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Howdy! 

Man, if I was unemployed, I would be doing little else but watching the Olympics right now. I had forgotten what a fun event it is.

My new favorite sport: canoe slalom, which I don’t entirely understand but am obsessed with watching. Anyways:

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ORE expected to resume mining over the weekend

Solana’s boogeyman is re-emerging from under the bed.

ORE, the Solana-based proof-of-work currency that pushed the network to its limits in early April before pausing operations, is expected to resume mining sometime around Sunday, its founder told Lightspeed exclusively. With delays, the launch could be pushed to early next week.

Solana and ORE have taken measures to keep the network from being overburdened a second time, but these are all yet to be tested in the wild.

ORE launched in early April as part of — and eventually grand champion of — Colosseum’s Solana accelerator-hackathon program. It’s an experiment in bringing proof-of-work, which is the mechanism used to secure and mine new bitcoin, to the higher-throughput Solana blockchain. In simple terms: It’s bitcoin on Solana. It was fair-launch, meaning insiders didn’t get privileged access to the tokens, and ORE is meant to be mined on a computer or phone — unlike bitcoin, which requires expensive and cumbersome ASICs. 

(As an aside, I asked Hardhat Chad how investors like Colosseum would see returns if they don’t receive token allocations, and he said the investment would go to his new company, Regolith Labs, which will hopefully create money-making products in the ORE ecosystem.)

The program was popular at launch and was widely thought to be the culprit behind Solana’s network congestion issues in early April — when users found it difficult to land transactions on the network. After just two weeks, the currency’s pseudonymous creator Hardhat Chad announced that the project would be suspending all mining activities until it was ready to roll out a more efficient v2.

Regarding v2’s launch, the founder thinks he’s gotten v1’s kinks worked out. 

“I can’t guarantee new issues won’t arise,” Hardhat Chad laughed in an interview, “but I don’t suspect the same issues will occur.”

For starters, Solana developers rolled out an upgrade to help ease the blockchain’s congestion at around the same time ORE paused mining. Solana also rolled out a new central scheduler in the interim, which could make the block creation process more efficient. 

On ORE’s end, v2 implements an anti-sybil (which is one person pretending to be several people, burdening the network) measure where miners who submit hashes more frequently than once a minute — which is how often new ORE is mined — will run into errors and increased fees. 

However, Hardhat Chad did say that ORE implemented a new hash function — which is how a block’s data is stored in proof-of-work — which is meant to make it easier for phone-based miners, for instance, to compete with ASICs while mining ORE. The hash function is called DrillX and uses some code that was originally written for Tor’s privacy-focused Onion Browser, Hardhat Chad told me.

The new hash function uses more Compute Units (CUs, which can be thought of like Ethereum gas) than the old one, which could create miner demand for Solana to increase its block size from the current 48 million CU limit, Hardhat Chad said. He added that he would support the network increasing its block size.

Hardhat Chad said ORE’s mission is partly to make mining a consumer experience that could bring new users into crypto — unlike bitcoin mining, which is currently run mainly by large companies.

“If we can create that fun consumer gamified experience that anyone can do from any laptop or phone, my thesis is that we can just get tokens into the hands of tens of millions of people,” he said. 

— Jack Kubinec

Zero In 

For those lucky enough to snag some ORE before mining was disabled, it’s been quite a bullish couple of months.

The token price spiked after Hardhat Chad paused mining, and it hasn’t slowed down since, especially as the developer announced all v1 tokens would be migrated to v2. It jumped from $500 on July 25 to over $1,200 on July 29 as ORE made announcements pertaining to the v2 release. 

It remains to be seen whether ORE can maintain its price level once mining picks up again, with one new token being created every minute.

— Jack Kubinec

The Pulse

ICYMI this week in Solanaland:

• X suspends and reinstates “makenowmeme” blinks app, which allows users to create memecoins on Solana with a simple post. Minting has resumed.
• Breakpoint conference buzz is in full swing. The event will be held in Singapore from Sept. 20-21, 2024, featuring speakers from across the Solana ecosystem.
• Helius released a comprehensive Solana report, authored by Solana enthusiast Lostin, that provided valuable insight into Solana’s architecture, transaction lifecycle and recent developments.
• Jupiter’s community approved a proposal to burn 30% of its JUP token supply from team and community allocations, aiming to provide more certainty, alignment and transparency.
• The monthly Solana Ecosystem Call returned on Aug. 1, featuring updates from Drip Mobile, Future of Solana, Orca’s DeFi usability and Breakpoint 2024.
• SOL’s price is dropping hard, currently at $155. Some speculate this is due to a recent revelation from a whistleblower that FTX has a secret holding of 8% of Solana’s supply. If true, panic sellers may be reacting to fears that this massive cache could potentially be liquidated.

— Jeffrey Albus

One Good DM

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Howdy!

Today’s a big day for regulated investment vehicle enjoyers, as we got news of a SOL ETP filing yesterday afternoon.

It’s also a big day for long daytime enjoyers, as yesterday was the longest day of 2024. I fall more into the latter camp personally. But regardless:

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3iQ takes the Solana fund plunge

The Canadian crypto-focused fund manager 3iQ announced yesterday afternoon that it had filed a prospectus to offer a solana exchange-traded product (ETP). 

The move is notable not so much for 3iQ’s size but for the historical context: The firm listed bitcoin and ether funds before either asset had a regulated futures market in the US. Many view a futures ETF as a key milestone for any potential crypto spot ETF.

The solana ETP, which would trade as QSOL on the Toronto Stock Exchange, would be a closed-end fund, meaning that a limited number of shares would be created through an initial public offering (IPO) which could then be bought and sold on the stock exchange. This is in contrast to BlackRock’s IBIT bitcoin ETF, for instance, which can create and buy back shares based on market fluctuations. 

The fund will charge a 1.5% management fee, according to a copy of the prospectus we obtained, which puts it below the 2.5% charged by the Grayscale Solana Trust — another solana-focused security in North America. 

What I found most interesting from the filing is that some of the fund’s SOL will be staked via Coinbase Custody, and 25% of the staking rewards will go to 3iQ as a “staking fee.” The other 75% goes to the fund — but that 25% is still a pretty big slice for the firm.

3iQ Digital Assets president Christopher Matta told me the hefty staking fee is justified by the value offered by a regulated solana vehicle having exposure to both price and staking rewards. Matta added that as more of these funds come to market, “fees, of course, will come down across the board.”

If you’ll remember, the SEC’s approval of US spot ether ETFs last month hinged on staking being stripped from the filings. 3iQ currently offers an ether staking ETF on the Toronto Stock Exchange. 

Down the road, solana ETF hopefuls should watch for a futures ETF to go live on the Chicago Mercantile Exchange (CME), a step both bitcoin and ether both went through before their eventual approvals. 

“​​I think a lot of the regulatory uncertainty in the US has probably been one of the reasons why it hasn’t happened yet,” Matta said of solana futures ETFs. Last year, the SEC indicated solana could be classified as a security in lawsuits against Binance and Coinbase. Any update to that stance would doubtless have a large impact on the potential for solana ETFs in the US.

For now at least, Canadian regulators will be giving solana a look-over.

Matta said the path from the prospectus to a decision from regulators will likely take “a few months.”

— Jack Kubinec

Zero In

Solana set a record for weekly unique active addresses on the network last week, according to Blockworks Research.

The darker purple represents existing addresses, while the lighter purple are new addresses. You can see a significant rise in new addresses over the past few months — perhaps driven by the growing interest in memecoin trading.

But lest I get flooded with angry emails, let me add one quick caveat: unique addresses are not the same thing as unique users. The chart shows roughly 4.7 million unique addresses transacted on Solana last week, but the number of unique users was certainly smaller, as some individuals will make use of multiple addresses.

— Jack Kubinec

The Pulse

ICYMI: Stories you may have missed from Solana land this week:

• The Solana Incubator Demo Day is set for June 26. Featured projects will include Armada, Espresso Cash, Juicer, Sanctum, Shaga, and Zeebit.
• Pyth Network deployed its pull oracle on Solana, bringing increased reliability, higher frequencies, more feeds, historical data, and enhanced security to Solana DeFi.
• The first footage of the MagicBlock Engine, designed for fully on-chain Solana games with zero lag and high performance, was showcased at a16z crypto demo day.
• Solana’s summer kickoff events are happening worldwide, with major meetups in Lisbon, Berlin, Zurich, Amsterdam, Chicago, San Francisco, and many more.
• Solana layer-2 network Sonic raised $12 million in a Series A funding round led by Bitkraft Ventures, with a valuation of $100 million.
• TipLink wallet has arrived on Truffle. Web2 users can now mint from Truffle Drop using just a Google account, eliminating the hassle of extensions and seed phrases.
• An MEV sandwich bot named “arsc” has made around $30 million from Solana users over the past two months through MEV attacks. The bot’s activities and profits are largely hidden, with significant funds in cold storage and active DeFi wallets.

— Jeff Albus

One Good DM

A message from Christopher Matta, president of 3iQ Digital Assets:

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Howdy!

Big news! Lightspeed is hiring a podcast host to work alongside the inimitable Mert Mumtaz.

If you’re down to receive 17 Slack messages from me in the hour before this newsletter is due asking you to explain how Solana works, this job could be perfect for you.

Apply to join one of the industry’s most exciting media brands here.

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Jito DAO’s $1.76B StakeNet question

Jito DAO is weighing whether to change delegation management of its $1.76 billion stake pool from Jito Labs to a new software named StakeNet. 

If the new program is implemented and succeeds, the newly-formed DAO could be in for a hefty payday. The proposal is still in a discussion period.

When users of Solana’s delegated-proof-of-stake system delegate their SOL to Jito’s stake pool, they receive JitoSOL, a liquid staking token (LST) that can be used in things like DeFi. 

Jito’s staking pool holds roughly 10.6 million staked solana, equivalent to around $1.76 billion at current prices. Yesterday’s governance proposal would shift the management of this stake pool to Jito Labs-developed StakeNet, which is a piece of software meant to automate JitoSOL delegation. 

Jito Labs CEO Lucas Bruder wrote a lengthy blog post about StakeNet in January. One top-line takeaway is that Solana stake pools are currently centralized, requiring things like off-chain bots to decide where staked Solana should go, but StakeNet lets an on-chain program delegate staked SOL. More concisely: It boosts decentralization.

Jito has become a core piece in how Solana works. The rapid expansion of its JitoSOL product — particularly at the expense of the once-dominant mSOL issued by Marinade — is notable. 

At around the time of FTX’s collapse in November 2022, JitoSOL held less than 5% of Solana’s LST market share, according to a Dune Analytics dashboard. Today, JitoSOL has by far the largest market share, hovering around 45% of the LSTs tracked on the dashboard.

JitoSOL may have further to grow. As Blockworks Research analyst Hayden Tsutsui pointed out, only roughly 6% of staked solana take the form of LSTs, whereas 38% of staked ETH corresponds to LSTs. 

If JitoSOL remains the top dog in liquid staking (think Lido’s stETH, but for Solana), there could be a lot of deposits left to soak up. 

JitoSOL became so popular partly by offering additional yield on top of Jito’s creation of maximal extractible value (MEV). Jito runs a fork of Solana Labs’ validator client that creates additional revenue through MEV. Jito Labs’ block engine charges a 5% fee on MEV tips, so the company makes more money the more its client gets used. 

But the biggest winner of StakeNet taking off could be Jito’s DAO. JitoSOL charges an annual management fee equal to 4% of total rewards. This 4% goes to the DAO, a Jito Labs spokesperson told me. 

If StakeNet is in fact a really good program, then JitoSOL could become more dominant than it already is. And a growing JitoSOL pie would make the DAO’s yearly slice that much bigger. 

— Jack Kubinec

Zero In

20%

That’s the proportion of all staked SOL held by the network’s top-10 validators.

And who’s on that list? Well, the answer might not be so surprising.

Coinbase is the network’s top validator, holding some 3% of the total stake — about 11.18 million SOL, according to data provider Solana Compass. 

Next is Galaxy with 9.8 million SOL, then Ledger by Figment (a collaborative initiative) and then Figment. The latter two hold 9.1 million SOL and 8.1 million SOL, respectively. 

Binance ranks 7th in the top-10 list of validators, with 5.5 million SOL. Jito2 ranks 8th, with about 5.4 millon SOL, while Jito1 holds 4.6 million SOL.

As Solana Compass notes, the distribution of stake among validators is “still somewhat top heavy, with large validators run by centralized exchanges receiving an outsized share of stake.”

— Michael McSweeney

The Pulse

It seems that 2015 was the golden year for Solana’s current crop of memecoin celebrity-influencers. 

Caitlyn Jenner, whose Pump dot Fun memecoin made waves over the long weekend, accepted the Arthur Ashe Courage Award at the ESPYS in 2015. Iggy Azalea, the next Solana influencer du jour, won top rap song at the 2015 Billboard Music Awards for her breakout hit “Fancy.”

Yesterday afternoon, former NBA player Paul Millsap wrote on X that he wants to get some of his “NBA boys” in on the memecoin-launching fun. 

His best season? 2015-2016, when he was named to the all-star team and finished fifth in defensive player of the year voting.

These celebrities were all a lot closer to the A-list a decade ago than they are now, which is perhaps why they find themselves able to now add “memecoin dev” to their LinkedIn pages.

— Jack Kubinec

One Good DM

A message from Lucas Bruder, CEO of Jito Labs: 

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Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

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