oohhhh…the institutions are coming!

Black Rocks with Bitcoin tokens spread across it.

By EdgyJune 27, 2023

The past few weeks have been rough after the SEC lawsuits. But hold those McDonald’s applications!

Several institutions are entering Crypto, and the markets have responded favorably.

Here’s what we got today:

  • Are institutions here? TradFi makes moves in crypto.
  • What is opBNB? A new EVM-compatible L2 for BNB Chain.
  • Polygon PoS is transitioning to a Zk-validium. Polygon 2.0 vision is out.
  • Around the Web. A new token from MakerDAO, Frax’s buyback strategy, IMF’s global platform for CBDCs and more.

Here’s your Edge 🗡️!

“If you don’t know who you are, this is an expensive place to find out.” – George Goodman


🏛️ Are Institutions Finally Here?

We’ve been dreaming about institutions coming to Crypto for years. Imagine all those pensions and trillions of dollars flowing into Crypto. It looks like it might be happening.

#1 BlackRock filed for a Bitcoin ETF.

Until now, the SEC has rejected all Bitcoin ETF applications. So why are we getting excited over BlackRock? Because not all players are created the same.

(Plenty of international football players sign with Major League Soccer. But it’s a game-changer when Messi signs)

Blackrock is the world’s largest asset manager. They have over $10 trillion in assets under management. BlackRock’s clients include governments, central banks, pension funds, insurance companies, and major hedge funds.

In short, they have serious influence and can get the ETF approved. They play to win.

ETF stands for Exchange-Traded Fund. The Spot Bitcoin ETF will track the Bitcoin price on traditional exchanges. It’ll be named iShares Bitcoin Trust.

This will make it easier for traditional investors to invest in Bitcoin. They won’t have to manage crypto directly. Just buy the ETF on the stock exchange. This will make it easier for people to shift 401k and retirement allocation to Crypto.

How this differs from Grayscale: Grayscale already offers GBTC, an existing product for institutions. But it kinda sucks.

  • It trades over the counter rather than on exchanges.
  • It doesn’t always track the price of the underlying product.

Interestingly, BlackRock uses Coinbase to hold its Bitcoins, even though the SEC says Coinbase is an unauthorized service for unregulated investments.

WisdomTree and Invesco also applied for ETFs. Rumors say that Fidelity is also preparing for its own ETF. Grayscale is currently suing the SEC to upgrade its trust into an ETF.

#2 EDX Exchange

A new crypto exchange is on the scene: EDX Markets.

What’s unique about it? First, it is backed by the Wall Street Giants.

  • Charles Schwab
  • Citadel Securities
  • Fidelity Investments
  • Virtu Financial
  • And others.

Second, EDX does not handle customer assets directly. Traditional crypto exchanges hold crypto assets in their own wallets. Whereas EDX will use third-party banks and a crypto custodian to hold customer assets.

Third, EDX isn’t focused on retail investors. They provide API-based trading access for institutions rather than a traditional front-end for retail users.

Currently, EDX only supports the trading of four cryptocurrencies: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash (seriously?)

They also plan to launch EDX Clearing, a clearinghouse to settle trades executed on the EDX Markets platform.

#3 Deutsche Bank filed for a Digital Asset License.

Deutsche Bank AG has applied to be a crypto custodian in Germany.

They had announced their plans for it in February 2021. They also plan to allow users to buy and sell digital assets through prime brokers. And even provide services such as taxation, valuation services, fund administration, lending, staking and voting, and more.

Edgy’s Take: So, let’s zoom out for a second.

US regulators are cracking down on existing crypto companies. Even Coinbase is being sued by the SEC. On the other hand, TradFi is making moves in crypto.

So, many suspect a coordinated effort by TradFi to take over crypto. I’m not one for conspiracy theories, but this has some merit to it.

First, they ignore you, then they laugh at you, then they fight you, then you win.

New Chain

🔶 A New L2 for Binance

A brand new building in the middle of a neighborhood with a with B on top of it

Binance shocked everyone when it announced a new Layer 2 chain this week. Are they abandoning BNB chain? Is this meant to scale their competitor Ethereum?

Here’s what you need to know.

#1 It’s a Scaling Solution for BNB Chain

Let’s go back to the basics. As more people use a particular blockchain, its transaction fees will rise. Ethereum L1 had this problem. And that’s why Alt Layer 1s such as Solana, BNB, and FTM became so popular.

ETH’s current solution is Layer 2s. They’re chains built on top of their L1s. L2s will perform the computations off-chain and then post the data and proof-of-computations on L1.

There are different types of rollups. And opBNB is an optimistic rollup. It assumes that the data posted by rollups are accurate until proven otherwise. Once proven, transactions will be re-executed and reach the correct state.

BNB is the most used chain in the world. Binance processes around 4.5m transactions per day, and it reached 16m at its all-time high. Working on an L2 makes sense.

opBNB is a Layer 2 meant to scale the BNB Chain. So, it’s built on top of the existing BNB Chain. It’ll perform the computations and post the proof and data on Binance.

#2 EVM Compatible

EVM stands for “Ethereum Virtual Machine.” It’s the computer system built by Ethereum for itself.

When a blockchain platform is EVM-compatible, developers can use the same tools, programming languages, and smart contracts from Ethereum on that platform without any major modifications.

Don’t be confused. Even though BNB Chain is EVM-compatible, opBNB has no direct relationship with Ethereum L1. opBNB will settle onto BNB chain only.

EVM compatibility is giving the BNB ecosystem more audience and resources. EVM has the largest number of devs and a mature ecosystem. EVM compatibility gives access to those.

#3 Based on OP Stack

The OP Stack is an open-source blueprint for building interoperable Layer2s.

It’s modular and divides L2 into different components. Devs can choose from these components to create custom L2s. (Think of it like Lego Blocks).

Even though it was built for the Ethereum ecosystem, Binance can also use it to create its own L2.

opBNB also has some new technical improvements. It can handle over 4000 transfer transactions/second and keep the average transaction cost below $0.005.

opBNB will open new possibilities for devs on Binance. High-volume applications like social and gaming can become a popular use case.

In Summary: opBNB is a layer 2 chain built on top of BNB that will help scale BNB and make it cheaper.


🟪 The Polygon Merge

Outline of the Polygon PoS to Polygon zkEVM Validium
Source: Polygon

​​The Merge was Ethereum’s transition to PoS. Something similar is happening to Polygon PoS.

Polygon has over $1b of on-chain assets, tens of thousands of dapps, and an average of 2.5 million daily transactions. And they are discussing changing its architecture from Polygon PoS to zkEVM. It’s the tech version of open-heart surgery.

Here’s what you need to know about it:

Why? Polygon 2.0

Polygon has announced its new vision: Polygon 2.0. It is their version of the L2 ecosystem.

It’ll be a network of ZK-powered L2 chains. According to them, it’ll support unlimited chains, aka unlimited scalability.

All of them will be connected via a cross-chain protocol as well. Cross-chain interactions can happen safely and instantly. For a user, the entire network will feel like a single chain.

According to the vision, all of their chains should be ZK-L2s. The current Polygon has a robust ecosystem, network effects, and low fees.

When MATIC came out, it was a way to scale Ethereum. However, it operated as a side chain. It wasn’t a true Layer 2 solution. Now the technology is ready, and they’re upgrading.

If everything goes well, the Zk-validium will be live on the mainnet by 2024 Q1. The users and devs on Polygon won’t have to do anything. Only the node operators and validators must upgrade to the latest client software version.

What happens to $MATIC?

$MATIC is the token of the current Polygon PoS chain. It won’t go away in the Polygon 2.0 ecosystem.

Since Zk-validium won’t post transaction data to Ethereum, it’ll need another way to ensure data availability. The MATIC stakers will be performing that function.

The MATIC stakers will also be decentralized sequencers. They’ll decide which transactions to include and how to order them.

It’ll probably have more utility in the Polygon 2.0 vision. But the full details aren’t out yet. It’ll be released in the coming weeks. Follow those here.

Edgy’s Take: This transition is just a step in a much larger transition to Polgyon 2.0: their vision for its Layer 2 ecosystem.

Polygon is not alone in this. Optimism is building its version based on the OP Stack. Similarly, Arbitrum and StarkNet are also building their own ecosystems based on L3s.

The Layer 2 wars are just starting.

Dive deeper:

🚀 DeFi Catalysts

MakerDAO launched a new token, sDAI. It is the tokenized version of DAI that earns through the DAI Savings Rate. It follows the ERC-4626 standard.

Reserve Protocol is making a $20 million investment in the Curve wars. They will buy Curve, Convex Finance, and StakeDAO governance tokens.

GND Protocol announced gETH. It will be minted using several LSDs and ETH derivatives as collateral.

Frax Finance is discussing a buyback strategy for $FXS. They plan to increase the magnitude of buying at lower levels and stop buying at higher levels.

The Graph has entered the final phase of its migration to Arbitrum. The transition should enhance scaling capabilities, reduce gas fees, and increase transaction speeds.

GMX V2 for Arbitrum is live on the testnet. The V2 has several new features, including funding fees to balance long and short positions. (Tweet is from June 13th)

Camelot DEX announced that their V3 AMM is live. It relaunched concentrated liquidity by leveraging the Algebra Protocol.

Ambient Finance, a new decentralized trading protocol, went live on the Ethereum mainnet. It was previously known as CrocSwap.

Curve Finance voted to onboard wBTC and wETH as crvUSD collateral. This will probably increase the growth of crvUSD.

🌎 What’s Happening?

📰 Industry News

International Monetary Fund is said to be working on a concept of a global infrastructure for the interoperability of settlements between CBDCs.

Ethereum is discussing increasing the maximum number of ETH that can be staked as a single validator to 2048 ETH. The minimum will continue to be 32.

zkSync Era crossed $500 million in Total Value Locked, according to L2 beat. Other zk-rollups are also showing high activity, signaling a Zk-season.

Berenberg, an investment bank, said in a research report that stablecoins and Defi are likely to be the next targets for the SEC.

United Kingdom parliamentarians have passed a new bill, Financial Services and Markets Bill. It can recognize crypto as a regulated activity in the country.

Lens Protocol, a decentralized social media protocol from the Aave team, has opened up to governance proposals from the public.

Wyre has decided to shut down after nearly a decade. They said the decision wasn’t due to any direction from any regulatory agency.

Aevo launched their Open Mainnet, the first release to the general public. It is an OP Chain associated with Ribbon Finance.

Circle has restarted buying US Treasury Bills as reserve assets for $USDC. The Circle Reserve Fund is managed by BlackRock.

Polygon introduced Polygon Copilot. It is an AI interface powered by OpenAI’s GPT-4 model. It’ll be a guide to everything related to Polygon.

🧠 Twitter Alpha

😂 Meme