NAV, while more aggressive players such as Metaplanet have reached multiples above 2.5× as investors bet on their ability to scale quickly. Ethereum-focused treasuries often command even higher premiums, reflecting the added yield potential from staking.

To build and expand their holdings, DATs rely on two main financing tools: at-the-market (ATM) offerings and private investments in public equity (PIPEs). ATMs enable companies to issue shares gradually at current market prices, raising capital in a manner that minimizes disruption. When trading at a premium, this approach can generate an accretive cycle of new equity, increasing the amount of crypto per share. This approach has been key to MicroStrategy’s and Metaplanet’s growth strategies. PIPEs, on the other hand, involve block sales of stock to institutional investors, typically at a discount, and are used by newer or smaller DATs to raise cash quickly. While PIPEs offer speed and certainty, they also pose risks of dilution and market overhang if the market weakens.

These mechanisms demonstrate how DATs differ from static vehicles, such as ETFs. Their active participation in equity markets to build assets creates a feedback loop: strong demand and high premiums enable more crypto accumulation, while downturns can quickly reverse this cycle. This reflexivity offers substantial upside in bull markets but also brings additional volatility and capital management risks during market stress.

The growth of DATs carries certain risks. Their valuations depend heavily on trading at a premium to the value of their underlying holdings; if investor sentiment shifts, these premiums can disappear, causing stocks to trade below their net asset value. To expand their cash reserves, companies often issue new shares through at-the-market programs or private placements, which, if overused, can lead to significant dilution. As equity proxies for crypto, DATs are also very volatile, often amplifying the price swings of the underlying assets. Finally, there are reputational risks: some struggling companies have used DAT pivots as short-term publicity stunts, which can damage investor trust and attract regulatory scrutiny.

Despite these challenges, the momentum behind DATs continues to grow. The market cap of crypto treasury companies nearly doubled in the first half of 2025, reaching about $160 billion. Investment banks report increasing demand for new vehicles, including those focused on alternative tokens beyond Bitcoin and Ethereum. The success of firms such as MicroStrategy and BitMine shows that when executed well, a DAT strategy can attract significant capital and give investors greater exposure to digital assets. DATs are likely to expand into more regions, diversify into additional tokens, and become a more integrated part of corporate finance. While the model remains sensitive to market cycles, it remains one of the most important links between institutional capital and the crypto ecosystem.

This organic growth is now being supported by regulatory progress. In June 2025, the U.S. Senate passed the GENIUS Act, establishing the first federal framework for dollar-pegged stablecoins. The bill grants oversight authority to the U.S. Treasury and legitimizes the issuance of stablecoins by banks, fintechs, and even major retailers. Meanwhile, in Europe, the Markets in Crypto Assets (MiCA) framework has established explicit rules for asset-referenced tokens, further encouraging institutional adoption.

Traditional finance sees RWAs as a new product category capable of delivering stable, real-world yields in a compliant digital wrapper. For on-chain protocols, RWAs offer a path to growth beyond crypto-native assets, tapping into deeper capital markets and creating linkages to real-economy income streams. With institutions, regulators, and DeFi platforms increasingly aligned, RWAs are no longer a theoretical use case; they are quickly becoming foundational to the next phase for crypto.

Why Tokenize Assets On-Chain?
The appeal of tokenizing real-world assets on blockchain goes beyond novelty; it addresses real inefficiencies in the traditional financial system.

Efficiency and Settlement Speed

Blockchain dramatically reduces settlement times by removing intermediaries and automating workflows. What once took days in traditional finance, such as clearing and settling a bond trade, can now be executed in minutes via smart contracts. This not only improves capital efficiency but also reduces counterparty risk and operating costs. A World Bank report found that tokenized securities could enable “T+0” settlement while streamlining issuance, servicing, and compliance.

Transparency and Trust

Tokenized assets exist on public or permissioned blockchains, enabling real-time auditability. Proof-of-reserve models allow users to independently verify backing assets without relying solely on third-party disclosures. For institutions, this creates operational clarity; for regulators, it provides enhanced surveillance and oversight of compliance.

Broader Market Access
Tokenization lowers the barrier to entry for high-value asset classes by enabling fractional ownership and digital transferability. Investors around the world can access tokenized real estate or bonds with just a digital wallet and a small amount of capital. Issuers gain access to global liquidity, often without the need for traditional brokers or banking channels. This democratization of access could meaningfully expand investor bases and capital inflows over time.

How Tokenization Works: From Stablecoins to Real Estate

At its core, tokenization refers to the process of converting ownership rights in a real-world asset into a digital token on a blockchain. While implementation details vary, the basic structure involves three core stages:

1. Off-Chain Structuring The asset is placed within a legal wrapper, such as a special purpose vehicle (SPV) or a custodial trust, so it can be represented on-chain. A regulated entity typically manages this structure, ensuring custody, legal enforceability, and compliance with relevant regulations.

2. Valuation and Verification The underlying asset is appraised or audited. For cash-based reserves, external auditors may verify bank balances or collateral holdings (i.e., “proof of reserves”). For real estate or debt instruments, third-party valuation ensures transparency and investor trust.

3. On-Chain Token Issuance A smart contract is deployed to mint the digital tokens on a blockchain (e.g., Ethereum or Solana). Each token represents a specific claim on the underlying asset, such as a dollar in reserve, a share of a property, or a coupon payment from a bond. Smart contracts can encode compliance logic, automate payouts, and enable secondary trading on decentralized platforms.

Example: Stablecoins

Stablecoins are the most widely adopted form of RWA tokenization. USD Coin (USDC), for instance, represents a 1:1 claim on reserves held by Circle in cash and short-term U.S. Treasuries. Another leading stablecoin, USDT (Tether), is backed by a mix of cash, commercial paper, and other assets. These tokens are issued via smart contracts and can be transferred globally, 24/7. In DeFi, stablecoins are foundational, used as collateral, trading pairs, and settlement assets. Their widespread use illustrates how a real-world asset (fiat currency) can be made programmable and globally accessible through blockchain infrastructure.

Example: Tokenized Real Estate

Real estate tokenization typically involves placing a property or real estate equity into a legal entity, which then issues tokens representing ownership. This allows a large, illiquid asset, such as a $1 million building, to be fractionalized into, say, 10,000 tokens worth $100 each. These tokens can be traded on digital marketplaces, giving investors exposure to rental income or capital appreciation without requiring full ownership. Projects like RedSwan and Homebase have already launched pilots for tokenized residential and commercial properties, while some DeFi platforms are accepting real estate-backed tokens as collateral for lending markets.

On-Chain Financial Products Enabled by RWAs Tokenized

RWAs unlock new categories of financial instruments that combine blockchain efficiency with traditional asset fundamentals. Several distinct product types are emerging.

Tokenized Treasuries and Bonds

Tokenized short-term government debt has gained significant traction as crypto-native investors seek safer, yield-generating assets. Products like BlackRock’s BUIDL fund and Franklin Templeton’s tokenized money market fund expose investors to U.S. Treasuries via tokens issued on Ethereum, Stellar, or Polygon. These digital instruments function similarly to bond ETFs, but offer programmability, real-time settlement, and composability with decentralized finance (DeFi) protocols. Circle has also allocated stablecoin reserves to tokenized treasuries, turning idle collateral into yield-bearing assets. Tokenized corporate debt and private credit are also emerging, although they are still in their early stages.

Real Estate:

Backed Lending Markets Real estate-backed tokens aren’t just for investment; they’re also powering on-chain lending markets. For example, MakerDAO allocated DAI to purchase tokens backed by real estate bridge loans through platforms like Centrifuge. These tokens represent short-term, income-producing debt obligations secured by real property. The result is a DeFi-native credit market tied to real-world collateral, enabling stablecoin issuers and investors to earn yield from housing finance.

Tokenized Funds and Private Equity

Institutional funds are exploring tokenization to improve capital formation and liquidity. A notable example is KKR, which partnered with Securitize to offer a tokenized feeder fund into one of its private equity strategies, issued on the Avalanche blockchain. This structure opens access to accredited investors and improves operational efficiency. Venture and hedge funds are also considering tokenization for secondary liquidity or broader access.

Wrapping Up

Real-world assets on-chain represent a convergence of traditional financial value and blockchain-native infrastructure. From stablecoins and tokenized treasuries to fractional real estate and private equity funds, RWAs are creating programmable, transparent, and globally accessible versions of legacy assets. The passing of the GENIUS Act marks a pivotal regulatory milestone, giving banks, fintechs, and crypto platforms the green light to accelerate development in this space.

What’s emerging is a more liquid, efficient, and interoperable financial system, one where the lines between TradFi and DeFi begin to blur. As tokenized financial products mature, they are likely to play a foundational role in how capital is formed, deployed, and traded in the coming decade.

At Varys Capital, we focus on infrastructure that enables new economic primitives. As AI and data-driven systems become central to how businesses operate, one structural limitation remains: the lack of access to private company data. AI can only index and analyze what it has access to. Enterprise data is still fragmented, siloed, and largely unmonetized. Interval is creating a new foundation for how data is owned, shared, and monetized.

Interval is building a purpose-built Layer 1 blockchain that enables enterprises to securely monetize and license their private data, unlocking a new asset class at the intersection of AI, blockchain, and enterprise software.

The Problem: Data is Valuable but Locked

For decades, enterprise data strategy has relied on control and isolation. Data is stored securely, access is tightly restricted, and movement across systems is limited.

While this model worked for traditional systems, it breaks down in a world increasingly driven by AI models requiring large, high-quality datasets that need to build in cross-platform data collaboration and facilitate real-time decision-making across organizations.

Today, some of the most valuable companies in the world are already built on proprietary data. Yet they have access only to a limited subset of companies available in the market because companies are reluctant to share their private data with a third party. Market intelligence firms like Gartner, IQVIA, and RELX collectively represent hundreds of billions in market value. Newer platforms like ZoomInfo have achieved massive valuations using even publicly available datasets

Despite this, most enterprise data remains:

• Siloed within individual organizations

• Difficult to share across counterparties

• Impossible to monetize without compromising privacy

As a result, businesses are sitting on highly valuable data assets that cannot be efficiently utilized or commercialized.

The Solution: A Blockchain for Data Monetization

Interval is building a purpose-built Layer 1 blockchain designed to enable the monetization and licensing of enterprise data. The platform allows organizations to securely ingest and encrypt private data while maintaining full control and provenance of datasets. Organizations can then monetize data through a structured marketplace. This enables them to seamlessly integrate their private market data and add public datasets for richer insights.

At its core, Interval introduces a new model where data becomes a programmable, monetizable asset rather than a static internal resource. The platform consists of three key components:

• Interval Network – a purpose-built L1 that serves as the foundation for data validation and exchange

• Interval Exchange – an embedded marketplace for trading tokenized data and structured data products

• Interval Portal + Val – an AI-powered business intelligence layer that allows enterprises to interact with their data

The system enables a full data lifecycle from ingestion and anonymization to monetization and insight generation, all within a secure framework.

Unlocking a New Data Economy

Interval’s core insight is that enterprise data is not just an operational asset — it is a financial asset. By enabling secure, anonymized data exchange, the platform unlocks new revenue streams for enterprises. By having better data interoperability across industries, they can access improved intelligence through combined datasets.

In some cases, individual enterprise datasets can generate low to mid-eight-figure revenue streams when monetized effectively. The platform is initially targeting industries where data is both highly valuable and structurally siloed, including:

• Real estate

• Energy

• Retail and supply chains

• Transportation

• Financial services

These sectors depend heavily on proprietary data but lack efficient infrastructure for sharing and monetizing it.

Clear Product Market Fit Immediately

Despite being early, Interval has already secured meaningful traction across multiple verticals.

Key partnerships include:

• One of the largest South American/LATAM consumer brands  with access to large-scale consumer distribution data

• Group Link One, which manages over 200 million connected IoT devices

• ADGM for  AI and data services in Abu Dhabi

• GS Holdings a major energy and real estate player in South Korea

• Hyundai covering vehicle and insurance data

From these engagements and others, Interval already has ARR in the eight figures, with a pipeline well into the nine figures.

Why Varys Capital Invested

At Varys Capital, we believe the next phase of digital infrastructure will be defined by how data is owned, shared, and monetized.

The rise of AI has significantly increased the value of proprietary data. Companies are spending billions of dollars annually to acquire unique datasets that give them a competitive edge. At the same time, most enterprise data remains locked within organizational silos, unable to be efficiently shared or monetized.

Interval addresses this gap by introducing a new framework for data ownership and exchange, where data provenance is verifiable, privacy is preserved through encryption and zero-knowledge systems, and monetization is built directly into the infrastructure layer.

What makes Interval particularly compelling is its positioning at the intersection of AI (data demand),  blockchain (trust and provenance), and enterprise software (distribution and revenue).

If successful, Interval could become a foundational layer of a new data economy, enabling enterprises to treat data not just as an internal resource but as a tradable, revenue-generating asset.

We’re excited to support the team as they build infrastructure that transforms how data is exchanged, monetized, and utilized across industries.

Varys Capital invested in Interval's seed round.

About Varys Capital

Varys Capital is a global, multi-strategy digital asset fund that invests in and supports early-stage companies building blockchain-enabled businesses. We are a highly differentiated capital partner with a deep understanding of the digital asset ecosystem and a proven track record of success as investors and operators. We provide our portfolio companies with access to capital, expertise, and a network of relationships to help them scale and succeed. Varys Capital was established in 2018 and is headquartered in Abu Dhabi, UAE, and Bangkok, Thailand.

Twitter | Linkedin For more information, visit: https://varys.capital/

Scaling the decentralized world computer has been a long journey. To compete with faster, cheaper, and more centralized chains, the Ethereum roadmap has focused on a hub and spoke model. Security and settlement on the main layer (L1) while offloading execution and higher throughput activity to counterparties (L2s). Conceptually, this setup made sense as a way to tackle scaling challenges, but putting it into practice exposed some key weaknesses.

Price action for ETH, the asset has been flat to down for almost four years. ETH proponents argued that increasing speed and scale would solve all of Ethereum’s issues. But the market found the approach convoluted and confusing. Supporters did not realize how important strong messaging, business development, and a good user experience matter. While Ethereum struggled to present a solid, unified plan, other projects, ones that were quicker, easier to use, and better at reaching out to businesses, started pulling ahead.

Recently, the Ethereum Foundation made some major organizational changes to address these key issues. The focus is now on bringing L1 and L2 together into one holistic network with teams dedicated to the development of each layer of the stack. Ethereum has finally entered wartime mode after resting on its laurels for far too long.

Accelerating Business Development

Ethereum has never put serious effort into business development, instead relying on its tech to speak for itself. In reality, all crypto protocols are effectively early-stage start-ups, and business development is immensely important. While competitors built slick teams to win over companies, governments, and big institutions, Ethereum leaned on its developer community and natural growth instead.

The original approach worked fine when the industry was young and experimental. But now, with serious money from corporations, countries, and financial giants moving online, having connections, lobbying power, and a proper outreach plan is a must.

New efforts are starting to make Ethereum’s outreach more professional, primarily through a new third-party agency called Ethrealize. Without strong voices speaking up to policymakers and institutions, Ethereum could lose ground to better-organized rivals. If Ethereum wants to safeguard trillions of dollars in digital assets, stablecoins, and decentralized apps, it has to get as good at business and diplomacy as it is at building its tech.

Scaling Layer 1 Without Compromising Layer 2

As L2s have scaled over the past few years, they have captured the fees the base used to assume. These L2s became “parasitic” L1 value capture. While the L1 may miss out on fee revenue (we think fees are going to zero for L1s), L2s aren’t just about handling more transactions; they offer variety in how businesses can operate and flexibility for different needs.

Big companies, governments, and other major players have their own rules and requirements. L2s let them build custom, controlled setups while still tapping into Ethereum’s security and ability to link with other systems.

Even as the L1 improves, L2s are still extremely important to the Ethereum ecosystem. They’re not just overflow valves, they create tailored spaces for specific industries and regions. Improving L1 boosts the whole network. A stronger L1 keeps final transactions secure and affordable, while L2s focus on adding unique features. The two layers don’t fight each other, they team up.

Rethinking Value Capture and Incentives

The big question for Ethereum investors is, how does the native asset ETH benefit as the network grows?

Right now, L2s don’t pay much to the L1, even though they depend on its security. These are businesses operating at 90%+ profit margins. That’s okay for now: low costs help growth and testing. But as Ethereum, the network continues to grow, investors and advocates need to decide if fees or scale are more important.

Future upgrades, like built-in systems called enshrined base rollups, could “fix” value capture by tying L2 profits directly to L1’s security and staking. This is key to keeping Ethereum’s economic strength solid, ensuring its token, ETH, stays valuable and tied to the network’s activity. The aim is a system where L2 innovation powers up L1, not pulls it apart.

The New Framework for Valuing Ethereum

Old-school financial measures, like transaction fees or network income, don’t fit blockchains like Ethereum. Higher fees mean fewer users. Networks thrive by the compounding effects of user growth. As using the network gets cheaper and fees drop, we need a fresh way to think about their worth.

We believe Ethereum’s value should come from economic security, and its total worth needs to match the value it protects, not just the cash it pulls in. If it ends up securing trillions in global assets such as digital property, bonds, stablecoins, and DeFi apps, as a proof of stake network, its token has to be valuable enough to shield that system from attacks (at least ⅓ of the value of these assets).

We like to think of ETH more like a nation state. The value comes from the size and strength of the economies they back, not government profits. Ethereum isn’t just a company or a platform, it’s becoming the base of a new financial world.

Pricing ETH

With digital assets, stablecoins, and big institutions jumping in, the bull case for ETH is finally looking clear.

Price appreciation won’t come from one huge moment but from steady steps: better usability, stronger business efforts, successful scaling updates, and growing trust in Ethereum’s security and leadership. The market will back networks that are both tech-savvy and trusted by institutions. Ethereum’s move to a teamed-up L1 and L2 model, plus smarter outreach and aligned rewards, sets it up to win.

Momentum is stepping in to solve this problem, leveraging the ve(3,3) model to establish itself as the leading liquidity hub for the Move ecosystem. The ve(3,3) model refines this further, ensuring deep, protocol-owned liquidity while rewarding long-term token holders with a share of trading fees.

Momentum’s implementation of ve(3,3) ensures:

• 100% of trading fees go to veMMT holders, fostering active governance and participation.

• Bribe-driven incentives that allow projects to attract liquidity without excessive emissions.

• Institutional-grade liquidity provisioning powered by deep integrations with key DeFi protocols.

This approach not only enhances liquidity but also aligns incentives across traders, liquidity providers, and governance participants, creating a sustainable, self-reinforcing flywheel.

With institutional demand for efficient liquidity and scalable DeFi solutions increasing, Varys Capital is excited to back Momentum to bring capital efficiency liquidity, deep liquidity, and sustainable incentives for traders, LPs, and protocols alike. Ensuring liquidity is sticky, capital is optimized, and all stakeholders benefit from participation in the Move-VM.

Strategic Advantages & Institutional Integration

Momentum’s strength lies in its deep-rooted partnerships, institutional backing, and rewarding community. As the official ve(3,3) DEX for the Move-VM, the platform benefits from direct liquidity inflows and ecosystem incentives. Additionally, its integration with M-Safe, Sui’s leading multi-sig treasury management solution, allows institutional capital to flow seamlessly into Momentum, ensuring deep and reliable liquidity from day one.

• $100M liquidity on day one.

• Seamless M-Safe integration, providing direct institutional access.

• IDO launchpad for Move-VM projects, creating a steady pipeline of new tokens and trading activity.

Momentum’s Token Generation Lab (TGL) further strengthens its position by providing a structured, high-quality launch environment for projects on Move-VM, ensuring consistent ecosystem growth.

Momentum’s Growth Strategy & Market Impact

Varys Capital was the lead investor, with investments from Coinbase Ventures, Aptos, Circle Ventures, Jump, Sui, Gate, Amber Group, Selini Capital, and more.

Momentum is strategically positioned to capture DeFi liquidity within the Move ecosystem, which includes Sui, Aptos, and Movement Labs. Its launch plan is backed by a structured liquidity campaign, including a trading competition and veMMT governance incentives, aimed at bootstrapping liquidity to $500M TVL within eight weeks.

About Momentum

Momentum is launching the first ve(3,3) DEX on the Move Virtual Machine (Move-VM), positioning itself as the market leader for Move-based liquidity. The platform aims to drive adoption by enabling bribe wars and incentivizing the staking of BTC, stablecoins, and Move-VM native tokens. For more information, visit: https://mmt.finance/

About Varys Capital

Varys Capital is a global, multi-strategy digital asset fund and market-maker that invests in and supports early-stage and growth-stage companies building blockchain-enabled businesses. We are a highly differentiated capital partner with a deep understanding of the digital asset ecosystem and a proven track record of success as investors and operators. We provide our portfolio companies with access to capital, expertise, and a network of relationships to help them scale and succeed. Varys Capital was established in 2018 and is headquartered in Abu Dhabi, UAE and Bangkok, Thailand. Twitter | Linkedin For more information, visit: https://varys.capital/

DePIN is seeking to challenge centralized infrastructure by moving away from reliance on telecom and cloud giants. It encourages everyday people to contribute resources like bandwidth, storage, or computing power and rewards them with tokens. It’s decentralized, cost-efficient, and inclusive. The total addressable market for DePIN is approximately $2.2 trillion and has the potential to exceed $3.5 trillion by 2028, according to Messari. Projects such as Helium (decentralized wireless networks) and Filecoin (distributed storage) have gained significant traction in recent years, making Grass one of the fastest-growing DePIN projects. This protocol transforms unused internet bandwidth into an additional income source for users and serves as a data pipeline for AI.

Grass’s product is built to be straightforward: Users install an app and let it run in the background, and the app will automatically use a portion of their unused bandwidth. That bandwidth is pooled across a global network and sold to companies that scrape public web data, such as those training AI datasets. In exchange, users earn $GRASS tokens. Since its debut in late 2023, Grass has onboarded over 3M users and processed over 8M gigabytes of data.

What sets Grass apart?

• Ethical Data Sourcing: Users opt-in and control their contribution, unlike centralized scrapers that often harvest data without consent.

• Proof-of-Contributions: A blockchain-based system tracks uptime, bandwidth quality, and demand to ensure fair token rewards.

• AI Synergy: Grass delivers verified, structured web data for AI, which is a critical need as developers scramble for clean datasets.

• In 2025, Grass processed over 1M gigabytes of data daily, awarding users with points eventually converting into $GRASS tokens.

Grass’s Blockchain Architecture

Grass isn’t just a bandwidth-sharing app. It’s a blockchain-driven system designed to scale, built on Solana to utilize the chain's speed and efficiency to handle data transactions. However, Grass is also creating its L2, which will be tailored toward handling the volume of data.

Breakdown:

• Solana Base: Grass uses Solana for its fast transaction settlement and real-time token payouts. It’s a solid foundation for logging contributions and rewards on-chain.

• Grass L2: This L2 is planned to be customized for Grass. It batches data scraping sessions off-chain and settles them on Solana, cutting congestion and costs while keeping the network decentralized.

Zero-Knowledge Proofs

ZKPs let you prove something is true without revealing the details. Grass uses zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge), a ZKP variant known for small proof sizes and fast verification, to power its network.

Data Provenance and Integrity

• When a Grass node scrapes web data, validators generate a zk-SNARK proof, tying the data to its source (for example, a public website) and confirming its authenticity. This proof is logged on-chain without exposing the user’s identity or the raw data.

• Companies buying the data need assurance it’s legit and not fabricated or altered. ZKPs provide that trust while shielding user privacy, a step up from centralized scrapers that often log sensitive info.

Scalability via ZK Rollups

• Grass’s L2 rollup aggregates thousands of data transactions into a single zk-SNARK proof. This proof, a cryptographic summary of off-chain activity, is submitted to Solana for verification and settlement.

• Solana is fast but cannot handle millions of individual data proofs without bloating. Rollups slash gas costs and latency, allowing Grass to scale to tens of millions of users.

Grass’s focus on bandwidth and AI data positions it alongside DePIN pioneers like Helium and Filecoin. This diversity within the DePIN ecosystem shows its growing potential. Each project addresses a distinct inefficiency with centralized infrastructure and shares the goal of replacing centralized intermediaries with community-run networks that reward participation. As AI, IoT, and automation grow in popularity, DePIN plays a significant role in democratizing access to the growth of these technologies. Grass shows that decentralized networks can turn passive users into stakeholders, allowing everyone to benefit from the development of AI. DePIN isn’t solely about decentralizing infrastructure but also about distributing ownership to those who actively contribute to the network's success.

The original Bitcoin whitepaper was centered around a simple idea – a peer-to-peer, electronic cash system. This seminal document also laid the foundation for broader ideas such as smart contracts, decentralized autonomous organizations (DAOs), and what was then referred to as "Smart Property." The vision was to enable ownership and management of various assets—like cars, company shares, or software rights—on a decentralized blockchain network.

The next adoption in crypto will be smart property, now called real-world assets (RWAs). RWAs represent digital tokens tied to tangible or synthetic assets, such as real estate, private credit, or data like the Consumer Price Index (CPI). This aims to bridge the gap between the traditional, off-chain, and on-chain world through a framework known as “RWAfi.” RWAs remain underutilized within the decentralized space. Plume is tackling this challenge with its RWAfi model, designed to unlock the immense potential of real-world value for crypto-native users. By combining the stability and credibility of RWAs with the modularity and flexibility of decentralized finance (DeFi), Plume is reimagining how assets are tokenized, traded, and utilized. This approach not only enhances accessibility but also forges a seamless connection between the physical and digital worlds.

According to Plume’s co-founder and Chief Business Officer, “Traditional RWA solutions often prioritize institutional needs, leaving retail crypto users underserved. RWAfi bridges this divide by making tokenized assets modular, flexible, and accessible to the crypto-native community, integrating them into the vibrant DeFi ecosystem.” This vision sets Plume apart from other platforms focusing solely on institutional onboarding, such as tokenizing real estate or private equity for sophisticated investors.

However, institutions are not overlooked in Plume's strategy. The platform has forged partnerships with several well-known entities to scale adoption and enhance credibility. For example, Plume’s partnerships with regulated broker-dealers ensure compliance in major jurisdictions, including the United States. By embedding compliance at every level—from AML and KYC to global securities, Plume ensures it can scale both retail and institutional adoption seamlessly. This institutional alignment allows Plume to provide secure, regulated channels for tokenizing and managing real-world assets like private credit, real estate, and other traditionally illiquid asset classes.

https://x.com/CoinDesk/status/1841825891405423007

Lessons learned from Stablecoins

Stablecoins have achieved widespread product-market fit in crypto because they are what RWAs today are not — they are just crypto. The stablecoin didn’t just take the US Dollar and slap them onto the blockchain, they were designed for a crypto audience and use case. Stablecoins leveraged crypto’s native features including liquidity, composability, global access, and 24/7 accessibility.

https://x.com/jp_mullin888/status/1868439898862325966

Balancing Institutional and Retail Needs

While institutional adoption is crucial for the growth of the RWA sector, Plume’s RWAfi framework is geared toward empowering retail investors. It allows crypto users to engage actively with RWAs, leveraging DeFi primitives like lending, liquid staking, and yield generation to unlock the full potential of their tokenized assets. Plume’s modular toolkit simplifies the tokenization process, eliminating many operational and regulatory complexities that have historically deterred wider adoption.

One of Plume’s defining strategies is its focus on assets that resonate with crypto-native users. By tokenizing assets offering stable yields, speculative potential, or cultural significance, Plume aligns its ecosystem with the habits and interests of its target audience.

The platform offers three distinct categories of tokenized assets to cater to a wide range of users:

• Stable Income Assets: These assets, including tokenized private credit and solar energy projects, provide predictable yields ranging from 7% to 15% annually.

• Speculative Assets: Designed for users seeking higher-risk, higher-reward opportunities, these assets include tokenized market data and event-driven investments, such as on-chain speculation on sports or economic outcomes.

• Cultural Collectibles: By tokenizing culturally significant assets like rare sneakers, Plume combines financial opportunity with social and cultural relevance, attracting younger, digitally native investors.

https://x.com/Trim_Bot/status/1864297566399053850

Liquidity and Beyond

Plume’s ecosystem extends beyond tokenization with over $275M worth of transactions on their testnet, focusing heavily on liquidity and utility. Plume enables these assets to act as collateral, staking tokens, or yield-generating instruments, unlocking their full potential.

For example, tokenized RWAs like real estate or private credit can serve as collateral for stablecoin loans, providing a more stable and less volatile option for lenders. Similarly, Plume introduces liquid staking for RWAs, allowing users to stake assets while receiving tokenized equivalents for use in other DeFi protocols. These open up opportunities for compounding yields and enhance the liquidity of traditionally illiquid assets.

The platform also supports perpetual trading, enabling users to speculate on tokenized RWAs via decentralized exchanges. This creates a unique fusion of traditional finance stability and DeFi’s speculative appeal, broadening the range of use cases and attracting diverse user profiles.

Plume’s commitment to security and trust is evident in its strategic partnerships and technological advancements. It is currently developing an AI-driven Proof of Concept for RWA analysis, which uses data insights to enhance decision-making and liquidity. Additionally, zero-knowledge proof (ZKP) enables the implementation of Proof of Reserves (ZK PoR), ensuring assets are fully backed without compromising sensitive information. Furthermore, the platform’s integration with Arbitrum, Celestia, and LayerZero enhances cross-chain interoperability and data efficiency across their ecosystem.

The Future of RWAfi and Plume

Plume is not just a blockchain for tokenizing assets; it reintroduces how real-world value can integrate with decentralized ecosystems. By focusing on modularity, accessibility, and user engagement by positioning itself as an RWA native chain.

Its emphasis on crypto-native interests, combined with robust compliance frameworks and innovative liquidity solutions, and potential to transform asset management. As the RWA market continues to expand—projected to exceed $16 trillion by 2030, Plume’s RWAfi framework offers a compelling model for the future, bringing real-world assets to life in ways previously unimaginable.

By aligning the stability of RWAs with the dynamism of DeFi, currently with over 150+ apps and protocols building on Plume. Plume is setting a new standard, unlocking opportunities for both seasoned investors and everyday users alike. This is not just the tokenization of assets; it is the tokenization of possibilities.

Digital Assets: Growth and Emerging Trends

Digital assets, despite their rapid rise in the past decade, are still relatively small compared to traditional asset classes. The report indicates that cryptocurrencies like Bitcoin and stablecoins are the primary forms of digital assets, each serving unique roles. Bitcoin, for instance, is predominantly used as a "store of value," while stablecoins function as vital liquidity sources in the digital ecosystem. The combined crypto market cap, currently standing at over $2T, has not diminished demand for traditional financial instruments, including U.S. Treasuries.

Stablecoins—digital assets pegged to stable financial instruments, often the U.S. dollar—have grown significantly and now account for over 80% of transaction volume in digital asset markets. This growth is attributed to stablecoins’ role in facilitating fast, cross-chain transactions and lending activities. Despite their popularity, stablecoins have seen increased scrutiny, particularly around their collateralization practices, as they increasingly rely on short-dated U.S. Treasuries to back their value.

Growing Demand for Treasury-Backed Stablecoins

As stablecoins seek to establish credibility, many have moved to back their value with assets like Treasury bills. About $120B in stablecoin collateral is invested in Treasuries, indicating a modest but noteworthy demand. This trend of collateralizing stablecoins with short-dated Treasuries highlights the potential of digital assets to influence Treasury issuance. In this regard, TBAC suggests that future Treasury issuances might need to increase the supply of Treasury bills to support this structural demand from stablecoin collateral.

Blockchain and Tokenization Initiatives in the Treasury Market

Blockchain technology is gaining traction in the Treasury market, with multiple projects exploring how it might improve operations. Some notable initiatives include:

Tokenized Treasury Funds: Organizations like BlackRock and Franklin Templeton have launched tokenized funds that allow investors to hold Treasuries on the blockchain. These funds operate similarly to traditional Treasury ETFs, offering advantages in speed and efficiency, particularly in transactions and settlement.

Tokenized Treasury Repos: JPMorgan's Onyx platform, for example, uses tokenized Treasuries for real-time intraday repos, which enable faster and more secure transactions. Additionally, DTCC’s Digital Asset Treasury Tokenization Pilot is testing the use of tokenized Treasuries as collateral in various financial applications.

Pilot Programs by Public and Private Sectors: Projects like SIFMA’s Multi-Asset Ledger Pilot and the BIS’s Project Agorá are exploring the application of shared ledger technology to streamline post-trade processes and cross-border transactions.

These pilot projects highlight the potential for blockchain to address inefficiencies in the financial ecosystem, from clearing and settlement to collateral management.

Potential Benefits of Tokenizing U.S. Treasuries

The TBAC report identifies several key benefits of tokenizing Treasuries:

Streamlined Settlement: Tokenization enables "atomic settlement," ensuring simultaneous and secure transaction completion, thereby reducing settlement failure risks.

Enhanced Collateral Management: Smart contracts embedded within tokenized Treasuries can automate collateral transfers, making it easier to meet collateral requirements in real-time.

Greater Transparency and Accountability: Blockchain’s immutable ledger capabilities can enhance the transparency of operations, providing real-time visibility for regulators and market participants.

Composability and Innovation: Tokenized Treasuries could lead to new structured financial products with the potential to bundle assets for unique investment solutions.

Broader Access: Tokenization allows fractional ownership, making Treasuries more accessible to retail investors and those in emerging markets, who may have previously been excluded due to the high cost of traditional purchases.

Despite these promising advantages, the TBAC cautions that tokenization may only offer incremental improvements in the Treasury market. Given the market's high efficiency, blockchain’s primary value may lie in enhancing specific areas like settlement rather than overhauling the entire market infrastructure.

Risks and Challenges of Tokenized Treasuries

While the benefits are substantial, tokenizing Treasuries introduces a new set of risks and challenges:

Technological Risks: Blockchain’s technology infrastructure, mainly if built in parallel with legacy systems, may face cost challenges. Additionally, public blockchains carry cybersecurity risks, which could compromise the safety of tokenized Treasuries.

Operational and Counterparty Risks: If issuers or custodians fail, the digital asset market’s reliance on counterparty trust presents risks. Custody risks are also significant, as secure storage solutions for digital assets are still evolving.

Privacy and Transparency Concerns: Public blockchains’ inherent transparency may deter some institutions, as they might not want trading activities made public. However, private, permissioned blockchains could offer a middle ground by balancing transparency with privacy.

Regulatory Uncertainty: Regulatory frameworks for tokenized assets remain under development, and the evolving legal landscape could create compliance challenges for issuers and investors alike.

Financial Stability Risks: The integration of tokenized assets with traditional markets introduces potential contagion and leverage risks. The TBAC report notes that runs on stablecoins could lead to "fire sales" of Treasury holdings, disrupting broader financial stability.

Financial Stability Implications of Stablecoin-Backed Treasuries

The stability of stablecoins, despite improved Treasury backing, remains an area of concern. Stablecoins are prone to de-pegging in times of market stress, as seen during events like Terra’s collapse in 2022. The TBAC warns that a run on a major stablecoin such as Tether could have ripple effects on the Treasury market, potentially leading to forced sales of short-dated Treasuries and increased market volatility.

The report draws parallels between the current stablecoin ecosystem and historical “wildcat” banking practices, where unregulated, privately issued currency led to widespread financial instability. TBAC suggests that stablecoins may need to adopt stricter regulatory standards, similar to narrow banks or money market funds, to safeguard against these risks. Such regulation would likely require stablecoins to hold a higher proportion of risk-free collateral, such as short-dated U.S. Treasuries, to prevent instability from spilling over into the traditional financial system.

The Path Forward: A Unified Ledger and Central Bank Involvement

The report envisions a future where a unified ledger, potentially developed by a central authority like the Federal Reserve, could become the backbone of a tokenized Treasury market. This infrastructure would offer a single source of truth and seamless interoperability across asset classes, eliminating the inefficiencies of fragmented ledgers. However, achieving this will require industry-wide buy-in and collaboration between the public and private sectors.

Central bank involvement, possibly through introducing a central bank digital currency (CBDC), is crucial for ensuring trust and stability in a tokenized ecosystem. The TBAC anticipates that the transition to a tokenized Treasury market will be gradual, with cautious steps to prevent risks associated with premature adoption.

Introduction

Since the early 2000s, tech giants like Facebook (now Meta), Twitter (now X), TikTok, Reddit, and YouTube have enabled users to create online opportunities through content. The creator economy is valued at over $155 billion and is expected to surpass $525 billion by 2030. From YouTube stars to Instagram influencers, creators leverage their skills and content to build loyal audiences. Despite enhancing digital connectivity, these platforms' centralized frameworks often limit creators' earning potential and control over their content. Our digital lives have become curated experiences, driven by algorithms designed to captivate and retain our attention. The internet, once a space for exploration, now analyzes, monitors, and commodifies our daily interactions for monetary gains.

From Web2 Struggles to Web3 Success

One of Web3's standout incentives, which is often lacking in Web2, is the concept of engagement rewards. In Web3, users gain rewards by actively participating in activities such as sharing content, posting updates, or using referral codes that provide bonuses, all of which contribute to a rewarding user experience. SocialFi platforms are accelerating this shift by enabling direct, microtransaction-based payments, and fostering adoption through convenient revenue models like pay-per-action or pay-per-view. This approach broadens income potential for businesses and empowers consumers with greater autonomy in their content consumption, offering new opportunities to earn through smaller, incremental transactions.

What does this mean for the average content consumer? While it may not directly impact consumers, who typically aren't focused on earning rewards, it significantly influences the experiences of their favorite content creators. This issue becomes clearer when examining the current challenges facing creators in the Web2 landscape. In Solving The Discoverability Dilemma In The Creator Economy, the author emphasizes, "The largest threat to the creator economy is the growing issue of discoverability. If overlooked, limited visibility for small to midsize creators translates to reduced revenue opportunities and a decreased likelihood of their sustained participation in the creator economy."

Monetization Challenges

Another significant pain point for content creators is monetization. Currently, social media platforms distribute earnings unevenly, often leaving the majority of content creators with meager profits. For example, on Spotify, the top percentile of artists generates a staggering 90% of royalties, making an average of $22,000 per quarter. The remaining creators earn a mere $36 on average. A similar trend can be observed on YouTube. View counts, interactions, and engagements generated by content creators are metrics that platforms rely on to determine monetary rewards. Typically, these decisions are made by centralized entities and their shareholders within Web2. Understandably, these platforms tend to favor rewarding top content creators by boosting their algorithms to generate more revenue, thereby setting a high entry barrier. In contrast, the majority of Web3 projects prefer to adopt a DAO (Decentralized Autonomous Organization) approach. In this setup, users have the power to vote on each proposal and determine the platform's direction by using the tokens they hold as voting tickets, creating a fair and transparent distribution system.

Censorship and Control

Another critical aspect to consider is the contentious issue of censorship. Mainstream social media platforms limit users' control over their data, content, comments, chats, and more. Some centralized platforms restrict content creators from discussing certain topics, while others reduce visibility for content that includes external links. In contrast, SocialFi empowers content creators, influencers, and users who value free speech and enhanced control over their data and privacy. Utilizing zero-knowledge (zk) technology, users can log in without exposing their identities. This approach is particularly sensitive when considering underage users consuming content and the regulatory aspects surrounding it.

Tech Giants Embracing Web3

In response to this new movement, tech moguls are exploring Web3 innovations to attract content creators onto their platforms. For instance:

• Twitter allowed non-fungible tokens (NFTs) as profile pictures.

• Spotify testing NFT galleries on musicians’ profiles.

• Ray-Ban Meta Glasses and Reality Labs, Meta focuses on developing immersive tech, bridging AI with virtual environments for broad user access along with web3 element with their partnerships with Polygon.

These efforts, however, reflect a nostalgic attempt to recreate the internet's early ethos, a space for unmediated discovery and community building. But is this truly decentralized? The centralization of these platforms raises questions about whether they can genuinely uphold the decentralized principles of Web3.

Building on the concept of SocialFi, DeSoc short for "decentralized society" is a term within the crypto space that leverages blockchain technology to create a new standard for digital information and idea sharing. Unlike traditional social media apps that require an email for sign-in, DeSoc apps use a blockchain wallet’s private key signature for authentication. Once signed in, users can share content, follow others, and collect digital goods in the form of fungible and NFTs. Data ownership rests with the user’s wallet, and data is stored in a decentralized file storage system, unlike the centralized data hosting used by giants like Facebook and Twitter. Some DeSoc apps offer data transferability, providing a unified experience across various platforms without the need for new profiles. The architecture of DeSoc apps ensures seamless integration between a user's profile data and their blockchain wallet.

A report by Galaxy Digital analyzed on-chain activity since 2021 across the most popular DeSoc apps, including Farcaster, Friend.tech, and others. It delves into growth strategies fueling DeSoc adoption, particularly focusing on Farcaster, which accounts for over 30% of all DeSoc-related transaction activity in 2024 and recently raised $150M Series A at a $1B valuation with only 80,000 daily active users (DAUs) at its peak and 350,000 signups. Farcaster, the social protocol, invites developers to build other apps called “Frames” on top of it, the most popular app is the social network Warpcast, which is similar to Twitter (X).

https://x.com/dwr/status/1813776004306837637

Farcaster employs a hybrid strategy by keeping user identities on-chain while storing data such as public posts, follows, and reactions off-chain. Users must "pay rent" to Farcaster to maintain their data storage, currently costing around $7 worth of ETH for 5,000 posts. If a user chooses not to pay, their older posts (referred to as "casts") will be deleted as new ones are made. On-chain transactions are only required for security related actions.

Friend.tech on the other hand had a different trajectory, their V1 generated substantial revenue through the support of KOL. Users can buy and sell "keys" linked to Twitter (now X) accounts, granting access to private chat rooms and exclusive content. Marketed as “the marketplace for your friends,” the platform hosts chat groups where entry requires a purchased key, which users can later resell. This model builds on high profile Twitter users’ past practices of selling tokens for exclusive access, though it sometimes led to legal scrutiny. Friend.tech takes this pre-existing aspect of Twitter and fleshes it out with a set of standardized crypto platform features like airdropped rewards and fee sharing, and requires invite codes to join boosting demand as new users seek access. However, due to high fees, retail users lost money daily.

Optimistically with the launch of their V2 new features like clubs and alluring $FRIEND token in hopes of reviving the platform. Clubs are group spaces managed by keyholders, keyholders elect a president who runs the club, and transactions use $FRIEND with a 1.5% fee. Clubs are similar to a discord channel, engagement farming the users on the platform. The rollout faced confusion and lackluster reception. It appears that users can only claim 10% of their airdrop (provided they follow at least 10 people) and need to join a club to claim the other 90%.

https://x.com/hasufl/status/1833446427055317320

The project’s downward spiral began with the early launch of its token, which has since seen a 90% drop in price. Adding to the controversy, the project team permanently relinquished control over its smart contracts, triggering a 26% price dump within 24 hours. This led to community speculation that the Friend.tech team was exit scamming. An analyst noted that, in addition to creator earnings, the Friend.tech team has also made over $60M in fees, suggesting that the team isn’t entirely hands-off. However, the team has responded on Twitter, denying these allegations, clarifying that no tokens were allocated to the team or investors, and stating that relinquishing control prevents future changes to fees or platform functionality.

There are debates on how the team should have handled the responsibility better in terms of launching the token, user retention, and fee revenue going back into the platform, as it is very common for the community after receiving the airdrop and instantly dump. Ultimately the community did not see value accrue from the fees back to the tokens and the community felt disappointed. The lack of incentives for creators to retain their group are lacking as the value derived from the creator comes from selling Keys which is upfront, leading to a lack of engagement and providing value after the Keys are sold in groups.

Friend.tech is a testament to the ever-evolving nature of technology and society's demand for more control, transparency, and fairness in digital interactions. As developers build more sophisticated dApps and as more users enter the space, we can expect the ecosystem to mature, solidifying its role in the future.

Disclaimer: This post is for informational purposes only and is not intended as investment advice, an endorsement, or an opinion regarding any specific product or service. The views and opinions expressed are solely those of the author and do not necessarily reflect those of Varys Capital or its affiliates. Varys Capital and its affiliates, employees, or agents make no representations or warranties as to the accuracy, suitability, or completeness of any information presented. Investors and readers should conduct their own due diligence and consult with a qualified professional before making any investment decisions or taking any action based on this content. Past performance is not indicative of future results, and investing involves risks, including the loss of principal. Neither Varys Capital nor any of its affiliates or agents shall be liable for any loss or damage arising from reliance on this information.

In traditional finance, institutions such as hedge funds and pension funds rely on sophisticated algorithmic trading systems managed by sell-side firms, mainly investment banks. These systems execute trades at optimal prices and volumes, enhancing market liquidity. However, digital asset trading platforms often suffer from high fees and prolonged setup times, making it difficult for institutions to adopt them. Additionally, privacy concerns arise as centralized authorities typically manage these platforms, leading to trust issues. Platforms like Tread.fi are stepping in to fill this gap.

With the increasing demand for institutional adoption of digital assets, especially following the approval of Bitcoin and Ethereum ETFs, having an institutional infrastructure is crucial for large institutions. Varys Capital is excited to partner with Tread.fi to build the most secure, efficient, and scalable digital asset trading platform. Tread.fi is designed to meet the needs of institutional clients by offering superior pricing and execution tools. Additionally, it enables retail investors to have access to the same tools with institutions by providing access to powerful trading tools historically available only to hedge funds. This democratization of access ensures that both institutional and retail clients can maximize their participation in the digital asset market, benefiting from enhanced liquidity management, optimized trade execution, and a user-friendly interface.

What does Tread.fi do?

Tread.fi provides institutional clients with a comprehensive suite of tools for efficient digital asset trading and liquidity management. The platform’s flagship products are Trading as a Service and Directed Cyclical Exchange, providing seamless integration, minimized market impact, and strong privacy features.

Trading as a Service (TaaS)

Tread.fi’s TaaS combines execution, settlement, and reporting into a single service, allowing clients to deploy their algorithms with ease and precision. This distributed trading execution engine facilitates quick integration with existing systems, enabling institutional clients to deploy complex trading strategies while reducing market impact and ensuring optimal pricing. The platform supports various asset types, including spot, futures, and options, catering to the diverse needs of institutional traders.

The TaaS managed service simplifies trading infrastructure for clients by splitting the operation into two distinct services. First, the Trading Engine, where Tread Labs manages the core trading engine and Order Execution Management System (OEMS) in private instances per client. This setup allows clients to offload the complexities of infrastructure management and focus solely on trading strategies. Additionally, the Client Proxy Service acts as an intermediary between the managed TaaS instance and the exchanges. It establishes secure connections and low-latency to exchange APIs, handles order routing, and provides data feeds to the client's trading algorithms, ensuring secure communication and reducing the risk of data breaches.

By managing these services, TaaS enhances reliability with minimal downtime, scales effortlessly with the client's strategies, and ensures the security of exchange API keys. Clients benefit from reduced operational overhead, as they no longer need to set up and maintain complex trading infrastructure, and can scale their trading strategies without worrying about infrastructure limitations.

Directed Cyclical Exchange (DiCy)

DiCy operates as a dark pool, providing a confidential trading environment. It enables communication among TaaS instances to identify netting opportunities and avoid exchange fees and spreads. This ensures full privacy and reduced market impact, making it ideal for executing large trades. DiCy enhances the efficiency of trading operations by supporting liquidity diversification and reducing dependency on traditional OTC/RFQ methods.

DiCy can reduce market access by internally crossing counterparties when trading multiple orders within or across entities using TaaS. This internal crossing mechanism offers savings on exchange fees, reduced market impact, and minimized alpha leakage. It is particularly beneficial for clients with multiple trading strategies running in parallel or pod-structured funds with multiple portfolios.

In the future, TaaS instances will securely and discreetly access a multi-party DiCy exchange to find verified institutional counterparties. This will further reduce market access fees and impact, fostering a more efficient and private trading environment for all participants.

About Tread.fi

Tread.fi enables institutional and retail investors with the most advanced trading and liquidity management tools. By democratizing access to trading products such as TaaS and DiCy, Tread.fi enables both retail and institutional users to optimize their trading strategies and maximize market participation. For more information, visit: Tread.fi

About Varys Capital

Varys Capital is a global, multi-strategy digital asset fund and market-maker that invests in and supports early-stage and growth-stage companies building blockchain-enabled businesses. We are a highly differentiated capital partner with a deep understanding of the digital asset ecosystem and a proven track record of success as investors and operators. We provide our portfolio companies with access to capital, expertise, and a network of relationships to help them scale and succeed. Varys Capital was established in 2018 and is headquartered in Abu Dhabi, UAE and Bangkok, Thailand. Twitter | Linkedin For more information, visit: https://varys.capital

This transition towards decentralization set the stage for a notable advancement in monetary systems: stablecoins. Unlike Bitcoin, which is widely known for extreme volatility, stablecoins aim to maintain a constant value. They achieve stability by being tethered to fiat currencies, collateralized by other cryptocurrencies, or regulated through algorithmic mechanisms. This approach effectively tackles a major obstacle to the wider adoption of digital assets, making them more practical for everyday transactions and reliable as a store of value.

The rapid adoption of stablecoins is driven by a dual demand: the need for a reliable digital currency in global commerce and financial services, and its utility for speculative purposes within decentralized finance (DeFi). Reliability is particularly vital in regions suffering from economic instability. Stablecoins address critical issues such as hyperinflation, exemplified by countries like Venezuela and Lebanon, where the local currencies have lost trust and utility. Consequently, stablecoins have emerged as a pragmatic solution to real-world economic challenges. Furthermore, their inherent stability makes them ideal for underpinning DeFi applications, such as lending and derivatives markets.

The adoption and designs of stablecoins reflect different approaches to achieving stability. Broadly, they fall into four main categories: centralized, overcollateralized, algorithmic, and delta-neutral stablecoins. This article delves into each category, examining their design, use cases, and inherent trade-offs.

Centralized Stablecoins

Fiat-backed stablecoins, particularly USDT issued by Tether and USDC issued by Circle, are the most prevalent forms of stablecoins, collectively representing about 90% of the market. Both are pegged to the U.S. dollar and are typically categorized as centralized stablecoins. This classification stems from their reserves, which primarily consist of U.S. dollars and U.S. treasuries, subjecting them to rigorous oversight from regulators. The backing of these stablecoins is a key factor in their dominance, primarily due to the widespread trust in the dollar. This trust provides a level of confidence and security that assures holders of the stability and reliability of the peg.

https://x.com/simplykashif/status/1796372047062266284

Despite the scalability, size, and ease of use fiat-backed stablecoins offer, many in the industry criticize the irony of their centralized operations. There have been instances where regulators have taken action against stablecoins. For example, the New York Department of Financial Services (NYDFS) forced Binance to cease the issuance of its popularly used stablecoin (BUSD). This incident highlights the vulnerabilities and regulatory hurdles that even the most established digital asset companies can encounter. Despite these challenges, new companies continue to enter the market. For instance, PayPal has introduced its PYUSD stablecoin, which is backed by U.S. Treasury bills, and Ripple has announced plans to launch a similar stablecoin. Nonetheless, PYUSD has faced scrutiny with the SEC issuing a Subpoena to Paypal to investigate its issuance.

Additionally, Central Bank Digital Currencies (CBDCs) represent a pivotal development for stablecoins as central banks have begun to explore digital forms of their sovereign currencies. Unlike traditional stablecoins, CBDCs are state-backed and offer an increased layer of government oversight. At the time of writing, The Bahamas, Jamaica, and Nigeria have launched official CBDCs with most of the rest of the world experimenting and developing their iterations. The adoption of CBDCs could streamline monetary policy by allowing underserved populations access to digital wallets and reducing costs and friction associated with money production. However, it also raises significant privacy challenges as it would give governments unprecedented access to personal financial data. Despite the current market dominance of centralized stablecoins, many DeFi users have expressed concerns that these types of stablecoins defeat the fundamental purpose of using cryptocurrency due to having a centralized governing authority.

Overcollateralized Stablecoins

Overcollateralized stablecoins are the second most adopted type of stablecoin, providing a stable value pegged to traditional assets such as the U.S. dollar but backed mostly through digital asset collateral. This type of stablecoin involves lending more collateral in value than the stablecoins issued to ensure stability and security against market volatility. Since its launch in 2017, DAI has become the most popular overcollateralized stablecoin, and the third most popular stablecoin overall, behind USDC and USDT. DAI is backed by a mix of various types of assets, such as U.S. treasuries, Ethereum, and USDC. This has allowed DAI to be heavily utilized in DeFi for those looking to use a more censorship-resistant stablecoin. However, due to its high over-collateralization requirements, there is a limit to the amount of DAI that can be issued, ultimately severely limiting its scalability.

Curve USD (crvUSD) is another new stablecoin within the DeFi ecosystem, primarily designed to operate within the ecosystem of Curve, a stablecoin-focused AMM. It utilizes a Lending-Liquidating AMM Algorithm (LLAMMA) to manage collateral, dynamically adjusting it to mitigate large-scale liquidations and stabilize the token's value. This soft-liquidation mechanism reduces the potential for sudden financial loss and promotes gradual market corrections. Such features make crvUSD highly effective for facilitating low-slippage trades between different stablecoins, thereby bolstering user confidence in its stability. However, the nature of its stabilization mechanism may limit crvUSD's broader adoption outside of the Curve ecosystem.

Prisma Finance recently introduced a stablecoin called mkUSD, collateralized by Ethereum liquid staking tokens (LSTs). This design aims to maximize the utility of DeFi’s largest asset type by TVL, creating a flywheel effect with the protocol and the rest of DeFi. The protocol gained popularity with DeFi users looking to leverage their ETH LST. However, mkUSD faces some crucial scaling issues since it relies on the depth and liquidity of the LST market, and the complexity of its mechanisms limits its adoption to more experienced DeFi users. In addition to those challenges, both mkUSD and crvUSD face the same challenges as DAI, which have large collateralization requirements.

https://x.com/HoanggTienDung/status/1707341416048025760

Algorithmic Stablecoins

To solve the scaling issues from over-collateralization, various protocols have decided to use algorithms to maintain stability. Algorithmic stablecoins are a type of cryptocurrency that maintains a stable value through on-chain algorithms. Terra, with its stablecoin UST, was one of the most well-known projects in this space. It used a dual-token system where UST was pegged to the U.S. dollar, and the second token, LUNA, was used to absorb the price volatility of UST. The stability of UST was theoretically maintained where UST and LUNA could be traded for $1 of each other. The stability of the system came under stress in May 2022, leading to a death spiral where the falling price of LUNA could not support the peg of UST, eventually resulting in both tokens collapsing, wiping out $60B worth of assets.

The fundamental flaw of algorithmic stablecoins lies in their dependency on continuous demand and market incentives to maintain stability. If demand for the stabilization token drops, the system can quickly destabilize. Moreover, algorithmic stablecoins face challenges with information lag such as potential on-chain delays and inaccuracies in price feeds which can cause the stablecoin to depeg. While algorithmic stablecoins represent a unique approach, their reliance on potentially unstable algorithms and market demand makes them inherently fragile and flawed.

Delta Neutral Stablecoins

While centralized and overcollateralized stablecoins dominate the market. Delta-neutral stablecoins, a relatively new type of stablecoin, have gained traction. Delta-neutral stablecoins aim to unlock the benefits of both algorithmic stablecoins and collateralized stablecoins. The core concept involves creating a token that is unaffected by price movements in the underlying collateral assets by balancing long and short positions. This strategy ensures that any gain or loss in the value of one position is offset by the opposite movement in another, maintaining the overall value of the stablecoin. For instance, if you hold $100 worth of ETH and simultaneously short $100 of ETH through perpetual futures, any price movement in ETH will impact both positions equally but in opposite directions, keeping the total value stable. This delta-neutral hedging mechanism provides the stability needed for the stablecoin.

This concept is being employed by Ethena, which has introduced a novel delta-neutral stablecoin, USDe. Ethena launched at the end of December last year and has already accumulated over $3.3B TVL in under six months, which makes it one of the fastest DeFi protocols to accomplish this feat. It is currently the largest delta-neutral stablecoin on the market.

USDe is built on a delta-neutral strategy, which balances staked ETH derivatives and short positions to maintain its peg to the dollar. This approach allows it to function independently from traditional financial systems, emphasizing its role as a "synthetic dollar" or "Internet Bond." One of the features of Ethena is its ability to generate yields for its holders. This yield comes from two main sources: the staking of Ethereum, which provides rewards from the Ethereum network itself, and the gains from short positions in Ethereum derivatives. This model helps stabilize the value of USDe and provides a potential income stream for its holders. Ethena's USDe achieves a 1:1 collateralization ratio by applying a delta-neutral strategy, where short positions in ETH futures counterbalance any devaluation in the underlying collateral. This approach sets it apart as the most capital-efficient synthetic dollar in the industry. Unlike other on-chain overcollateralized stablecoins that require a minimum collateral ratio of around 150% or higher, USDe's method allows for significant scalability without heavily relying on centralized collateral like U.S. Treasuries. Ethena is essentially trying to solve the stablecoin trilemma where stablecoins are only able to achieve two out of three of the following: Stability, Scalability, Censorship-Resistance.

Ethena represents an advancement in DeFi's pursuit of stable and scalable financial instruments. By leveraging DeFi and CeFi mechanisms and reducing the volatility traditionally associated with digital assets, Ethena could substantially widen the scope of DeFi applications, attracting more institutional involvement and fostering broader market stability.

However, this approach comes with its own set of challenges, particularly regarding the reliance on derivative markets, which introduces a layer of complexity and risk. For instance, negative funding rates in these markets can impact USDe's overall profitability and stability. Additionally, some critics argue this model essentially functions as a tokenized hedge fund marketed as a stablecoin, which raises concerns as USDe becomes larger and systematically embedded within DeFi.

https://twitter.com/ConorRyder/status/1759706195709849806

The development of stablecoins is crucial for the growth of digital assets, offering various solutions to maintain stability in a volatile asset space. Each type addresses different needs and challenges, from centralized models like USDT and USDC to overcollateralized options such as DAI. Algorithmic stablecoins, despite their hopeful approach, have struggled with maintaining stability, as evidenced by the collapse of TerraUSD.

The ability to offer a stable yield-generating asset without reliance on traditional financial instruments as collateral does not come without challenges. Ethena critics believe that the stablecoin will collapse when funding rates eventually turn negative and that the stablecoin is a tokenized hedge fund. However, Ethena has created a sizable reserve fund of over $43M to make payments if funding rates turn negative. Nonetheless, the development of Ethena and future stablecoins will be crucial for the growth of DeFi and the adoption of digital assets.

FundRock, an Apex Group company, is a leading independent UCITS Management Company and Alternative Investment Fund Manager (AIFM).

FundRock is based in the Abu Dhabi Global Market (“ADGM”), one of the world’s fastest-growing financial centers. As a fully authorized ManCo for Qualified Investor Funds and Exempt Funds, they were an ideal partner and currently serve as our domestic investment manager.

FundRock ME’s ADGM license permits the following activities:

• Managing a Collective Investment Fund

• Arranging deals in investments

• Managing assets

• Advising on investments or credit

Matthew Pykstra, Senior Executive Officer at FundRock, and Darius Askaripour, Managing Partner at Varys Capital, discuss the fruitful union.

As a founder, you must contend with a nonstop barrage of challenges. This is the path of an operator. This is the path of a visionary cutting a lane through an often congested thoroughfare. It’s never a straight line, as the road is full of potholes and detours, and is constantly under construction.

Varys Capital didn’t decide to set up shop in the UAE solely based on the endless attractants, rather, it was a region full of infinite possibilities. This one dynamic has helped us shape multiple directives supporting the GCC region:

1. Community: Support the local community by molding the next generation of founders through all aspects of the entrepreneurial journey.

2. Hire locally. This is important for laying roots in a region and contributing to the local economy. People are flocking to the UAE in droves, and the talent pool is evolving at neck-breaking speeds. Incentivizing movers and shakers while rewarding creativity is truly one of the most rewarding aspects of running an enterprise.

3. Invest locally. We expect to support local projects and companies through close associations with existing and newly emerging incubators. Our deal flow channels are well-established throughout the GCC, and we intend to fund the next wave of brilliant founders.

We are thrilled to see what the future holds for the nation of UAE and hope to make significant contributions to the exemplary vision shared by the nation’s innovative leaders.

So, how does quantitative infrastructure and execution benefit venture capital investments?

The answer centers around equity plus a token warrant, one of venture capital's most common investment structures within blockchain.

Token warrants in the realm of cryptocurrency are comparable to options in traditional stock markets. These are essentially agreements that confer upon investors the right, but not the obligation, to purchase a specified amount of cryptocurrency tokens at an agreed-upon price at a future date.

The role of token warrants in tokenomics is multifaceted.

1. Firstly, they can be used to manage the supply of tokens. By offering warrants, a project can control how many tokens are circulating at any given time. This is crucial because the availability of tokens directly affects their value – generally, the scarcer the token, the higher its potential value.

2. Secondly, token warrants influence investor behavior. By providing the option to purchase tokens at a predetermined price in the future, warrants can encourage early investment in a project. This early investment is often critical for developing and succeeding new blockchain projects. It also creates a sense of confidence and commitment among investors, as they have a stake in the project's future success.

3. Moreover, token warrants can impact the demand for tokens. They create an additional layer of interest in the token, as investors who hold warrants are likely to follow the project's progress closely. This increased interest can lead to higher demand for the tokens once they are available, potentially driving up their value.

One valuable insight is that securing these tokens as a priced-in add-on for capital contribution is not uncommon, especially in early stages (e.g., pre-seed, seed). This is done to incentivize capital contributions and align interests.

Early-stage investment dominates the country, with a projected market volume of US$0.6b this year alone.

Investors in the UAE are increasingly turning to venture capital to diversify their investment portfolios and seek higher returns. This is driven by a growing awareness of the potential for high-growth startups to disrupt traditional industries and create significant value. Blockchain initiatives are rife with advantageous developments, further closing the chasm between traditional finance and distributed ledger technology (DLT) applications.

Additionally, investors are attracted to the potential for early-stage investments to generate outsized returns and the opportunity to support innovation and entrepreneurship in the region.

The UAE has several unique characteristics that contribute to its flourishing VC market.

1. Its strategic location is a gateway between East and West, attracting international investors and providing access to various markets.

2. The country strongly focuses on diversifying its economy away from oil and gas, leading to increased investment in sectors such as technology and innovation. Blockchain/Web3 sits right at this perfect intersection.

3. The government launched various funding programs and initiatives to support early-stage startups and encourage investment in the sector.

4. According to the Ministry of Economy, the UAE has more than 400,000 registered SMEs, contributing to 52% of the non-oil GDP and 86% of the total employment in the country. The UAE also has more than 100 incubators and accelerators, which provide mentorship, funding, and networking opportunities for startups and entrepreneurs.

5. According to the National Agenda for Entrepreneurship and SMEs, the UAE aims to increase its startups to one million, incubate ten unicorn startups, and achieve a strong partnership between the public and private sectors by 2030. The National Agenda also includes 29 initiatives and incentives to enhance the business environment and entrepreneurial mindset in the UAE, such as simplifying procedures, reducing fees, providing grants, and facilitating access to markets and finance.

The country has a stable and diversified economy, with a strong focus on sectors such as tourism, real estate, and financial services. This provides a solid foundation for investment and supports the growth of startups and innovative businesses. Additionally, the United Arab Emirates has a young and dynamic population with a high level of digital literacy and a strong entrepreneurial spirit. This creates a fertile environment for innovative startups and attracts local and international investors alike.

https://www.statista.com/outlook/fmo/capital-raising/traditional-capital-raising/venture-capital/united-arab-emirates#analyst-opinion

ADGM's commitment to excellence drives a remarkable 211% surge in AUM in Q1 2024, with 107 managers overseeing 137 funds and a 30% growth in operational entities, reinforcing its status as a leading international financial hub.

As a sign of the future and to address the demand for blockchain-related services and innovation, ADGM partnered with the Solana Foundation.

One of the best experiences working with the regulator was the ease with which you can communicate with key personnel and the fact that they constantly seek opinions on how to service and accommodate a wide array of businesses directly from operators.

https://x.com/adglobalmarket/status/1793209476331241755?s=46&t=9JQMYFENQhHOthpkU_HTrA