The tokenization of everything

BTC’s price has dropped 9.4% over the past 7 days, down to $42,455. The BTC ETF was a “sell the news” event. It’s crazy how much the market sentiment can change in a week.

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Off the top of my head, here are some reasons I remain quite bullish:
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• Larry Fink, BlackRock’s CEO, is bullish on tokenization and Crypto.
• Possible Fed pivot regarding interest rates
• Year of the Dragon in Chinese Horoscope
• We’ve paved the way for an ETH ETF
• The BTC halving is coming
• U.S. Election year
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The most undervalued asset in this industry is patience.

Here’s what we got today:

• Larry’s favorite narrative. An introduction to tokenization.
• Airdrop Alpha. Your guide for qualifying for Berachain airdrop.
• A new DeFi primitive. An introduction to Morpho Blue.
• Around the Web. Injective Volana Upgrade, BananaGun on Solana, Rabby screenshot, and more.

Today’s email is brought to you by Cartesi, the app-rollups that can run Linux.

Here’s your Edge 🗡️!

Tokenization Narrative 101

Larry Fink, the founder and CEO of BlackRock, has been singing praises of tokenization.
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​Why does this matter? BlackRock has ~$9 trillion of assets under management. Blackrock is one of the companies approved for a BTC ETF. They have the money and power to make stuff happen.

“These ETFs are stepping stones towards tokenization, and I believe that’s where we’re headed.” – Larry Fink

You can watch the clip yourself.
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Tokenization is the representation of assets on the blockchain. These can include anything from financial assets to land. This offers benefits like increased liquidity and instant settlement.

Crypto natives have been talking about Real World Assets and tokenization for a long time.
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We wrote about this back in March 2023. While RWA tokens have been pretty hot the past few months, this sector has a lot of room to grow.

Many saw Larry’s comments as TradFi accepting the crypto thesis. They argue that finance will eventually shift to our chains.

Many opposed that view. They said Banks won’t come to public chains like Ethereum. They will run their private chains. Aka, Larry wasn’t going to pump our bags.

The only token to benefit from Banks running private chains would be $LINK. If Banks aim to connect to our ecosystem, they’d likely use CCIP from ChainLink. I had talked about this in detail before.

I expect comments like these from Larry and other TradFi players in this bull cycle. In the short term, these comments will drive attention toward RWA projects, and in crypto markets, attention drives prices.

Below is a market map of different RWA projects.

There are many different sectors in RWA. Investing in leading protocols of these sectors is a way to get exposure.

• US T-Bills. MakerDAO was the alpha play. Projects like Ondo are catching up.
• Private Credit. Maple Finance & Goldfinch are top projects in this category.
• Infrastructure. Centrifuge is a leader in tokenizing and managing RWA.
• There are more categories such as the tokenization of real estate and equities.
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Above are DeFi projects that can benefit from the RWA narrative. But they don’t cover the TradFi institutions that have entered crypto.

Avalanche has released Evergreen Subnets. They are specifically designed for financial institutions to explore onchain tokenization. It has features like Geofencing and KYC/KYB standards.

Major institutions have already started building on Avalanche Evergreen Subnets.

• Citybank tested FX trade simulation on Avalanche Evergreen Subnets.
• JP Morgan, Apollo Global, and Monetary Authority of Singapore collaborated to launch Project Guardian. It experiments with asset tokenization.
• Investment firm Republic launched Republic Note on Avalanche. It gives retail access to their venture portfolio of over 750 companies.
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If you want to learn more about this narrative, here are some resources:

• ​RWA.xyz​
• ​Binance RWA Report​
• ​The State of Tokenization​

Cartesi Rollups: Web3 Developers’ Holy Grail

The biggest challenge for dApp developers? Immature development environments.

Compared to Web2’s robust development environment, Web3’s dev tools and libraries are nascent. It would take literally decades for Web3 languages to recreate the existing libraries and tooling available to traditional software developers.

A solution? Cartesi Rollups. Cartesi provides a framework for building app-specific rollups with Web2 tooling. These can be L2s, or L3s, or sovereign rollups.

Why use it? Via the Cartesi Virtual Machine, Cartesi Rollups run Linux, the world’s most widely used open-source operating system. Devs can now have decades of rich code libraries and open-sourcing tooling for writing Web3 apps that are more expressive and computationally intensive.
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It offers many more benefits as well:

• Go from EVM’s 10 million instructions per block to 3.7 billion on CVM.
• Inherit security and censorship resistance from Ethereum.
• Your dApp will live on its own optimistic rollup with a dedicated CPU. Competing with other ecosystem dApps for scarce blockspace is a thing of the past.
• Building on an appchain helps you offer predictable and stable fees for users.
• Flexibility in the tech stack, such as customizable gas metering and DA solutions.

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​Cartesi is unleashing the next wave of revolution in crypto history. If you’re interested…

​Learn more about Cartesi →

The Berachain Opportunity

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We’re going to be covering more airdrop opportunities this year. No, I won’t be one of those threadbois hyping up 5-figures airdrops. We’ll only share curated opportunities that we think are worth your time.

People focused on yield farming in the previous cycle. The attention is shifting towards airdrops for this coming cycle.
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We have already seen multiple five-figure airdrops from the likes of Jito, Arbitrum, Arkham, and more.

If you have missed some of these opportunities, Berachain might be one worth looking into.
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​What’s Berachain? Berachain is an EVM-equivalent L1 built on top of the Cosmos SDK. It uses Proof of Liquidity (PoL) consensus focusing on DeFi primitives.

PoL is a mechanism that aims to align network security and liquidity.

Unlike traditional PoS chains, users with a fixed amount of capital must choose between staking with a validator or contributing to on-chain liquidity.

Tri-Token Structure

The Berachain economics ecosystem encompasses three tokens:

• $BERA: Gas token
• $HONEY: Ecosystem native stablecoin
• $BGT: Berachain governance token

$BGT is the Soulbound token. This means it cannot be bought or traded but only earned.

​​You can only obtain $BGT by providing liquidity to the Berachain ecosystem.

​By staking and delegating $BGT, users earn fees through $HONEY. Users can redeem 1 BGT for 1 BERA at any time. They can also burn BGT.

However, this is a one-way process. Once the BGT is burned, it’s gone for good.

This gives users a choice between holding a gas token or a token that allows them to earn fees.

The Team Raised $42M from their latest investment round.

VCs like Polychain Capital, Robot Ventures, and many others are among the investors.

Following a rough start, Berachain Testnet Artio has been live since January 11th. So if you’re reading this, you’re still early to the party.

Berachain Airdrop Strategies

We can only guess the best method to farm an airdrop based on previous experience. We are still waiting to receive confirmation from the team. I’d suggest staying active on their social channels.

​Strategy 1: Start using the testnet​

The first step is to get acquainted with the testnet. Use Metamask for now as other wallets, like Rabby, are unavailable.
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Before starting your journey, you can also try to obtain the “Bera Cub” rank on their Discord.

As their Discord feels somewhat chaotic, how to obtain this rank remains unclear. And the exact purpose of it needs clarifying.

Ideally, from the above link, you already have all you need to qualify for the airdrop.

Step-by-step:

1. Claim your $BERA on the testnet website by pasting your wallet address.
2. ​Swap your newly obtained $BERA to $STGUSDC.
3. Do the same on Honey and mint $HONEY for $STGUSDC.
4. Using their lending/borrowing platform to lend $HONEY, $WBTC, or $WETH.
5. Play on their Perp Dex; I suggest opening a few small positions.
6. When you have obtained your first $BGT, go and stake that into the validators available here.
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Strategy 2: Hold or trade historical NFTs from the Bera collection.​
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Some NFTs have gained momentum since the testnet announcement.

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The above collection is listed outside their official one, but take a look at the generated volume.

Here’s a list of their official NFTs from their Discord server:
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​OG Bong Bears

◦ https://opensea.io/collection/bongbears​

Bond Bears (rebase 1)

◦ https://opensea.io/collection/bond-bears​

Boo Bears (rebase 2)

◦ https://opensea.io/collection/boo-bears​

Baby Bears (rebase 3)

◦ https://opensea.io/collection/the-baby-bears​

Band Bears (rebase 4)

◦ https://opensea.io/collection/the-band-bears​

Bit Bears (rebase 5)

◦ https://opensea.io/collection/berachain-bit-bears​

Strategy 3: Complete all tasks in the Galxe campaign: “Explore the Beraverse.”

This is a reminder that playing with a testnet could be dangerous.

Your priority should always be the safety of your funds; use a burner wallet!

Morpho Blue: A New DeFi Primitive?

The above chart tracks the total supply, total borrows, and TVL of Morpho Blue. In this case, the TVL is the sum of the total supply and the total borrowing of Morpho Blue.

It officially went live on the Mainnet on January 10th. But, as of today, it already has 20.7+M in total deposits. That’s very impressive for just a week of activity.

Morpho Blue is a lending protocol created by Morpho Labs. They have previously built the Morpho Optimizer, which operates on top of Compound and Aave. And those have attracted over $1B in TVL!​

Morpho Labs created Morpho Blue as a solution to problems with the current lending paradigm:

• Inefficiencies in fees, rate spread, and collateralization factors.
• Reliance on its DAO and trusted contractors to manage risk parameters.
• Inflexibilities due to dependence on the DAO to do everything, from market creation to setting risk parameters.
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Morpho Blue is trying to be a foundational protocol for lending. This is kind of like HTTPS for the internet. More logic layers will be built on top.

For example, Morpho Blue won’t handle risk management. Other layers on top will instead handle this. Risk experts can build noncustodial curated vaults for lenders to earn yield passively. They also plan to create a separate protocol to support the risk management layer.

Similarly, they will have permissionless asset listings. Markets with any collateral, loan assets, and risk parameters can be created.

Here are some additional features of Morpho Blue.:

• Immutable. It’ll run the same way forever.
• Governance minimized. The DAO doesn’t control things like risk management.
• High efficiency. Better interest rates, higher collateralization ratios, and low gas costs.
• High flexibility. Permissionless asset-listing and permissionless risk management.

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I’ll be keeping an eye on this protocol. And if you would like to follow it, this Dune Dashboard is pretty good.

🚀 DeFi Catalysts

Banana Gun has decided to launch on Solana. $BANANA holders will have to specify a Solana address to receive $SOL revenue share.

Injective Volan Upgrade is live on mainnet. The upgrade includes improvements in scalability, interoperability, RWA infrastructure and more,

Polygon Labs has announced Libre, a financial institution-focused L2 that will be built using Polygon CDK.

Blast testnet is now live. And they are organizing a competition between dApps to reach 100k users and $1.3 billion.

SyncFutures has deployed its v3 on Arbitrum. It isn’t fully open to everyone yet. It is in the invite-only phase.

Lido Finance has expanded to zkSync. wstETH is now available for all zkSync users.

MarginFi has released flashloans on their platform. The initial rollout of the flashloans will only be available to those who are approved by the team.

AltLayer, a protocol for launching native and restaked rollups, announced their token. Both EigenLayer and Celstia communities are eligible for airdrop.

Euler Finance introduced the Ethereum Vault Connector. It enables anyone to build credit-based protocols and products.

📰 Industry News

Circle, the company behind $USDC, has filed for US IPO. Its investors include Coinbase, Goldman Sachs, Fidelity, and BlackRock.

EigenLayer has introduced new LSTs and unpaused restaking caps. The changes will take effect on January 29th.

Rabby wallet hinted at a screenshot for airdrop. For this bull cycle, airdrops are becoming the equivalent of yield-farming in the last bull run.

Solana is creating a second version of their smartphone. They are running an early discount now. And are planning to ship it by 2025.

1inch DAO voted in Storm Partners as permanent legal counsel. The DAO will pay $50k to the law firm as a retainer.

🧠 Twitter Alpha

1. Taiki’s $TIA thesis.
2. ​Thesis on BTC ETF mid-term.
3. Manta surpassing Base in TVL.
4. ​mETH (Mantle) fastest growing LST.
5. Liquid Restaking tokens overview.

😂 Meme

DISCLAIMER: I’m NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.