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Thank you for your continued support!

– The Castle Chronicle Team

Welcome to Edition 117 of The Castle Chronicle.

Here’s what we have for you today:

• 🔍 Market Watch – Price action & Relevant metrics across sectors and assets

• 📖 Recommended Reads – The best reads you might have missed

•  🧱 Founder Corner - Dan from Rysk

• 💚 HypeVM Farming - CL with some farming opportunities on the HL ecosystem

• 🏰 Castle Reads - All of Castle’s research you might have missed

📈 PRICE ACTION

Finally, some interesting directional cues! After weeks if sideways BTC has finally broken higher from its accumulation range. So far, this is developing exactly as expected in line with the anticipated re-accumulation.

• Healthy uptrend

• Re-accumulation

This is just the 1st confirmation step for continuation, as price still needs to prove itself a bit more on the lower timeframes, but so far it’s doing all the right things! What I want to see now is a confirmed re-accumulation on the daily chart and then I’ll be happy to follow this thing long.

The reason I’m waiting for a break higher after this push is simple - I want to rule out re-distribution. There is still a very good chance that there isn’t enough juice in this pump and it simply dies off. With a confirmed re-accumulation our chances are much better.

TOP PERFORMERS

With BTC pumping it is expected to see rising tides across the entire crypto market. It should come as no surprise that many cryptos are seeing big green numbers, outperforming BTC. Now is a good time to pay attention to relatively stronger coins and IF BTC confirms a re-accumulation, we can start betting on them.

BTC FEAR AND GREED INDEX

Just a few weeks ago, we were at super low sentiment levels, yet now we’re slowly creeping into the greed territory. Emotions are truly a spectacle in the market.

That being said, I think this index provides the most value at its extremes - the upper and lower 10%. That’s when emotions take over completely and people make reckless decisions. Compared to that we’re still fairly neutral.

CAPITAL FLOW

Nothing stands out to me in regards to capital flow. We can see the regular high activity within Ethereum and slightly higher outflow from Arbitrum this week. Same old, same old.

NARRATIVE PERFORMANCE

Every single narrative is in the green this week with AI-Agents leading the charge up +35% on average. We can see coins like $ZEREBRO up +260%, $GRIFFAIN +87%, and $LUNA +55%. These are spectacular bounces on the slightest signs of strength from BTC. If BTC should continue its bullish run I’d say AI-Agents are definitely a narrative worth watching!

This week has been very refreshing for the bulls and gives us some hope. It is still a little bit too early for me to put my “RISK ON” pants on, but if things continue in this fashion, I’ll be changed in no time. Until then -

Risk responsibly, and I’ll see y’all next time!

🧱 FOUNDER CORNER: Startups Die When They Stop Believing by Dan from Rysk

WHY I’M WRITING THIS

I’m Dan, founder of Rysk, a DeFi protocol focused on structured products and options.

I started The Founder Corner because building in crypto, especially in DeFi, is hard. 

But it’s also exciting. 

It tests you. Forces you to grow. Forces you to confront yourself. 

We need more people building, and to get there, we need to tell the truth about what the journey actually looks like, without sugar coating it. 

What it feels like when it’s not going well, when no one’s watching, when you’re not sure if you’re going to make it.

Let me tell you about my 2024.

THE BOTTOM OF RYSK

Early that year, Rysk was one of the top options protocols on Arbitrum. 

We had finally shipped a product we had been building for months: an options AMM. It was a beautiful challenge, and we were proud of it. We had real traders using it. We thought we were on our way.

But the product didn’t scale.

The demand for options in DeFi just wasn’t there. What looked like PMF turned out to be a mirage. 

Growth stalled, and people started saying we were solving a problem no one cared about: "No one wants options in DeFi."

Without PMF, without traction, things get tough. At this point, we had spent everything - time, energy, and capital - and we weren’t sure it was going to work.

RUNNING ON EMPTY

Funds were running out, and we needed to fundraise. We started pitching, but doing it without momentum or conviction is brutal. I remember talking with my co-founders and asking ourselves: What if this is it? 

Not because we stopped believing, but because we were exhausted.

Then came the most challenging part: we had to let people go. People who were all-in. People who gave everything. It wasn’t their fault. 

It’s one of the worst things I’ve ever done as a founder. You don’t forget it. It stays with you.

REBUILDING FROM THE GROUND UP

Looking back, that might’ve been one of the most powerful moments as a builder: Low runway, high uncertainty, but a committed team, passionate about solving the problem. We believed options could help people, and we just had to find the right design for it. 

We tore our product all down to the fundamentals. Got brutally honest. Talked to users like it was Day 1 again. Challenged every assumption. Basically re-started from zero, together.

This was the turning point. We went through hell as a team and came out stronger. Rysk stopped being just a product. It became something else: a mission, a lore, a team that refused to give up.

CHAOS BY STRUCTURE

If you’re in that place right now, here’s what helped us. Surround yourself with long-term people. Builders. Friends. Investors who stick around when it’s ugly. The ones who give you space, help, and a reason to keep going. The Castle community was one of them. That’s why I’m writing this here, in the Chronicle newsletter, hoping it can help any founder who’s in the middle of the same storm.

I’ve realized that being a successful founder isn’t about getting everything right. It’s about resilience. It’s about facing problems head-on, owning your mistakes, and moving forward anyway. The ones who survive aren’t the ones with the cleanest roadmaps. They’re the ones who accept that chaos and uncertainty is the average day, and learn to operate inside it.

When we first defined Rysk’s identity, we called it “chaos by structure.” 

At the time, it sounded cool. 

Now I actually understand what it means. 

It’s not just branding. It’s a core value. It’s how we build.

STILL BELIEVING

Startups die when they stop believing.
We’re still here because we didn’t.

Expect more coming from the life of a founder.

Follow Dan and Rysk on Twitter for more Defi and Founder content:

• Dan: https://x.com/DanDeFiEd

• Rysk: https://x.com/ryskfinance

💚 HYPEVM FARMING OPPORTUNITIES

The market is not the easiest, but lots of you, I HOPE, hold some little stable coins ready to be deployed in some profitable & productive operations.

With close to a third of the $HYPE supply still to be distributed and its strong price action, everything related to $HYPE and its EVM remains interesting for us as a place to park capital.

IT'S A CHAD ECOSYSTEM as well.

Today we highlight some more farming strategies on the Hyperliquid ecosystem:

1. HyperSwap 

The main dex on the chain has been doing well in recent weeks and its TVL has risen quite rapidly. 

The strategy here is simple, buy $HYPE token on the orderbook, bridge on the EVM and buy some $LHYPE from loopedHYPE which is an innovative staking protocol looping $HYPE to increase yield and stHYPE that is the other main staking provider on the EVM. 

Then, add some LP of $HYPE and/or $LHYPE/$stHYPE on it. 

A real FARMEuuuR would be repeating those operations on many addy.


2) HyperLend is the other obvious choice to farm the HypeVM.

It wants to position itself as the native borrow/lending protocol on the SHAIN.

With an exponential growth of its TVL since last month, we understand that we are not the only ones looking out there.

Tho, the Utilization of all the vaults are already MAXXED OUT at the moment: 

Also, I was only able to deposit dust on some of my addy, but the idea would be to track once they reopen more space for deposit and deposit/borrow $HYPE on with many addresses. 

3) Sentiment is another interesting play if you want to farm $HYPE.

They offer vault looping $HYPE on leverage (or not) in order to increase the amount of $HYPE held by the user meanwhile counting in as TVL for the overall metrics. Just need to get some $wstHYPE on Hyperswap then you are ready to loop. Select the collateral, the leverage and ofc, NFA.

This strategy is risky but excellent for point accumulation imo.

CONCLUSION 

When you farm point szn, you have to be careful WHERE you will deploy your capital in order to avoid being rugged or lost it in some scammy contracts.

Simple trick to protect capital? Look for teams that are doxxed, teams that are known IRL & doing events at conferences. 

🏰 CASTLE READS

• AI dispatch: our weekly roundup of all the news that matters in AI:

Twitter tweet

• Our Report on Arbitrum Chains:

Twitter tweet

• On Dolomite and $DOLO TGE:

Twitter tweet

• Our space on Arbitrum Grants:

Twitter tweet

That’s it for this week! Hopefully, both $BTC and $ETH will find good support after the small bounce they had. Otherwise, prepare for impact dear readers.

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

Orbit Chains give builders something increasingly rare in blockchain infrastructure: freedom. Freedom to define your own economics, your own governance, your own trust assumptions. Freedom to launch a chain that fits your application, not the other way around.

Over 35 Orbit Chains have already gone live — powering everything from high-throughput gaming and omnichain loyalty to liquidity routers and education infra. These are not clones; they’re sovereign systems with their own design space.

With interoperability on the horizon, Orbit is evolving from a modular toolkit into the connective tissue of a new kind of ecosystem. Orbit isn’t just unifying chains under a single vision, it’s empowering each to define its own.

1. Going Beyond Arbitrum One

Layer 2s (L2s) have made significant contributions to Ethereum's scalability roadmap. While their early focus was on achieving product-market fit (PMF) as roll-ups and building foundational infrastructure, they now face new challenges, including how to scale themselves.

To address this, some L2s have launched frameworks that enable developers to build chains using their stacks. Each L2 offers a different approach.

This report explores Arbitrum Orbits: a powerful framework for launching customizable chains that inherit the technical strengths of the Arbitrum stack. Orbit Chains can be deployed as L2s that settle on Ethereum, or as Layer 3s (L3s) that settle on Arbitrum One or another L2.

Orbit Chains are modular by design, empowering teams to tailor architecture to specific needs, from governance and gas tokens to performance and trust assumptions.

This model stands in contrast to Optimism’s Superchain, which emphasizes standardization and interoperability under a unified architecture. Orbit prioritizes sovereignty and customization, offering developers greater flexibility in scaling.

Several Orbit Chains are already live, powering applications across gaming, DeFi, NFTs, infrastructure, and more. While user experience (UX) across these deployments is still evolving, efforts are already underway to improve cohesion and create a more seamless developer and user journey.

In this report, we explore Orbit Chains, their role in scaling Arbitrum, the opportunities they unlock, and the growing ecosystem that is forming around them. Through case studies and analysis, we highlight early successes, identify areas for improvement, and outline the roadmap for a more unified Orbit experience

2. Introducing Orbit

Arbitrum Orbit lets teams launch customizable, sovereign chains that inherit the security and performance of Arbitrum One, designed in response to demand from teams wanting more flexibility and control.

Built on top of Ethereum or an L2, Orbit chains inherit the robust security of the chain while granting developers autonomy over key architectural choices.

Orbits ensure:

• Flexibility: Developers can fine-tune infrastructure settings to align with project-specific goals.

• Scalability: High throughput and low transaction costs.

• Robust Performance: Leverages the Nitro stack and Stylus for performance and security.

• Permissionless Development: Developers can deploy L3s without requiring approval.

Projects choose between two design options, reflecting a tradeoff between decentralization and performance. They can take the form of a rollup or an AnyTrust chain:

• Rollup: Stores transaction data on Ethereum L1 (most robust security model; trust-minimized and decentralized).

• AnyTrust: Uses a Data Availability Committee (DAC) to store raw transaction data, reducing costs and improving settlement times by introducing a lightweight trust assumption. This model is well-suited for use cases such as gaming and social media apps.

Both models benefit from Arbitrum’s security guarantees while offering higher flexibility over design parameters. This includes the ability to:

• Set different trust assumptions

• Adjust gas fees

• Design unique tokenomics

• Implement custom governance models

• Choose consensus mechanisms

This level of control enables the creation of application-specific chains (appchains) that are optimized for targeted use cases.

Orbit builders also benefit from a Partner Network of third parties and integrations:

• Rollup-as-a-Service (RaaS) providers

• Circle’s Cross-Chain Transfer Protocol for native USDC movement

• Block explorers, bridges, RPCs, oracles, and indexers

• Key advantages of Arbitrum Orbits include:

• Customization for specific application needs

• Developer sovereignty and governance autonomy

• Enhanced scalability and lower transaction costs

• Flexibility to experiment with novel functionalities

• Support for programming in multiple languages via Stylus (e.g., C++, Rust)

A unique feature of Orbits is the elastic block time, which means chains only produce blocks when there is demand. This reduces L1 settlement costs and avoids empty blocks.

Another core strength of Orbit Chains is their ability to scale without compromising on security. By leveraging the trust guarantees of the underlying L2, Orbits offer developers and users a strong foundation of safety, a critical differentiator in an increasingly appchain-heavy landscape.

Together, these elements position Orbit Chains as a highly customizable scaling solution for teams seeking sovereignty and flexibility. In the next sections, we compare Arbitrum’s design philosophy to that of competing frameworks and explore how the Orbit model strikes a balance between openness and structured incentives.

2.1 A Different Approach to Superchain

A key distinction emerges when comparing Arbitrum Orbit to other scaling frameworks like Optimism’s Superchain. While both aim to support modular ecosystems, their philosophies diverge: Orbit prioritizes customization and sovereignty, allowing teams to build application-specific chains with full control over architecture. The Superchain, by contrast, emphasizes standardization and cohesion under a shared framework.

This tradeoff affects developer optionality. The Superchain’s unified design simplifies UX and messaging, but can constrain flexibility. Orbit, meanwhile, has historically suffered from fragmentation, with siloed chains and inconsistent UX, but that is beginning to change.

Interoperability is now a core focus. Offchain Labs and the Arbitrum Foundation have launched a phased Interoperability Campaign, with early support for cross-chain intents and pilot chain integration. Over time, Orbit Chains will become increasingly composable — no longer standalone deployments, but parts of a shared ecosystem.

Orbit isn’t choosing between sovereignty and cohesion — it’s working to deliver both.

2.2 How Does Orbit Licensing Work?

Orbit operates under a tiered licensing model that balances permissionless deployment with aligned incentives for the broader ecosystem.

• L3 Orbit Chains that settle on Arbitrum One or Nova are fully permissionless. Anyone can deploy without approval from Offchain Labs or the DAO.

• L2 Orbit Chains that settle outside of Arbitrum One or Nova are also permissionless under the Arbitrum Expansion Program (AEP), provided they follow the AEP terms, including revenue sharing and standard integration requirements.

The AEP is a self-service initiative that simplifies the deployment of Orbit Chains, enabling developers to launch Layer 2 (L2) or Layer 3 (L3) networks with Ethereum-grade security and broad configurability.

This licensing model is designed to be flexible and minimally extractive. Developers can configure their architecture freely, including trust assumptions, fee models, and governance, while ensuring value flows back to the network’s core infrastructure and contributors.

3. Orbit Chains in Action

Because Orbit Chains can be tailored at the architectural level — from VM to settlement layer to gas token — no two deployments look the same. This modularity has attracted projects across DeFi, gaming, infrastructure, and even AI, each customizing their chain to suit its community and use case.

To gain a deeper understanding of the Arbitrum Orbit ecosystem, examining some of its real-world applications is essential. This section highlights different case studies of existing Orbit Chains, as they provide valuable insights into their design, performance, and adoption.

Who Benefits from an Orbit?

• Products with established product-market fit: Protocols with significant usage and revenue may benefit from launching an L3 to go fully vertical. A clear example is Pirate Nation, a popular onchain game.

• Strong communities: This applies to gaming projects, NFT ecosystems, and other network-driven protocols. Examples include Sanko, Azuki, and Apechain, all of which had active user bases before launching their own Orbit Chains.

• Teams looking to experiment: Orbit allows for backend experimentation — including new VM languages via Stylus, custom bridging, and modular interoperability.

Currently, 35 Orbit Chains are live on mainnet, supported by over 1,200 developers and $252 million in bridged value.

Here are the top 10 Arbitrum Orbits for Total Value Bridged:

Across testnet and mainnet deployments, Orbit Chains span several verticals:

• DeFi: 26 chains

• Gaming: 21

• AI & DePIN: 11

• NFTs: 5

• Infrastructure & Tools: 13

In the sections that follow, we highlight case studies from each category, focusing on how different teams configured their Orbits and what those choices enabled in practice.

3.1 DeFi

3.1.1 Gravity (AnyTrust L2)

What it does:

Gravity is an AnyTrust Orbit Chain built by Galxe that settles on Ethereum. It enables high-performance, omnichain user experiences — powering quests, loyalty campaigns, and yield-enabled engagement for a user base of over 25 million. Gravity serves as a programmable engagement layer, allowing protocols to tap into Galxe’s user network with omnichain incentives and unified balances.

Why they chose Orbit:

Galxe needed scalable, low-latency infrastructure to support growing cross-chain activity and eliminate UX friction across campaigns. Orbit offered architectural flexibility and access to ecosystem-standard infrastructure, enabling Galxe to scale its backend without losing Ethereum alignment.

Design decisions and performance highlights:

• AnyTrust model for lower fees and faster confirmation

• 1 gigagas/sec throughput and sub-second finality

• Parallel pipelined execution for throughput scaling

• EVM compatibility for developer ease

• Integrated restaking security using EigenLayer and Babylon

• Built-in omnichain intent support for campaign execution

• Key infra partners: LayerZero, Stargate

Traction and roadmap:

• Highest TVL of any Orbit Chain: $74 million+

• Devnet launched Q1 2025

• Focused on omnichain campaign primitives and unified user balances across chains

Chain info:

Gravity demonstrates how Orbit supports high-throughput, omnichain UX at scale.

3.1.2 Corn (Rollup L2)

What it does:

Corn is a Rollup Orbit Chain designed to unlock yield for native Bitcoin assets on Arbitrum. It allows users to bridge BTC (via LayerZero and Thorchain integrations) and deploy it into a growing ecosystem of BTC-native DeFi protocols, all while benefiting from Arbitrum-native execution environments.

For a deeper introduction to Corn, you can refer to this article.

Why they chose Orbit:

Corn wanted to create a verticalized Bitcoin yield ecosystem that combines custom gas models, Celestia DA, and native BTC interoperability. Orbit enabled that stack with minimal constraints, while still inheriting Ethereum security guarantees.

Design decisions and performance highlights:

• Rollup L2 design with data availability outsourced to Celestia

• BTC bridging via LayerZero and Thorchain

• Plans for native BTC staking and LP-based yield vaults

• EVM execution with custom gas token under consideration

Traction and roadmap:

• Strong early TVL growth

• Ecosystem of BTC-native products under development

• Roadmap includes native BTC integrations and liquidity aggregation via the Arbitrum Orbit stack

Chain info:

Corn highlights how Orbit enables vertically integrated appchains tailored to novel asset classes like Bitcoin.

3.1.3 Converge (L2 Rollup)

What it does:

Converge is an institutional-grade Orbit Chain focused on bringing real-world assets (RWAs) and institutional capital onchain. Built on top of Ethena and Securitize infrastructure, which collectively manage nearly $10B, Converge aims to provide a high-performance, compliant base layer for financial applications and tokenized assets.

Why they chose Orbit:

Converge needed customizable infrastructure with institutional-grade performance, gas token flexibility, and security guarantees aligned with Ethereum. Orbit enabled them to deploy a Rollup L2 with advanced account abstraction, cross-language contract support, and high-throughput execution, while retaining access to Arbitrum’s composability and trust-minimized environment.

Design decisions and performance highlights:

• Rollup L2 with <100ms block times (targeting <50ms in Q4 2025)

• Optimized Conduit G2 sequencer and mini-block streaming

• Native gas tokens: USDe and USDtb, with optional ETH via paymasters

• Account abstraction via ERC-7702 (programmable session keys, wallet compatibility)

• Supports smart contracts in Solidity, C++, and Rust — with up to 70x faster execution

• Converge Validator Network (CVN) powered by staked sENA for institutional safeguards

• Permissioned RWA/DeFi support alongside permissionless digital assets

Traction and roadmap:

• Launched in collaboration with Ethena and Securitize

• Initial focus on RWA tokenization, institutional DeFi rails, and stablecoin liquidity

• Roadmap includes <50ms finality, further Stylus optimization, and expanded asset support

• Interoperability with Ethereum, Solana, and Arbitrum ecosystems via stablecoin + RWA bridging

Converge demonstrates how Orbit can support high-speed, institutionally compliant rollups that bring real-world value and capital onto Arbitrum infrastructure.

3.1.4 SX Bet (Custom L2)

What it does:

SX Bet is a non-custodial, peer-to-peer prediction market where users can offer and accept bets without intermediaries. It enables fairer odds and higher payout efficiency by removing the margin capture of centralized sportsbooks.

Why they chose Orbit:

SX Bet needed full control over infrastructure to support rapid bet resolution, high-frequency trading, and transparent settlement. Orbit allowed them to launch a custom chain, retaining Ethereum security while optimizing for betting logic and UX.

Design decisions and performance highlights:

• Custom-built EVM-compatible L2 with native bet resolution

• Settlement on Ethereum for trust minimization

• UX optimized for fast betting flow and resolution

• Over 3 million bets processed, with $500 million+ in volume

• Orbit infra enables dynamic fee control and onchain matching logic

Traction and roadmap:

• $10 million+ bridged within two months of launch

• Active Polymarket integration for multi-market exposure

• Expanding categories and partner markets for Q3 2025

SX Bet shows how Orbit Chains unlock purpose-built infrastructure for verticals like prediction markets, without compromising trust or composability.

Chain info:

3.2 Gaming

3.2.1 Sanko (L3 via Caldera)

What it does:

Sanko is an L3 Orbit Chain built to serve as the foundation of a fully interoperable gaming universe. It enables low-cost, high-speed gameplay and supports the development of modular in-game economies across a growing suite of titles. The Sanko chain acts as an ecosystem hub, allowing all games to interoperate and share infrastructure, assets, and tooling.

Why they chose Orbit:

Sanko wanted an L3 chain where all its games could share liquidity and back-end logic, with performance optimizations not possible on general-purpose chains. Orbit provided the freedom to build custom game infrastructure, virtual machines, and token logic while remaining anchored to Arbitrum One.

Design decisions and performance highlights:

• L3 Orbit Chain launched via Caldera, settling on Arbitrum One

• Low transaction fees and fast finality

• Supports development in multiple languages (EVM + WebAssembly)

• Built-in tooling for game development and asset creation

• Native token DMT launched as an OFT via LayerZero

Traction and roadmap:

• First Orbit gaming chain live since May 2024

• Interoperable game ecosystem in production

• DMT token launched early 2025

• Recent deposit slowdowns attributed to broader market downturn

Sanko illustrates how Orbit enables integrated gaming environments with composable economies and shared infrastructure.

3.2.2 Proof of Play (Apex & Boss L3s)

What it does:

Proof of Play is the gaming studio behind Pirate Nation, one of the most popular and successful onchain games in Web3. Pirate Nation is a pirate-themed RPG where players can sail the seas, trade assets, engage in PvP battles, and build out their in-game economies — all while remaining largely unaware they are interacting with blockchain infrastructure. Rather than emphasizing Web3 mechanics, the game is built around seamless gameplay, with blockchain integrated invisibly in the background.

Why they chose Orbit:

The decision to move to Orbit wasn’t driven by ideology — it was driven by scale. Pirate Nation originally launched on Arbitrum Nova, but their success became a constraint: the volume of daily transactions was overwhelming shared blockspace, leading to performance issues. Given the prospect of continued growth, Proof of Play needed dedicated infrastructure with full control over throughput, pricing, and resource allocation.

General-purpose chains couldn’t meet those needs. Orbit allowed them to spin up purpose-built L3s, Apex and Boss, that maintain Arbitrum’s security guarantees while offering the sovereignty and performance essential to a live gaming environment.

Design decisions and performance highlights:

• Two parallel L3 Orbit Chains (Apex & Boss), both settling on Arbitrum One

• Chains optimized for load balancing and parallel execution

• Fully custom infrastructure for consistent speed and pricing

• UX-first design — blockchain is intentionally invisible to players

• Native gas token and gated-access mechanics in development

• Slight slowdown in bridge deposits, attributed to broader market conditions

Traction and roadmap:

• Among the most active Orbit deployments by gas consumption

• Large-scale migration of assets and players from Nova

• Roadmap includes additional games, modular infrastructure layers, and DAO-enabled governance

  

Proof of Play illustrates the real-world need for app-specific chains — and how Orbit delivers scalability without compromising on UX, security, or composability

Apex chain info:

Boss chain info:

3.3 AI & DePin

3.3.1 CapX (Rollup L2)

CapX is a Rollup Orbit Chain designed specifically for the AI and DePIN vertical. Its core goal is to streamline the creation, deployment, and monetization of onchain AI agents — providing infrastructure tailored to the next generation of decentralized applications powered by machine intelligence.

• CapX Chain: An L2 Orbit Chain optimized for building and managing AI agents onchain

• CapX Super App: A consumer-facing interface that allows users to browse, deploy, and trade AI agents

• CapX Cloud: A decentralized network for deploying applications that leverage AI agents natively

Why they chose Orbit:

CapX wanted full-stack control over execution, gas pricing, and custom agent frameworks, while preserving Ethereum trust assumptions. Orbit provided the perfect foundation to launch a specialized chain that supports fast experimentation, native AI monetization, and seamless integration with DePIN tools.

Orbit also gave CapX flexibility in choosing its settlement path (Ethereum) and modular access to Arbitrum-native tooling, including bridges, RPC providers, and RaaS platforms.

Design decisions and performance highlights:

• Rollup Orbit Chain settling on Ethereum

• Purpose-built execution logic for AI training and inference

• Modular backend connecting agent infrastructure with dApps

• Built-in marketplace and agent registry via CapX Super App

• Currently deployed on testnet for iterative product development

Here are some analytics taken from their explorer:

Traction and roadmap:

• CapX Chain is live on testnet

• Recently announced funding raise: CapX raise announcement

• CapX Explorer showing active onchain deployment of AI agents

• Mainnet launch planned in phased rollout

• Ecosystem positioning itself to capture Ethereum-native AI + DePIN demand, where Arbitrum has historically lagged

Chain info:

CapX is a strong example of how Orbit allows teams to build category-defining infrastructure, offering AI and DePIN developers the modularity, performance, and sovereignty they can’t find on generalized L2s.

3.4 NFTs

Arbitrum Orbits have attracted particular interest from NFT projects. Among those, some of the most established ones have chosen to build on Arbitrum. 

3.4.1 ApeChain (L3 via Arbitrum One)

What it does:

ApeChain is an L3 Orbit Chain purpose-built for the Bored Ape Yacht Club (BAYC) and its wider ecosystem. It provides a dedicated home for BAYC-related experiences, combining NFT infrastructure, content creation, and mini-game deployment within a single chain.

Although categorized under NFTs, ApeChain is inherently multi-modal, acting as a launchpad for gaming, metaverse extensions, and community-owned tooling. It powers the next phase of the Otherside metaverse and deepens ecosystem utility around the $APE token.

Why they chose Orbit:

The BAYC community needed an execution environment that could offer custom infrastructure, consistent UX, and low fees without giving up security. Orbit enabled Yuga Labs and its contributors to launch an L3 that maintained close alignment with Ethereum while unlocking the freedom to tailor gas tokens, dev tools, and infrastructure.

The goal was to go beyond “an NFT chain” and create a sovereign ecosystem capable of hosting games, tools, and NFT-native mechanics.

While we have placed ApeChain in the NFT Category, it also fits the Gaming category, as a substantial part of their focus is on deploying mini-games within the broader Otherside Metaverse.

Design decisions and performance highlights:

• L3 Orbit Chain settling on Arbitrum One

• Uses $APE as the native gas token

• Built to support three pillars: content creation, tool development, and distribution

• Strong emphasis on developer tooling and modular infrastructure

• Mini-games within Otherside metaverse are deployed directly on-chain

Traction and roadmap:

• Key NFT infrastructure now migrated to ApeChain

• Gaming layer and $APE integrations ongoing

• Increasing use of Orbit infra for metaverse-native deployments

• Positioned to become the default home for BAYC ecosystem apps and community-led initiatives

Chain info:

ApeChain shows how NFT-native communities can evolve into full-stack ecosystems — using Orbit to scale beyond collectibles and into infrastructure, gaming, and distribution.

3.4.2 RariChain (AnyTrust L3)

What it does:

RariChain is an L3 Orbit Chain launched by the Rarible Foundation, built to support creators, collectors, and NFT developers with native infrastructure optimized for onchain marketplaces. The chain is specifically designed to enforce royalty logic at the protocol level, ensuring creators retain monetization rights — even as liquidity fragments across chains.

Why they chose Orbit:

Rarible wanted a customizable, lightweight chain that could serve as a sandbox for protocol-level innovation around NFTs. Orbit allowed them to launch an L3 with low costs, fast finality, and an open framework for supporting NFT creators, marketplaces, and tooling projects.

By building on Orbit, Rarible was able to define its own royalty logic and seamlessly connect with its broader ecosystem across Ethereum and other chains. More information about on all the core features can be found here.

Design decisions and performance highlights:

• AnyTrust L3 settling on Arbitrum One

• Built with Caldera as Rollup-as-a-Service (RaaS) provider

• Cross-chain interoperability via Relay Protocol

• Creator-friendly tooling and royalty enforcement at the base layer

• Positioned as an onboarding hub for NFT projects expanding from Ethereum

Traction and roadmap:

• Bridge activity shows steady deposits since launch

• Expanding creator toolkit and marketplace integrations

• Playing a foundational role in the NFT-to-appchain transition for established projects

Rarichain chain info:

RariChain highlights how Orbit enables NFT projects to move beyond marketplaces, providing sovereign infrastructure that enforces creator rights and expands ecosystem utility.

3.4.3 AnimeChain (L3 via Arbitrum One)

What it does:

AnimeChain is an L3 Orbit Chain designed for the anime community, enabling on-chain creation, licensing, and monetization of anime content and NFTs. It integrates AI-powered production tools and community governance into a unified Web3-native platform, bridging fans, creators, and studios.

Why they chose Orbit:

Orbit provides the scalability and customizability AnimeChain needs to support high-volume activity, including NFT minting, microtransactions, and AI-powered creation, while retaining Ethereum alignment. With fast finality, gasless onboarding, and EVM compatibility, Orbit was the ideal stack for scaling the anime fandom onchain.

Design decisions and performance highlights:

• L3 Orbit Chain built on Arbitrum Nitro

• 40,000 TPS with 250ms block times

• Integrated AI tools for animation, character design, and content generation

• Gasless onboarding and Web2-friendly UX

• Transparent rights management and royalty distribution

• Strategic integrations with Azuki, Anime.com, and the Web3 Foundation

Traction and roadmap:

• 3.3M wallets onboarded, 13.6M NFTs minted (as of March 2025)

• $ANIME token launched Jan 2025 (10B supply, 50.5% community)

• Major IP partnerships (e.g., Fate/stay night)

• Roadmap includes AI tooling upgrades, global creator grants, streaming integrations, and governance via AnimeDAO

AnimeChain blends anime fandom, AI-powered content tools, and modular blockchain architecture — creating a scalable, creator-first platform for Web3-native storytelling and IP.

3.5 Infrastructure & Tools

3.5.1 Everclear (Rollup L2)

What it does:

Everclear is an L2 Orbit Chain focused on solving cross-chain liquidity fragmentation. It acts as a universal clearing layer, enabling solvers, CEXs, and bridging protocols to rebalance liquidity efficiently across multiple networks.

By netting settlements and coordinating liquidity flows, Everclear reduces redundancy and cost, making it an essential piece of the chain abstraction stack.

Why they chose Orbit:

Everclear needed full control over execution logic, solver coordination, and trust assumptions — all while remaining anchored to Ethereum security. Orbit allowed them to build a bespoke clearing infrastructure while accessing fast, low-cost settlement and integration with Arbitrum-native tooling.

How it works:

Everclear uses an intent-based settlement model:

• Users express an intent (e.g. to swap or transfer assets cross-chain)

• Solvers compete in auctions to fulfill the request efficiently

• Netting mechanisms reduce execution cost by batching and coordinating liquidity flows across chains

Design decisions and performance highlights:

• Rollup L2 settling directly on Ethereum

• Intent-based settlement using solver auctions

• Liquidity netting and rebalance logic baked into protocol design

• Optimized for CEXs, bridges, and dApps needing coordinated liquidity movement

• Plays a key backend role in enabling seamless cross-chain UX

Traction and roadmap:

• Launched late 2024

• Reached $100M+ in monthly USD volume by March 2025

• Integrated with major bridges and solver networks

• Continuing to expand coordination mechanisms across EVM and non-EVM chains

Chain info:

Everclear shows how Orbit can power specialized backend infrastructure helping abstract away liquidity complexity in a modular, trust-minimized way.

3.5.2. EDU Chain

EDU Chain is an L3 Orbit Chain developed by Open Campus, focused on transforming education through blockchain-based infrastructure. It aims to decentralize access to learning and credentialing via a Learn, Own, Earn model which enables educators, learners, and platforms to participate in a shared, token-incentivized ecosystem.

EDU Chain provides infrastructure for educational dApps, credentialing systems, tokenized rewards, and more, helping create a globally accessible, verifiable education stack.

Why they chose Orbit:

Open Campus required a chain that could support a large number of users and partners at low cost, with the flexibility to define their own governance and token models. Orbit’s AnyTrust model allowed them to launch a cost-efficient chain with scalable throughput, while still inheriting Arbitrum security and plugging into its broader ecosystem.

Design decisions and performance highlights:

• AnyTrust L3 built on Arbitrum One

• Developed and operated by Open Campus

• Supports verifiable credentials, NFT certificates, and token rewards

• Built for global accessibility: low gas costs and Web2-friendly UX

• Backed by a network of 140+ educational partners

Traction and roadmap:

Mainnet live since January 2025

Integrations with schools, universities, and edtech platforms underway

Launching token-based reward mechanisms and proof-of-learning systems

Aims to be the default infrastructure for decentralized education initiatives

Chain info:

EDU Chain shows how Orbit can unlock entirely new verticals, bringing decentralized infrastructure to global education in a scalable, cost-efficient, and modular format.

4. Future Roadmap and Food for Thought

The diversity of chains launched through Orbit, across DeFi, gaming, AI, NFTs, and other sectors, underscores the modularity of the framework and its ability to serve distinct needs across various verticals. Orbit Chains are no longer experimental; they’re powering production-grade infrastructure.

But as the ecosystem grows, so do its coordination challenges.

One of Orbit’s core challenges is interoperability. Despite sharing the same stack, most Orbit Chains still operate in silos, lacking standard messaging, unified UX, or native composability. Users are forced to switch networks manually, and developers often duplicate integrations across deployments.

This fragmentation undermines the network effects that Orbit can generate.

Chain abstraction is now emerging as a central theme for Orbit’s evolution. The vision is clear: Orbit Chains should feel like parts of a unified ecosystem, not isolated deployments. This shift is already underway, with community proposals on the Arbitrum forum having called for a comprehensive chain abstraction package to address growing UX and coordination gaps.

While Orbit adoption is growing, the user experience still feels disconnected. The UX across chains remains inconsistent, and Orbit apps rarely feel interoperable out of the box. Now’s the moment for Arbitrum to respond.

As other ecosystems begin rolling out seamless chain-switching and unified standards, users will come to expect the same from Orbit. And they should.

Offchain Labs and the Arbitrum Foundation are working to solve this, laying the groundwork for a more connected and composable Orbit landscape and leading the charge to boost the user experience and ensure further interoperability between Arbitrum Chains.

As part of it, they have unveiled their plans for a Crosschain Broadcaster Standard to reduce fragmentation across Arbitrum chains by implementing secure, standard, and seamless communication. It does so by implementing a trustless messaging standard that is agnostic across rollups, using onchain proofs rooted in Ethereum instead of trusting offchain actors.

This is part of a broader Interoperability Campaign coordinated by the Arbitrum Foundation and Offchain Labs. Key components include:

• A Universal Intent Engine, developed with support from the Ethereum Foundation and other L2s, enabling sub-3s cross-chain actions

• A Solver Loan Program (SLP) to provide liquidity for fulfilling intents

• Tooling to activate Fast Withdrawals, enable multi-RPC support, and broadcast intents across chains

• A phased rollout prioritizing pilot apps and chains before ecosystem-wide support

Given the complexity of onboarding dozens of chains at once, the rollout is intentionally staged. Smart contracts are being developed to allow Orbit teams to activate transfer routes themselves, reducing reliance on centralized onboarding and enabling permissionless interop over time.

The ability for users to interact with various chains without needing to understand the underlying infrastructure will be a significant milestone. Yet these challenges remain, including ensuring consistent security across diverse Orbit chains and maintaining seamless interoperability. Only then will they truly become a seamless addition to the Arbitrum ecosystem.

Looking forward, ZK-based infrastructure is another key area of development. Arbitrum’s roadmap includes future support for zero-knowledge proofs to enhance privacy, settlement efficiency, and cross-chain trust minimization, unlocking use cases in DeFi, compliance, and identity.

Nonetheless, the potential of Arbitrum Orbits to provide customization, sovereignty, and scalability, while maintaining a high level of security, positions them as a valuable tool for developers to deploy sovereign blockchains.

By combining the security and performance of the Arbitrum stack with the flexibility of customizable chain configurations, Orbits are poised to play a crucial role in realizing the vision of a truly interconnected and decentralized Arbitrum network.

Grants are also available. In collaboration with Alchemy, the Arbitrum Foundation has launched a $10M grant program to support Orbit Chain development. Teams can receive up to $500K to:

• Launch a new Orbit Chain

• Migrate from another network

• Build applications on Orbit

• Deploy a sequencer using Arbitrum infrastructure

There’s still over $3m available, make sure to apply if you are a builder. 

5. Conclusion: The Dawn of Sovereign Blockchains

Arbitrum Orbit Chains enable projects to launch custom, sovereign blockchains tailored to their specific needs, while still reaping the benefits of the security, performance, and decentralization of the broader Arbitrum stack.

Throughout this report, we’ve explored a wide range of Orbit deployments — from DeFi to gaming, AI, NFTs, and beyond. Each case study reveals how teams are leveraging Orbit not just to launch faster or cheaper, but to design ecosystems that are uniquely theirs: app-specific, performance-optimized, and fully composable.

In many cases, Orbit has enabled projects to scale in ways that general-purpose chains cannot. For example, Proof of Play used Orbit to overcome throughput ceilings and infrastructure constraints that emerged as Pirate Nation grew. Others, like Corn and Everclear, used Orbit to experiment with new asset classes or backend coordination logic. These stories showcase the flexibility Orbit offers to builders working at the edge of design space.

Nonetheless, there is a strong need to ensure that these chains are interconnected and interoperable, improving the users' experience. A fragmented navigational experience, in fact, reduces the network effect of Arbitrum Chains, one of its main value propositions.

Only once they become seamless will it become evident how they are not standalone implementations but part of a broader ecosystem.

That’s why current efforts from Offchain Labs to enable trustless messaging, chain abstraction, and intent-based interoperability are so critical. If successful, these upgrades will shift Orbit from a collection of sovereign deployments to a seamlessly interconnected ecosystem — one where sovereignty and cohesion reinforce each other, rather than compete.

Until then, Arbitrum has a clear path forward:

Continue onboarding protocols that require the flexibility and control Orbit can provide

Expand awareness of Orbit’s modular potential across verticals

Position Arbitrum Chains not just as alternatives, but as infrastructure for category-defining applications

Arbitrum Orbit is no longer an experiment. It’s a movement toward chains that are purpose-built, sovereign by design, and increasingly unified. The next era of blockchain won’t be dominated by one chain, it will be powered by many, working together. Orbit is how we get there.

Thanks for reading, please follow us on Twitter at @Castle_Labs and visit our website to learn more about our services and get in touch.

Virtually yours,

The Castle

GM frens, and welcome to another edition of The Castle Chronicle.

Not much has changed from last week. The calls for doom of last week are quickly turning into cheers of joy for a possible bottom.

It’s crazy how sensitive some people are, uh?

Here’s what we got for you today:

• 🔍 Market Watch – Price action & Relevant metrics across sectors and assets

• 🗳️ OnChain Sleuthing – Most profitable $S point strategies

• 📖 Recommended Reads – The best reads you might have missed

📈 PRICE ACTION

Nothing new on the BTC chart this week. The current price action still looks like a healthy re-accumulation and my overall expectation here is for price to eventually break out of this range and continue its bullish run.

• Healthy uptrend

• Re-accumulation

Remember, the main purpose of re-accumulation is to liquidate people out of their positions before continuing to move higher. I generally like to stay out of this phase and only get involved after some back and forth and a clear directional cue - an impulsive move to the upside that I can follow. Until that happens, this market is off the watchlist.

TOP PERFORMERS

In previous weeks we didn’t see much green. Usually it was one or two coins that randomly pumped on some news and the rest was in red. This week however, we can definitely see a bit more green in the markets.

XCN in particular looks fairly interesting to me. After a long period of sideways, price broke out higher with good momentum, started re-accumulating and is now showing strength. This is exactly the kind of context I like to see.

• Breaking out of long accumulation range

• Good momentum

• Re-accumulation

Once again I want to emphasize an important part of the puzzle - while this is a good looking chart, the overall context of the broader market is not that good, which makes me generally very risk averse. If this was happening during an overall bullish phase, I’d be eager to risk. But that’s not quite the case. NFA.

CAPITAL FLOW

Nothing peaks my interest in the capital flows this week. We can see the usual inflow/outflow tug of war in Ethereum, minor net inflows into Unichain, and minor net outflows from OP Mainnet.

NARRATIVE PERFORMANCE

Narrative performance is a little more balanced this week. DeFAI is having a bit of a bounce after getting hammered for numerous weeks in a row, and Cross-chain is performing the worst. None of these numbers on either side are anything spectacular that could indicate a newly forming narrative.

🌪️ ON-CHAIN SLEUTHING: BEST STRATEGIES ON SONIC

An Analysis of the TOP Holders of $Sonic points - what are their strategies?

Degens and on-chain farmers are focusing a lot of attention on the $Sonic chain nowadays, and this is mostly because of their point season, which is up and running until June 2025.

See : Sonic Points Simplified

200 million points are to be distributed during this event and many strategies have already been presented on CT but I decided to CHECK THE CHAIN manually to see which strategy the big players were doing.

Via this link, Sonic Points, you can access a view of the biggest $SONIC points holders.

I decided to analyze the wallets of each of the top 5 holders to get a clear image of the most profitable strategy.

#1 Holder

This wallet has deposited close to 16 million USD of $S & 1.5 million of USDC on Aave, and holds a small spot position of about 200k USD of $S.

But that’s not only! It also holds over $1m in the Vertex orderbook: $542k of $wS and $512k in USDC.

Thanks to these strategies, this whale has accumulated a total of 12,1 million $S points.

#2 Holder

This address went a lil bit more degen than the one above.

This address:

• Provides around 500k USD of $S and $anon paired on the dex Wagmi (from the famous Sesta)

• 135k USD of $S and $Snake on Snake Finance

• Stakes around 100k USD of Shadow dex tokens.

  With a portfolio of 760k USD and a total of 9,5 million $S points, this account succeeded in getting a very high number of points for the amount of capital it has invested.

#3 Holder

The strategy this user is carrying out is built around Silo Finance to gather as many points as possible. Providing around 12,5 million mostly in $S and borrowing 4 million of USDC of collateral.

They are also staking 150k USD of $Shadow on Shadow Exchange

In total, this account has 8 millions USD exposed to the Sonic ecosystem and has accumulated a little bit more than 8 millions $Sonic points.

#4 Holder 

This address is staking most of its $S bag on Beets.fi, the liquid staking hub of the Sonic ecosystem.

With over 200 million USD in TVL, Beets finance has attracted lots of capital.

The other position they have is on Silo finance, providing 2,4 millions $S and borrowing 1,2 millions USDC on the platform.

In total, this address is exposed to the Sonic eco for 11,7 millions USD and has accumulated 7,7 million points.

#5 Holder

Interestingly, this address is a multisig providing over 9 million USD of ETH on Euler & Shadow

It also has 724k USD of ETH too on Rings Protocol (a liquid staking protocol on Sonic):

With over 10 millions USD exposed to Sonic eco, this address accumulated 7,3 millions Sonic points.

Obviously a big ETH farmer or an ETH defi-focused fund that bridged a part of its portfolio on the new EVM to farm the season.

Conclusion

With 1 billion USD TVL on the network, the point season is obviously popular with Degens & farmers alike.

After briefly analyzing the wallets of the big $S POINTS holders, I can identify three different strategies that those whales follow.

1. Focus on providing USDC or $SONIC or ETH on borrow/ lending protocols like Aave, Silo finance & Euler. Can also provide ETH on Shadow dex. This strategy seems to yield a conservative amount of points.

2. LPing volatile pairs on WAGMI or Shadow DEX seems to be yielding a good amount of Points from my analysis. Wallet #2 has the best performance in terms of points/versus capital invested, and its biggest position is LPing on WAGMI.

3. Liquid staking $Sonic & bridge ETH on Beets finance, Rings protocol, or Staking $SHADOW token on its own platform. Three of the five wallets analyzed have used this strategy in part, which seems to be a good indicator that liquid staking $S/$ETH on the chain is a good idea.

WAGMI dex, staking $SHADOW & liquid staking SONIC are, imo, the strategy yielding the best amount of points / capital invested.

🏰 CASTLE WEEKLY READS

1. AI newsletter:

Twitter tweet

2. Evolution of Consensus with Hyperliquid, Monad, Sonic:

Twitter tweet

3. A research report on OpenServ and agent-to-agent collaboration:

Twitter tweet

4. Chilla on Mantle:

Twitter tweet

5. We’re having an Arbitrum AMA with Jojo next Wednesday. Interested in learning or applying to incentive programs? Tune in and shoot your questions:

Twitter tweet

🔍️ RECOMMENDED READS

1. Big $TRUMP unlock this week: Are you going to try to play it? Waiting for the president to Tweet?

Twitter tweet

2. Lots of Base drama on the timeline, from a token they launched on Zora:

Twitter tweet

3. Keep an eye on new campaigns on Kaito:

Twitter tweet

4. Converge, a RWA-focused chain built by Ethena and Securitize is building on the Arbitrum stack.

Twitter tweet

5. Coffeezilla interviewing $OM CEO after huge token dump:

Twitter tweet

That’s it for this week - expect more changes to the newsletter coming soon as we revamp our format in the upcoming months!

1.1 Can Consensus Fix Blockchains?

Consensus mechanisms ensure every computer in the network agrees on which transactions are consistently and securely validated and added to the blockchain, based on a set of consensus rules.

Every blockchain tries to achieve a balance with respect to the blockchain trilemma: balancing speed, security, and decentralization. Projects can often only prioritize two features at the expense of a third.

Consensus mechanisms are essential in preventing malicious actors from successfully tampering with the network or its data. They prevent double-spending and keep everything in sync, while ensuring that each node in the blockchain produces the same sequence of transactions for each block.

Think of them as the rules of a decentralized game, steering participants toward a unified “truth”. Here’s a rundown of key consensus mechanisms:

• Proof of Work (PoW): Miners solve complex puzzles with computational power to add blocks and are rewarded with cryptocurrency. It’s secure but energy-heavy and slow (e.g., Bitcoin, pre-2022 Ethereum).

• Proof of Stake (PoS): Validators stake cryptocurrency for a chance to create blocks. This method is energy-efficient and faster but may favor wealthier participants (e.g., post-2022 Ethereum, Cardano).

• Delegated Proof of Stake (DPoS): Token holders vote for delegates to validate transactions, offering speed and scalability but risking centralization (e.g., EOS, Tron).

• Proof of Authority (PoA): Trusted nodes validate based on identity, making it fast and efficient but less decentralized (e.g., VeChain).

Despite the promise of decentralization brought forward by blockchains, these rarely translate into the expected performance, especially for blue chips: 

• Bitcoin averages 7 transactions per second (TPS).

• Ethereum post-PoS hits 15–30 TPS.

• Visa, by contrast, averages 1,700 TPS daily.

These gaps spark delays, congestion, and high fees, exposing scalability challenges.

1.2 New Consensus Models

Emerging Layer-1s (L1) like Hyperliquid, Monad, and Sonic are leading to new consensus mechanisms specifically designed to solve these challenges. These mechanisms boost speed, scalability, and impact while fostering trust.

This article offers an in-depth examination of how these projects tackle the blockchain trilemma, advancing consensus design further. We delve into each project's background, consensus mechanisms, relationship with Ethereum, scalability solutions, practical applications, approaches to funding and governance, and primary challenges.

2 Hyperliquid

Hyperliquid is an L1 blockchain built for high-speed, low-cost decentralized trading. It splits into two pillars:

• HyperCore: an on-chain engine for perpetual futures and spot order books with one-block finality.

• HyperEVM: an Ethereum-compatible smart contract platform.

While traditional L1s face trade-offs between decentralization, performance, and accessibility, Hyperliquid seeks to overcome these challenges by offering a high-performance, fully on-chain trading ecosystem.

• HyperCore can process up to 200,000 orders per second, a theoretical peak set to grow with node software upgrades.

• HyperEVM introduces Ethereum's smart contract platform to Hyperliquid, offering HyperCore's liquidity and financial tools as open resources.

With HyperCore and HyperEVM, the team aims to enable seamless interaction between decentralized applications (dApps) and blockchain components without sacrificing efficiency or user experience.

2.1 Consensus Mechanism

Initially, Hyperliquid employed the Tendermint consensus algorithm. However, a more advanced solution was necessary to support high-frequency trading better and achieve higher transaction throughput.

To address this, Hyperliquid developed a consensus mechanism called HyperBFT. This hybrid system combines PoS with Byzantine Fault Tolerance (BFT), and is optimized for high throughput, low latency, and robust security.

The PoS model is based on the HotStuff protocol, where validators generate blocks by staking $HYPE tokens. HyperBFT’s hybrid approach is more energy-efficient than traditional PoW methods, while maintaining robust security.

2.2 Scalability and Speed

HyperBFT achieves a median finality of 0.2 seconds and latency under 0.9 seconds. The on-chain order book mimics centralized exchange precision, supporting 50x leverage, one-click trading, and stop-losses.

Hyperliquid excels in high-throughput scenarios, processing 200,000 TPS concurrently without sharding. However, network latency and validator spread currently limit this.

2.3 Challenges

• Low number of validators (security): Hyperliquid is relatively centralized, with only 16 validators compared to Ethereum’s vast network of 800k+ validators. They aim to expand their validator set as the network grows, aligning with their decentralization goal.

• Its untested resilience against major cyberattacks raises questions about its long-term decentralization and robustness. This centralization poses security risks, especially concerning the $2.3 billion USDC in the bridge, which was targeted in a 2024 hacking attempt.

• Centralization impact: In March 2025, Hyperliquid faced an incident with the $JELLY token. A trader manipulated the platform's liquidation system by creating three accounts and taking leveraged positions: two long totaling $4.05 million and one short of $4.1 million in $JELLY futures. This led to a 400% price spike and the trader self-liquidated, causing Hyperliquid's vault to assume a $6 million short position. This resulted in unrealized losses for liquidity providers, estimated between $700,000 and $10 million. However, after Hyperliquid's intervention, the vault made a $700,000 profit, as Hyperliquid ended up delisting the $JELLY contract, sparking debates about decentralization and governance transparency.

• High-Leverage trading risks: on March 13, 2025, a whale liquidated $ETH long positions through high-leverage trading, resulting in a loss of approximately $4 million in the HLP Vault. Such events highlight the platform's vulnerability to market manipulation and the need for robust risk management strategies.

• Competition: Hyperliquid's closed-source code and absence of automated validator penalties limit transparency and resilience. Competition from high-throughput platforms like Solana, emerging L1s such as Monad and MegaETH, and advanced DEXs like dYdX presents challenges.

• Scalability: Hyperliquid is engineered for scalability, handling up to 200,000 TPS with sub-second finality. However, extreme conditions such as massive leveraged trades may introduce challenges like liquidity strain or validator coordination delays.

3. Monad

Monad is an EVM-compatible L1 for scalability and performance, using parallel execution and MonadBFT.

Monad targets up to 10k TPS with blocks produced every 500 msec and finalized in one second. It promotes decentralization while tackling Ethereum’s bottlenecks (e.g., slow speeds, high fees, and limited scalability). Its testnet launched February 19, 2025, with speculation about mainnet launch in Q3-Q4 2025.

3.1 Consensus Mechanism

Monad’s architecture centers on its custom MonadBFT consensus mechanism, an optimized evolution of the HotStuff BFT protocol.

It integrates pipelined execution and efficient communication to distinguish itself from traditional blockchain designs.

• MonadBFT: This algorithm turns HotStuff’s three-phase process into two, improving validator speed. Validators rotate as leaders: one proposes a block and gathers prior votes into a quorum certificate (QC), a consensus proof to certify the previous block. A timeout mechanism keeps the network robust if a leader fails, ensuring security in partially synchronous settings.

• Parallel Execution: Parallel execution refers to the ability to process multiple tasks or transactions simultaneously, rather than one at a time. Nodes agree on transaction order first, then execute transactions concurrently across multiple threads using an optimistic approach. This ensures consistency with sequential outcomes while significantly boosting throughput.

• PoS: Validators stake tokens to participate, securing the network through economic incentives. This PoS system balances speed and security, with staked assets discouraging malicious actions.

MonadBFT delivers scalable, reliable finality for real-time dApps by reducing communication overhead,

The diagram below illustrates MonadBFT's pipelining process, showing how validators (Alice, Bob, Charlie, David, etc.) propose, vote on, and finalize blocks (N, N+1, N+2, etc.) across overlapping rounds.

Each block progresses through stages: proposed, voted, and finalized. Validators rotate leadership, producing QCs to certify blocks.

3.2 Scalability and Speed

Monad combines MonadBFT’s efficiency with parallel execution, allowing it to outperform traditional L1s by handling transactions concurrently, avoiding sharding, and ensuring quick finality. Its theoretical capacity could go higher than mentioned above (10k TPS, sub-second finality), though real-world results depend on network latency and validator spread.

3.3 Challenges

• Execution Complexity: Monad’s optimistic parallel execution could lead to inconsistencies, rollbacks, or vulnerabilities (e.g., edge-case exploits). Its advanced features (MonadBFT and parallel execution) add complexity, increasing development and maintenance costs, particularly for smaller teams. This may hinder growth and security, challenging smaller teams and making it favored by teams with more resources and development experience.

• Network Latency: Real-world TPS and finality rely on validator distribution and latency, risking underperformance.

• Untested Scale: Pre-mainnet, Monad’s 10,000 TPS claim remains unproven, with possible bugs or bottlenecks.

• Competition: High-throughput platform rivals like Sonic, Arbitrum, and Solana could challenge developer and user adoption.

• Learning Curve: Despite EVM compatibility, Monad’s unique systems (MonadBFT, MonadDB) may slow developer onboarding.

• Centralization: Early Foundation control and a concentrated token model could centralize power, threatening long-term decentralization and security

4. Sonic

Sonic is an EVM-compatible L1 for high throughput and sub-second transaction finality, evolving from the Fantom Opera ecosystem.

Sonic introduces notable operational enhancements: its latest consensus protocol, SonicCS 2.0, achieves a 2x increase in consensus speed and a 68% reduction in memory usage per epoch (from 420 MB to 135 MB), lowering resource demands for validators and improving scalability.

These upgrades tackle several blockchain challenges:

• Slow transaction processing

• High operational costs

• Fragmented ecosystems

With a rebranded identity, Sonic incentivizes developers by redistributing up to 90% of network transaction fees through its Fee Monetization program (FeeM), fostering dApp creation and adoption.

4.1 Consensus Mechanism

Sonic’s Lachesis Consensus blends Directed Acyclic Graphs (DAGs) with Asynchronous Byzantine Fault Tolerance (ABFT), advancing beyond Fantom Opera’s foundation.

• ABFT: allows validators to process transactions and exchange blocks asynchronously. This eliminates the sequential delays of Practical Byzantine Fault Tolerance (PBFT)-based systems, enhancing throughput and resilience.

• DAG: Transactions are represented as vertices and dependencies as DAG edges, enabling concurrent block additions. This accelerates validation compared to linear blockchain designs, forming an interconnected web-like structure rather than a single chain.

• PoS: Validators stake at least 500k $S tokens to participate, batching transactions into event blocks within local DAGs. Consensus is reached when sufficient validators confirm these blocks as “roots” on the main chain, achieving sub-second finality. This PoS system balances speed, security, and decentralization, with staked tokens deterring misconduct.

The figure below illustrates a DAG for a specific node:

• Orange events represent candidate leader events

• Yellow events indicate committed leader events.

The events positioned between these leaders can be sequenced into a chain, enabling the extraction of a transaction list to construct a block.

4.2 SonicCS 2.0 - Their latest Consensus Mechanism upgrade

Sonic recently upgraded its consensus mechanism with SonicCS 2.0, introduced on March 27, 2025. This protocol leverages a DAG-based approach with overlapping elections, reducing computational effort and memory usage by 68%. Experiments with 200 epochs of Sonic mainnet data demonstrate a 2.04x average speedup (ranging from 1.37x to 2.62x) and significant memory efficiency, reinforcing Sonic’s capacity to process over 10k TPS with sub-second finality. SonicCS 2.0 is set to roll out to the mainnet soon, with a detailed technical report forthcoming.

4.3 Scalability and Speed

Sonic’s hybrid Lachesis consensus merges DAG’s adaptability with ABFT’s integrity, delivering rapid, secure transaction finality without requiring sharding. This design supports seamless scalability as network demand grows.

SonicCS 2.0 can potentially push Sonic's mainnet performance closer to theoretical estimates of 396,825 TPs. However, practical results hinge on network latency and validator distribution. According to Andre Cronje, the maximum real-time TPS measured on Sonic was already around 5,140, which is quite impressive.

Sonic is fully EVM compatible, optimizing performance within this framework rather than replacing it with a distinct virtual machine. SonicCS 2.0's vectorized operations and overlapping elections enhance validator efficiency and dApp performance.

4.4 Challenges

• Consensus Complexity: Under high load, Sonic's consensus mechanism may introduce intricate dependencies or validation delays, risking inefficiencies or exploits.

• Developer Adaptation: While EMV-compatible, Sonic’s advanced features (e.g., SonicCS 2.0’s vectorized voting) may require developers to adjust workflows, potentially slowing adoption.

• Network Latency: Sub-second finality and 10k TPS depend on validator distribution and latency, which could degrade real-world performance.

• Untested Scale: Before the SonicCS 2.0 mainnet rollout, the 10k TPS claim lacked full real-world validation, and possible bottlenecks or bugs have yet to emerge.

• L2 Dominance: Ethereum’s L2 solutions (e.g., Optimism, zkSync) offer similar performance at lower costs, leveraging vast liquidity and developer ecosystems. Sonic’s Sonic Gateway bridge aids interoperability, but competing as an independent L1 remains challenging.

• Centralization: The 500,000 $S staking requirement and early control by the Sonic Foundation risk centralizing power, potentially alienating decentralization-focused users and weakening security if token distribution favors insiders

5. Comparison Table

6. Harnessing Ethereum’s Ecosystem

Hyperliquid, Monad, and Sonic all leverage EVM-compatibility, enabling developers to deploy dApps on high-speed infrastructure using familiar tools and smart contracts. This delivers low-cost, high-throughput transactions with robust security, tapping into Ethereum’s ecosystem without code rewrites.

• Powering Diverse dApps

These L1s offer sub-second confirmation times and high TPS capacity, making them ideal for a wide range of dApps that can seamlessly deploy.

Hyperliquid offers fast, secure DEX transactions with an on-chain order book, matching centralized exchange precision with high scalability.

Sonic adds rapid finality for efficient DeFi applications, securing transactions in under a second.

Monad enhances this with 10,000 TYPS, 1-second block times, and single-slot finality.

• Beyond Web3: Enterprise Potential

These networks’ speed and scalability position them for enterprise use in finance, supply chain, and payments. Retailers can handle high-volume payments at reduced costs, while healthcare providers secure real-time patient data compatible with existing systems.

7. L2 as Ethereum’s Answer to the Scaling Issue

What about L2s? Why do we need new L1 blockchains with fancy consensus mechanisms in the first place?

L2 solutions like Arbitrum, Optimism, and Base boosted L1 scalability by processing transactions off-chain. Arbitrum achieves up to 4,000 TPS, while Base targets thousands with 0.2-second Flashblocks by mid-2025.

However, L2s depend on Ethereum’s security and finality, inheriting its features and limitations. For instance, the need for fraud proofs in systems like optimistic rollups can lead to delays, since transactions on Optimism's OP Stack chains become finalized when their data is included in a finalized Ethereum block. This can impact user experience, especially for applications requiring rapid transaction finality.​

New L1 blockchains like Hyperliquid, Monad, and Sonic address these limitations with advanced consensus mechanisms. Unlike L2s, these L1s are highly performant without relying on Ethereum’s infrastructure, avoiding complexities like fraud proofs or L1 block-time bottlenecks.

Yet, building new L1s introduces risks, potentially challenging decentralization or increasing costs. While L1 blockchains provide a base layer of security and decentralization, they often face scalability challenges due to consensus mechanisms and block size limitations. Furthermore, they don’t have the historic performance and trust of Ethereum.

The necessity of developing new L1 blockchains in the presence of existing L2 solutions is an ongoing discussion topic on Twitter:

L2s ease L1 congestion but tie their scalability to Ethereum’s constraints. They are as fast as Ethereum, but this doesn't consider that all L2 transactions' finality depends on L1 block confirmation times. At the same time, new L1s promise independence and speed, but they must prove they can scale securely for billions of users.

The interplay between L1 and L2 solutions raises critical questions about the future architecture of blockchain networks. 

These considerations underscore the need for ongoing research and dialogue within the blockchain community to navigate the complexities of scalability, security, and decentralization.​

8. Conclusion and Food for Thought

One major hurdle in the current market is thin and rotating liquidity, affecting both new and existing users. Attention is low and short-spanned, making it even more challenging to secure a growing mindshare in this crowded sector.

Therefore, to drive adoption, it’s essential to prioritize the needs of both developers and users.

But let’s be honest: most users care more about practical functionality than the underlying technology. They want a seamless experience, with fast transactions and low fees that make the network accessible, especially for microtransactions.

Security is also non-negotiable: users expect robust safeguards to protect their assets and data, fostering trust in the system. And, of course, there must be stuff to do on chain, which satisfies different types of user needs.

Both L1s and L2s need to fight for these interests to stay relevant. Instead of solely focusing on the “best tech” and trying to “over-improve” the consensus mechanisms of their chain, they should also be pragmatic and focus on offering users and developers the best network to build and use their applications.

To conclude, new L1s, like Hyperliquid, Monad, and Sonic, address L2 dependencies but face challenges, as seen in Hyperliquid’s small validator pool, where just four nodes heightened collusion risks, exposing vulnerabilities. Expanding validators, securing bridges, implementing higher approval thresholds, real-time monitoring, and anomaly detection can bolster resilience. Balancing security, scalability, and decentralization through proactive risk management is key to fostering trust and sustaining DeFi’s growth, urging users to scrutinize platform safeguards and developers to prioritize robust defenses.

Let the “devs do something”: let them do the heavy tech weight and define the consensus mechanisms trade-off, fueling the search for equilibrium.

Also, let's not forget about users: those who enjoy responsive, efficient, decentralized, and secure applications.

These new designs are pushing the boundaries of what consensus models can achieve regarding pace, security, and interoperability.

It will be interesting to see how they evolve and how they intertwine once Monad (and other competitors) go live.

Brought to you by Cryptor.

Thanks for reading, please follow us on Twitter at @Castle_Labs and visit our website to learn more about our services and get in touch.

Virtually yours,

The Castle

Unless you’ve been completely disconnected from the space, you’ve seen it: Hyperliquid is everywhere. 

It’s one of the few projects that nailed its TGE strategy with flawless execution, massive wealth creation, and momentum that continues across the ecosystem.

While most traders are laser-focused on the perps layer, which has clearly found PMF and built one of the most active cults in crypto, what often gets overlooked is the growing app layer around HyperEVM. This is where the real opportunity lies today.

Castle has already covered Hyperliquid’s core in this breakdown.

This guide builds on that and dives into the airdrop meta forming around HyperEVM. How it’s evolving, who’s likely to get rewarded, and how to position yourself now while it’s still early.

Setting the Stage: What Happened, What’s Next

What happened?

Hyperliquid's first airdrop on November 2024 set a historic benchmark, distributing 31% of its token supply to over 90,000 users. The token launched at $3.20 and peaked at $34.

This valued the drop at over $10.5 billion at its peak, marking one of the largest wealth transfers to early crypto users ever.

What's next?

The opportunity today is massive and still early. HyperEVM is live with core protocols running and point systems active.

Liquidity across the ecosystem remains thin, which is often where the biggest upside starts. Hyperliquid has allocated 31% of its total supply so far. Another 39% remains unclaimed. At current valuations, that’s nearly $4 billion in $HYPE potentially reserved for future participants.

This is not just about $HYPE either. Native protocols like Kittenswap, HyperLend, and HypurrFi are running their point campaigns. These reward activity now and could stack with future ecosystem payouts.

Most of the market hasn’t caught on yet. Participation stays relatively low, attention is scattered, and few are positioned well. If this follows the first cycle’s playbook, the earliest and most consistent players will see the biggest gains.

So who’s likely to benefit next? Based on Hyperliquid’s past and current trends, the top candidates are clear.

• Perp traders generating steady volume and staying active stand out.

• NFT holders tied to Hyperliquid-native collections are in the mix too.

• HyperEVM protocol farmers engaging in lending, liquidity provision, and borrowing, are expected to be the top contenders for receiving any future $HYPE rewards.

With that in mind, here are the 10 most interesting farming opportunities in the Hyperliquid ecosystem.

1. KittenSwap – A ve(3,3) DEX for HyperEVM

KittenSwap is the primary DeX on HyperEVM, using a ve(3,3) model similar to Velodrome and Solidly. It supports both stable and volatile pairs, and rewards long-term users through fee sharing, point programs, and governance.

As the ecosystem’s largest DEX by volume and TVL, it plays a central role in HyperEVM liquidity. New protocols often use it to launch tokens or pair stablecoins.

KittenSwap recently rolled out concentrated liquidity pools with custom price ranges and temporarily boosted point multipliers. 

Some pools now earn as much as 20x points (like LHYPE/HYPE and USDXL/HYPE), while standard multipliers have been reduced. The protocol clearly favors concentrated liquidity going forward.

Farming Strategy

Visit https://app.kittenswap.finance/

• Add Liquidity in High-Reward Pools- Focus on pools with higher multipliers like PURR/HYPE, LHYPE/HYPE, and USDXL. Avoid high-TVL pools where rewards are diluted.

Boost Earnings with  MechaCats NFTs

Holding MechaCats NFTs gives a points multiplier:

• 1–9 NFTs = 1.25x

• 100–199 = 1.4x

• 500+ = 1.5x

MechaCats holders are also guaranteed 3% of the veKITTEN supply at launch.

2. HypurrFi – Leveraged Lending and Stablecoin Yield

HypurrFi operates as a leveraged lending platform on HyperEVM and the home of USDXL, a native overcollateralized stablecoin. Users can borrow USDXL against $HYPE or stHYPE, while still earning interest on supplied collateral.

The protocol routes its own revenue into a reserve of tokenized U.S. Treasuries to improve the long-term stability and backing of USDXL.

Farming Strategy

Visit https://app.hypurr.fi/ 

• Deposit $HYPE → Borrow USDXL
  The simplest way to farm: maintain HYPE exposure while unlocking USDXL for additional yield opportunities
  

• LP the Borrowed USDXL
  Pair with HYPE, LHYPE, or feUSD on KittenSwap/HyperSwap to earn strong point multipliers
  

• Hold or Lend USDXL
  Simply holding or lending it may qualify for future protocol or ecosystem rewards
  
  According to HypurrFi, early users often receive the best rewards, even before points are visible. Activity is tracked in the background, with borrowing, LPing, or moving USDXL potentially qualifying for multiple campaigns
  Points are active and updated regularly, making this one of the easiest farming strategies on HyperEVM

3. HyperLend – Lending Infrastructure 

HyperLend is the primary lending protocol on HyperEVM, supporting core assets like HYPE, stHYPE, LHYPE, and USDXL. Beyond functioning as a standalone money market, it underpins other protocols including Harmonix, Mizu, and Felix, routing liquidity across the ecosystem.

The public points program launched on April 7, 2025, with weekly rewards and XP-based compounding. Points are tied to lending, borrowing, daily activity, and social referral boosts, automatically appearing in your wallet dashboard without requiring manual claims.

Farming Strategy

Supply assets: https://app.hyperlend.finance/ 

• Supply assets like HYPE, LHYPE, or USDXL as soon as the new epoch begins

• TVL caps are enforced, with points dropping sharply for late entries

Borrow to Amplify Points

• Borrowing increases reward weight, with even small positions helping

• Borrow stables against HYPE or LHYPE without sacrificing spot exposure

Enable XP Loop via Daily Drop

• Holding ≥100 points and ≥$50 deposited unlocks a daily XP claim

• XP compounds across the week and converts into additional points

Activate All Boosts You Can

• Testnet participants receive a permanent multiplier

• Hypio NFT holders earn bonus points (extra boost for NFTs with HyperLend trait)

• Referral tree unlocks 13 tiers of point share based on invitee performance

Stack via Other Protocols

• LPing USDXL or LHYPE borrowed from HyperLend into KittenSwap or HypurrFi enables point stacking across multiple protocols

• Supply newly listed uBTC to earn HyperLend points while stacking rewards from HyperUnit

HyperLend represents a "set-and-track" strategy requiring minimal intervention once deployed. Your main task is optimizing entry timing, claiming daily XP, and occasionally rebalancing based on emissions shifts.

4. Felix Protocol – Stablecoin Yield + Liquidation Farming

Felix is HyperEVM’s first native stablecoin protocol. It allows users to mint feUSD by depositing HYPE and offers two main yield paths: staking feUSD in stability pools for liquidation rewards or using it across LPs to earn additional points.

As a foundational DeFi building block, Felix helps mint leverage, absorb risk, and move capital between money markets and DEXs. The points program goes live on April 13, 2025 at 12:00 PM UTC.

Farming Strategy 

Head over to- https://usefelix.xyz/borrow

• Deposit HYPE → Mint feUSD
  feUSD is overcollateralized and designed for ecosystem-wide usage.
  

• Stake feUSD in Stability Pools
  These pools backstop liquidations. When vaults are liquidated, you receive discounted HYPE and a portion of protocol rewards.
  

• LP feUSD on KittenSwap or HyperSwap
  Pairs like feUSD/USDXL and feUSD/HYPE often come with boosted multipliers across partner ecosystems.
  

• Watch for Integrations
  Felix is integrated with HyperLend and supported in Mizu auto-farm vaults.
  Using it across multiple protocols may unlock compounding incentives.
  

Felix is a clean way to put idle HYPE to work. It keeps you eligible for multiple upside streams - protocol rewards, liquidation yield, and ecosystem-wide point distributions.

5. Mizu Labs – Auto-Farming Across the HyperEVM Stack

Mizu Labs is a yield aggregator automating farming across the HyperEVM ecosystem. It offers vaults for hypeETH and hypeBTC, which are liquid wrappers of bridged ETH and BTC, and deploys these assets into top-yielding protocols like HyperLend, HypurrFi, Felix, Harmonix, and more.

The protocol is built for users who want HyperEVM exposure without the hassle of rotating capital or tracking point updates. Mizu abstracts yield optimization and consolidates rewards into single vaults.

Farming Strategy

• Deposit ETH or BTC → Receive hypeETH or hypeBTC
  Mizu provides a guided bridge and wrapping flow. These wrappers are required to access any vault.
  

• Deposit hypeETH or hypeBTC into Mizu Vaults
  Once deposited, Mizu routes capital to optimize rewards, yield, and point accumulation across protocols.
  

• Earn Stacked Rewards
  Vaults are eligible for partner rewards from up to eight protocols, including Hyperbeat, Harmonix, HypurrFi, Timeswap, and HyperLend. Royco Markets has allocated 1 to 2 percent of each token’s supply to Mizu users.

Mizu is a passive but powerful strategy for ETH and BTC holders who want seamless exposure to HyperEVM and access to multi-protocol upside with minimal management.

6. Drip.Trade – Native NFT Marketplace with Future Airdrop Potential

Drip.Trade serves as the main NFT marketplace on HyperEVM, hosting native collections like Hypios, MechaCats, Hypers, and others tied to point boosts, airdrops, and whitelists across the ecosystem. Most NFT-based projects on HyperEVM launch here or use Drip for secondary liquidity.

The platform already has a live token: $JPEG, which powers parts of the marketplace and may factor into future reward dynamics.

Farming Strategy

Buy and Hold Key Collections

• Start with Hypios (used by HyperLend for boosts), MechaCats (KittenSwap multiplier and 3% of $KITTEN supply), and Hypers (Drip's flagship project)

• These have historically received whitelist spots and token allocations from partner protocols

Stay Active on Drip

Trade, list, and delist regularly as marketplace activity may factor into future airdrops

7. Hyperbeat

Hyperbeat operates as a validator and ecosystem fund focused on staking, yield, and long-term alignment with Hyperliquid. 

It gives users exposure to multiple projects through vault deployments and rewards with Hearts (points), potentially leading to future token distribution.

Positioned as a hands-off way to access HyperEVM early protocols without rotating capital, Hyperbeat simplifies the farming process.

Farming Strategy

• Stake HYPE with Hyperbeat’s Validator
  Generates Hearts over time, with weekly snapshot-based rewards.

• Deposit into Vaults via Royco Markets
  Choose between:
  • HyperETH vault for ETH → exposure to 15+ partner tokens
  • HyperBTC vault for BTC
  • HyperUSD vault for stables (over $11M TVL)

• Earn Stacked Rewards
  One deposit earns Hearts and partner protocol points from HyperLend, HypurrFi, Harmonix, Timeswap, Silhouette, and more.

• No Active Farming Required
  Funds auto-route and rewards track automatically as new protocols join.

Twitter tweet

Hyperbeat is a passive way to farm across HyperEVM—combining validator staking with multi-protocol vaults in a single setup.

8. HyperSwap – Low-Slippage DEX With Deep Ecosystem Integration

HyperSwap functions as a minimal-slippage AMM on HyperEVM, positioned as a lighter, cleaner alternative to KittenSwap, optimized for fast execution, low TVL farming, and ecosystem partner campaigns.

The active points program distributes 2.5M points over 5 weeks (500K/week), split across usage, LPing, and integrations with 20+ partner protocols. Weekly snapshots occur every Sunday at 10 PM PST.

Farming Strategy

• LP & Stake
  Provide liquidity and stake LP tokens directly on HyperSwap. Points scale with pool size, duration, and volume. Longer staking improves share.

• Swap Regularly
  Trade weekly on HyperSwap to earn activity-based points, especially in partner token pools.

• Farm Ecosystem Pools
  Certain pairs offer bonus emissions: USDXL, feUSD, KEI, LHYPE, stHYPE, uBTC/uETH. LPing these earns both HyperSwap and partner protocol points.

• Stack Boosts Through Holdings
  Holders of Hypio NFTs, Buddy tokens, CatCabal, PiP, and similar assets earn weekly points if active on HyperSwap.

• Referral System
  Invite users to earn 10% of the points they generate via swaps and LPing.

HyperSwap is ideal for smaller LPs and cross-protocol farmers. With purely usage-based rewards and no NFT or veToken mechanics, it remains simple and scalable.

9. Looped HYPE

Looped HYPE wraps $HYPE into LHYPE, a rebasing token designed for passive leverage—no liquidations, no fee tracking. It earns boosted staking yield and integrates with top protocols on HyperEVM. Looped HYPE also runs a structured early adopter program distributing 7% of its total token supply to users who mint and hold LHYPE across supported DeFi positions.

Farming Strategy

• Mint LHYPE on the Official Site
  Avoid swapping. Only direct minters or those using supported integrations qualify for the Early Adopter Program.

• Participate in Phase-2 (Live)
  Allocation: 3% of total supply
  Cap: 2M HYPE
  Hold LHYPE for ≥8 weeks in one of the following: native wallet, AMM pools (KittenSwap, HyperSwap, Laminar), or lending protocols (Felix, Timeswap).

• LP LHYPE Across the Ecosystem
  KittenSwap concentrated pools offer 20x multipliers. HyperSwap includes LHYPE in its points program. Holding LHYPE also counts toward Mizu, Harmonix, and HypurrFi campaigns.

• No Active Management Needed
  Once deployed into DeFi, LHYPE continues to rebase and farm across layers automatically.

10. $HYPE Staking 

Staking $HYPE on Hyperliquid is a low-effort way to earn yield and potentially qualify for future airdrops from both Hyperliquid and its partner protocols.

Validators like HypurrCollective x Nansen have already secured multiple airdrops for their stakers, including:

• $SENT (Sentiient AI) – 2% of supply, over $120K distributed

• $TIME (Timeswap) – 0.5% of supply, valued at $100K

These were distributed to wallets with minimum HYPE balances, often tiered by stake size.

Staking Strategy:

• Go to Hyperliquid Staking

• Move $HYPE from spot to staking account

• Delegate to a validator (e.g. HypurrCollective x Nansen)

Earn staking rewards + unlock airdrop eligibility

If you’re not actively farming, this is the simplest way to stay in the game and get rewarded for holding.

Conclusion and Food for Thought

That covers the core of what’s live and relevant, but it’s far from everything happening in the Hyperliquid ecosystem.

There are dozens of new protocols building on HyperEVM right now. Many show promise, others are still finding their footing. Due to the scope of this piece, we placed our focus on protocols with live campaigns, active rewards, and meaningful traction. But the momentum is spreading fast.

The most profitable airdrops rarely announce themselves loudly. Hyperliquid has already demonstrated its commitment to rewarding early users through one of the largest token distributions in crypto history. Now, the entire ecosystem surrounding HyperEVM appears positioned for a similar trajectory.

There are significant reasons to make the statement that early activity across the HyperEVM ecosystem is currently significantly mispriced relative to potential future value. The protocols outlined in this guide represent the core infrastructure of what could become a major DeFi environment, with substantial token distributions likely for early participants. For those who missed the first Hyperliquid airdrop, the emerging EVM ecosystem offers a rare second chance to position early,this time with more clarity around which activities matter most.

Brought to you by Hunter.

Thanks for reading, please follow us on Twitter at @Castle_Labs and visit our website to learn more about our services and get in touch.

Virtually yours,

The Castle

We don’t need more AI assistants. We need autonomous systems.

Artificial Intelligence (AI) has dominated the broader discourse within the crypto sector this year, capturing the attention of builders, investors, and users alike. In just a few months, agent frameworks, launchpads, and experimental tools have flooded the landscape, with thousands of new agents deployed and dozens of new platforms emerging.

But despite this rapid expansion, the promise of AI agents remains largely unfulfilled. Most agents today are still isolated - running in silos, unable to share context, delegate tasks, or collaborate. They duplicate effort, burn compute, and offer limited real-world value.

The next evolution of this space isn’t about building more or better agents; it’s about building systems and networks that allow agents to work together.

That’s where OpenServ comes in.

Rather than treating agents as standalone units, OpenServ provides the infrastructure for multi-agent collaboration, enabling autonomous teams of agents to reason, coordinate, and execute tasks at scale. With OpenServ, agents become components of a larger ecosystem, capable of sharing memory, leveraging one another’s resources and capabilities, and delivering end-to-end workflows with minimal human input.

In this report, we explore the current fragmentation of the agent landscape, introduce OpenServ’s architecture, and unpack how it could unlock a new era of composable, collaborative intelligence.

Current Challenges

The explosion of AI agents over the past year has created a fragmented and increasingly inefficient landscape. During the height of the agent boom, platforms like Virtuals saw more than 1,000 agents launched daily - but quantity hasn’t translated to quality. As a result of this proliferation, the space is now littered with redundant, siloed deployments that fail to deliver real utility.

Key Challenges in Today’s Agent Landscape

• Fragmentation Across Frameworks: Most AI agents operate in isolated environments and are unable to collaborate or communicate. Without shared infrastructure or protocols, each agent exists as a standalone app. Much of the innovation to date has focused on getting agents deployed, not on ensuring they work meaningfully after launch. This mirrors early blockchain ecosystems, where liquidity and attention were spread thin across many incompatible chains.

• Redundancy of Functionality: With no coordination layer, thousands of agents now perform near-identical tasks, from shallow content generation to basic automation. Rather than working together, agents are stuck duplicating each other’s outputs, wasting time, compute, and capital.

• Interoperability Breakdown: Agents developed under different architectures or platforms struggle to talk to one another, especially across Web2 and Web3 boundaries. This lack of cross-framework collaboration severely limits composability, forcing users into fragmented agent silos.

• Wasted Resources and Narrow Utility: Many agents rely on expensive, domain-specific training data but are confined to narrow tasks in closed environments. Their capabilities are often bound by the limits and resources of whoever built them, rather than being enhanced through dynamic collaboration. Without shared memory or collaboration, their impact is limited. Valuable compute is wasted on repetitive tasks, while users face fragmented, low-value experiences with little cohesion or return.

Just like in early crypto markets, surges in experimentation often lead to oversaturation before the ecosystem matures.

We’ve seen this before: thousands of tokens, hundreds of L1s, few that endure. The next chapter for agents will follow the same arc, from isolated experiments to collaborative ecosystems built on interoperable infrastructure.

To move forward, we need systems that enable agents to share memory, assign tasks, and reason together in real time.

From Isolation to Collaboration

Solving the limitations of today’s agent landscape requires more than better individual agents. It requires reimagining how agents operate as a system.

Rather than isolated bots executing narrow tasks, the next evolution of AI agents will function as collaborative teams that ”interact, learn, and coordinate towards common objectives”. These teams rely on “distributed, adaptive strategies”, where agents can self-assign roles, share memory, and collaborate toward common goals.

Unlocking this kind of coordination comes with its own set of technical requirements. A truly collaborative agent environment needs:

• Trustless collaboration and resource sharing

• Seamless access to agent-owned resources and support for diverse capabilities

• A balance between communication privacy and transparency

• Scalability for multi-agent interoperability

• End-to-end permissionless interactions

This is the direction OpenServ is building toward. At its core, OpenServ turns agents into interoperable, composable building blocks for complex workflows.

Importantly, OpenServ is designed for accessibility. With a no-code builder and intuitive tools, anyone can deploy intelligent agents - no technical background required.

How is this possible?

OpenServ’s infrastructure layer is composed of three core components.

Cognition Framework

The cognition framework equips agents with core cognitive functions: memory, reasoning, and learning. Memory can be short-term or long-term, allowing agents to build persistent context across tasks. Reasoning enables agents to interpret complex instructions and make dynamic decisions. Learning mechanisms, including reinforcement loops and contextual awareness, help agents improve over time.

These capabilities form the basis for advanced, autonomous behavior. Instead of needing to be constantly prompted or reset, agents can recall past actions, make sense of new inputs, and adapt to evolving environments.

Orchestration Layer

The orchestration layer handles the internal logistics of agentic workflows. It manages how tasks are assigned, how progress is tracked, and how performance is validated.

On OpenServ, each deployed agent is supported by two specialized shadow agents:

• One oversees decision-making and cognitive execution.

• The other verifies the quality and consistency of outputs.

This layer also allows for human-in-the-loop interactions, giving users the ability to oversee, intervene, or optimize when needed, a critical feature for enterprise use cases where compliance, quality control, or human judgment are required.

Multi-Agent Collaboration Protocol

This core component of OpenServ allows agents to work in coordinated teams by implementing a task-based architecture where agents communicate through a shared framework and collaborate toward defined goals. They operate like employees of a startup, completely composed of AI agents. A program manager agent supervises the workflow, assigning tasks to agents according to project stages, like to do, in review, and done.

Collaboration is designed to be:

• Cross-framework: agents built in different environments can still interact.

• Parallelized: multiple agents work simultaneously without bottlenecks.

• Private by default: individual agent tasks are isolated, preserving context and control.

OpenServ also provides an easy way to integrate, thanks to an open-source agent toolkit and REST API for developers. These allow for custom integrations, smoother onboarding, and a low-friction path to deploy agents that can immediately plug into the collaboration protocol.

Why use OpenServ?

OpenServ is not just a framework for building agents. It should, in fact, be seen as an environment where autonomous agents can be composed, monetized, and deployed at scale. By solving the hardest coordination problems on behalf of developers, OpenServ allows builders to focus on outcomes instead of infrastructure.

Whether you are a solo hacker, a growing startup, or an enterprise team, OpenServ helps you bring intelligent agent workflows to life faster, with less friction and greater flexibility.

Build With Less Friction

With OpenServ, you do not need to worry about low-level infrastructure. Developers can spin up agents that reason, communicate, and collaborate, all without starting from scratch.

So what?

You can prototype faster, test ideas sooner, and skip the time and cost of building agentic training sets, cognition, memory, or communication layers yourself. Whether you are technical or not, OpenServ makes it easier to go from idea to live multi-agent workflow.

How?

The no-code builder, REST APIs, and open-source agent toolkit let anyone deploy agents as part of collaborative teams with minimal effort.

Turn Agents Into Revenue Streams

The OpenServ marketplace allows developers to list, share, or monetize their agents and resources. Teams and individuals can rent, reconfigure, or compose your agent into their own workflows.

At its core, the agent marketplace connects agent developers with users who need their capabilities. Rather than build solutions from scratch, users can browse and deploy existing agents to fit their needs — or combine multiple agents into powerful custom workflows.

So what?

Your code becomes a reusable, income-generating asset. At the same time, you can build faster by harnessing the work of other developers in the ecosystem. OpenServ enables a collaborative development loop where agents are not just products but shared building blocks.

How?

Agents built on OpenServ can be published directly to the marketplace. Composability by design means your agent can plug into dozens of workflows beyond the one it was originally built for — and you can do the same with theirs.

Connect to the Real World

OpenServ agents can interact with external platforms such as Gmail, Slack, or onchain contracts through the external integration layer. They can pull data, trigger actions, or update systems in real time.

So what?

You are not limited to theoretical workflows. Your agents can operate across tools your team already uses, automating real-world tasks and acting as teammates across both Web2 and Web3 environments.

How?

The external REST API enables plug-and-play integration with offchain and onchain tools. Agents can ingest third-party data, call external services, or execute onchain logic as part of their workflow.

Automate Complex Workflows

Because OpenServ supports collaborative agent teams, you can build systems where each agent has a role and the team works together intelligently.

So what?

You can automate work that normally requires coordination between people or systems, such as campaign management, customer support, reporting, or community operations. These are not just smarter bots; they are self-running agent teams.

How?

The internal communication protocol allows agents to share tasks, pass memory, and collaborate within structured workflows. Program manager agents oversee task progression through stages like to-do, in review, and done.

Make Knowledge Actionable

With multimodal file handling and persistent memory, agents can store, retrieve, and act on documents, media, or structured data.

So what?

You can stop reinventing the wheel. Build once, and your agents remember. Over time, they build foundational knowledge that makes them smarter, faster, and more aligned with your goals. Imagine having an agent that automatically creates your document in different media types (Google sheets, images, videos, etc.) and files and distributes them accordingly.

How?

OpenServ agents support ingestion and output across file types, including docs, PDFs, spreadsheets, and images. With long-term memory storage, agents learn and adapt across user sessions.

The Result: Less Time on Ops, More Time on Outcomes

OpenServ is designed to reduce overhead, remove blockers, and let agents do what they do best cooperatively and not in isolation. Whether you are automating internal workflows or building tools for others, the outcome is the same - less complexity, more leverage.

Towards the Agentic Economy

OpenServ is more than a toolset. It is the foundation of an emerging agentic economy - a full-stack platform where intelligent agents can be built, deployed, composed, and monetized by anyone, from anywhere.

This vision unfolds across three key layers:

• The Infrastructure Layer (outlined in section 3): Think of this as the “engine”, providing agents with persistent memory, advanced reasoning, and real-time collaboration capabilities. This layer abstracts the complexity of building intelligent agents from scratch, allowing developers to focus on creativity and application logic.

• The Developer and Builder Layer (featured in section 4): Above the engine sits a chain-agnostic framework for developers and creators. OpenServ supports both SDK-based deployment and a no-code builder, allowing anyone, regardless of skill level, to launch sophisticated, multi-agent workflows. Agents built on OpenServ can operate across any chain, integrate with third-party platforms, and scale across a growing library of reusable components. Developers can plug into APIs, use OpenAI’s agent stack, or extend existing Web2 and Web3 systems.

• The Application and Monetization Layer: At the top of the stack are the applications built using OpenServ and the monetization flows that support them. Users can launch SaaS-style agent products, Web2 and crypto-native applications, White-label solutions for teams or brands, and more. Developers can monetize through platform fees, subscription models, the agent marketplace, or even tokenized workflows. This creates a sustainable loop between agent creation, usage, and long-term value capture.

From Framework to Function: A Real Life Example of Agentic Workflows

OpenServ is building toward a future where users can launch complex workflows with just a single prompt. Imagine this in the future:

A crypto marketer visits OpenServ to launch a community airdrop.

They enter a short project description, and an agent team spins up automatically, comprising:

• A Virtuals agent generates campaign logic and optimization parameters

• An Eliza agent acts as a community manager, collecting wallet data and opt-ins

• An Eligibility agent checks onchain activity and filters qualified users

• An Airdrop executor sends tokens

• An Analytics agent tracks engagement and feeds insights back into the loop

The entire campaign is coordinated by an OpenServ Program Manager agent, who delegates tasks and oversees quality.

From the user’s perspective, it takes two clicks. The work of five agents happens in the background, coordinated in real time.

The Big Picture

This is the future OpenServ is enabling:

• A modular, programmable agent economy

• An open platform for creators and collaborators

• A world where agents work as digital teammates, building with you and for you

The applications are just getting started, but the infrastructure is already here.

The launch of dash dot fun in April is a key part of this vision, by creating a customised data dashboard that users can leverage for their research, trading, and more. Nowadays, to conduct deep research on tokens or cryptocurrency markets as a whole, users have to navigate across multiple sources and tabs. With dash dot fun, they can simply drag and drop components to create a specific dashboard to their needs.

For instance, a dashboard could include:

• Kaito data and analytics

• Bubble Maps widget to analyze the tokens within the verticals with the most mindshare in Kaito

• Onchain research agents to further leverage this data

• Wallet trackers to analyze smart money changes and whale activity

• Defai agents to execute trades based on this data

• Dash dot fun is deeply integrated into the OpenServ ecosystem, bringing value and utility to $SERV. All dash dot fun users are required to use $SERV to access premium and customization services.

As the first application launched on the OpenServ engine, dash dot fun users can leverage OpenServ agents and teams and create custom workflows using all the available components.

What will users be able to build on OpenServ?

Here are some examples from the recently conducted hackathon.

Future Outlook

The next wave of AI will not be defined by single-use bots or isolated agents: it will be shaped by interoperable systems, networks of agents that collaborate, compose, and create value across use cases, platforms, and users.

OpenServ is building the backbone of that world.

In the coming 12 to 18 months, we will see early versions of complete agentic workflows, systems where users, developers, and protocols coordinate with teams of intelligent agents to get work done at scale:

• Startups launch with built-in agent teams handling operations, outreach, and analytics from day one.

• DAOs deploy agents to automate contributor management, proposal execution, and treasury activity.

• DeFi platforms plug in OpenServ agents to optimize liquidity programs, run growth experiments, or coordinate governance.

• Creators and developers monetize agents that encode their expertise, not through SaaS, but through composable, tokenized services.

• B2B clients use white-label OpenServ teams to run always-on support, data processing, or marketing, with zero additional headcount.

A core focus of OpenServ has been keeping the framework future-proof. As AI evolves at an incredible pace, having a modular and adaptable design is essential to stay relevant and lead.

With tools like dash.fun on the horizon, deeper integrations underway, and the recent unveiling of the Builder’s Playground, OpenServ is poised to lead the coming AI agent renaissance.

Strong educational and product demonstration campaigns will be critical to realizing this vision. Most cryptocurrency users still underestimate the potential of AI agents and how they can transform the way we automate, collaborate, and scale everyday tasks.

The infrastructure is ready. The playground is open.

Apply Now.

Brought to you by Atomist and Francesco.

Thanks for reading, please follow us on Twitter at @Castle_Labs and visit Linktree to learn more about our services and get in touch.

Virtually yours,

The Castle

GM frens, and welcome to another edition of The Castle Chronicle.

Have you been thankful in the last week?

What a crazy week this was! Last week’s “reciprocal” tariffs sparked mostly bearish market reactions. This week Trump announced a 90 day pause on higher tariffs for most countries that have not retaliated which led to a market rebound.

Despite the pause, the situation remains uncertain. The markets are all over the place and no one really knows what to expect.

Here’s what we got for you today:

• 🔍 Market Watch – Price action & Relevant metrics across the sector

• ✈️ Travala - An introduction to the Crypto x Travel Space

• 🏰 Castle Round Up – The best reads you might have missed

🔍️ MARKET WATCH

PRICE ACTION

Despite the recent events, BTC remained relatively stable. The weekly chart keeps going sideways in what I assume to be a re-accumulation. At one point it looked like price might break down and start a new bearish direction, but so far demand is holding up.

• Healthy uptrend

• Re-accumulation

If price does happen to break down violently here, I’d say we might see some longer-lasting bearishness. Either way, this is currently a market that is not ready to be traded in any direction in my view.

Not following what I’m talking about? Check out my quick cheat sheet to understand how I approach a chart.

TOP PERFORMERS

Although BTC didn’t react too violently to the recent market events, the initial dump was met with a rebound. And with that, some cryptos rebounded harder than others. This week’s winner is $FARTCOIN pumping almost 90%.

Taking a closer look at the daily chart, we can see a preceding downtrend that eventually started going sideways and accumulating. Price then broke out higher - at this point I wouldn’t be bullish just yet, because any bullishness in a downtrend should always be viewed as a re-distribution. That thesis was just invalidated though, as price broke out higher again, confirming a re-accumulation and with that a new trend direction.

• Trend reversal

• Re-accumulation

• New uptrend

This is a good-looking bullish chart. In an isolated environment, I would be interested in trading this. But given the overall situation of market uncertainty and crypto not being in the most bullish context, I will skip. Had this happened in an overall market-wide bullish context, I would be all over this chart.

BTC FEAR AND GREED INDEX

While nothing much has changed in the recent weeks, the Fear & Greed index is showing better numbers moving from extreme fear to almost neutral. I guess even emotions have their lifespans.

CAPITAL FLOW

This week we see a tug-of-war between inflows and outflows in Ethereum, resulting in an overall slight net inflow. Berachain on the other hand continues seeing capital flowing out of it week by week after it has taken a major beating recently.

NARRATIVE PERFORMANCE

Although we have seen some individual cryptos rebound more than others, the overall aggregate situation doesn’t look too good. Most narratives are down anywhere from 1% to 17% with DeFAI getting rekt the most once again.

Courtesy of 0x_Vlad - Chief Male Astrologist at Castle Labs

✈️ AN INTRODUCTION TO THE CRYPTO X TRAVEL SPACE

What's up in the Travel X Crypto space?

There are a lot of folks who keep claiming there are no REAL use cases for crypto and that it's only built on speculation.

But in the coming years, IMO, we will see many applications involving real-life economies that learn how to leverage on-chain tech to increase their efficiency and users' acquisition/retention.

One of the sectors that will experience much growth in the future is the Travel space.

Last week, while I was peacefully scrolling on X, I got hit by this tweet from Travala.

Twitter tweet

These stats are impressive:

• Close to $10 million in sales for March

• Over 190k monthly users who are buying real-life products using crypto assets at a rate of around 74% for all of those In Real Life sales.

• Travala also boasts around 57k Smart Members, who stake tokens on the platform to receive different perks such as discounts on flights, hotel nights, and activities.

It caught my attention because it clearly shows that you now have crypto-native applications that are being built at the juncture of Blockchain and real-life activities. Not only using a financial onramp based on blockchain tech (paying with stablecoins or crypto assets) but also leveraging the concept of token staking ($AVA being the native Travala token) to increase customer retention with unique perks and discounts.

So I decided to investigate further and found that a nascent ecosystem was being built around Travala

First, they integrated Viator, one of the biggest digital tour operators worldwide, into crypto on-ramping in 2021.

This opened up a whole new niche of crypto users to all the tours offered by Viator.

There is also Concierge a tailored agency for high-net-worth crypto users who are looking for a unique Travel experience.

Another project that has been built around the Travala ecosystem & that I found interesting is Dtravel.

They already conducted an airdrop of a % of their token supply to $AVA stakers in 2021.

This app positions itself as a decentralized version of Airbnb or Booking.com, connecting rental vacation owners with travelers without the high fees charged by centralized parties and the possibility of being de-platformed.

DTravel is built on Base chain and has its own token, $TRVL, with some traction and usage for its product (in the picture below, you can see that there were 5 offerings in around NYC for mid-April).

If we look at Dubai in mid-May we find 11 rental properties:

Currently, it's a very early product with limited network effect, but it has much potential to grow in the coming years. I recommend having a look at this post for a deeper introduction to the product and the solution DTravel is trying to be.

The crypto x travel is an early space, but Travala has good traction at the moment, with different protocols building around it for the creation of an ecosystem of services for travelers. This should be watched closely as one of the most interesting intersections between crypto and real life.

Courtesy of C-L - Contributor at Castle Labs

🏰 CASTLE ROUND UP

THE AI DISPATCH

NAVIGATING THE COMPLEXITIES OF ON-CHAIN DEVELOPMENT WITH ENSO

GTE: THE VERTICAL EXCHANGE ON MEGAETH

SOLANA PERPETUAL POWERHOUSES: AN OVERVIEW OF GMX-SOLANA, JUPITER, AND DRIFT

And that’s all for this week! Remember, the markets remain uncertain. The best thing to do during moments like these is to simply stay on the side lines and watch it from afar. Once the situation calms down a bit there will be new opportunities.

Risk responsibly and we’ll see you next time!

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

The Global Token Exchange (GTE), aims to be the world’s fastest and most decentralized trading venue. It is built on MegaETH and delivers a solution for every stage of a given asset’s trading lifecycle: from (fair) launch, to price discovery on AMMs, CEX-like CLOB support, and price aggregation across the MegaETH ecosystem.

The GTE product suite includes:

• A permissionless token launchpad utilizing a bonding curve to bootstrap liquidity into the GTE AMM

• A classic AMM for passive liquidity provisioning, with Uniswap V2 at its foundation.

• An on-chain CLOB for providing CEX-level liquidity, price discovery, and market makers (MM) support

• A best-price aggregator across the GTE AMM, CLOB, and the entire MegaETH ecosystem, ensuring GTE users get the best price.

• A token launchpad for Larger protocols seeking a takeoff venue for their TGE

Going Vertical

To fully understand what GTE is trying to do, we need to address each vertical that it is trying to tap into.

AMMs are excellent for price discovery and low-liquidity assets. Instead of relying on an orderbook, traders can execute their trades against liquidity pools, meaning there will always be a maker (the LP). This is crucial for tokens that lack a deep order book on CEXs. 

CLOBs, in turn, are great for high-volume trading, efficient price discovery, and price order execution because they allow traders to set their prices and quantities, leading to a more competitive and transparent market. Unlike AMMs, where LP ratios determine prices, CLOBs rely on real-time order matching, ensuring that trades occur at the best market price. This makes CLOBs ideal for institutional traders, professional market makers, and assets that require deep liquidity, where large orders can be executed with minimal slippage. 

However, in today’s world, a token usually launches on a platform like Pump.Fun (e.g., PinkSale, Juicedbox, four.meme) in a bonding curve gets its initial distribution and dissipates the tokens through AMMs like Raydium.

When there is enough (organic) traction/volume, CEXs usually will try to list the platform and have market makers involved in creating efficient markets. A CEX will list these tokens because it will drive volume to its platform, attract new users and thus increase trading fees. On top of that, CEXs usually make a distinction between listing spot assets and listing perps as there are some subtle differences: with spot markets, CEXs will need to hold the underlying asset, while with perpetuals, they typically do not, which makes their listing much easier. 

Over time, the token will be tradable across different venues, DEXs, CEXs, p2p markets, or even usable on other DeFi platforms. At that point, for a trader to get the best price, they usually need to compare and find the best price across multiple avenues (e.g., using an aggregator).

The process above can be referred to as the “life cycle of an asset.” 

From its inception to distribution to adoption, this process usually takes place across different platforms, but it seems to be slowly changing. Pump fun, for instance, recently launched Pump Swap, further solidifying their moat. Their reason was to capture more value, as 41% of radium’s swap fee of the past 30 days came from memecoins, even though memecoins’ volume has dropped significantly. The year-to-date cumulative volume of tokens launched on Pump.fun is nearing $80bn. This is, of course, the volume across different markets, whereas the cumulative volume of Pump.fun only just crossed $22bn. 

This shows that controlling the full life cycle on just one platform can be much more lucrative. Pump fun has proven that it is feasible for a launchpad to create their own AMM. Since its official launch on 20th March, Pump Swap has a cumulative volume of $2.5bn (as of the 31st of March), an average of $200mn per day, about half of Raydium’s, an average of $400mn per day.

The GTE Architecture

As mentioned, the particularity of the GTE architecture is a focus on positioning across all of these verticals, while most already established platforms focus on just one or two.

All the features listed below are components of the core architecture of GTE. 

1. Launchpad

GTE’s Launchpad “Takeoff” provides a fair, on-chain environment for projects to issue new tokens and bootstrap liquidity with minimal friction. Through its permissionless token launcher, 80% of the token supply will be traded on a bonding curve. When a token hits the bonding price, an LP will be deployed on the GTE AMM, launching the token, and 20% of the supply will be burnt.

2. AMM

GTE’s AMM is essentially a direct fork of Uniswap V2 with no modifications to its core functionality. It uses the standard constant-product model (x*y = k), requiring liquidity providers to deposit tokens in a 50/50 ratio by value, ensuring straightforward, permissionless swaps. Because it inherits Uniswap V2’s battle-tested smart contracts, the GTE AMM offers users a highly stable, well-understood swapping solution. This design choice reflects GTE’s focus on delivering proven, reliable technology at scale while integrating seamlessly with the broader GTE ecosystem.

3. Aggregator

GTE’s DEX aggregator is a comprehensive routing engine that continuously checks available order books and liquidity pools, ensuring minimal slippage and optimal execution with each trade. It scans every significant liquidity source on MegaETH, including GTE’s own AMM and CLOB, to find traders the best possible price for any swap. Users can tap into its functionality through the GTE frontend or integrate it programmatically in their applications, providing a seamless on-chain experience for both retail and professional traders.

4. CLOB

GTE’s CLOB enables institutional and retail traders, and market makers to trade on-chain with a similar experience to a CEX by mirroring the user experience, interface, and performance. Unlike AMMs, a CLOB allows for active liquidity management, allowing MMs to be much more capital efficient and enabling better prices for the end users. Most CLOBs use “price-time priority” ensuring a fair queue for buyers and sellers.

GTE vs CEXs

GTE and CEXs are similar in many ways. From a user experience standpoint, GTE offers a similar interface, including professional charting tools, different order types (limit, market, stop-market, stop-limit), and TWAP orders with different options (reduce only, post only, Fill or Kill, Immediate or Cancel, Take Profit, and Stop Loss).

These features are typical of CEXs and usually not available on DEXs. In terms of performance, MegaETH enables GTE to have high throughput and sub-10ms block times so that orders can be placed and canceled with near-zero latency and cost. User onboarding also follows a similar experience to a CEX: users can simply sign up using their email or X (formerly Twitter) accounts or log in with their EVM wallets.

Improvements to CEX

GTE improves upon the standard CEX model by prioritizing users and transparency, while aiming to match the performance: it is fully non-custodial and transparent, without sacrificing speed.

They do this by focusing on:

• Non-custodial account creation via Privy: On GTE, users maintain control of their assets and can log in using their socials or Web3 wallet. By having Privy as their wallet provider, users will have complete control over the created wallet and, in extension, all the assets.

• Full Transparency: GTE provides on-chain visibility of trades, liquidity pools, fees generated, and the number of addresses trading on the platform. This level of transparency is not typically available on CEXs, which often operate as “black boxes”.

• Composability: GTE is built with composability in mind, allowing third-party developers to build applications on top of it. This enables the creation of customer user interfaces and data dashboards, expanding the platform’s functionality and user experience. CEXs typically only offer this level of functionality only beyond user APIs.

GTE vs DEXs

GTE shares several similarities with DEXs:

• Non-custodial nature: Like most DEXs, GTE is non-custodial by default. Swapping and interactions happen from a user's own wallet.

• On-chain transactions: GTE transactions are executed fully on-chain and smart contracts.

• Use of AMMs: GTE launches with a fork of Uniswap V2, a familiar and battle-tested format. No need to reinvent the wheel.

However, what distinguishes GTE from DEXs is that it introduces key improvements:

• CLOB and AMM synergy: GTE combines both AMMs and CLOBs, creating a synergistic unlock previously unknown to DEXs. This unlock enables CEX-level MM activity and great capital efficiency for a token that has been launched on GTE, users can immediately trade on the AMM and get price discovery before MMs come in, and on top it is also possible to trade on both, where users can first execute part of their transactions on a CLOB and when the pricing is more favourable on AMMs have the rest of the orders filled there.

• Entire token lifecycle on one platform: GTE is designed to cover the entire token lifecycle. From TGE, through AMM, spot trading, to perps and futures, and cross-ecosystem trading. This full vertical integration aims to provide a more seamless and efficient trading experience for users compared to the fragmented experience users have when trading a token on Pump.fun, which then gets listed on a CEX where you need to send your funds over to a CEX to get more efficient execution.

• CEX-like user interface: GTE aims to provide a user interface that is familiar to CEXs

GTE vs HL vs JUP vs GMX?

The DEX (perp) space is rapidly maturing, with multiple protocols offering unique approaches to on-chain trading. Three of the most prominent platforms are Hyperliquid (HL), Jupiter (JUP), and GMX. Each aims

to deliver performant, non-custodial trading, transparency, and has its take on capital efficiency. By comparing their core models to GTE, we can see where GTE’s vertical integration and on-chain CLOB can bring a distinct edge.

While HL centers on high-frequency, order book-based trading, Jupiter aggregates swaps for best execution on Solana, and GMX focuses on leveraged perps and a novel pooled-liquidity approach, each largely addresses a single phase of a token’s life. By contrast, GTE weaves together token launches, AMM swaps, CLOB trades, and aggregated liquidity into one seamless environment. From a token’s early liquidity needs all the way to sophisticated derivatives trading, GTE covers every step of the journey, giving projects and traders a truly end-to-end ecosystem.

However, this broader scope also poses a risk for GTE: While competitors have specialized in one (maybe two) domain(s), GTE is trying to specialize in all domains, and will need to deliver strong performance across all these fronts at once. This can stretch engineering resources, complicate quality control, and raise the bar for seamless user experience. GTE is mitigating these risks by leveraging battle-tested contracts like Uniswap V2, and known designs for the launchpad.

Funding History

GTE has secured its funding through a combination of community rounds and from VC, highlighting the project’s dual focus on grassroots support and institutional backing, similar to how MegaETH did their raise.

Echo raise: A $2.5 m community-focused round. Three different Echo groups participated in this round, which sold out within an hour and added over 720 unique investors to GTE.

On the venture side, GTE raised $1.5mn for its pre-seed and $6.9420mn for its seed round, with participation of Maven 11, Wintermute, Flow Traders, Robot Ventures, IMC Trading, Guy Young of Ethena, Max Resnick of Anza, and undisclosed traders from Jump Trading.

Conclusion

GTE is positioning itself as a comprehensive, decentralized trading solution capable of meeting the full spectrum of market needs, from token launches and early liquidity to sophisticated spot and derivatives trading. By combining an AMM, a high-speed CLOB, an aggregator that ensures best-price execution, and a user-friendly launchpad, GTE aspires to deliver both the approachability of DeFi and the performance of CEXs

Built on MegaETH to harness near-instant block times and high throughput, GTE promises institutional-grade speed without sacrificing the transparency and custody benefits of on-chain operations. Its holistic view of a token’s lifecycle, covering everything from TGE to mature perps markets, highlights a drive for proper vertical integration.

This approach brings efficiency gains for both emerging projects, which can bootstrap liquidity and gain immediate exposure, and seasoned traders, who can access advanced order types and tight spreads within a single platform.

Looking ahead, GTE faces the challenge of delivering reliable performance across multiple trading verticals simultaneously. Nevertheless, by leveraging proven architectures (AMMs, well-established CLOB mechanics) and forging a network of strong backers, GTE appears well positioned to navigate the complexities of high-speed on-chain trading. Should it succeed, it may set a new standard for decentralized venues, one that marries the liquidity and user experience of centralized platforms with the openness and self-custody ethos at the core of DeFi.

Brought to you by NDW.

Thanks for reading, please follow us on Twitter at @Castle_Labs and visit our website to learn more about our services and get in touch.

Virtually yours,

The Castle

GM frens, and welcome to another edition of The Castle Chronicle.

Trump has announced reciprocal tariffs on many countries, sparking market volatility, but crypto doesn’t seem to care much. BTC just keeps going sideways in its little range, and besides a single crypto showing strength due to news, the entire market is as dead as dead can be.

Here’s what we got for you today:

• 🔍 Market Watch – Sideways BTC price action, news-driven pumps, and overall negative numbers across the board

• 🚪 Exit Tech — Exit locked token positions early!

• 🗳️ Arbitrum Corner – Orbits, RWA, and more ecosystem updates

🔍️ MARKET WATCH

PRICE ACTION

BTC keeps going sideways in this range that I expect to eventually break to the upside, confirming an accumulation in an overall re-accumulation.

• Overall uptrend

• Re-accumulation

The market is honestly really boring and it will take quite a bit of time before it becomes tradable for me again. There are definitely more interesting markets out there.

Not following what I’m talking about? Check out my quick cheat sheet to understand how I approach a chart.

TOP PERFORMERS

Every now and then demand shows up randomly in some coin, most often after announcing some news. This time it’s EOS, announcing a rebrand and staking incentives. It’s this week’s single well performing crypto, gaining 38%. This goes to show how uneventful this current market environment really is.

CAPITAL FLOW

We’re seeing a huge inflow into ETH this week and a few of its L2s. On the other hand, after many weeks of constant capital inflow, Bera is finally seeing some money flowing out of it.

NARRATIVE PERFORMANCE

Looking at all the different narratives it’s pretty clear that this week has not been very good for any one category. We can see negative numbers across the board with DeFAI and AI-Agents losing the most.

Courtesy of 0x_Vlad - Chief Male Astrologist at Castle Labs

🚪 Exit Tech has Officially Launched! 

Exit.tech is a decentralized marketplace designed to help you exit locked DeFi positions, starting with $esGMX. If you're an Arbitrum OG (like we are), chances are you still have some esGMX lying around—likely because vesting esGMX is tricky and requires locking additional $GMX or $GLP tokens. 

With Exit.tech, you can exit those positions easily, without needing any extra capital.

On the other hand, if you're bullish on $GMX and have been following the updates the GMX team has been rolling out lately, you know GMX continues to be one of the cheapest and most efficient platforms for perpetual trading. 

Exit.tech offers $GMX and $GLP holders an opportunity to earn boosted yields, with the top pool currently offering up to a 10% APR boost.

Check it out: 👉 exit.tech

💙 ECOSYSTEM UPDATES

This week, the Arbitrum Corner takes you on a stroll through the main ecosystem updates! From events to project updates and new Orbit launches, we’ve been busier than ever catching up with developments across multiple verticals.

Without further ado, here’s what we are looking at today:

Conduit (one of Arbitrum Orbit’s network partners) has conducted research highlighting how much gaming protocols can save by operating their own rollup over a shared blockchain.

This is an interesting deep dive into Orbits's role in providing extreme customization that fits projects' specific requirements. The case of Pirate Nation highlights how Orbits solved their scalability and cost-related issues.

Twitter tweet

It answers this question by taking Pixels (running on Ronin) and Proof of Play (running on Arbitrum as an Orbit) as case studies, using DA data from Celestia and Arbitrum AnyTrust:

During the same time period, Proof of Play processed 9,338.9 MB of data and paid $45 in DA, 12x the data of Pixel < at less than 1% of the cost.

Full report available here:

Onchain Gaming Cost Comparison: Rollup vs. Shared Chain

We break down how on-chain games can save over 90% in on-chain expenses by running their own rollup, using real data from real games.

www.conduit.xyz/blog/onchain-gaming-cost-comparison-rollup-vs-l1

Dinari Launching Token-Backed US Stocks on Arbitrum, through “dtokens”:

Twitter tweet

RWA has been one of the most active and developing areas for Arbitrum as a whole, and especially for the DAO. Learn more about it through Entropy’s dashboard: https://dune.com/entropy_advisors/arbitrum-rwa-case-study

Forbes report on the partnership between Bitso and Arbitrum for stablecoins:

Twitter tweet

Espresso hackathon closes applications - Keep an eye on it!

Twitter tweet

Cookie receives a grant to integrate Arbitrum with social metrics and on-chain data:

Twitter tweet

It took a long time, but now users can access metrics on Arbitrum projects on Cookie, one of the most adopted data analytics and dashboard providers.

Bet more on Gaming - AMA with WINR: Arbitrum is hosting an AMA with Winr, a gaming and gambling protocol

Twitter tweet

More Arbitrum chains are popping off every day! Here’s an introduction to Destra network, launching an Orbit specifically for AI agents:

Twitter tweet

Seems like the initial focus of Arbitrum in the AI space is paying off, leading to several native projects coming up. Among those, we also highlight Project Zero:

Twitter tweet

Blackbird is leveraging Arbitrum to revolutionize the Restaurant Business. They support over 600+ restaurants in the US! Hope they will be expanding to Europe soon:

Twitter tweet

Learn more about how they are leveraging their own Orbit:

Arbitrum Technology is Powering Blackbird's Restaurant Revolution

Restaurant loyalty and payment platform Blackbird is demonstrating exactly how blockchain can create seamless experiences in the real world. Built using Arbitrum technology, which enables developers to create customizable blockchains tailored to specific use cases, Blackbird is designed for restaurant lovers and allows diners to earn points, rewards, and insider

blog.arbitrum.io/arbitrum-technology-is-powering-blackbirds-restaurant-revolution

Are you gonna be in Hong Kong on the 7th of April? Make sure to join the Arbilink event, which has quite a stacked speaker lineup.

Twitter tweet

Courtesy of Francesco - Co-founder at Castle

And that’s it for this week! We hope you enjoyed reading and aren’t getting rekt out there.

See you next week!

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

Setting the Scene

Bitmex introduced Perpetual Swaps in 2016; since then, they have been an integral part of crypto derivatives.

Perpetual derivatives are a type of futures contract with no expiration date, meaning users don't get liquidated until they add margin.

They let users open long or short positions on the assets of their choice and provide an optimum leverage opportunity to define their risk capabilities.

On-chain derivatives have been growing for a long time and have reached Product Market Fit (PMF), first on Ethereum and then on other ecosystems.

Among those, Solana Perps achieved great success with Jupiter and Drift being the biggest trading avenues.

Recently, GMX, one of the most significant perpetual trading avenues on Arbitrum and Avalanche, launched on Solana as GMX SOL, another sign of Solana’s maturing DeFi ecosystem.

This research will analyze Solana’s thriving perpetual ecosystem, focusing on established Solana perpetual protocols like Jupiter and Drift, and one of the most significant EVM perpetual players (GMX), recently launched on Solana.

1. Platforms Overview

This section compares the protocols mentioned above regarding how they work, their key metrics, and their product offerings.

1.1 GMX-Solana

GMX-Solana is a decentralized leveraged perpetual trading platform recently launched on Solana, building on its reputation as a leading trading product in the EVM ecosystem.

GMX-Solana is a slightly modified implementation of GMX V2 tailored for the Solana blockchain.

Users can leverage trade, provide liquidity, and swap tokens. A notable feature introduced at launch is GMX-Solana’s Trade-to-Mint model, where traders earn GT tokens based on the trading fees they pay. These GT tokens can then be sold for stablecoins through the treasury, offsetting users’ trading fees.

The GT tokenomics are similar to those of Bitcoin; as more GT tokens enter circulation, the higher the price of them and the harder they become to mint. Additionally, GMX-Solana may do a TGE for the GT token once the minted supply exceeds 82.53 million, contingent upon governance approval.

Liquidity providers can provide liquidity to either the Global Liquidity Vault (GLV) or GM pools. GLV contains SOL/USDC and dynamically shifts that liquidity to support various synthetic markets (all based on SOL/USDC), while GM is an isolated pool design for LPs who want exposure to specific assets.

As of the time of writing, GMX-Solana has already done over $2.4b in total trading volume, with a TVL (Total Value Locked) of around $6.5m.

1.2 Jupiter

Jupiter is a spot aggregator on Solana and one of the biggest on-chain leverage trading platforms through its product Jupiter Perpetuals. 

Similar to GMX-Solana, it follows a pool-based design. Under this model, the liquidity pool acts as the counterparty against traders. In this design, when a trader loses money, the liquidity pool makes money, and vice versa.

Jupiter allows traders to open up to 100x leveraged positions for major assets like SOL, ETH, and wBTC. On Jupiter perps, the long side is collateralized by the same token as the index token, and the short side is collateralized by stables, to settle positions efficiently.

Liquidity providers provide liquidity through JLP, which works similarly to GMX-Solana GLV. JLP consists of 5 major assets, which are SOL, ETH, wBTC, USDC, and USDT .

At the time of writing, JLP's market cap is around $1.4b, which equates to the liquidity available in the pool for Jupiter Perps. The platform’s total trading volume is about $268b.

1.3 Drift

Drift is also one of the largest on-chain perpetual exchanges. Since launching their v2, the platform has accrued almost $900m in TVL and a total trading volume of $59.2b.

The platform provides leverage trading up to 20x, liquidity provisioning, spot trading, and borrow and lending markets.

Drift has a hybrid design, as it sources liquidity from various avenues to execute the trade efficiently, ensure deep liquidity and proper P&L settlement.

Drift sources liquidity from Just-in-Time (JIT) auction, limit orderbook, and AMM. JIT is managed by market makers who fills the order request in a short term auction, Automated market maker is a pool of different assets to provide liquidity, and the limit orderbook is an on-chain orderbook managed by off-chain bots which fill orders against the AMMs.

Liquidity providers on the platform can provide liquidity to multiple avenues, including Strategy Vaults, Insurance funds, borrowing and lending pools, and Backstop AMM Liquidity (BAL). The liquidity provided in the borrowing and lending pools can also be used as collateral to open up trades on the platform. This flexibility attracts liquidity from traders as well.

Drift also incentivizes traders through offering FUEL tokens for the volume they create. Traders will be able to redeem the FUEL earned from the protocol for the platform’s governance token, $DRIFT.

Note: The above graphics are just for representational purposes and don’t depict the protocol's actual architecture and order flow.

2. Comparative Analysis

This part of the research covers all the above-mentioned platforms and compares their core KPIs (Key Performance Indicators).

A good trading experience on a perpetual DEX comes from the following being true:

• Low Fees (Trade Opening/Closing fees and Swap fees)

• Good UI/UX (Fast RPCs and Backend servers)

• Low-latency price feed/No Oracle Manipulation (No bad liquidation)

• High Liquidity (Less Price Impact)

• Ease of collateral use and multiple markets (Increase Exposure)

2.1 GMX-Solana

GMX-Solana charges fees of about 4-7 bps of the position’s notional size on swaps and position opening/closing. Fees are adjusted based on the trade's impact on the market's balance: if a trade improves the market’s balance, the fee is lower, and higher if it reduces the balance. These are offset by the GT trading incentives currently offered.

GMX-Solana uses Chainlink as the oracle provider. For RPCs, GMX-Solana uses Helius, which is an industry standard.

When users open their position, GMX-Solana lets them provide collateral in multiple tokens depending on the pool's availability. They list 25+ markets, including BTC, ETH, SOL, DOGE, that traders can long or short and gain exposure to.

2.2 Jupiter Perps

Jupiter Perps is an integrated platform within Jupiter’s spot aggregator, with a great UI/UX and an easy-to-use interface. On Jupiter perps, the range of tradable assets is limited to SOL-PERP, ETH-PERP, and WBTC-PERP.

Jupiter charges a flat fee of 6bps to open/close a trade. Similar to GMX, its price feed relies on external price oracles.

2.3 Drift

Drift has a slightly more complex UI compared to other protocols analysed due to the various features it offers.

Drift offers 50+ perpetuals to trade, a wider offer than its competitors. Drift fees can range from 3bps to 10bps of the position size based on trader tier, which is based on the amount of $DRIFT staked in the insurance funds and 30D volume.

To protect LPs, Drift categorizes perps based on their associated risk. These tiers decide whether a particular tranche of perps gets access to the insurance funds. Drift uses Pyth Network and Switchboard as oracle sources.

3. Liquidity and Volume

Liquidity is crucial to any perpetual exchange to best serve its users. As on-chain derivatives are growing, these platforms have seen sustained growth in terms of liquidity and volume.

Perpetual Protocols TVL on Solana, Source: DefiLlama

7-day moving average of TVL and Volume, Source: DefiLlama

As these protocols have wide-ranging TVL and volumes, a better comparison metric would be capital efficiency, often measured by Volume(24H)/TVL. These numbers reflect how much of the protocol’s TVL is utilized through trading on the exchange, thus generating fees and yield for LPs(Liquidity Providers). If the capital is underutilized, it isn’t efficient.

The higher this number, the more efficient the protocol’s liquidity is. While these numbers usually change based on market conditions and traders’ interest, capital efficiency is considered good with a score above 1.

This number is about 0.59 for GMX-Solana, while it is 0.38 and 0.15 for Jupiter and Drift, respectively. GMX’s capital efficiency is higher than Jupiter's and Drift's; one reason for that is the platform’s lower liquidity at the moment.

Also, Drift’s capital efficiency is calculated by removing the platform’s Strategic Vaults TVL, as these strategic vaults don’t necessarily create volume on the exchange. Still, their TVL is counted in Drift’s overall TVL.

Note: To calculate capital efficiency without deviating much based on a single day's performance and market volatility, the formula used for the above calculation is: 7-day moving average of volume/7-day moving average of TVL.

7-day moving average of TVL and Fees, Source: DefiLlama

Another metric to analyze here is Fees(24H)/TVL, using the formula 7-day moving average of fees/7-day moving average of TVL. This number represents how much of a protocol's fees are generated from the liquidity locked.

• GMX-Solana: 0.0002

• Jupiter Perps: 0.00097

• Drift: 0.00003

In this metric, Jupiter generates the highest fees proportionate to the value locked.

3.1 GMX-Solana

GMX-Solana sources its liquidity from GLV(Global Liquidity Vault) and GM pools. GLV pools are yield-optimized and often rebalance based on market conditions, and liquidity is allocated accordingly. Not all markets source their liquidity from GLV.

Conversely, GM pools are isolated for users who want exposure to a specific asset. These pools earn fees from perpetual trading and the spot market. At the time of writing, GLV offers around 6% APY.

Most of the platform’s active liquidity comes from GLV, as the APY of specific GM pools is much lower, in the range of 1-5%, and with very thin liquidity.

Moreover, GMX-Solana cannot capture much of the on-chain trading volume on Solana now, due to less liquidity, dropping traders’ interest, and market volatility.

Total Value Locked (TVL) on GMX-Solana, Source: DefiLlama

Daily Volume on GMX-Solana, Source: DefiLlama

3.2 Jupiter Perp

Jupiter Perp liquidity comes from the JLP token, an index fund of SOL, ETH, wBTC, USDC, and USDT. JLP accrues in value through the fees generated by Jupiter Perps. JLP is excellent for providing liquidity because it gives the LPs flexibility to provide/remove liquidity easily.

At the time of writing, JLP offers an APY of 10%.

Total Value Locked (TVL) on Jupiter Perp, Source: DefiLlama

Daily Volume on Jupiter Perp, Source: DefiLlama

3.3 Drift

Drift liquidity comes from different avenues, as explained in the overview section. Since users can provide liquidity through various means, the APY differs for each.

The highest APY of 338% is offered by the platform through Strategic Vaults, which are handled by external actors. Other pools, including borrowing and lending, insurance funds, provide an APY of 10-15%.

LPs can also provide liquidity through BAL, where they automatically open an opposing position to the traders and earn fees from the market’s funding rate. Moreover, 80% of the taker fees collected are allocated to BAL providers, leading to a total APY in the 10-25% range, based on the market they provide liquidity to.

Total Value Locked (TVL), Source: DefiLlama

Daily Volume on Drift, Source: DefiLlama

4. Risk Management

Risk management is pivotal to every perpetual exchange. While risks related to smart contracts often remain, an ideal risk-managed protocol would settle positions efficiently even in highly volatile conditions and do less harm to Liquidity Providers.

4.1 GMX-Solana

GMX-Solana has two types of markets: fully backed markets and Synthetic markets.

Every GMX-Solana market has 3 tokens:

• The Index Token

• The Long Token

• The Short token

The short and long tokens back a market. The long token backs the long positions while the short token, usually a stablecoin, backs the short positions.

The index token is the token that users use either long or short. However, it is important to note that GMX-Solana also supports backing one token in a particular market, which could be risky for short positions.

When the long and index tokens are the same, the market is fully backed, which means traders’ P&L can be quickly settled in times of high volatility. In the synthetic market, long and index tokens are different, and in times of high volatility, this could cause a problem in P&L settlement.

To ensure P&L is settled efficiently, GMX-Solana uses ADL (Auto-Deleveraging), which partially or fully closes certain profitable positions to keep the markets solvent.

Multiple fees are involved to manage risk, protect LPs, and maintain pool balance, including:

• Price Impact Fees: which either LPs or traders pay when they imbalance the pool

• Dynamic Borrowing Fees: which traders pay to LPs for borrowing assets from the liquidity pool

• Funding Fees incentivize the opposite side of the market to trade in a different direction.

These fees are essential to incentivize liquidity providers and protect the exchange in case of solvency issues.

4.2 Jupiter Perps

Jupiter Perps works similarly to GMX-Solana, except that it does not allow synthetic markets in which the long backing token is different from the index token. This further preserves the exchange and positions even in highly volatile situations.

4.3 Drift

Drift works differently, since it follows a hybrid approach for liquidity. Drift utilizes an Insurance Fund to manage risk and efficiently maintain the exchange's solvency. The insurance fund accrues fees from the protocol’s revenue, liquidations, and trading fees. Since BAL is an AMM, LPs might be blocked from burning their shares if this causes high imbalances in the pool.

5. Current State and Future Trends

Most of the current derivatives liquidity is in Solana, with major contributors being Jupiter and Drift. At the time of writing, out of around $5.2b in total liquidity in on-chain derivatives, Solana contributed about $2.7b, making up for more than 50% of total liquidity.

7-day cumulative volume by Solana Perpetual Avenues, Source: DefiLlama

Currently, Solana Perps volume is led by Jupiter, followed by Drift. There is a lot to catch up on for GMX-Solana to challenge incumbents.

DEX to CEX Futures Trade Volume, Source: The Block

On-chain derivatives have never been more thriving, with increasing competition within protocols building amazing products. The DEX to CEX Trading Volume ratio is rising: as it is currently around 7%, there is much room to grow from here.

Top 10 chains by 1-month Trading Volume, Source: Defillama

Solana is the second-largest chain by volume in the on-chain derivatives sector. The gap between Hyperliquid’s volume and other chains is huge. As the industry grows, this gap will eventually decrease with better features and incentives introduced by the protocols on Solana.

With increased throughput achieved through Firedancer validator clients, protocols can reach speed and efficiency comparable to Solana's competitors.

6. Conclusion

Jupiter and Drift have shown a sustained growth pattern over time but lack capital efficiency. Though GMX-Solana performs a little better in capital efficiency, partially because of lower liquidity, it still has much catching up to do.

Jupiter promotes simplicity over complication with its JLP token; LPs can buy and hold JLP to provide liquidity on the platform. While GMX and Jupiter follow a similar model in handling trades, their approach to liquidity differs, with more minor similarities between GLV and JLP.

Drift offers cross-margin accounts for sophisticated traders seeking better risk allocation. It allows for less leverage and focuses on risk management by incentivizing the insurance funds due to its design.

The DEX to CEX derivatives volume ratio is currently at a historical high. As Solana is the most significant liquidity contributor to the on-chain derivatives markets, its ecosystem will benefit from a significant part of this generated volume.

Brought to you by Noveleader.

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Virtually yours,

The Castle

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Setting the Scene

Blockchain technology holds the potential to revolutionize entire industries, yet the barrier to entry for developers remains high. Unlike traditional Web2 development, where frameworks and shared libraries facilitate faster innovation, building onchain has been like assembling a spaceship from scratch.

On-chain development is incredibly hard, with many moving parts, complex smart contract integrations, and a constant battle between fast shipping and maintaining security. These complexities slow down innovation and create significant roadblocks for teams looking to launch and iterate on new products.

Furthermore, the increasing fragmentation of the landscape, led by the emergence of new blockchains, is increasing the need for better and faster ways to connect these networks.

For blockchain ecosystems to scale effectively, developers need to build faster. Currently, too much time is spent on infrastructure management, delaying crucial product-market fit (PMF) testing.

With blockchain adoption still in its early days and protocols competing for traction, reducing time-to-market is more important than ever.

This report focuses on the practical reality of building onchain—what slows developers down, what solutions exist, and how shortcuts like Enso can remove bottlenecks and speed things up.

1. The Struggles of Onchain Development

 As the cryptocurrency ecosystem continues maturing, the areas for onchain development increase, opening up new spaces for opportunities. At the same time, the landscape and liquidity are increasingly fragmented across multiple protocols and networks each with its own consensus mechanisms, block time, smart contract logic, and programming language. Integrating all of these becomes exceptionally challenging for developers, who have to face issues of incompatibilities between integrations constantly.

Developing a product that integrates multiple blockchain applications is poised to encounter multiple obstacles. In addition, the tools that allow developers to link these networks and capture these opportunities are still behind what is traditionally used in Web2 development.

This raises several challenges for onchain development.

1.1 Integration Overhead:

Onchain development involves interacting with various blockchain networks and protocols, each with its own consensus mechanism, smart contract architecture, liquidity models, security requirements, and risk profile.

Developers still rely on writing extensive custom code to integrate each of these networks seamlessly, which is time-consuming and error-prone. The necessity of developing custom solutions has also contributed to a siloed environment with limited interoperability.

The complexities increase proportionally to the number of integrations required and the different programming languages used. As the landscape constantly grows, integrations are expected to become more frequent and complex and require constant adaptation. The job is never fully done, as new integrations are frequently added, and old ones become obsolete and require maintenance. Simplifying the integration process is key to unlocking further composability and interoperability within the cryptocurrency landscape.

Limited development power in a team is currently a significant limiting factor on the amount of integrations teams can devote their attention to, often limiting their implementations. In fact, hiring and retaining developers to build these custom solutions is complex and adds financial strains to companies, with senior developers costing over $150,000 annually.

1.2 Security Risks and Audit Costs

Smart contract hacks remain one of the biggest threats in DeFi. In 2024 only, hackers siphoned over $2.2 billion from crypto platforms. As smart contracts handle valuable assets, security vulnerabilities can lead to catastrophic losses. Hacks come in all forms, such as reentrancy attacks (like the one to The DAO), flash loan attacks (for DeFi protocols), oracle manipulation, and more. A single mistake can be fatal for the future of a protocol. Conducting manual integrations means the development team carries the entire burden of smart contract security.

As a result, before launching their products into production, teams must conduct multiple rounds of auditing, which can cost a sizable part of their funding and significantly delay product launches - security audits can range anywhere from a few tens of thousands to hundreds of thousands, depending on complexity and who is carrying it out. This becomes incredibly expensive for projects with a large native code base and requires frequent checks to ensure all new integrations do not present security risks. Protocols often also offer sizable bounties to incentivize white hat hackers to report security issues, further increasing costs.

1.3 Slow Time-to-Market

Before launching a minimum viable product (MVP), developers must set up infrastructure, test interactions, and ensure compliance with blockchain standards. Unlike Web2, where developers can quickly spin up an MVP using APIs and SDKs, onchain development is more complex in terms of deployment and workflows, with different iteration cycles, resulting in developers spending more time handling and securing the basic functionalities before testing their ideas in production. Web3 integrations have setup challenges that include but are not limited to node management, bridge integration, data validity, and last but not least, costs. Consequently, setting the necessary infrastructure can mean developers take months and incur significant costs before even testing their concept in the market.

These challenges mean developers face constant opportunity costs: time wasted honing integrations is time that could be spent perfecting the product.

This manifests both economically and operationally.

Developers must constantly balance their time, especially during the early stages of a project. As a result, they inevitably try to strike a balance between the desired integrations, their security risks and costs, and the time it would take to deploy them in a testing environment and later in production. Nonetheless, they should not have to compromise, as these opportunity costs can often pile up as time goes on.

While several tools now exist that can ease the pain of onchain development, major improvements are still needed to streamline onchain development.

2. The Tools Helping Developers Build Faster

New tools to help developers build faster will always be delivered with a slight delay. As blockchains constantly evolve, tools and services try to catch up as well as they can.

Nonetheless, tools and services have emerged to help developers streamline onchain development. In particular, we touch upon:

• Pre-built Smart Contract Libraries and Frameworks

• AI-powered Development Assistants

2.1 Prebuilt Smart Contract Libraries & Testing Frameworks

Building on the Ethereum Virtual Machine (EVM) now provides a series of benefits in terms of resources available, thanks to these Web3 native tools that focus on smart contracts. Prebuilt smart contract libraries play a crucial role in onchain development by providing reusable, secure, and efficient repositories for their applications. Testing frameworks provide everything developers need to streamline the process of deploying new blockchain applications.

Some of the most widely used are:

1. OpenZeppelin Contracts: OpenZeppelin’s open-sourced contracts are a trusted and widely-used library for building secure smart contracts, with over 1.5m active contracts and $15.6b in TVL in its contracts. It offers a range of pre-audited templates for common blockchain use cases, including ERC-20 tokens, NFTs, governance modules, and access control mechanisms. Developers rely on OpenZeppelin to reduce development time, ensure security, and avoid reinventing the wheel when creating blockchain-based applications. All of this leads to OpenZeppelin's contracts having over 300k weekly downloads.

2. Thirdweb: Thirdweb provides a suite of developer-friendly tools that simplify the process of building decentralized applications (dApps). Thousands of developers leverage Thirdweb to quickly launch NFT marketplaces, DAOs, and DeFi applications without the need to write complex smart contract code from scratch. This is reflected in Thirdweb’s rating of 4.93 on Product Hunt. By offering customizable, pre-built smart contracts, Thirdweb accelerates the development of web3 projects and makes it easier for developers to deploy scalable blockchain solutions. Users have the option to select a free plan or enrol in a “Pro” plan for $999 per month, suitable for larger teams.

3. Testing Frameworks: These development frameworks make it easier to launch EVM blockchain applications by streamlining the development process from inception to production. In particular, they focus on supporting development with writing, testing, and deploying smart contracts. Hardhat and Truffle are two of the most popular development environments, which are, however, less used these days, with Truffle being sunset.

   
   Among these tools, we find:

• Scaffold, a stack to debug and refine smart contracts to launch production-grade applications

• Foundry (by Paradigm), with over 8600 GitHub stars and 450 contributors. This testing environment is easy to set up and provides native coverage checking and fuzzing for faster compilation and testing than Hardhat.

• Apeworx, a similar framework where users can compile, test, and interact with smart contracts, but it is written in Python and is known for its customizability and security focus on key management.

• Virtual Studio Code, providing plug-ins such as Solidity visualizers, coverage checkers, and smart contract completion.

• Tenderly, a leading tool for transaction debugging and creating a simulation environment, along with other additional debugging and security solutions such as Gelato, OZ Defender, and Brahma.

For a comprehensive overview of more tools, we highlight this resource: https://github.com/Consensys/ethereum-developer-tools-list?tab=readme-ov-file

Prebuilt Smart Contract libraries and Testing Frameworks have several unique propositions for developers:

• Security and Auditing: Developing smart contracts from scratch can introduce vulnerabilities that may be exploited. On the other hand, prebuilt libraries like OpenZeppelin are extensively audited and tested, minimizing the risk of security flaws and ensuring developers can use them confidently. They also reduce the security costs, such as auditing for projects that adopt them rather than building from scratch.

• Time and Cost Efficiency: Writing secure and optimized smart contracts from the ground up is time-consuming and costly. Prebuilt libraries provide standardized templates for common use cases (e.g., token standards like ERC-20, governance, and access control), reducing the need to reinvent these solutions. Developers can save significant time and focus on their unique application logic instead of basic contract functionality.

• Modularity and Customization: These libraries offer modular components that developers can easily customize to integrate into their projects (e.g., adding additional functionalities to an ERC-20 token template).

• Reduced Development Complexity: Smart contract libraries abstract away some of the complexities of onchain development. They provide a higher level of abstraction that makes it easier for developers to implement complex functionality (e.g., multi-signature wallets, decentralized governance, or tokenomics) without deep blockchain expertise.

• Interoperability: Libraries like OpenZeppelin or Thirdweb ensure compatibility with popular blockchain standards and other dApps, platforms, and services within the broader blockchain ecosystem.

• Community and Ecosystem Support: Using widely adopted libraries provides access to a large community of developers who can offer support, share knowledge, and contribute to the library’s improvement.

2.2 AI-Powered Development Assistants

The emergence of AI has brought new tools that can improve the efficiency of onchain development through support and automation, speeding up integrations and simplifying how they can research for possible bugs and security risks.

These tools help developers write code, debug, and optimize smart contracts, reducing coding time and allowing them to focus on higher-level logic.

Examples of these tools include:

• GitHub Copilot: an AI-powered code completion tool built by GitHub in collaboration with OpenAI, with over $300m in ARR (as of 2024). It assists developers by providing context-aware code suggestions, auto-generating code snippets, and offering solutions based on existing code and documentation: It’s like that friend who finishes your sentences but actually knows what they’re talking about (most of the time).

  
  Copilot helps speed up the coding process, reduce errors, and increase overall efficiency. Nonetheless, its answers sometimes might suffer from a lack of a “big picture” understanding, and for this reason it might be more suited for smaller and precise tasks.

• Cursor: a newer AI assistant that helps developers by providing intelligent code suggestions, autocompletion, and debugging support. It is built on VS code and uses a chat-driven workflow for “conversational coding”. Cursor grew to over $100m in ARR in just 12 months. Its main functionalities include enhancing productivity by offering faster iterations, context-aware assistance (with file-aware answers, using the open files for context-specific answers), and automating repetitive coding tasks, allowing developers to focus more on product development and less on mundane coding chores. Compared to the Github pilot, Cursor seems to work better for open-ended problems. Some weaknesses include some hit-or-miss explanations and intensive resource consumption, requiring powerful machines.

Combined, these tools can be particularly effective in supporting:

• Bug Detection and Debugging: analyze smart contract code for potential vulnerabilities, inefficiencies, and errors. By identifying issues early in the development process, AI assistants can help developers fix problems before deployment, reducing testing times and the risk of costly bugs or security breaches on the blockchain. Automated tests can include security audits, performance checks, and functional tests, allowing developers to deploy more reliable and secure contracts.

• Optimization Suggestions: optimize smart contract code for gas efficiency, performance, and security.

Nonetheless, most of these solutions are more general and less targeted to specific use cases that applications might have, so they could fail to encapsulate all of the nuances related to onchain development. In addition, they still require individual development and deployment and must be thoroughly tested before being deployed in production, incurring similar issues to the ones mentioned in Section 1.

To solve this gap, we have seen the emergence of Web3 protocols dedicated to making onchain development seamless, providing standardized libraries and tools, and abstracting the complexity of integrating new protocols across multiple networks, such as Enso.

3. Introducing Enso: The Shortcut to Faster Onchain Development

Enso is a direct solution to the pain points of onchain developments highlighted above, making it easier for every developer to develop or leverage DeFi interactions in their application. It does so by providing “shortcuts” for developers, who can use them to “interact with multiple DeFi protocols without manually integrating them.”

Say goodbye to long nights of coding. With Enso, developers can specify actions as intents that describe their desired outcomes, which are then executed in the background.

Enso is composed of three main components: Enso Shortcuts, the Enso Network, and the Enso Intent Engine. To understand the differences between them, let's break down each component.

3.1 Enso Shortcuts

Enso Shortcuts are pre-built actions that simplify complex onchain operations. They are built as reusable building blocks and combine several onchain actions, such as token swaps, lending, and any other DeFi integration, without the need for manual integrations.

Shortcuts abstract the complexity of integrations and transform them into automated flows, which developers can write as plain intents, which are key to abstracting the complexity of these interactions.

Let’s see how these shortcuts are actually enabled within Enso.

• Role: They serve as pre-configured combinations of actions that automate multi-step workflows.

• Function: Abstract the complexity of manual integrations and transform them into automated flows, enhancing execution efficiency and reducing development time.

• Key Benefits:

  • Simplifies developer workflows by bundling operations.

  • Reduces the need for custom coding for protocol integrations.

  • Improves scalability by enabling modular and chain-agnostic execution.

3.2 Enso Network

The Enso network plays a crucial role in facilitating seamless interactions across different blockchain networks. It stores necessary data for execution and provides a shared state for smart contracts, enabling cross-chain operations.

• Role: Serves as the infrastructure connecting multiple blockchain ecosystems.

• Function: Facilitates seamless interactions across different blockchain frameworks by centralizing data into a unified ledger.

• Key Benefits:

  • Enhances interoperability across blockchains.

  • Provides access to broader liquidity through solvers.

  • Protects against MEV (Maximal Extractable Value) attacks by optimizing transaction execution.

3.3 Enso Intent Engine

The Enso Intent Engine is the core technology that powers structured intents. It abstracts smart contract interactions across blockchain frameworks, enabling developers to define specific outcomes or actions without handling underlying complexities.

Enso aggregates all shortcuts and executable onchain actions through a centralized API and streamlined UI, substituting countless integrations with a single one, enabling modular and chain-agnostic development by abstracting all the complexities of onchain development.

This way, developers can simply leverage the Enso Intent Engine and dedicate their time to the most critical tasks, without manually integrating every smart contract.

• Role: Translates structured intents into actionable workflows. It abstracts the complexity of smart contract interactions across blockchain frameworks.

• Function: Converts structured intents into actionable workflows, leveraging shortcuts and network data to execute transactions efficiently.

• Key Benefits:

  • Enables modular development across blockchains.

  • Abstracts technical complexity, allowing developers to focus on product logic rather than infrastructure challenges.

  • Supports chain-agnostic applications by standardizing interactions.

Here’s a handy summary of their differences:

How do these elements interact with each other?

• The Intent Engine relies on the shared state provided by the Network to access necessary data for executing intents. This includes liquidity information, protocol-specific details, and transaction optimization strategies.

• The Network ensures that shortcuts can be applied seamlessly across multiple blockchains by maintaining interoperability and centralizing execution data. This allows shortcuts to work efficiently regardless of the underlying blockchain framework.

• Shortcuts provide predefined workflows that are utilized by the Intent Engine to execute user-defined intents. For example, if a developer defines an intent to "swap ETH for DAI and lend it," the Intent Engine uses relevant shortcuts to automate these actions.

In summary, Enso Shortcuts are specific tools within the broader Enso ecosystem that simplify complex blockchain operations. The Enso Network is the infrastructure that connects various blockchain ecosystems, while the Enso Intent Engine is the core technology that abstracts smart contract interactions.

3.4. How does Enso work? Example of an Interaction Flow

A developer defines a structured intent (e.g., "Swap ETH for DAI and lend it") that aligns with the capabilities of the Enso Intent Engine.

The Enso Intent Engine translates intents into a series of necessary actions (e.g., token approvals, swaps, lending), which are then matched with available shortcuts in the Enso Network.

The Enso Network provides the necessary data and shared state to execute these actions across different blockchain frameworks, ensuring shortcuts work seamlessly across various blockchains.

The Enso Shortcuts execute the actions as a single optimized transaction, fulfilling the developer's intent efficiently.

Instead of taking care of custom integrations individually, Enso provides developers with an abstraction layer that standardizes all onchain actions.

Any possible action developers might need to execute can therefore be combined into a shortcut, defined as a “combination of actions”, involving an individual or multiple transactions.

As a practical example, imagine a project that wants to deploy a DeFi solution where tokens are automatically swapped on Uniswap on Base and then deposited on Aave on Arbitrum. Instead of integrating each of these manually, protocols can combine these actions into an Enso shortcut, significantly reducing the development times and resulting costs.

By adopting Enso, projects can benefit from:

• Time Savings: Enso eliminates weeks or months of manual integration work.

• Cost Efficiency: Reduces audit costs by providing pre-secured transaction modules.

• Security-First Approach: Built-in security measures help prevent exploits and errors.

What else is possible? Let’s dive into more examples of shortcuts that are already live.

3.5 Case Studies: How Enso Helped Projects Scale Faster

Enso is already leveraged by 75+ projects, with over $11b in total intent volume settled and over $4b in direct volume settled.

How are these projects leveraging shortcuts?

3.5.1. Boyco – A Blockchain Marketplace

Boyco is a decentralized marketplace that incentivizes specific actions, aligning action providers and incentive providers. Boyco's primary goal was to bootstrap liquidity for applications before the launch of the Berachain mainnet.

They required a way for seamless DeFi integrations for liquidity and payment customized for Berachain.

In particular, Enso shortcuts allowed Boyco users to benefit from:

• Combined transactions into a single step

• Seamless liquidity strategies operating across multiple protocols

• Native asset routing capabilities

By leveraging Enso, Boyco reduced its development time by 60% and integrated multi-chain liquidity sources in days instead of months.

This massively contributed to Boyco's success in bootstrapping Berachain liquidity, with over $3b in TVL accrued in a short period and deployed safely through Enso.

The average transfer conducted highlights the nature of this partnership. While most other chains integrated by Enso have a smaller average transfer, Boyco is one of the first integrations with a clear focus on bootstrapping liquidity at a Layer 1 scale.

3.5.2. ZKSync Ignite – Powering One-click Deposits

Enso shortcuts also powered ZKsync Ignite, an incentive program to bootstrap liquidity on ZKsync Elastic Chain.

The Ignite program distributed over 300m ZK tokens to users that provided liquidity for key token pairs, traded on selected protocols and supplied assets to lending markets.

In particular, they leveraged Enso shortcuts for one-click deposits into pools, allowing users to simply select the pool they want to deposit and immediately add liquidity seamlessly.

3.5.3. CowSwap – Automating DeFi Intents

CowSwap is an AMM that leverages intents to execute complex DeFi transactions.

They use Enso as a solver for their swaps and Defi intents to ensure efficient trade settlement across multiple chains and reduce the maintenance costs for their integrations' smart contracts.

As Cowswap constantly develops new integrations for its AMM, shortcuts help it execute its roadmap more quickly.

Thanks to this and more updates, Cowswap continues to grow and now has over 30% of the DEX market share.

3.5.4. Onplug/Glider – Automating On-Chain Workflows

Other examples of projects that have chosen Enso to automate their onchain flows include Onplug and Glider. In particular, they leverage shortcuts to automate yield farming and lending strategies.

Onplug is a single app that provides a streamlined way to aggregate, manage, and execute your onchain activity all in one place. Thanks to Enso, Onplug could rebuild its integration layer (which took about 7 months) with shortcuts in 1.5 days. This alone gives you an idea of the savings protocols can experience by leveraging shortcuts.

Glider is a platform that provides users with portfolio automation services. With Enso shortcuts, they built a complete portfolio automation protocol with automated trading features in days.

Both these protocols leverage shortcuts to implement automation features and reduce transaction costs much faster than they would have traditionally, reducing their time to market.

More use cases include:

• AI Integration: AI-driven onchain automation. Example: BrianKnowsAI.

• Asset Management: focused on onchain asset management. Example: Velvet.

• TVL: Etherfi and Veda Labs.

• One-click LST Staking: Dinero.

• Optimized Call Data with direct-to-solver swaps: Li.fi

4. Food for Thought: The Need for Speed in Web3 Development

Web3 is still in its early days, and one of the most significant advantages new projects have is speed, the ability to quickly test, iterate, and refine their ideas to find PMF.

Developing onchain should not be an insurmountable challenge and should be made as easy as Web2 development, as fast as possible.

By leveraging Enso, developers can build, test, and deploy products faster, allowing them to focus on what truly matters—creating groundbreaking applications in the blockchain space.

Before Enso, Defi integrations were time-consuming, requiring months of manual integration, custom code, expensive audits, and slow rollouts. With Enso, a single shortcut can replace months of work in a few days, resulting in substantial savings from development costs and overheads.

Instructions to execute desired outcomes are specified as intents in plain text, making it further accessible for less experienced developers. With time, Enso will also transition to a permissionless ecosystem while it is currently focused on expanding its capabilities.

The success of initial case studies such as Cowswap and Boyco highlights the need for solutions that improve the speed of onchain development.

With the right tools, developers can focus on their products and reduce their time to market, security, and integration overhead.

With the blockchain ecosystem constantly evolving, we expect more protocols to choose this approach to simplify their integrations within Defi. This is especially true for smaller protocols planning a faster launch to capture mindshare within a new vertical.

Thanks to shortcuts, developers can reduce their headaches when building onchain, directly solving the current pain points regarding integrations, audits, security costs and risks, and slow time to market. These can now be abstracted, reducing a month's workload into a few days.

Brought to you by Francesco.

Thanks for reading, please follow us on Twitter at @Castle_Labs and visit our website to learn more about our services and get in touch.

Virtually yours,

The Castle

GM frens, and welcome to another edition of The Castle Chronicle.

While $BTC remains calm other areas of the crypto market are displaying notable activity. This week we’ll dive deeper into relatively stronger outperformers and explore the potential emergence of a new narrative!

Additionally, we’ll examine Arbitrum's governance, with key votes underway for strategic direction and security, as the DAO celebrates its second anniversary.

Here’s what we got for you today:

• 🔍 Market Watch – Price action & Relevant metrics across the sector

• 🗳️ Arbitrum Corner – Arbitrum DAO: Strategic Votes and Second Anniversary Mark Pivotal Week

🔍️ MARKET WATCH

PRICE ACTION

It's been another week of sideways price action with no significant price developments. This is kind of boring for BTC, but it’s giving space for other cryptos to catch a bid potentially.

• Healthy uptrend

• Re-accumulation

My expectation here is longer sideways for the purpose of re-accumulation and an eventual break to the upside to continue the bullish run. But for now, we’re far from that.

Not following what I’m talking about? Check out my quick cheat sheet to understand how I approach a chart.

TOP PERFORMERS

With BTC going sideways, spotting some relatively stronger cryptos is very easy. One of the more interesting ones this week is $BERA, which shows decent strength and is up 32% over the week.

That being said, no matter which altcoin I take a look at, the recent jump seems just some random strength, as most of them seem to be within a bigger sideways price action.

For me to show real interest in trading something, I’d like to see a trending market that is either just breaking out of sideways price action or already trending for a while.

• Accumulation (1st green box)

• Re-accumulation (2nd green box)

• All happening within a bigger sideways price action

$BERA is currently brewing something, but I want to see a bit more before I look to get involved. Should the price break out of this sideways market, I will look to follow the momentum.

CAPITAL FLOW

Bera has been the centre of attention for a while. Capital has been flowing into the ecosystem week by week. Combine that with a decent-looking chart, and we might have an upcoming longer-lasting narrative. The Bera ecosystem is definitely one to pay attention to!

NARRATIVE PERFORMANCE

While I wouldn’t call any of this a strong narrative, it is notable that some money and attention is going into the cross-chain sector, which is up almost 30%. 

ZetaChain is leading the charge, up 85%! 
Wormhole and LayerZero are up 25% and 20%, respectively.

Courtesy of 0x_Vlad - Chief Male Astrologist at Castle Labs

💙 ARBITRUM GOVERNANCE

For this edition of the Arbitrum Corner, we focus on governance by highlighting a series of fundamental developments happening as we speak.

We focus on three very important proposals which involve the election of two fundamental roles concerning security (council) and operations (OAT), as well as one of the most awaited proposals: the Strategic Objective Setting (SOS) which finally allows us to move forward from the Arbitrum Mission Vision Purpose (MVP).

Let’s get right into it!

1. Arbitrum Strategic Objective Setting (SOS) – Defining the DAO’s Interim Goals

The MVP was instrumental in setting a common understanding of Arbitrum’s north star and vision in place.

Now, it’s time to be practical and move on to the strategies to help us reach these goals: the SOS.

This initiative calls all DAO contributors to propose short (1-year) and mid-term (2-year) objectives that would contribute to reaching Arbitrum’s MVP.

A set of objectives, “regarded as the DAO’s highest priorities,” will then be voted on and selected for implementation (and reviewed every 12 months). Entropy will then budget these objectives with capital on a yearly basis.

Too often, the common sentiment has been that the initiatives taken from the DAO lacked a common framework and vision. The MVP and the SOS ensure that those are tied closely and will set in motion a series of strategic initiatives with a cohesive long-term impact on Arbitrum.

In turn, this will contribute to:

• More efficient assessment of the initiative

• Prevention of doubled efforts

• Cohesion and alignment over siloed proposals

If the MVP helps to define the DAO’s long-term vision, then the SOS allows Arbitrum DAO to chart the course to get there.

The SOS proposal passed the vote on a snapshot and is currently in the submission period, according to its timeline:

• First Phase (Ratification of the SOS Framework):

  • Review, Feedback, & Edit Period: January 10th - January 23rd

  • Snapshot Period: January 23rd - January 30th

• Second Phase (Ratification of a Strategic Objectives Matrix):

  • Notice Period: 14 days (note that this period’s initiation might be pushed back slightly such that submitters will have more time to include possible takeaways from ETHDenver into their matrices during the Submission Period)

  • Submission Period: 30 days

  • Feedback Period: 21 days

  • Revision Period: 14 days

  • Voting Period: 7 days

• Review Phase (Potential Amendments to the Strategic Objectives Matrix): Initiated 12 months after the previous voting period has ended or as a result of an ad hoc adjustments proposal as described above.

We cannot stress how important that anyone who actively participates in the DAO gets behind this and shares their voice on what they believe to be the most important SOS we should focus on.

2. OpCo’s Oversight and Transparency Committee (OAT)

The application for OpCo’s OAT has officially closed this week, it’s now time to move on and vote for candidates. We’ve got a fair turnover, with 14 applicants across 3 different domains

The OAT will have the important role of contributing to:

• Operational Support

  • Advice on OpCo’s operational development.

  • Review proposals for the DAO, by the OpCo team, related to the continuation of the OpCo & its operations.

• Strategic Coordination: engagement with key stakeholders, contributors, and proposers.

• Accountability: ensure OpCo fulfills its mandate, prepare and review stakeholder updates, and design relevant KPIs on success.

• Hiring, Termination, & Authorization: recruit essential staff to the entity, salaries, budgets and other finances.

The elected members will remain in charge for 12 months.

While strong focus in voting will be places on assessing candidates for their skills (and taking into account their COI), it will also be important that OpCo’s composition reflects the necessary oversight the DAO has to conduct on the external entity.

Interesting to notice the applications from both Offchain Labs and Arbitrum Foundation, as a testament to their expressed desire to be more involved and closer in DAO matters.

There are only 3 places available, battled between:

• AF/OCL

• Arbitrum dao native contributors

• External DAO operatives

Who’s gonna win? Are you ready for Arbitrum’s Hunger Games?

3. Security Council Elections

The nominee selections for the Arbitrum Security Council will be closing in 2 days!

All candidates who receive over 8.49m votes will advance to the voting phase, starting on April 12th! We’ve had over 22 applicants, with incredible backgrounds.

With 48 hours to go, only 3 candidates have already reached the threshold.

Nominee Selection | Arbitrum Security Council Election

Vote for your favorite candidate to become a nominee in the Security Council election

www.tally.xyz/gov/arbitrum/council/security-council/election/3/round-1

The Security Council is granted the power to intervene in case of security emergencies. They are currently one of the most critical security features Layer 2s can rely on in case of emergency.

For this reason, members of the security council should be selected for their experience with security-related manners, as well as a good understanding of the technical workings of Arbitrum and alignment with the DAO.

In a few days, we’ll see who the DAO has selected, and then voting will start.

What else is happening on Arbitrum beyond governance?

Wyoming launches the testnet for its Stablecoin on Arbitrum

Twitter tweet

New Entropy dashboard for more clarity on DAO finances

Twitter tweet

Happy birthday Arbitrum DAO! We are now two years old. Pretty smart kids!

Twitter tweet

Also, we are gonna be hosting a space on Arbitrum interoperability today at 5 pm UTC, make sure to tune in!

Twitter tweet

We’re also excited to announce that we have been onboarded as DAO Relations Partner for the Gaming Catalyst Program (GCP):

Twitter tweet

Courtesy of Francesco - Co-founder at Castle

And that’s it for this week! A more entertaining week compared to recent ones.

We hope you enjoyed reading and see you next time!

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

GM frens, and welcome to another edition of The Castle Chronicle.

BTC went sideways this week, with a little boost from the FOMC meeting and with that, some altcoins popped off a bit. Were those valid opportunities though?

In addition, we also bring you a deeper look into gaming on Arbitrum, as they are participating on a massive stage at the most prominent gaming conference, the Game Developers Conference (GDC).

Here’s what we got for you this week:

• 📈 Price Action – Sideways price action

• 🔍 Market Watch – Small bounces after major selloffs

• 🗳️ Arbitrum Corner – A small recap of all the games available to play in the Arbitrum booth

• 📖 Castle Recap – Catch up with all that we published this week

🔍️ MARKET WATCH

PRICE ACTION

BTC has definitely lost its momentum cycle by now, but that by itself doesn’t mean all that much. Whenever a momentum cycle fails, our 1st assumption should always be re-accumulation. Therefore my expectation here is for price to find a bottom and start going sideways with the expectation of a bullish continuation.

• Healthy uptrend

• Re-accumulation

While this is an overall bullish chart, it does not mean that we should look for bullish trades. The lower timeframes are currently bearish as the price is seeking liquidity on the downside, and while that is going on, the best thing to do is to sit on the sidelines. We want to see our lower timeframes line up with our higher timeframe bias/context and always have momentum on our sides.

The current market condition is simply not worth the risk. For all we know price can do anything at this point, there’s no edge in trading here.

Not following what I’m talking about? Check out my quick cheat sheet to understand how I approach a chart.

TOP PERFORMERS

Even though BTC is still in the midst of a selloff, the downward momentum has significantly slowed down, giving room for some altcoins to pop off. Does that mean we should trade these, though? Absolutely not.

For illustrative purposes, let’s take a look at one of the strongest performers this week - $CAKE. Even though $CAKE is up 50% on the week, but the pump happened in the middle of nowhere. All I can see is sideways chop without any clear directional cues. Catching this pump is guesswork and astrology at best. There’s no edge in such an approach, which is why it can’t perform consistently well over a big enough statistical sample of trades.

• Sideways price action

• No directional cues

So while it might seem that there’s a chance to catch some of these pumps, it really isn’t possible unless we’re gambling or have insider info (naughty naughty!). The best thing for us as traders is to wait for a better predictable market condition and look for opportunities then.

CAPITAL FLOW

Ethereum is seeing significant outflows this week, close to 300m$. Another outperformer is Berachain, consistently attracting capital week after week.

NARRATIVE PERFORMANCE

It looks like the major sell-off is over for now, and we’re seeing some bounces, with the Data narrative leading the charge. That being said, the majority of the data narrative is affected by a single entity—Bubblemaps. They released their own token, which is currently up over 100%.

Seeing that most of these aggregate bounces are around the 10% ish mark, I think it’s safe to say that the market is still very cautious, and no big money is flowing into any specific narrative just yet.

Courtesy of 0x_Vlad - Chief Male Astrologist at Castle Labs

💙 FOCUS ON ARBITRUM GAMING

This week our Arbitrum Corner is all about Gaming!

With over $250m allocated to the GCP fund, expectations for the development of gaming on Arbitrum are at an all-time high.

For this Arbitrum Corner we highlight one of the main events in this sector, the Game Developers Conference (GDC), which saw Arbitrum among its participants.

Participating on such an important stage, both in the gaming and RWA sectors, will give Arbitrum a massive headstart in breaking boundaries with Web2—as it was the main Web3 player participating in GDC.

Gaming on Arbitrum is more active than ever.

The living proof of this is Arbitrum’s stand at the GDC, where users could play different games:

Twitter tweet

Here’s a small recap of all the games available to play in the Arbitrum booth:

RIFTSTORM

A looter shooter ARPG with very interesting dynamics.

The game is already available for download on Steam. Here’s what it looks like:

Twitter tweet

THE LOST GLITCHES

A Strategic Multiplayer Card Game where you can make your own deck and play against friends (and enemies).

THE BEACON

A game powered by Treasure, The Beacon has been online on Arbitrum for a while. Users can enjoy RPG action with a medieval/knight vibe, we sure love that at Castle!

CAPTAIN LASERHAWK UNIVERSE

A retro shooter game developed by Ubisoft. We see many web3 games trying to break the mainstream - but what happens when existing gaming giants launch web3 games?

OTHERSIDE

The apes are now on Arbitrum and anyone can experience the Otherside metaverse

Twitter tweet

TOLLAN UNIVERSE

An upcoming action game with an open-world ecosystem.

Have a look at their demo:

Twitter tweet

L3E7

A location-based game unlocking interesting IRL dynamics.

PIRATE NATION

One of the most known Web3 games, a fully on-chain RPG backed by @a16z:

PLANET-X

Powered by Gallax: the world’s “biggest treasure hunt” is now open for beta pre-registrations:

CALIVERSE

A hyperrealistic metaverse built using @unreal engine 5

JIN ANOMALY

Bringing the cyberpunk vibes with an action RPG, is still in development.

Gaming on ARB is dead you say? Couldn’t be farther from the truth.

The conference is still ongoing so these are not all of the updates!

@Hunter will share all the alpha soon, for the moment it’s great to see the interest from more traditional game developers on how they can leverage Arbitrum to create a profitable and sustainable game faster than without.

Here’s him bringing us inside the conference for a behind-the-scenes sneak peak:

Twitter tweet

Expect more on gaming from our side!

Courtesy of Francesco - Co-founder at Castle Labs

📖 RECOMMENDED READS

In case you didn’t catch it, we released a HUGE report on MegaETH this week. Make sure to check it out!

And of course, let’s not forget about our weekly AI Dispatch

Another week in the books! We hope you enjoyed our newsletter and we’ll see you again next week!

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

1. Introduction to MegaETH: An Investor-Focused Lens

Market Context

Ethereum’s rapid user growth has led to significant capacity constraints, increasing both transaction inclusion times and fees for its users. For blockchain investors and users alike, these limitations underscore the need for scalable solutions that preserve the decentralization and security Ethereum is known for. In response, Ethereum’s rollup-centric roadmap focuses on Layer 2 (L2) expansions, transforming Ethereum into a settlement layer rather than handling all execution on the mainnet.

Rollups 101

A rollup is a L2 technology that processes transactions off-chain, then bundles (or “rolls up”) those transactions into a single batch on Ethereum. This approach cuts congestion and reduces fees while inheriting Ethereum’s security guarantees. As more usage migrates to L2s, the fees to store these bundled transactions on Ethereum’s mainnet have also risen.

To address these rising costs, EIP-4844 (“protodanksharding”) introduced blobs—temporary, low-cost data containers attached to Ethereum blocks. Blobs provide an economical way for rollups to post transaction data, reducing fees by up to 99%. 

However, blob capacity is limited, with each Ethereum block currently holding 3 blobs, soon to become 6 via the upcoming “Pectra” hardfork. Once the blob limit is reached, a new pricing mechanism for blob space will be triggered, analogous to regular Ethereum gas pricing based on demand. Although blobs drastically lower transaction costs in the short term, the finite supply, and the increasing competition among L2s—could push fees up again as more rollups enter the market.

Rising On-Chain Activity

Demand for on-chain activity continues to skyrocket, as evidenced by metrics like Megagas/s (million gas per second), an indicator of overall blockchain capacity usage. Over the past year, Mgas/s has jumped from around 6 to nearly 35, a 6× increase that mirrors the rise in daily active addresses. This spike has already pushed L2 transaction fees from $0.001–$0.004 to $0.02–$0.033, a 30× leap, when blob space is fully utilized.

Defining gas/s:

Gas per second (Gas/s) is a measure of blockchain bandwidth, calculated by dividing the total gas consumed by the number of seconds. Unlike transactions per second (TPS), which can be misleading due to varying transaction complexities, Gas/s provides a clearer picture of network capacity.

Every Ethereum transaction consists of multiple EVM opcodes, each carrying a specific gas cost based on its complexity. For example:

• ETH Transfer: ~21k gas

• Uniswap V3 Swap: 120k - 250k gas

• Yearn Rebalance: 100k to over 1M gas

A blockchain capable of 10 Megagas/s can handle:

• ~500 ETH transfers per second, or

• As few as 10 complex Yearn rebalances.

For even larger scales, Gigagas per second (Gigagas/s) represents 1 billion gas units per second. If a blockchain supports 1 Gigagas/s, it could process approximately 47.6k ETH transfers or 15.3k-22.2k ERC20 transactions per second.

Since TPS can be misleading, Gigagas/s is a better metric for measuring network bandwidth. However, some targets (e.g., 100k TPS for ETH transfers) may still be referenced for comparison.

Source:growthepie.xyz

Data Availability Solutions for Layer 2 

As a self-standing L2, simply increasing the blob limit may lead to a cat-and-mouse cycle of short-lived capacity gains followed by renewed congestion. This can be solved by complementing it with alternative Data Availability (DA) solutions like Celestia and EigenDA. These platforms provide alternative storage for rollup transaction data at a fraction of Ethereum’s cost without sacrificing much on performance but introduce additional trust assumptions around DA. Rollups are either called Validiums if they store data off-chain using ZK-proofs or Optimiums if they use optimistic proving, both reducing fees. 

Choosing to post data off-chain can significantly cut operating costs, attracting both developers and users. However, any off-chain DA model carries the risk of data withholding, which could impact security perceptions and long-term adoption.

Capital Inflow into Scaling Solutions 

Source: growthepie.xyz

On-chain metrics confirm that user adoption and transaction volumes continue to climb, driving substantial venture capital interest in scaling solutions. In 2024 alone, crypto startups raised $14 billion across 2,000 deals, with over 30% of that focused on blockchain infrastructure.

• Monad (a high-performance EVM-compatible L1) secured $225 million

• Blockstream raised $210 million for L2 technologies

• Espresso Systems closed $28 million in a Series B

• Avalanche raised $250 million for its Avalanche9000 upgrade

• MegaETH raised $20 million from VCs and angels, plus $10 million from individual Echo investors and another $13.5 million from the NFT sale

Clearly, investor appetite for projects aiming to alleviate Ethereum’s capacity bottlenecks remains robust. 

One of the most interesting approaches is that of MegaETH, marketed as the first “realtime blockchain”.

In this report, we’ll dive deep into what MegaETH is, how they plan to scale, discuss their ecosystem, and compare it to alternative L1s and L2s.

2. What is MegaETH

Most blockchains (including L2s) require a network of nodes to reach consensus, which inherently introduces latency. Physical distance, node communication overhead, and block confirmation times all limit how fast transactions can be finalized. MegaETH tackles these scalability and speed needs by focusing on maximizing execution throughput and minimizing latency, an approach dubbed Increase Bandwidth, Reduce Latency (IBRL). 

As part of this plan, MegaETH targets 100,000 TPS, 10+ Ggas/s, and sub-10ms block times, making it potentially one of the fastest blockchain environments. Why “Realtime Blockchain”? This is inspired by Robert Miller’s 1968 paper on human-computer interaction, whose key findings include insights on optimal response times:

• Human users expect near-instantaneous feedback in interactive systems; a response time of 0.1 seconds or less allows users to feel the interaction is instantaneous.

• A delay of 1 second still maintains a user’s flow of thought but starts to feel sluggish

• At 10 seconds or more, the user loses engagement and may switch tasks or abandon the interaction.

Fast response times improve users' efficiency, engagement, and satisfaction, while delays introduce cognitive load, frustrations, and reduced task performance. 

MegaETH aims to keep response times under 0.1 seconds, creating an “instantaneous” user experience. Traditional blockchains, even Solana at ~400ms block times, do not hit this threshold.

Near-instant confirmations can unlock new on-chain use cases (e.g., high-frequency trading, real-time gaming, and interactive dApps), bolster user adoption, increase ecosystem growth, and ultimately increase token demand.

Technical Architecture: Node Specialization

MegaETH can reach its performance by leveraging node specialization, and having four different nodes for different roles, allowing a mixture of low and high hardware requirements.

By delegating security, censorship resistance, and data availability to the Ethereum mainnet and EigenDA, MegaETH can optimize for performance, leveraging a centralized sequencer.

Prover Nodes (Optimistic)

• Minimal Hardware (1 core, 0.5 GB RAM)

• Validate blocks asynchronously using a stateless validation scheme

• Ideal for users who want to support the network at a low cost

Replica Nodes

• Consumer-Grade (4–8 cores, 16 GB RAM, 100 Mbps bandwidth)

• Receive state diffs from the sequencer via P2P and apply them directly, without re-executing all transactions

• Rely on proofs from Prover Nodes for final validation

Full Nodes

• Higher-End Hardware (16 cores, 64 GB RAM, 200 Mbps)

• Re-execute every transaction to validate blocks, similar to Ethereum full nodes, but require ~4× the resources

• Suited for developers or institutions needing maximum trust in verifying all on-chain data

Sequencer

• Enterprise-Grade (100 cores, up to 4 TB RAM, 10 Gbps)

• Single active sequencer orders and executes transactions, removing consensus overhead and speeding block production

• Publishes blocks, state diffs, and witnesses to EigenDA, a third-party Data Availability (DA) solution, prover nodes, replica nodes, and the full nodes.

Dual-block architecture

MegaETH uses a dual-block architecture with mini-blocks and EVM blocks to achieve a balance between real-time performance and compatibility with the broader EVM ecosystem. 

• Mini-blocks are produced in 1-10ms intervals and are designed for low latency and compactness. They are lightweight (in terms of metadata), more frequent, enable faster updates to the chain state, and are suitable for applications requiring real-time interactions.

• EVM blocks, on the other hand, are produced in 1s intervals and maintain full metadata, ensuring backward compatibility with existing EVM tools, applications, and infrastructure. This allows developers to integrate with MegaETH without completely refactoring their contracts, infrastructure, and systems. 

It is important to note that mini-blocks are ordered lists of transactions executed and preconfirmed by the sequencer; these blocks contain every transaction that has been processed by the system, meaning they have the same guarantees as EVM blocks. The key difference, however, is that mini blocks contain different metadata fields than EVM blocks, which lowers the required storage and bandwidth overhead.

Other key properties of mini-blocks are: 

• Roll back guarantees

In the event of a rollback on a mini-block the sequencer would be at risk of slashing. Upholding the vision of not only being performant but consistent and reliable.

• Elastic production

The current configuration is tuned for maximum performance and reducing waste, meaning block are only created when there are actual transactions. Neither mini-block or EVM blocks are produced if no transactions are present. 

Data Availability via EigenDA

To ensure that nodes always have access to the required block data/information, the sequencer publishes the blocks, witnesses, and state diffs to EigenDA alongside the different nodes. DA throughput and costs have historically been the bottleneck for blockchain application speed and usability. EigenDA is the DA solution from Eigenlayer, boasting a throughput of 15MB/s today, with a roadmap toward 100MB/s and beyond, hundreds to thousands of times higher than Ethereum’s blob-based DA. This enables MegaETH to offload transaction data, reducing on-chain congestion and maintaining low latency. However, this does not come without additional trust assumptions by relying on EigenDA nodes instead of Ethereum DA:

• MegaETH nodes rely on EigenDA nodes to continuously make block data accessible.

• Accepts lower economic security.

• Reliance on operator uptime

Nonetheless, these risks are (will be),or will be partly, mitigated by Eigenlayer slashing mechanisms. 

Big box sequencer

While centralizing transaction ordering in a single sequencer maximizes speed, it introduces potential centralization risks (e.g., censorship or downtime if the sequencer fails). Despite that, the payoff is a blockchain platform that might outcompete others in throughput, making it attractive for latency-sensitive applications and possibly investors seeking high-growth, high-utility ecosystems. 

Additionally, the rollup has a force inclusion mechanism allowing users to include their transactions from the L1 if the sequencer acts maliciously and tries to censor users on the L2. The escape hatch mechanism also allows users to exit their ETH on Ethereum in case of sequencer failure. Besides, for redundancy and security reasons, MegaETH will also have a rotating set of sequencers with only one active at any given time.

How MegaETH Captured Mindshare: From “Just Another L2” to a Community Phenomenon

In an industry with new L1s and L2s popping up constantly, mindshare, or the degree to which a project dominates public attention and conversation, can be more valuable than any single technical breakthrough. According to an analysis by Sandra Lee, MegaETH has seen its mindshare climb 15x in the last six months.

While many infrastructure projects struggle to connect with broader audiences, focusing on dry, technical messaging, MegaETH took a different route, leveraging:

• Sticky Name and Visual Identity: MegaETH is distinct and repeatable, making it hard to forget. 

• Blending Serious and Lighthearted: While MegaETH’s technology is grounded in deep infrastructure, the project’s public persona is fun and meme-savvy, appealing to devs and retail users alike. This two-pronged brand strategy ensures it resonates in technical circles without feeling too corporate or inaccessible.

Why does this matter for mindshare? In crypto’s meme-driven culture, projects that successfully intertwine robust tech with playful branding often gain organic marketing, communities enjoy and share it freely, boosting daily chatter and visibility - as highlighted by others such as Berachain and Monad. This can be seen by the Kaito Connect pre-TGE arena results, where Megaeth received 21.4m votes (without buying votes), just losing out to 0G Labs with 22.1m votes. When reviewing the voter distribution it seems that MegaETH wins in the amount of smart followers, (smart) engagement, pre-TGE mindshare, and smart follower vote.

Among the key differentiating factors defining MegaETH’s capacity to attract mindshare, we highlight: 

The MegaMafia Effect: Empowering Builders, Not Just Funding Them

MegaETH’s MegaMafia program hosted in-person events and collaborations, tightening the bonds between projects and fostering a culture of co-operation instead of solo building. Additionally, rather than handing out grants, MegaETH gave builders ongoing support, empowering them to build the next generation dApps, resulting in the ecosystem raising more than the chain itself. We’ll go more in-depth about the MegaMafia in section 4.

Community-Driven Funding: A Catalyst for Public Engagement

While section 5 will explore MegaETH’s fundraising in-depth, it also highlights how fundraising can double as a mindshare strategy:

• $10M Raise on Echo: In under three minutes, over 3,200 investors from 94 countries contributed. Crucially, the terms matched those of previous VCs, flipping the script on the typical “VC-first” funding playbook.

• Fluffle Soulbound NFTs: Priced at 1 ETH each, 5000 SBTs (soulbound tokens which are “non-transferable”) were minted, granting future token allocations at TGE. This approach brought thousands of dedicated, vested users on board, with another 5,000 spots to be distributed by the MegaMafia projects.

Founder-Led Marketing & Story with community questions and ideas.

• Authentic Voice: Instead of polished corporate announcements, MegaETH’s communication is often very approachable and unfiltered.

• Crypto audiences generally follow people, not logos. MegaETH’s leadership embraces this.

• Visible Personalities: Key figures like Bing (@hotpot_dao) and Bread (@0xBreadguy) are active on social platforms. They discuss MegaETH’s philosophy (like “building a civilization, not just a chain”) and engage in real-time with individual team members, creating a personal connection with the community and reflecting genuine enthusiasm.

• Transparent: Besides being unfiltered, the MegaETH leadership has shown openness to acknowledging mistakes and transparency about events that did not go according to plan. Examples are the Fluffe sale not going smoothly and the testnet going down due to a “bug” being exploited.

Founder-led messaging builds trust and loyalty, turning bystanders into evangelists who resonate with the project's thought leaders' personal stories, beliefs, and technical visions.

By combining a memorable brand, a grassroots developer program, inclusive fundraising, and transparent leadership, MegaETH went from “just another L2” to “one of the loudest projects in crypto.”

Although MegaETH’s mainnet is not live yet, the growing pre-launch excitement suggests a built-in audience eager to experiment with MegaETH’s real-time capabilities the moment the testnet rolls out.

3. Projects Building on MegaETH: Meet the MegaMafia

MegaMafia is MegaETH’s flagship builder incubator, designed to empower developers to create fully on-chain applications that leverage the unique capabilities of MegaETH’s high-speed and high-throughput infrastructure. Unlike traditional grant programs that passively fund projects, MegaMafia actively fosters collaboration, competition, and rapid iteration, resulting in a tightly-knit ecosystem of cutting-edge dApps that prioritize user engagement and novel experiences.

Evolution of MegaMafia

The initiative has grown through two distinct iterations, each refining its approach to supporting the most ambitious builders in the space:

• Berlin (First physical meetup): MegaMafia’s inception occurred in Berlin, spearheaded by MegaETH co-founder Bing. This phase involved carefully curating a select group of builders, renting a hotel and workspace, flying them in, and challenging them to develop applications that could only exist on MegaETH. Out of this experimental cohort, six pioneering projects emerged.

• Chiang Mai (Second meet up, Devcon 2024, MegaZu): Building on the success of the first iteration, MegaMafia scaled its vision during Devcon 2024 in Chiang Mai. This time, 50 builders participated in a four-week co-working and co-living program, resulting in the incubation of 17 projects. The focus remained on creating applications that broke traditional limitations, harnessing MegaETH’s real-time execution environment.

Core Principles & Differentiation

MegaMafia stands apart from other blockchain incubators through its commitment to empowering builders to create something 0-to-1:

1. Brutal Honesty & High Competition: The program is highly selective, and churn is an expected part of the process. Builders who do not align with MegaMafia’s vision either self-select out or are encouraged to pivot.

2. Collaborative Culture: Rather than isolated development, MegaMafia fosters deep collaboration, with teams often sharing resources, offices, and even headquarters post-incubation.

3. Emotional Engagement: Beyond financial DeFi applications, projects must strive to create experiences that “make you feel something.”

The Mafia 

The projects born out of MegaMafia underscore MegaETH’s broader narrative: delivering real-time speed isn’t just a gimmick but a catalyst for building dApps that break conventional boundaries. From DeFi protocols offering sub-second liquidations to interactive games bridging thousands of players (or AI agents) simultaneously, each application uniquely leverages MegaETH’s low-latency foundation. Crucially, the collaborative culture of MegaMafia, where teams share resources and iterate quickly, creates an ecosystem dynamic that’s more than the sum of its parts.

For investors, this roster of dApps represents multiple market verticals (finance, gaming, AI, infrastructure), each with the potential to drive on-chain activity and expand MegaETH’s, and the broader crypto user base. .

DeFi & Trading

GTE is an all-in-one trading venue that will cover the entire life cycle of a token. From Launch, migration into an AMM, getting fully on-chain CLOB support with similar experiences to an CEX, and having access to the best prices across the MegaETH ecosystem with their aggregator.

Euphoria is revolutionizing derivatives trading by making it intuitive, social, and fun. Rejecting the cold, complex norms of traditional finance, Euphoria introduces Tap Trading, a mobile-first, game-like experience designed for the TikTok generation.

Avon is revolutionizing on-chain lending by combining order book matching with flexible lending pools, offering borrowers the most competitive rates and lenders optimal returns. Unlike outdated pooled lending models, Avon enables custom loan terms, real-time price discovery, and instant liquidity, ensuring users no longer overpay or settle for average yields. Avon delivers institutional-grade efficiency, sub-second liquidations, and a new era of DeFi credit markets.

CAP Labs is revolutionizing DeFi yield by replacing unsustainable endogenous models with scalable exogenous sources like arbitrage, MEV, and RWAs. Its stablecoin engine offers adaptive, competitive yields without reliance on token emissions or centralized intermediaries.

Valhalla is the first fully on-chain perpetuals exchange to offer transparent, permissionless trading with deep DeFi composability. It integrates perpetuals seamlessly with other DeFi primitives, ensuring fair access and innovative strategies for all traders. With a community-first ethos, an on-chain orderbook, and a composable tech stack.

Teko is the first real-time, under-collateralized lending protocol, enabling maximum capital efficiency with instant liquidations and seamless composability. Teko unlocks novel lending strategies, microliquidations, and tailored risk profiles, allowing users to leverage everything on-chain. Whether hedging, farming, or executing advanced DeFi strategies, Teko delivers TradFi-level borrowing freedom with on-chain speed and transparency.

Gaming & Interactive Applications

Showdown is the next evolution of card games, blending poker with strategic action cards for a high-stakes, bluff-filled duel. Created by top-ranked Hearthstone and Magic players, it’s free-to-play, fully transparent, and community-first, offering all cards for free and securing prize pools via smart contracts. With real-time betting markets and a competitive ecosystem.

Pump Party is a live, interactive gameshow designed to bring crypto to the masses through short-form, high-energy, viral gameplay. Inspired by HQ Trivia, it blends real-time participation, meme-driven mini-games, and scripted storytelling into a highly produced live experience. It enables seamless prize pools and gas-free transactions, hiding crypto mechanics under the hood for mass adoption. Positioned at the intersection of mobile gaming, live streaming, and large-scale engagement, Pump Party is pioneering the future of interactive entertainment.

Sweep is a real-time gaming prediction platform that lets viewers place bets on live-streamed events, turning passive watching into an interactive, high-stakes experience. Sweep enables instant predictions, real-time payouts, and seamless engagement across Twitch, YouTube, and Kick. With over 250K predictions and 70K+ concurrent viewers, Sweep is redefining live entertainment by letting players win cash on the biggest gaming moments, instantly.

AWE is a next-generation 3D game engine designed to make building immersive, real-time crypto experiences seamless and open. It enables anyone, coders and non-coders alike, to create AI simulations, crypto games, and interactive galleries with drag-and-drop simplicity or JavaScript/TypeScript. Running on decentralized infrastructure, AWE ensures censorship resistance, modular flexibility, and on-chain asset ownership. It powers real-time "money games" and simulations at lightning speed. No downloads, no barriers, just limitless creativity.

Unique Concepts 

Lemonade is a fully on-chain community management protocol that empowers creators with an all-in-one platform for shops, events, and community hubs, without coding. It combines no-code dApp building, tokenized engagement, and AI automation to streamline ticketing, rewards, CRM, and more. With seamless integration into DeFi services like CapLabs, GTE, and Teko Finance, Lemonade maximizes community monetization while ensuring full ownership of data and assets.

Noise is a trends trading platform, users can trade the tokens themselves, but also the attention / mindshare of a token. Besides trading tokens, Noise will allow anyone to trade on anything trend related. From things like will blue jeans make a comeback next year. 

Funes is a decentralized, crowd-sourced online museum dedicated to preserving the physical world through 3D models of human constructions. Using photogrammetry, anyone can contribute by capturing buildings via smartphones, cameras, or drones, helping to build the largest open-access 3D database of architectural history. Inspired by Borges' Funes the Memorious, this Eternal Museum ensures that as the digital age overtakes the physical, our material world remains preserved for future generations.

AI & Infrastructure

Nectar AI is a next-generation generative AI platform that lets users create personalized AI companions, blending advanced roleplay with ultra-fast image generation. Expanding beyond chat, Nectar introduces autonomous, tokenized AI agents that earn, spend, and execute real-world transactions—all while adapting to human emotions. With multilingual support and deep personalization, Nectar AI pioneers on-chain and IRL AI-driven interactions, redefining companionship, commerce, and automation in the digital age.

HOP Network is a next-generation VPN designed to be the fastest, most anonymous, and censorship-resistant solution for internet freedom. Unlike traditional VPNs, HOP operates on a decentralized infrastructure, making it unstoppable against government restrictions and ISP throttling.

VoyageAI is building the infrastructure for the AI-to-AI economy, enabling autonomous agents to discover, trust, and collaborate seamlessly. By developing the Discovery Layer (AI networking), Trust Layer (verification & reputation), and Coordination Layer (task distribution & value transfer), VoyageAI is unlocking a new era where AI agents form dynamic markets, optimize resources, and reshape industries. Just as the internet connected humans, VoyageAI is connecting AI to create the next economic revolution. Join the voyage.

4. Ecosystem clash - How can MegaETH attract significant mindshare?

We've introduced how new blockchain launches are focusing on increasing performance and throughput, among those, the most awaited are Monad and Megaeth, both still in development. Here we carry out a theoretical comparison of their capabilities alongside established ecosystems like Arbitrum, Base, and Solana to provide valuable insights into potential performance, adoption paths, and key challenges. 

Below is a forward-looking perspective on how MegaETH’s design might measure up to existing and emerging competitors across crucial dimensions.

Performance and Speed

MegaETH’s sub-10ms block times promise near-instant execution, ideal for latency-sensitive dApps like fully on-chain gaming and high-frequency trading. 

Solana leads both in terms of raw liquidity and bridged TVL (excluding its native token), boasting $8 billion in TVL and $27 billion in bridged assets. However, a significant portion of Solana’s TVL is composed of SOL itself, which is expected given that SOL is primarily utilized within its own ecosystem. 

In contrast, Arbitrum and Base host a more diverse range of assets, with less prominence of their native tokens.

Despite this, Solana still leads Arbitrum and Base in stablecoin adoption by a considerable margin, underscoring the importance of deep liquidity in driving DeFi activity.

MegaETH’s ability to secure stablecoin partnerships and streamline cross-chain bridging will be critical to its DeFi adoption and long-term success. In this regard, MegaETH has already partnered with USDT0, Tether’s initiative for natively interoperable USDT across multiple chains. USDT0 is currently live on Tron, TON, Bera, Ink, Ethereum, and Arbitrum, setting a strong foundation for seamless liquidity integration on MegaETH.

Similar to TVL dominance, Solana also leads in active user metrics, both on a daily and monthly basis. A key advantage Solana holds over L2 networks is its unified state, allowing users to interact seamlessly within a single ecosystem without the need for bridging or fragmented liquidity. In contrast, L2s often suffer from liquidity dispersion, with dApps spread across multiple chains, creating a more fragmented user experience.

Another major catalyst for Solana’s adoption has been Pump.fun, a platform that enables users to launch and instantly trade tokens without the need to seed liquidity. Since its launch in early 2024, Pump.fun has generated nearly $600 million in lifetime revenue, showcasing its impact on Solana’s ecosystem growth. 

Notably, when comparing SOL’s price movement to Pump.fun’s fee generation, the two metrics exhibit a strong correlation, suggesting that Pump.fun’s activity has played a role in driving demand and price appreciation for SOL.

The same cannot be said for Arbitrum and Base, as their combined DEX volume and application revenue remain significantly lower than Solana’s. 

1. Base has recorded a lifetime DEX volume of nearly $320bn with a total app revenue of approximately $315m.

   

2. While Arbitrum surpasses Base in trading volume with over $470bn, it has generated a lower total revenue of just over $26m.
   

   

3. Solana’s ecosystem has demonstrated stronger user engagement and revenue generation, further solidifying its lead in both trading activity and economic sustainability within the blockchain landscape.

   

Interestingly, when analyzing Solana’s revenue breakdown, the majority of dApp revenue is concentrated in just five platforms: Pump, Phantom, Photon, Trojan, and Bullx. All of these platforms are primarily used for memecoin trading, further reinforcing the notion that Solana’s network activity is heavily driven by memecoin speculation.

In contrast, Arbitrum’s revenue streams are more diverse, ranging from perpetual DEXs, lending protocols, and yield-generating platforms, indicating a broader DeFi-driven economy. Meanwhile, approximately one-third of Base’s revenue comes solely from L2 sequencing fees, while the remaining revenue is generated from a wide range of dApps like Coinbase Wallet, AI agent deployers, yield farms, Telegram trading bots, and automated market makers (AMMs).

For MegaETH to compete, it must successfully challenge Solana’s dominance in memecoin trading, provide a superior UI/UX experience, and capture broader market mindshare. Winning over traders, builders, and users through seamless, low-latency interactions and an engaging ecosystem will be key to MegaETH’s ability to establish itself as a leading ecosystem.

5. Expectations for MegaETH: Investment & Market Implications

MegaETH’s Funding approach

MegaETH chose a hybrid fundraising strategy, balancing both VC-led and community-driven participation. 

They raised a $20m seed round at $200m fully diluted valuation, led by Dragonfly with participation from Robot Ventures, Folius, Figment Capital, Tangent, and notable angels including Vitalik (Ethereum), Joseph Lubin (ConsenSys), Cobie (Echo), and Sreeram (EigenLayer). 

Beyond this “traditional” backing, MegaETH also raised another $10m on echo with similar terms for its community, plus another 5000 ETH (~$13.5m) via its Fluffle NFT sale. Another 5000 ETH raise is planned in the coming months, where community members can get access by participating in the MegaETH ecosystem.

Comparative landscape

This hybrid approach stands in contrast to other major players in the space. 

1. Monad, for instance,  raised $240m exclusively from VCs and insiders.

2. Solana garnered nearly $360m with a mere $1.8m allocated to its initial Coinlist ICO. 

3. Arbitrum raised $124m from VCs and then airdropped 13% of its tokens to the community, DAOs, and early users – striking a partial balance between institutional funding and grassroots exposure. 

On the other end of the spectrum, there is Hyperliquid, which avoided large private funding rounds altogether, bootstrapping development and airdropping 31% of its tokens to early users while reserving another 38.8% for future emissions. This mode made Hyperliquid’s token launch highly lucrative for early adopters, who saw significant gains once the token began trading on secondary markets.

Implications for investors and users

MegaETH’s funding path seems to balance the benefits of strategic VC capital with the inclusivity and engagement fostered by community-driven raises. Learning from traditional raises and purely community-focused distributions. For investors, this approach could translate into broader token distribution, potentially reducing concentration risk and enhancing market liquidity. For end-users, it suggests a chain with aligned incentives,  where early adopters and the wider public benefit alongside institutional backers.  

6. Conclusion: Evaluating MegaETH’s Long-Term Outlook

Comprehensive Risk-Reward Analysis

From a technical standpoint, MegaETH’s single-sequencer design and sub-10ms block times offer an unparalleled user experience but also raise centralization concerns and untested scalability assumptions. While this highly optimized architecture could enable real-time, on-chain interactions that other blockchains struggle to achieve, its real-world feasibility will only be confirmed once the chain operates under heavy load.

On the ecosystem side, MegaETH has successfully built strong pre-launch awareness through its MegaMafia incubator and robust branding strategy. However, liquidity depth and stablecoin adoption remain uncertain factors that will only be validated once the mainnet goes live.

Balancing Upside & Uncertainties

Upside

Speed and Scale: If MegaETH successfully demonstrates near-instant confirmations with robust developer tooling, it could lure a new wave of dApps builders trying to build actual new innovative applications

Community and Mindshare: MegaMafia and the community have been well received, as seen in general mindshare across crypto Twitter. If these attributes can be successfully multiplied and further given more attention, it will only expand the ecosystem.

Convergence web2 and Web3: With high throughput and flexible data availability, MegaETH could become a go-to platform for mainstream use cases currently unfeasible on slower chains.

Uncertainties

Actual speed, security and scale: It remains a question whether the chain and infrastructure will stay stable under real-world conditions.

Liquidity and onboarding: Competing blockchains and L2s also vie for user attention. Unless MegaETH secures stablecoins and large-scale bridging, adoption may stagnate.

Competitive pressure: Rivals like Base have already begun lowering block times, and new L2s could replicate MegaETH’s single-sequencer approach.

Market Context & Valuation

Crypto markets are cyclical, with price appreciation often hinging on broader sentiment around Bitcoin, Ethereum, and other large-cap assets. MegaETH’s relatively low FDV (~$200m echo raise and $520m for fluffle raise) may attract venture capital and retail investors seeking undervalued plays—especially when comparable projects like Berachain and Mantle list billion-dollar valuations. This means there’s considerable upside if MegaETH executes well.

Key Takeaways & Metrics to Monitor for Capital Deployers

1. Developer Activity

Track new contract deployments, MegaMafia expansions, and code commits. Vibrant dev engagement is a leading indicator of long-term viability.

2. TVL and liquidity growth

Observe stablecoin inflows, DEX volumes, and bridging flows. Sustained growth here is crucial for ecosystem health.

3. User retention, DAUs and MAUs

A high influx of addresses is meaningless if churn is equally high. Steady or rising usage signals sticky adoption.

4. Sequencer, node, infrastructure reliability

Monitor node uptime and block production consistency. Centralization can become a fatal flaw if the sequencer frequently fails.

Final Thoughts & Actionable Insights

For those looking to gain exposure, Fluffle NFTs and upcoming MegaMafia project raises provide early entry points, though they carry venture-level risk. Sizing allocations conservatively and watching for mainnet milestones can mitigate downside while retaining upside potential.

In sum, MegaETH’s promise of near-instant blocktimes, strong community roots, and inclusive funding could carve out a significant share of the ever-growing blockchain market. Yet, scaling those advantages into robust liquidity, stable governance, and broad developer adoption stands as the ultimate test. For investors, maintaining diligent watch over key metrics and carefully phased allocations can maximize upside while mitigating the inherent risks of a fast-evolving L2 landscape.

Brought to you by NDW.

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Virtually yours,

The Castle

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GM, and welcome to another edition of The Castle Chronicle.

It’s been a rather bearish couple of days in crypto, BTC is selling off, and the whole market is red.

Here’s what has happened this week:

• 📈 Price Action – BTC is losing momentum. What can we expect next?

• 🔍 Market Watch - A deeper look into a bloody market

• 🗳️ Teaser – A quick look at MegaETH

• 💙Arbitrum Corner – Innovating at the Speed of Arbitrum

📈 PRICE ACTION

It’s been a long couple of weeks of back and forth, indecision, and slow bleed in the crypto market, but now BTC has finally decided to make a move. Unfortunately, it’s to the downside.

The weekly chart has lost its momentum cycle, and we can see some significant bearish price action on the lower timeframes.

• Healthy uptrend

• Momentum cycle lost

Losing a momentum cycle by itself doesn’t mean too much, but it’s definitely a first sign of loss of momentum. In healthy uptrends our first assumption should always be re-accumulation.

I marked previous instances of the same thing happening on the chart with white circles - the lost momentum cycle often results in more sideways price action for the purpose of re-accumulation, and that is my expectation here as well.

That being said, this market continues to be untradable for me. The weekly direction is still bullish, so I’m looking for reasons to go long. But there’s a long way of price building up before I see the green light for trades again.

As traders, more than 90% of our job is waiting for the right conditions to be met. And until they are, we gotta make sure not to do anything silly. Remember, you can outperform the majority of the market simply by staying on the side-lines.

Not following what I’m talking about? Check out my quick cheatsheet to understand how I approach a chart.

Courtesy of 0x_Vlad - Castle Lab’s Male Astrologist

🔍️ MARKET WATCH

TOP PERFORMERS

While BTC is selling off it’s no surprise to not see any strong performers in the market. There might be some outliers, especially in the lower market cap bracket, but I don’t see a reason to look for any. In typical Wyckoff fashion we should only look for relatively stronger performers when the main asset is clearly bullish, which currently is NOT the case.

FEAR AND GREED INDEX

It’s interesting to see that the Fear & Greed index is showing neutral numbers compared to the previous week’s extreme fear. I hope it’s because people stabled up and didn’t enter any new trades and patiently wait on the sidelines.

CAPITAL FLOW

Last week we saw significant inflows into Arbitrum and huge outflows out of Base. This week, we can see the exact opposite. Overall the numbers aren’t anything out of the ordinary, just regular capital flow.

NARRATIVE PERFORMANCE

The overall market is taking a beating and there’s almost no demand to be seen anywhere. All categories are in the red with DeFAI getting rekt the most. This should serve as further proof that looking for bullish trades during times like these is generally not a wise thing to do.

Courtesy of 0x_Vlad - Castle Lab’s Male Astrologist

🗳️ A QUICK LOOK AT MEGAETH

As Ethereum's network continues to expand, scaling solutions have become a critical focus for developers and investors alike. In a report to be published next week, we’ll highlight MegaETH. They are building the world’s first real-time blockchain, aiming to address latency and throughput challenges through sub-10ms block times.

On Monday we’ll publish a report exploring MegaETH’s technical innovations, its potential impact on DeFi and the blockchain ecosystem as a whole, and how it compares to other scaling solutions and L1s.

Courtesy of NDW - Fundamental Researcher at Castle Labs

💙 ARBITRUM ECOSYSTEM SPOTLIGHT

Welcome to another edition of the Arbitrum Corner!

This week, we bring you an ecosystem spotlight on some of the most interesting protocols building on Arbitrum.

MASSDOTMONEY

The stock market is falling and you’re thinking of buying some stocks?

Mass is a mobile app that allows you to buy stocks such as $COIN, $HOOD, and more assets directly on-chain on Arbitrum!

Dividends also accrue directly to your wallet.

Twitter tweet

Mass also introduces other improvements, which abstract some of the complexity of trading on-chain, such as a Gas tank that you can fill with any crypto and you can use to pay gas across all networks.

Here’s Hunter showing how easy it is:

Twitter tweet

The protocol currently offers over 45 stocks and ETFs, with plans to reach over 150 by the end of the year:

Twitter tweet

ELDORADO

We’ve already touched on Eldorado in one of our first Arbitrum Corners, highlighting their real world impact. With many protocols losing focus on how their product works in practice, it is refreshing to see a very practical application, which is improving the lives of a lot of people.

Eldorado is an app focused on allowing users to buy and sell USDT peer-to-peer, and transfer it freely with EldoradoPay.

With many countries plagued by inflation, having USDT (or other stablecoins) available to purchase is fundamental to having a chance to shield savings from inflation. Eldorado supports FIAT currencies from most South American countries, including Venezuela, Brazil, Colombia, Argentina, Peru, and Bolivia.

Eldorado has now reached over 1m downloads in the app store:

Twitter tweet

But that’s not all - they received over 33k reviews with a score of 4.8:

Twitter tweet

What are users doing with Eldorado?

70% of retail consumers use Eldorado for its interoperability, as they connect most of the region’s payment methods.

“For example, a freelancer might get paid in PayPal or Zelle, but since most local businesses don’t accept those, they swap their balance for stablecoins and cash out through their preferred local payment app.”

Eldorado also services individual "market makers", providing stablecoin liquidity and earn a spread on their buy and sell orders.

They currently “have 10,000 market makers making anywhere from $500 to $3,000 per month”., showing the strength of their decentralized approach.

We advise reading more on this interesting article from @artemis_xyz:

Twitter tweet

RENEGADE

Renegade is a protocol providing fully private trading with zero MEV, slippage, or price impact.

Twitter tweet

They can do so by leveraging multi-party computation (MPC) to match peer-to-peer orders and zero-knowledge proofs for trade settlement. All trades on Renegade are executed at the real-time Binance midpoint price, without any spread or price impact.

Twitter tweet

Who is Renegade for?

• Liquid Token Funds: Instead of incurring spreads by trading OTC, they can use Renegade to execute their orders at the midpoint price.

• Market Makers: Market makers can anonymously rebalance net hedged or delta-neutral positions, “balancing inventory without needing to cross a public spread”.

• AMM Takers: Trades on Renegade are guaranteed to execute at midpoint prices, avoiding MEV attacks, price impact, or arbitrage.

How has Arbitrum benefited Renegade? Stylus has proven to be a massive boost for Renegade allowing them to “verify the equivalent of nearly a dozen zero-knowledge proofs” while still costing “less than $1 in gas and taking less than 1 second to match”.

CLUTCH

Clutch is a decentralized parlay platform (DPP), a fully on-chain and non-custodial betting platform recently launched on Arbitrum:

Twitter tweet

In addition to single bets, users can combine multiple ones from sportsbooks or polymarket bets into a single wager, increasing their payout.

There’s no limit to creativity.
Here, someone combined a price prediction on SOL with an NBA match-winner:

Twitter tweet

The platform is provably fair, as it operates in a trustless manner and with no third-party interventions.

Clutch just reached over $100k in betting volume:

Twitter tweet

Users can keep up with all the new bets using Clutch AI assistant’s X ACCOUNT: https://x.com/AiAgentkAia 

Clutch was initially live on Sanko, and eventually moved to Arbitrum. Why?

Twitter tweet

That’s it for this week.

Despite the market downturn, the Arbitrum ecosystem is lively and dynamic, as shown by the multitude of new and interesting protocols that are being launched.

Are you building on Arbitrum and want to be featured? Get in touch with us!

Courtesy of Francesco - Founder at Castle

And that’s all for this week! It’s been rather bloody and while the overall high timeframe still suggests a bullish market, currently it looks far from it.

These are the best times to touch grass and build.

Stay safe and see you next time!

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

GM, and welcome to another edition of The Castle Chronicle.

What a week! The crypto world reacted sharply to the White House's proposed Crypto Strategic Reserve, sparking market volatility.

Now, all eyes turn to the upcoming March 7th summit, where the initiative's details and broader regulatory implications will take center stage.

Here’s what’s happened this week:

• 🔍 Market Watch – Relevant metrics across sectors and assets

• 📈 Price Action – Mixed signals and crazy volatility

• 🗳️ Arbitrum Corner – A recap from ETHDenver

• 🏰 Castle recap – A list of all the articles we published this week

Exit $esGMX or boost your $GMX yields on exit.tech today!

🚪Follow Exit Tech on X

🔍️ MARKET WATCH

TOP PERFORMERS

Although BTC is just chopping around in a range, we saw some serious strength coming into a few markets. Cardano soared 43% after Trump announced that it would be one of the 5 crypto assets in his Crypto Strategic Reserve.

BTC FEAR AND GREED INDEX

We are still in the extreme fear territory, but at least it’s better than last week. What a significant change compared to a month ago. The crypto sentiment truly is a wild ride.

CAPITAL FLOW

With BERA POL about to kick off, it is no surprise to see significant inflows into the ecosystem. Arbitrum is also seeing a significant inflow—is that because it’s the main bridge to Hyperliquid, or are they cooking something?

On the other hand, BASE is experiencing an insane capital outflow. Putting things into perspective, BASE currently has a TVL of almost $3b, so this isn’t anything alarming per se.

NARRATIVE PERFORMANCE

Pretty much every single sector is dumping with social-fi taking the biggest beating, as $KAITO is experiencing a sell-off,

CEX coins are the only only ones seeing positive numbers with $CRO and $BGB leading the charge.

Courtesy of 0x_Vlad - trend-based trader and MentFX student

📈PRICE ACTION

Last week we saw a move below the current range low and for a moment it looked like the weekly chart is gonna lose its momentum cycle. The dip got eaten up quickly though and we saw some demand come into the market. Right now we’re still hovering around that range low, so we’ll have to wait and see what it wants to do.

Here’s where we’re at:

• Healthy uptrend

• Re-accumulation

As always, within a healthy uptrend our instant assumption should be re-accumulation. I am therefore still expecting demand to show up either here, or after price momentarily breaks down and finds demand lower.

Either way, this is currently a market that is chopping. I wouldn’t touch BTC here until it gives me a clear sign that it’s ready to move higher.

Trade responsibly, and I’ll see y’all next time!

Not following what I’m talking about? Check out my quick cheatsheet to understand how I approach a chart.

Courtesy of 0x_Vlad - trend-based trader and MentFX student

💙 ARBITRUM ETHDENVER RECAP

🏔️ Arbitrum at ETHDenver: From Fire Booths to Burgers

ETHDenver was peak Arbitrum energy this year.

Whether you were grabbing merch at the packed-out booth, catching Stylus alpha, or just vibing at the ArbiBurger pop-up, it felt like Arbitrum was everywhere—and it kinda was.

At the main event, the Arbitrum booth stayed busy. We had merch flying, DAO volunteers holding it down (s/o @0xatomist @0xdonpepe @juanrah pruitt @tbenetti and @lino), and a steady stream of builders stopping by to chat Orbit Chains, Stylus, and whatever else was cooking. The real alpha though? The talks.

• Stylus Unveiled: Rust + EVM = 🔥, courtesy of @bidzyyys from @OpenZeppelin (recap). Massive moment for devs who’ve been waiting to level up their smart contracts without sacrificing speed or security in languages they know and love.

• Robinhood x Arbitrum: Swap natively inside your Robinhood wallet, as explained by Johann from Robinhood Crypto & AJ from Offchain Labs (recap). Mainstream adoption? Yeah, we’re leaning in.

• Zigitrum: Building smart contracts in Zig with @ChrisCo512 (recap). For all the language nerds out there, this one's worth a rewatch - one more possibility added to the Stylus playbook.

• One-Step Proofs Deep Dive: @tsahidoteth breaking down fraud proofs like it’s no big deal (recap). The tech that keeps it trustless, made simple.

But ETHDenver wasn’t just about the main stage. Side events were where the real culture kicked in:

• Protocol Cup with @nct_labs

  • Arbitrum builders swapped laptops for cleats in a community football match. A chance to take a break from the conference grind and meet other teams on the field. Sponsored by Arbitrum, PlumeNetwork, and Injective, the Protocol Cup was a 5v5 basketball tournament where leading crypto protocols and community teams competed.

• SheFi Summit by @shefiorg

  • A packed house for panels on how to build, invest, and lead with intention. Arbitrum was out supporting the women leading the charge in Web3, and the energy was unmatched. Diverse crypto and AI leaders, thought-provoking panels, networking opportunities, and interactive quests with real rewards. SheFi had it all.

• Arbicorn Roast with @use_corn

  • In partnership with innovative BTCFi protocols @use_Corn, @Lombardbtc, and @Legion, Arbitrum presented the Arbicorn Roast. There were fire tacos on demand and a real retro vibe from Corn with a host of arcade games available to play. Not to mention core contributors from all protocols chatting with the ecosystem. BTCFi is choosing Arbitrum stack as it’s home!

• Crosschain Collider

  Nothing works well like parties to unite interop maxis under a common UX. If you’re betting on a multi-chain world, this was the spot to break some moves. Shoutout to the sponsors Across Protocol, Axelar, Camelot, Caldera, Chainlink, the Ethereum Foundation, Espresso, Everclear, GMX, LayerZero, Lifi protocol, Open Zeppelin, Polymer Labs, Succinct Labs, and Reservoir.

• ArbiBurger at Shake Shack

  • Yes, they actually branded Shake Shack. Yes, there were custom wrappers. Yes, the line was out the door. ETHDenver attendees pulled up for the shakes and stayed for the ecosystem. Brought to you by The Arbitrum DAO, Entropy Advisors, and Corn, ArbiBurger offered attendees free burgers, fries, and shakes while connecting with fellow builders and enthusiasts. The vibe was immaculate and anyone you wanted to talk to from the eco was there. Hunter and Churro repping OCL, Wenmoon for a bit of beauty, Cliff and Raam repping the foundation, Entropy showing us they’re all in, Coinflip getting his BD on, Dennison with the Tally gang, Kryz with his L2beat hat on, and many, many more.

For the DAO in us, ETHDenver was also a rare chance to put PFPs to names:

• Delegate Day

  Top delegates, Offchain Labs, and Arbitrum Foundation folks came together to sync on vision, roadmaps, and governance pain points. The DAO has many operational challenges, and they need to be solved together.

• ARDC Brunch

  ARDC members linked up IRL to swap notes and brainstorm how to level up research across the ecosystem. Big plans are brewing for more impact and visibility from the contributor side.

• Governance Brunch from Tally, L2beat, Areta

  • Ballots & Burritos - A safe place for governance leaders to discuss key challenges and leading initiatives in the field. Because it’s not just about Arbitrum, it’s about the success of decentralized organizations.

ETHDenver might be over, but the momentum feels like it’s just getting started. If this week was any sign, Arbitrum’s not just shipping—it’s setting the vibe for 2025.

Courtesy of Atomist - Founder at Castle

🏰 CASTLE RECAP

Just in case you missed it, we published some interesting articles this week. Make sure to check them out!

Sonic: Growing Fast with a Focus on Defi

Arbitrum's Path to a Stage 2 Rollup

The AI Dispatch #7 - The Stars Are Aligning?

And that’s it for this week! May the White House bless us with a new bull run! We need it.

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

Introduction

Layer 2 (L2) scaling solutions have become indispensable to Ethereum, addressing issues of transaction congestion and high fees while preserving decentralization and not compromising the network’s core principles.

As Ethereum continues to grow, L2s are critical in ensuring the scalability of applications and protocols. However, not all L2 solutions achieve scalability in the same manner. Each comes with its own trade-offs in terms of efficiency, security, and decentralization.

L2 solutions try to balance scalability gains with security and decentralization, which are vital to maintaining the system's integrity and trustworthiness.

Rollups are classified into three maturity stages: Stage 0, Stage 1, or Stage 2. This framework was initially proposed by Vitalik Buterin, Ethereum’s co-founder, and later refined by L2Beat, a public good platform tracking the development of L2s.

This framework provides a structured approach to understanding the evolution of rollups and sets expectations for their gradual transition toward greater decentralization and security.

Most L2s launch at Stage 0, relying on centralized mechanisms for dispute resolution and security, before progressing toward more decentralized models. A notable exception was Arbitrum, which launched with fraud proofs live since its inception. This was instrumental in positioning Arbitrum as a leading L2, setting itself apart from other rollups by prioritizing security and decentralization from the outset.

Recently, Arbitrum has taken a significant step forward by introducing the Bounded Liquidity Delay Protocol (BoLD). This new dispute resolution mechanism enhances security and improves validator participation, pushing Arbitrum closer than ever to becoming a fully permissionless Stage 2 rollup.

With BoLD, Arbitrum enhances its decentralization and minimizes validation and dispute resolution risks.

This report examines the innovations brought by BoLD, focusing on three key areas:

1. Dispute resolution improvements

2. Broader validator participation

3. Security enhancements

We begin by introducing L2Beat’s rollup categorization framework before diving into how BoLD resolves existing issues, positioning Arbitrum on the verge of complete decentralization and closer to the ambitious goal of becoming a Stage 2 rollup.

BoLD and its Role in Enhancing Security and Dispute Resolution

Bold is designed to replace the original Arbitrum dispute resolution protocol.

Bold aims to unlock permissionless validation by ensuring that disputes are executed within a fixed period. It wishes to accomplish this by allowing anyone to “validate, propose, and defend an Arbitrum chain’s state without requiring permission to do so.” 

The introduction of BoLD marks a pivotal change in Arbitrum's dispute resolution process, significantly enhancing security and decentralization.

To highlight the improvements introduced by Bold, it is essential first to explain how dispute resolution works in Arbitrum’s previous model:

1. Validators post claims about the correct outcome

2. These claims are backed by staked (bonds), posted by the ones claiming. 

3. In the case of multiple competing claims, the protocol must select the correct one.

4. When the smart contract declares a winner, the losing bond is confiscated, and the other is returned to the respective party.

This mechanism has, however, some limitations, particularly in terms of:

• Centralization: Due to the validator set being whitelisted, there is no possibility for broader participation from the community

• Costs: The necessary coordination among validators to defend in case of competing claims increases costs for dispute resolution.

• Security and Delays: The system was prone to delay attacks, in which malicious actors could slow down the network by targeting withdrawals and validation. 

In turn, Bold improves dispute resolution by tackling these issues:

• Centralization: BoLD opens up access to permissionless validation, removing the previous reliance on a centralized set of whitelisted validators. This significantly increases the participation pool, encouraging a more decentralized system.

• Costs: BoLD ensures trustless cooperation among validators, meaning they do not need to coordinate directly.

  

  Validators can pool resources to defend a correct assertion, sharing defense costs.  Bonds confiscated from attackers can be redistributed among defendants.

• Security: BoLD allows claims to be executed in parallel, reducing the computation costs. A single honest validator can now defend against any number of malicious actors. 

Furthermore, thanks to a "resource ratio," attackers must spend more resources than defendants through their bonds, which are confiscated even if only a single honest validator can successfully challenge their claim.

“Bonds put up by honest parties will always be refunded while malicious actors always stand to lose 100% of their bond”.

• Delays: BoLD introduces time-bound dispute resolution, setting a limit to the maximum withdrawal delay, which is capped at two challenge periods (roughly 12.8 days). This protection ensures that delay attacks, such as preventing withdrawals for malicious purposes, are significantly mitigated.

Combined, these features will considerably increase the cost of attacking Arbitrum.

The system is also designed to be deterministic (thanks to the deterministic nature of the L2 state), meaning that as long as an honest party participates, they will win. Anyone who agrees on a state can defend it until a “single point of disagreement is found”.

This is because malicious actors cannot fake the proofs of transaction execution, ensuring higher security and integrity. 

Increasing Validators: How BoLD supports broader validator participation.

Transitioning from one stage to another is clear proof of the maturity of rollups.

Arbitrum’s transition from Stage 1 to Stage 2 represents the evolution of a system moving from a relatively controlled, permissioned validator model to a more decentralized and open validator set.

In the current architecture, L2 withdrawals from Arbitrum to Ethereum are handled by a select group of validators. This design protects the dispute protocol from possible denial-of-service attacks, also known as “delay attacks”, where malicious validators could spend funds to prevent the confirmation of claims, stalling withdrawals from Arbitrum to Ethereum as long as they have money to stand. 

While this arrangement is secure to an extent, it limits the degree of decentralization, as only a tiny group of validators are responsible for validating transactions and handling withdrawals, exposing the system to centralization risks.

BoLD implements permissionless validation with a new dispute resolution protocol that is “maximally resistant against delay attacks”, increasing the number of validators significantly. This makes the system safer by establishing a maximum delay on withdrawals and ensuring malicious actors cannot manipulate the system as easily.

In turn, this makes withdrawals from Arbitrum to Ethereum safer by eliminating the surface for delay attacks, thanks to establishing a maximum withdrawal delay.

Bold is a new approach to L2 validation in a permissionless manner by allowing Arbitrum to:

• Guarantee the safety and liveliness of the chain

• Minimize latency to settle states

• Prevent dishonest parties from raising the cost for honest ones.

Bold will launch with a trustless bonding pool contract where anyone (provided they meet the requirements) can pool their funds to challenge dishonest proposers, making it easier to participate in securing the network and improving decentralization.

BoLD also facilitates a more inclusive and decentralized model by allowing anyone (provided they meet the bond requirements) to pool their funds into a trustless bonding pool contract to challenge dishonest proposers. This opens up participation for a broader range of individuals and helps secure the network. Arbitrum's resilience improves as more validators participate, and the network becomes better equipped to handle attacks and disruptions.

A focus on aligning incentives between honest validators is key to BoLD’s success. Failed attackers lose their bonds, which are then confiscated and distributed:

• 1% as a Defender bounty across the entities who have put the bonds to defend Arbitrum. 

• The rest is sent to the DAO treasury, which can decide whether to redistribute an additional % among defenders or use the funds to refund gas costs to the honest validators, burn them, or keep them in the treasury.

This ensures that validators are incentivized and rewarded to act honestly and protect the network.

To further reduce costs, Bold employs a multi-level refinement process that optimizes the computation required for dispute resolution. By refining the process in stages, Bold ensures that resources are utilized efficiently without compromising security.

Last but not least, Bold requires no additional hardware from validators. 

The Road to Stage 2 Rollup: BOLD’s importance in moving to permissionless, decentralized validation.

The emergence of many L2 networks has raised issues in terms of standardization, which allows for a comparison between them. 

Vitalik Buterin’s original proposal for the rollup stages provided a framework for the gradual decentralization of L2 networks:

1. Stage 0: Full training wheels. Open source software. Operators control the system with centralized dispute resolution.

2. Stage 1: There are limited training wheels. Smart contracts and decentralized proof systems are implemented. This includes implementing proof systems, decentralizing proof submission, and allowing for an exit window without coordination. There is still a Security Council that addresses bugs as a safety net.

3. Stage 2: No training wheels. Full permissionless fraud proofs, extended exit windows (30+ days) for users to exit in case of unwanted upgrades, and no room for governance attacks. The role of the security council is restricted to specific onchain errors. 

L2Beat refined and implemented this framework with clear and distinct progression criteria. Currently, the L2Beat framework serves as a roadmap for rollups, which aspire to evolve from a controlled Stage 1 to a fully decentralized Stage 2 rollup.

However, it is important to highlight that those metrics do not provide a proxy for rollup security but rather assess the “maturity” of rollups, with the ultimate goal of being entirely decentralized. 

Stage 0 requirements

Projects at this stage are in the nascent development phase. While functional, they rely on relatively centralized dispute resolution and validation mechanisms, reflecting their early experimental phase. Base, Scroll, and Blast are all examples of Stage 0 rollups.

1. Self-identify as a rollup.

2. Post state roots on a Layer 1 (L1) to allow withdrawals.

3. Provide Data Availability (DA) on L1, ensuring all data to reconstruct the L2 is available.

4. The software can reconstruct the rollup from L1 data, allowing anyone to review and audit the software.

Stage 1 requirements

Projects at this stage implement more sophisticated security measures. These systems incorporate a fraud-proof system to verify the correctness of state roots from a minimum number of whitelisted validators and enforce an exit window of at least seven days for users to withdraw in the event of unwanted upgrades. Additionally, a Security Council—a group of trusted participants, partially external to the rollup’s operational team—serves as a fallback for bugs. Arbitrum prior to Bold is an exemplar of a Stage 1 rollup, leveraging fraud proofs and a centralized safety net for dispute resolution.

1. Proper proof system to verify the correctness of state roots.

2. At least five minimum whitelisted participants can submit fraud proofs.

3. Exit window without coordination: The rollup operators cannot block withdrawals. 

4. Users should have at least 7 days for an exit window of unwanted upgrades.

5. The security council should be adequately set up: at least 8 participants in a multi-sig, with 50% consensus required. At least 50% should be external to the organization running the rollup, including 2 outsiders. Identities should be publicly disclosed.

Stage 2 requirements

These are intended as fully decentralized rollups. The transition to Stage 2 requires a robust framework that secures state transitions and incentivizes permissionless validator participation. In this phase, fraud proofs are permissionless—anyone can submit them—and the exit window is extended to 30 days. The Security Council’s role is dramatically reduced, and it is restricted to addressing soundness errors onchain. 

1. Permissionless fraud system: Anyone can submit fraud proofs.

2.  30 Days Exit Window.

3. Security council power is restricted to serious flaws identified onchain (soundness errors).

These requirements were eventually adapted once L2Beat updated their definitions.

In particular, changes have been introduced about the requirements of the Security Council and how it should be set up:

• 8 members.

• At least 75% threshold.

• Subjective evaluation of members.

• Publicly announced.

Since its launch, Arbitrum has been one of the first Stage 1 rollups with functioning fraud proofs. In comparison, most of the rollups in the L2Beat top 10 are all at stage 0, except for Optimism, which only recently introduced fraud proofs.

Source L2beat

Arbitrum is currently the closest rollup to Stage 2. With the development of Bold, another slice of the pie is now green as state validation transitions from a permissioned to a permissionless system.

Nonetheless, even with the implementation of Bold, there are still two main issues to be fixed before Arbitrum can transition to a Stage 2 rollup:

• Restricting Security Council Powers: it is necessary to restrict their authority further to intervene only in case of soundness errors. 

• Increasing the Exit Window: to be considered a Stage 2, the exit window should be reaching at least 30 days to exit in case of unwanted upgrades. 

• Strengthen Community Engagement: educating stakeholders on governance processes and encouraging active participation will be critical to maintaining decentralization.

Conclusion & Food for Thought:
Why BoLD is vital for Arbitrum’s evolution

Arbitrum’s journey toward becoming a Stage 2 rollup highlights the importance of decentralization, security, and scalability for L2s. BoLD represents a crucial step in this evolution, enabling permissionless validation and enhancing Arbitrum’s security and resilience.

Arbitrum has always prided itself as one of the most credibly neutral blockchain networks.

Credible neutrality refers to the concept of a provably fair network that treats all actors equally and has mechanisms that anyone can read and verify. 

For a mechanism to actually be able to serve as this kind of common substrate, everyone participating must be able to see that the mechanism is fair, and everyone participating must be able to see that everyone else is able to see that the mechanism is fair, because everyone participating wants to be sure that everyone else will not abandon the mechanism the next day.

This has benefited the Arbitrum network incredibly:

• Chosen as a bridge for Hyperliquid: all USDC onboarding on Hyperliquid is deposited through Arbitrum, which led to over $2.5b in volume and $2.75b in TVL.

• Chosen to claim LayerZero airdrop and to implement Omnichain Functional Tokens (OFT)

• Chosen for USDT0 Layer Mesh: Arbitrum is one of the infrastructure providers selected for USDT0 (together with Ethereum, Tron and TON), the new interoperable version of USDT. 

Moving towards a Stage 2 rollup ensures Arbitrum removes any centralized safety net and transitions to a fully decentralized rollup, improving its neutral stance. Bold replaces the previous dispute resolution mechanisms and opens the network to permissionless validation.

With Bold, anyone can now help secure the Arbitrum network, removing the need for a permissionless set of validators as a centralized safety net and embracing decentralization. 

By strengthening the dispute resolution mechanisms, Bold makes Arbitrum more secure and resilient against possible attacks while decentralizing the validator set to protect the network.

Even a single honest party can now secure the network against malicious actors.

Participating in Bold is permissionless. We encourage developers and validators alike to do so and contribute to Arbitrum’s decentralized future. 

We expect that fixing the remaining issues to become a Stage 2 rollups will be the next main focus of the Arbitrum Foundation and Offchain Labs.

A big enough exit window and limited risks from the Security Council are pivotal measures to give anyone operating on Arbitrum peace of mind.

Compared to other rollups, Arbitrum is leading the way to becoming a Stage 2 rollup, a testament to its security-first approach to scaling Ethereum. 

Bold’s enhancements are not just technical upgrades but strategic developments that significantly lower the barriers to participating in decentralized ecosystem security.

These innovations will benefit Arbitrum and impact broader trends across Defi and rollups selecting their dispute resolution and validation mechanisms.  

• Enhancing credible neutrality of Arbitrum

• Enhancing network adoption

• Enhancing community participation 

• Enhancing security through permissionless validation.

Arbitrum’s pioneering work, particularly with the Bold protocol, demonstrates a clear commitment to decentralization and robust security principles. As the network matures, the anticipated transition to a Stage 2 rollup will likely position it as the gold standard for L2 solutions, fostering a more secure, efficient, and inclusive Ethereum ecosystem.

As Arbitrum matures, the successful transition to a Stage 2 rollup will set a benchmark for what constitutes a secure, efficient, and decentralized L2 system. This will likely have significant implications for the broader Ethereum ecosystem, influencing how other L2 solutions develop and interact with the Ethereum mainnet.

For this reason, we hope the following report will reflect this completed transition. 

Brace yourself, Stage 2 rollups are coming! 

Brought to you by Francesco.

Thanks for reading!

If you enjoyed it, please follow us on Twitter at @Castle_Labs and visit our website for more research and to learn more about our services and get in touch.

Virtually yours,

The Castle

GM, and welcome to another edition of The Castle Chronicle.

ETHDenver is still ongoing and we hope you’re having a great time! Our founder Atomist is roaming the area, so if you see him don’t be shy and come say hi!

Besides that, we’re having a bit of a bearish week, as one would expect, after crypto suffered its biggest hack: over $1.5b hacked by Bybit. There are huge sell-offs across the board, and altcoins are taking an absolute beating. Is it all over though? Not quite.

We should all be dealing with it like Ben from Bybit is dealing with the hack: with a good laugh!

Here’s what’s happening today:

• 📈 Price Action – What is the current BTC price action telling us?

• 🗳️ Arbitrum Corner – A mix of Ecosystem, governance, and tech updates

• 📖 Recommended Reads - The best reads for the week you might have missed

📈 PRICE ACTION

Gm frens!

Looks like we have some bearish price action this week. While the HTF (weekly) still looks bullish, the lower timeframes are showing weakness. Let’s talk a little bit about what’s going on and what we can expect going forward.

• Healthy uptrend

• Possibly lost momentum cycle

• Re-accumulation

While this is still a very bullish looking chart, we do have a possible failure of the current momentum cycle - meaning we can see price breaking below the 10/20 EMA. What are the possible scenarios here?

Whatever happens here, our instant assumption should be re-accumulation - a temporary move against the bigger trend to re-fuel for continuation.

The most bullish scenario is that this weekly candle ends up just wicking lows, re-accumulating by liquidating some late longs, and resuming the uptrend. This way the momentum cycle won’t even be lost yet and we remain completely bullish.

If this candle continues lower, however, that will mean that the most recent sideways price action was a local distribution. The expectation here would be for price to break down and find some equilibrium again - an area of equal supply and demand, resulting in price going sideways. Here, for overall re-accumulation, we’d expect demand to overpower supply and price to break out higher, confirming an accumulation and trend continuation.

If however, supply overpowers demand and price breaks down, that would confirm a re-distribution and a new direction of trend (bearish).

Whatever ends up being the case, one thing is for certain - this is currently not a good market to trade. There is a lot of indecision and mixed signals. One of my most important conditions in determining a tradable market is overall top-down alignment. A clear trending condition in the same direction for each timeframe. That is currently NOT the case.

I hope this analysis can aid you in your trading decisions. Remember, you can outperform the majority of the market by simply staying out during bad times.

Trade responsibly and I’ll see y’all next time!

Not following what I’m talking about? Check out my quick cheatsheet to understand how I approach a chart.

Courtesy of 0x_Vlad - trend-based trader and MentFX student

💙 A MIX OF ECOSYSTEM, GOVERNANCE, AND TECH UPDATES

Welcome to another edition of our weekly Arbitrum Corner!

With many delegates in ETHDenver, this week feels more tranquil than usual.

For this reason, this week we bring you a mix of Ecosystem, governance, and tech updates.

The Funding Stylus Sprint funded over 17 projects, which are then spotlighted:

Twitter tweet

More details on the projects: https://blog.arbitrum.io/stylus-sprint-recipients/

The DAO Treasure Diversification Program (STEP 2.0) has also opened up its applications ( “Request for proposals”) and will allocate over 35m ARB.

Twitter tweet

The first version of this program has successfully bootstrapped diversification within the DAO treasury, incentivizing participation from over 35 providers including Blackrock, Securitize Franklin Templeton, Ondo Finance, MountainUSD and more.

Twitter tweet

Read the complete proposal on the forum: https://forum.arbitrum.foundation/t/request-for-proposals-arbitrum-treasury-diversification-step-2/28500

$3m in grants for Arbitrum builders, that can be leveraged to access all the tools and infrastructure provided by Alchemy:

Twitter tweet

USDT0 in action:

Twitter tweet

Fluid volumes on Arbitrum:

Twitter tweet

Dolomite launching GMX strategies:

Twitter tweet

An analysis of GLV performance on GMX:

Twitter tweet

What did $GMX do in February? An update:

Twitter tweet

In other news, $XAI finally announced the launch of XAI Play in March 2025, which should host over 40k games from Steam.

Twitter tweet

New incentive programs are regularly proposed to the DAO, the last one by Jumper and Merkl. Are incentives coming back to Arbitrum soon after the detox?

https://forum.arbitrum.foundation/t/jumper-x-merkl-maga-2025-make-arbitrum-great-again/28463

These are the main updates for the week! If you are in Denver as well make sure to join the Arbitrum Crosschain Collider Event:

Twitter tweet

Courtesy of Francesco - Co-founder at Castle

📖 RECOMMENDED READS

• A debate on the tradeoffs between centralization and efficiency for DEXs:

Twitter tweet

• Potential for Restaking + DeFai:

Twitter tweet

• Ethereum Petra Upgrade goes live on testnet:

Twitter tweet

• Great podcast with Ben from Bybit on the $1.5b hack and what goes on behind the scenes to solve these issues:

Twitter tweet

• The true cost of liquidations

Twitter tweet

That’s it for this week! We hope to see you again in a week with a much more bullish outlook. However, crypto seems increasingly tied to macroeconomic uncertainty.

I thought this was the year of the bull market??? Can we get a refund???

In our newsletter, we may discuss projects or tokens in which we hold positions. While we aim to provide informative content, our views are not financial advice. Please conduct your research and consult professionals before making investment decisions. Crypto markets are volatile, and past performance doesn't guarantee future results. Invest responsibly, and be aware of the risks. Your capital is at risk, and we do not accept liability for any losses.

GM, and welcome to another edition of The Castle Chronicle.

ETHDenver is coming up, and if you’re around, make sure to say hi to our founder, Atomist - he tends to walk around with a big pointy wizard hat.

Here’s what’s happening today:

• 🟢 $Kaito – Everything you need to know about the $KAITO airdrop

• 📈 Price Action – Are there any interesting opportunities while BTC is going sideways?

• 💙 Arbitrum Corner – The Next Growth Phase

Everything you need to know about the $KAITO launch

The $KAITO airdrop has been one of the most awaited launches.

It was impossible to miss the predictions for YAPS, with many forecasting $100+ for each YAP and already planning their retirement.

Well, as always, it did not really go that way.

Most users received about 5-20 $KAITO for each yap.

However, the token distribution was not only about yaps!

This was one of the most interesting aspects of the Kaito launch. Instead of a linear distribution, they went one step beyond a linear distribution and used their algo to take into account:

• Alignment with $KAITO: if you’ve bad mouthed them you can expect a possible penalty, if you have engaged with them repeatedly, by writing about them, voting on Kaito connect etc., you would have gotten a bonus.

• Regional presence

• Emerging Yappers

• Onchain reputation

We believe this is indeed an interesting system that solves some of the issues they would have encountered with a linear airdrop distribution and encourages the creation of a loyal user base.

The best way to get loyal users is… check notes… making them rich.

While many projections expected a 20%+ airdrop, Kaito has found the sweet spot between ensuring users are rewarded well, without creating issues for the long-term success of the platform.

How did the token perform post-airdrop?

Since its launch, Kaito has been listed on most Tier 1 exchanges.

The token has launched around $1-1.20. After the launch on Binance, it has dropped down to $0.80. However, today the price of Kaito is already at $1.8, showing signs of growth.

Nonetheless, only about 30% of the airdrop has been claimed already, leaving room for more airdrop dumps:

The selling pressure post-airdrop was limited, given the 10% initial community distribution:

What about NFT genesis holders?

Kaito has reiterated that Genesis NFTs will have a core role in the future of the platform. As part of this, they used their royalty fees to sweep the NFT floor. What do they know? lol

Twitter tweet

What can users do with $KAITO?

$KAITO will play a critical role in the Kaito ecosystem.

Kaito has repeatedly reiterated its long-term vision for the platform, with plans to expand beyond Web3.

Twitter tweet

For now, users can currently stake their $KAITO for a 10% APR:

Twitter tweet

Furthermore, those who are staking over 75% of their airdrop can now show off a “holder” badge, which can potentially give access to more benefits in the future:

Twitter tweet

All in all, $KAITO’s launch has been extremely successful and will probably serve as a blueprint for other projects looking to improve their token distribution and ensure it goes into the best hands possible.

📈 PRICE ACTION

Nothing new on the BTC chart. Still consolidating in a weekly momentum cycle. Although there’s imho nothing much to do, let’s talk a little bit about existing opportunities in crypto.

Here's what we can see:

• Healthy uptrend

• Active momentum cycle

• Sideways price action

I want to talk a little bit about relative strength again. If this chart was an index, such as the US100, NASDAQ, or QQQ (all the same thing), this price action would provide ample opportunity in individual stocks. It is precisely during moments like these when it’s easy to spot the relative strength of individual stocks compared to the leading index.

So, if we take a look at some big caps and their relative performance compared to BTC (assuming BTC acts as an index), we should be able to see many individual cryptos that are popping off, right? This was especially true in past “alt seasons” where we could see significant outperformance and coins pumping left and right.

Is that still the case, though?

If we look at relative performance in the last 30 days, we can see a few outliers doing better than BTC, but it’s really not much of a spectacle.

Once we get to the 6th highest outperformance it’s only by 13%.

This is a rather disappointing view. But if you really want to get into some crypto trades, OM, XCN, and S make sense to follow, as they are showing significant strength relative to BTC.

Don’t trade out of boredom frens.

It’s a much better idea to wait for a favorable environment and outperform the slot machine addicts.

Trade responsibly and I’ll see y’all next time!

Not following what I’m talking about? Check out my quick cheatsheet to briefly explain how I approach a chart.

Courtesy of 0x_Vlad - trend-based trader and MentFX student

💙 ARBITRUM’S NEXT GROWTH PHASE

Arbitrum’s Next Growth Phase

We’ve seen a change in the winds in recent weeks.

The Arbitrum Foundation is throwing its- weight around, Entropy Advisors are taking a more opinionated stance and even Marc Zeller’s ACI is getting involved.

Despite this, the DAO has already been moving steadily to optimize treasury funds, reintroduce incentives, and refine strategy & operations.

With millions in ARB and ETH actively being deployed, protocols and builders have a prime opportunity to align with the ecosystem’s next growth phase.

Here’s what’s happening right now and why it matters.

Incentives Will Return

After an incentive detox, new programs are being proposed to drive user engagement and liquidity on the chain:

• MAGA 2025 (Make Arbitrum Great Again) – A Jumper x Merkl initiative aimed at boosting liquidity and transaction volume - focusing on increasing the flows of specific assets to the chain.

  • Check the full proposal here.

• ARB Incentives for dApps & Protocols – A Patterns proposal to fund user acquisition Web2 marketing style.

• Word on the grapevine is that one or two more structured frameworks may be on the way too 👀 

• It’s also worth noting that the next ARDC Research task will assess and recommend a path forward for incentives on Arbitrum, led by Castle Labs and Defillama Research.

DAO Treasury Deployment & Diversification

The DAO is actively deploying its treasury instead of sitting on idle capital:

• Stable Treasury Endowment Program 2.0 – After a successful Pilot, the 2nd iteration is now approved, with the DAO set to deploy 35M ARB into real-world assets (RWAs) to build a sustainable, yield-generating treasury for long-term ecosystem growth.

Twitter tweet

• 7,500 ETH Treasury Management Strategy – Seeking DeFi protocols to put ETH holdings into yield-generating and ecosystem-supporting strategies, all managed by structured teams to oversee fund deployments.

Operational & Strategic Restructuring

Governance efficiency is being improved through restructuring efforts:

• Strategic Objective Setting (SOS) - A structured framework to align Arbitrum DAO’s short- and mid-term objectives. This process has just kicked off and should firmly lock down the precise focus of the ecosystem and DAO for the next 2 years, which should go a long way to informing future operations.

Twitter tweet

• OpCo – A DAO-adjacent operations entity to execute strategy with greater efficiency has been approved by the DAO with a hefty budget, however, what this will actually look like is still quite unknown.

  But the appetite for full-time employees is clearly there.

Twitter tweet

• Delegate Incentive Program (DIP) – A $4.2M annual budget rewarding active governance participants, ensuring strong delegate engagement is still ongoing, with iterations of the program consistently ongoing thanks to Seed Gov. What will the next phase look like? Will we see consolidation to a smaller group of larger delegates?

Twitter tweet

Strategic Grants & Ecosystem Development

Beyond direct incentives, targeted funding programs are fuelling long-term growth:

• Arbitrum Audit Program – Brought forward by the Foundation, this is a proposed security subsidy program for early-stage projects. Whether this is run by the Foundation or the current stewards in the ADPC (Axis Advisory, Areta), this is a great comfort for builders.

• D.A.O. Grant Program - Season 3 – Continuing structured grants for ecosystem development, including Orbit-focused projects through the Questbook platform. Keep an eye out here, the ARDC will soon be dropping an assessment on all kinds of grants.

• Stylus Sprint Increased Budget – Additional funding was initially approved on Snapshot but will soon go to Tally. This will fund Stylus-related products and tooling from the likes of Pyth Network, Nuffle Labs, Trail of Bits, and Sylow, along with several already approved teams.

Arbitrum’s Next Growth Wave

Arbitrum has often been criticized for not chasing the latest trends and being a slow-moving machine across the Foundation, OCL, and the DAO. While short-term narratives have their place, the real value lies in staying true to long-term convictions of scaling Ethereum and making Arbitrum the best place for builders.

With Arbitrum just a few steps away from a Stage 2 rollup, it’s time for the DAO, Foundation, and OCL to roll up their sleeves.

We need to see action and execution from all parties, not just words.

We all remain committed to backing the best builders solving the most challenging problems in crypto - but we can do it in a much more strategic, structured, and cohesive way.

This is Arbitrum’s year.

We’re here for the long run.

We’re here to win.

Courtesy of Atomist - Co-Founder at Castle

That’s all for this week!

We hope your yapping paid off 🫡 

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