Unchained - Solana Insiders Wanted to Reduce Inflation, but It Failed. Here’s What the Proposal’s Author Thinks - Ep. 800

Episode Date: March 14, 2025

The Solana ecosystem just completed a critical governance vote. SIMD-228, a proposal to tie Solana’s inflation rate to its staking participation rate, was put forward by Multicoin Capital and Anza, but despite a majority voting in favor, it failed to meet the required supermajority to pass. Tushar Jain, co-founder and managing partner at Multicoin Capital, who co-authored the proposal, joins the show to discuss: Why he believes the proposal was necessary Whether inflation is too high for Solana’s long-term health If some validators voted against their own interests The silver lining of the governance process Why a smaller proposal focused on fee sharing did pass Whether Multicoin Capital will resubmit a revised proposal Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! BitKey: Use code UNCHAINED for 20% off Mantle Guest Tushar Jain, Co-founder and Managing Partner at Multicoin Capital Links Unchained: Proposal to Cut SOL Inflation by 80% Fails After ‘Close Call’ SIMD Vote Status Kayuza’s tweet  Timestamps: 🤝 0:00 Intro 🗳️ 3:09 Why Solana’s inflation rate was initially an afterthought  💰5:20 Why inflation became untenable ⚙️ 6:23 What does it take to right-size inflation for Solana ⚙️ 7:18 How SIMD-228 would have worked 🤯 11:00 Why Tushar “does not want to bet on people being dumb” 💰 15:48 How this could have strengthened DeFi on Solana 😕 17:49 Why Tushar was disappointed with the outcome but sees a silver lining 📚 19:49 Could the vote have been fairer? ⚖️ 22:06 Whether smaller validators would be unfairly hurt by SIMD-228 🔐 27:37 Does Solana pay too much for security? 📈 27:55 Would this have boosted the price of SOL? ✔️28:19 Whether validators should ask stakers how to vote ✅ 30:13 What the passing of SIMD-123 means for the network 🔄 32:40 Will Multicoin resubmit the proposal? 📰 34:50 News Recap Learn more about your ad choices. Visit megaphone.fm/adchoices

I'll be honest, I was disappointed. I do continue to think this was the right path for the network. And I was disappointed to see it fail. But I was quickly reminded by looking at all the stats of just how big of a success it was for the network governance. Hi, everyone. Welcome to Unchained. You're no hype resource for all things crypto. I'm your host, Laura Shin.

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Today's guest is Tushar Jane, co-founder and managing partner at Multi-Coin Capital. Welcome to Shar. Thanks for having me. Heads up, everyone. Although our guest this week is a managing partner of a registered investment advisor, nothing in this podcast should be considered an offer of Multi-Coyne's investment advisory services or should otherwise be confused for investment, tax, legal, or other financial advice. So, Tishar, you, Vishal Konkani, also,

of multi-coin and Max Resnick of Anza proposed SIMD-228 or Salana Improvement Document 228, which introduced a programmatic market-based emission mechanism based on the staking participation rate. We almost recorded this podcast on Thursday before the final votes were in, and at that time, it seemed possible that the proposal might pass. It was kind of going back and forth between passing and not passing. However, as of now, when we are recording, which is Friday morning, we decided to push the recording until after the final votes were in. It turns out the proposal did not pass. We saw 61.39% voted yes, which was below the required 66.67 threshold. However, of those who did vote, I guess you would call it a plurality voted yes, 44% versus 27%

who voted against, and then the remaining abstained from voting, or not abstain, but they didn't vote. And before we discuss this whole final outcome, why don't we just take a step back and let's start with what problems you were trying to solve with the Solana emissions rate with this proposal. Yeah, absolutely. So to set some context, we've been thinking about Solana emissions and the nature of staking for a long time now. And the work on this inflation reduction, Simdi, began in earnest after some conversations we had at Breakpoint last year. So about five, six months ago, there was a clear sense that inflation was too high amongst several diverse set of network participants. And there was also a sense that inflation was not something that was seriously considered in the early days of Solana when it was set. It was just copy pasted from Cosmos.

And Tolly and the rest of the core dev team have been pretty clear that it just wasn't a priority at the time. At the time they were worried about, I want to ship main net, I want to get things live, I want the network to not fall over. And so they didn't think to optimize on the inflation schedule. They said, ship it, make it good enough. And we can come back to it. And this is a core tenet of like, you know, how Solano thinks is let's go faster. We should ship things. We should have them live rather than having a bunch of academic debates about things.

So especially at the time given where Solano was, I think that was absolutely the right. decision. But now the Solana inflation emissions account for billions of dollars of Seoul being minted every year and being rewarded to stakers, invalidators. And that's a very large amount. And at the same time, we also finally have the real economic value on Solana, the tips, the priority fees, the transaction fees, all summed up, also adding up to very significant amounts in the billions of dollars. In fact, Solana has the highest real economic value of any chain out there at this point pretty consistently. So we thought this was a good time to revisit that inflation schedule because there are ways in which inflation is a cost to the network. Specifically,

there are leaks for commissions that are taken by validators, or some people in some jurisdictions have the interpretation that staking is taxable income. And so they must sell in order to pay their taxes, of course. And those leaks are expensive. And if the sole price goes up from here, those leaks become even more expensive. right? And for me, I am not thinking about the world as it is today. I am thinking about the world as I think it's going to be in six to 12 months, which I'm very bullish on the future of Solana and sold the asset. So as far as I understand, at least currently, especially because this didn't pass the emissions, or sorry, the inflation model initially started at 8%. And it's been decreasing 15% annually. However, at a certain point, when it reaches 1.5, I guess it's supposed to remain stable there.

So explain now what changes you proposed in SIMD-228. So the idea behind SIMD-228 was that inflation should be a function of staking participation. And our fundamental rationale for that is, you know, what is the point of inflation? Like, why do these systems have inflation in the first place? And the reason they have inflation is to incentivize stakers when there isn't anything else to incentivize stakers. And we need stakers because in a proof of stake system, the stakers are what provide the economic security for the whole network.

If you don't have any stakers and you don't have a proof of stake network. So when we thought about it from that first principles perspective, of inflation is meant to incentivize staking, then we thought, well, if inflation is expensive, it costs us something as a network, we want it for a specific purpose, which is to incentivize staking. Well, what we should do is see, are we getting what we want? And are we overpaying for what we want? And what our proposal specifically did is look at the staking participation rate, and when the staking participation rate is high, it would lower the inflation because it would say,

hey, we already have plenty of stakers. Marginal stakers are not adding that much incremental security. We don't need to pay much more for it. And if staking participation was low, it would increase inflation, even above the current curve. So in the case that staking participation dropped down significantly, we would increase inflation more than the status quo inflation in order to make sure that people were incentivized to come back in, stake and secure the network. Yeah, you know, it seemed to me somewhat similar to EIP-1559 and that it is trying to tie the economic model of the network to the participation.

and because of the fact that staking, you know, is tied to security, that also, you know, it prevents you from overpaying for security or underpaying. So for listeners who have that as a reference, that is how I was viewing it. And I saw that, you know, beforehand, there was a pretty strong debate. It seemed like there were more people in favor. But like I listened to a Twitter space is, I think Mert was the host. And it seemed kind of like set up as a little bit of a debate between the pro people. And I felt like Lily was like the main anti-person, Lily Liu of the Salana Foundation, the president.

But there was one part of the argument where I felt like, oh, I think she has a point there. She talked about the ETPs in Europe. And she said that the Salana ETPs were actually had. they had the most AUM, I think. And she attributed that to the fact that they offered the highest percentage yield because the ETPs in do allow yield from sticking to be a part of the product. And an interesting part of the argument was she said that, well, it was really your counter argument.

You said that the real yield they're getting is actually lower and that the people who are swayed by that sticker price are sort of like. dumb retail, but Solana would want to, you know, attract more like Wall Street types who understand who can calculate the real yield. But what was interesting to me was if I think about the history of crypto, it feels like retail has always led and that Wall Street is more like the followers. I totally understand your point from like a mathematical perspective, But I think where I sided with Lily was that Wall Street's not going to go to a chain where they're like dominant. They want to go to where the retail activity is.

I was just curious for your thoughts on that. Yeah, absolutely. That was a fun Twitter spaces. It was extremely well attended. We had thousands of people dialing in. And I have to say the amount of passionate discourse about this Cindy has been very impressive. So I appreciate all of the people who joined that space, as well as the several other spaces that we did. We did a bunch of podcasts and calls.

There was a lot of engagement here. To address your specific point that you brought up about those slana staking ETPs in Europe, I would say I have a general principle of I don't want to rely on people being dumb. I think that overall, like, people get smarter over time. They learn more about how systems work. And I don't want to bet on people are going to be done. And the reality is these salinas staking ETPs in Europe have actually a negative real yield, not just like a slightly lower real yield, because what happens is these ETPs, they must meet intraday liquidity requirements.

So what that means is they cannot stake 100% of the soul that they have. They can only stake a portion of it because if they can't meet an intraday liquidity requirement, that's a huge crisis. And let's say you're only staking half of your soul in the ETP, which I think is higher than the actual amount. I think most of them are staking even less than half. Well, if you're staking half, you're earning three and a half percent off the 7 percent. inflation yield, but inflation is four and a half percent, right? So you actually are earning a negative 1 percent yield by participating in those ETPs. So that's point number one. Like I just don't, I don't want to bet on people being enumerate and not understanding what they're buying. I think

that's not great. And then point number two, along those same lines is Solana, the asset, moves by 5% in a regular day. Like, it's not unusual at all to see it move 5% or even 10% in a regular day without any big, you know, earth-shattering news or anything. And when you look back at the historical volatility, this thing is like a 70 to 80-80-val asset for the finance people who are listening who understand what that means. It's just an incredibly volatile asset. Now, I don't know what sophisticated investor is going to allocate to a a 70, 80, ball asset in order to earn what is basically a two and a half percent real yield, the difference between the seven and the four and a half, the seven nominal staking return

and the four and a half inflation rate. It's just not a rational thing to expect to do. And I think the future of Solana is to get more of the extremely sharp, knowledgeable people on. I want to bring on more intellectual capital into the Solana ecosystem. I am not looking to onboard, you know, enumerate people who don't understand what they're doing. Like, that's not, I think, in the best interests of the network. All right. So in a moment, we'll talk a little bit about another possible benefit they look to introduce, as well as how things actually turned out.

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Use code unchained for 20% off. We have another listener comment, this one from Tyler Menzer on X, responding to Mike Belchie's remarks on how the crypto industry can prevent U.S. policy from flip-flopping every four years. Tyler Menzer writes, quote, not having massive billion-dollar frauds blow up every couple years would be a great start. Even with Gensler at the SEC, winds were blowing in crypto's favor until F-T-X-SbF gave new life to strict

enforcement. Again, if you want to hear a comment featured on the show, please write a review or leave a comment on an episode on YouTube or X. Back to my conversation with Tushar. One other thing I wanted to ask about was I saw that in the proposal you said that a benefit is that it could possibly benefit defy on Solana. And I wondered if you could explain how you thought that might happen. Absolutely. In my mind, Solana is an economy. Just like Ethereum is an economy, these ecosystems are economies. And when you think about the economy, there's this risk-free rate is like a fundamental concept in all modern economies. And the risk-free rate serves as kind of a hurdle rate for other types of investment.

You would never make an investment that returns you less than the risk-free rate, for example. It's just not rational to do so. Maybe there's some enumerate people out there going back to my earlier point that do, but that's not what I want to bet on. I want to bet on rational, smart people. And in an ecosystem like Solana, the return to staking is the risk-free rate because there's no slashing yet. No one's ever been slashed. So it's effectively risk-free. Like, that's how everyone perceives it.

And so that sets a high hurdle rate for people to do. participate in defy because is it doesn't make sense for you to provide liquidity on like a sole usDC AMM when that might earn you 5% but staking earns you seven right like it it doesn't uh I made those numbers up obviously like the return to providing liquidity on AMM is a very volatile thing and there's a lot of other considerations but there's a number of other uses for salana the asset in defy that I think become possible with a lower staking rate hurdle in order to make those activities economically rational. All right.

So now let's talk about the outcome when you saw that it didn't pass. What was your first thought? I mean, I'll be honest. I was disappointed. I do continue to think this was the right path for the network. And I was disappointed to see it fail. But I was quickly reminded by looking at all the stats of just how big of a success it was for the network governance. All of these networks have some sort of big milestone governance moment at some point in their maturity.

In my mind, for Bitcoin, that governance maturity moment was actually the block size wars in 2017. And Solano right now has a similar market cap to what Bitcoin did during. during that whole debate in the mid tens of billions to 100 billion-ish market cap range. Ethereum has had a number of these types of governance debates as well. If you go back as early as the Dow hack or even the migration to proof of stake, I think are both good examples of those types of governance debates. This one was the first one where there were actual votes. people got to actually vote. It wasn't just a bunch of people who are insiders or, you know, in the know,

sitting in closed chat rooms or physical rooms making the decision about what was consensus or not. We got to see very clearly and numerically what does the community think. And while the proposal did have the majority of votes, we believe that in order to change things, you need to have a super majority. And we did not meet that threshold. So we don't think this change should happen until there's maybe an updated proposal that does win enough community support. So that was the first thing I thought. The second thing I thought about is, okay, what did we learn from this process?

Because this was a stress test. This was a major stress test of the Solana governance system. Swana has gone through a number of big technical stress tests, as everyone is aware, as it scaled its transaction pipeline and number of users, et cetera. But I think this was the first big governance stress test. And we learned a lot. I think the network passed with a huge diversity of participation, more institutions participating than ever before, more voter participation than basically anything in crypto ever. However,

the system was not perfect. There are a number of things that, you know, I wish were different. I wish, for example, that validators had been able to change their votes after they had been cast. There were a number of significant examples where validators cast a vote and then they heard from their stakers that the stakers wanted something different and they couldn't change it. And, you know, that's something I think we can improve in the future. I think that the way that stake pools operated in this governance was suboptimal because the stake pools weren't able to voice the opinions of their stakers. And that was a significant amount of stake that basically didn't have a voice because of how

stake pools are set up. And then last and probably most theoretical, something I've been thinking about is right now governance power is vested in validators. And that's an interesting slash maybe weird bundle to force stakers to pick where I as a staker I'm forced to pick someone not only who I think is going to deliver the best performing validator for the network. Obviously performance matters. Solana is all about performance. But also. also is going to be most aligned with me on governance questions. And to me, like, these are two different skill sets. And the fact that we have to bundle them together is potentially weird in a room for improvement.

Well, one thing that I noted was in the end, majorities of smaller validators voted against. And they were the ones in the lead-up that were noted to probably, suffer the most under this proposal. According to Dune Analytics, amongst validators with stake levels below 500K, which Dune broke out into three different categories, all had majorities that voted against. And then there were two categories with stake level above 500K. Those two categories did vote for it, but the smaller set, which was those with between 500K and 1 million Solstaked, just barely voted for it at 51 percent and those with more than

1 million Solstake voted for it by almost two-thirds. So I wondered if you felt like, you know, seeing this that there would have, or maybe this sparked ideas about how you might propose next time to do it in a way where the smaller validators wouldn't necessarily be punished so much. I don't think the smaller validators are disproportionately hurt by inflation. reduction proposal for a few reasons. One, smaller validators almost entirely run on zero percent inflation commissions. That's become the norm on Solana. It's actually the larger validators who have high commissions.

And you see a number of large validators with eight, 10 percent commissions. So in terms of revenue opportunity being lost, the larger validators, actually suffered or would have suffered a much larger loss of revenue than the smaller validators. And just to understand, you mean percentage-wise or you mean in absolute numbers? Or what are you saying? In both. Because the larger validators have higher commissions on average. And obviously, they have more stake.

And so just in dollar volume alone, they would have. incurred more of an effect from this change than the smaller validators. I think, you know, what would I do differently to win over the smaller validators? Wait, but just to understand it, are you also considering profits in that or, you know, like when you just say revenue, that's only one side of the equation. Like, I can't remember exactly what I was reading, but I feel like people were saying that it would disproportionately affect them? Yeah, I'm not, I'm just talking about revenue. Profits is really hard to do because, uh, you don't see specific cost breakdowns. A lot of these things are conglomerates, uh, where there's one business line cross subsidizing and cross

selling another business line. For example, if you're an RPC operator, it makes sense to run a validator in order to read the tip of the chain state, uh, in order to be able to provide that to your RPC clients, if you're in exchange, you want to run a validator so you can have the latest information about the status of the chain for deposits, withdrawals, and those types of normal operations. If you're a trading firm, you definitely want to run a validator in order to have the latest information about prices on chain and trade opportunities that you have. And in fact, I think the future of Solana is those types of validators, not small independent validators who just get paid to do some DevOps and, you know, keep a server running. I think the

future of Solana is validators who charge no commissions on anything and all have orthogonal business models, business models like being trading firms or exchanges or RPC providers or big ETF issuers or asset managers or all of these other types of businesses. I don't think that's going to happen, you know, in the next year or two. But if I fast forward five, 10 years, I think that is the natural equilibrium state that we will tend towards. Okay. But anyway, so to continue about how to refine the proposal? We did refine the proposal several times. We first published our proposal in mid-January. and we had several calls with validators.

We updated the formula significantly about a week after we put up the proposal after talking with validators. We then added a gradual rollout from one epoch to 10 epochs to 50 epochs of gradual rollout. We had several conversations with core engineers and obviously some of those media appearances, the Twitter spaces and the. the podcast and such around it, which all incorporated lots of feedback. And I do want to thank all the people who took time to provide that feedback.

I think whether positive or negative feedback, it was all very valuable. And what it takes for governance to be successful is to have a lot of people who care. And clearly people care. And they care a lot. And I think that is quite possibly the most bullish takeaway out of this whole process is how much people care. I wonder what you think of this tweet that I saw, somebody named Kizuya, tweeted that the layman summary of what happened is, quote, hey, validators, Sol Network is massively overpaying for security. We can have a much healthier and sustainable emission schedule,

but it would involve cutting your rewards. In the end, though, our network will be stronger for it, likely even leading to higher Sol price to more than make up for it. And the validators, not surprisingly, said, nah, I'm good. I'd prefer to keep getting massively overpaid for my services. And then he commented, if you're a sole long-term investor, there is no way to spin this outcome as positive. What's your response to that? Well, I would say every major investor who talked about this proposal was supportive, every single one. We had every big fund and every major long-term sole holder was positive about this proposal and publicly voiced their support.

We had several major funds publicly saying we intend to vote yes. I think one of the main issues that we ran into is really the principal agent problem here that this tweet describes. And a lot of the validators, whether intentionally or unintentionally, and I don't want to ascribe malice when the tooling wasn't there, did not have the tooling to reach out to their stakers and say, what do you want? How do you want me to vote? And I think having that tooling would have made a huge difference because what happened in the vote is that the very large stakers were able to reach out

to their validators because they have a relationship. Like I know everyone multi-coin stakes too. And I know them by name and I have a relationship with them. And so do the other big investors. Like they know exactly who they're staking to. And they can go pink. them on telegram or send an email and get on the phone with them and tell them what they think, which is why those large validators, because the large stakers typically stake to large validators, those large validators voted overwhelmingly yes for the proposal because they actually heard feedback from their stakers. But for all the smaller validators, they didn't have the ability to reach out to all their stakers. There's no tool to do that. And so in the absence of that information,

it created this incentive issue of, well, I don't even know what my stakers want. Am I going to reduce my revenue without even hearing from them? Okay. So last quick question. There was another proposal that was voted on at the same time, SIMD 1, 2, 3. That one passed. That one introduced on-chain revenue sharing for validators and stakers. Can you tell us a little bit more about that and why you think that passed?

because some people, like I saw Anatoly tweeted something where he basically said, like, stakers weren't necessarily, or validators weren't necessarily acting in their self-interest if one of these did not pass, but one did. Anyway, curious for your thoughts on, you know, why that passed and also what this means now that it has passed. Absolutely. Before I get into that, let me just explain briefly what SIMD-123 was or is. it's a method for validators to distribute the priority fees that they get to their stakers on chain without having to use some other distribution tool like GDOS tip router.

So this allows them to do it within the Solana system itself, first party. And this did pass. And there's a couple of things that are, different about SIMD-123 versus 228. Simdi-123 is opt-in. What that means is validators don't have to send those rewards to their stakers. It's just that now they have the tooling to do so. It's optional.

No one is forcing anything. Citi-228 would have been enforced across the whole network. You can't have different inflation rates for different validators, obviously. So I think that was a meaningful difference in the amount of opposition. that comes in because some of those validators who are charging high commissions and, you know, taking that as revenue, they believe that they have the market power that they won't have to opt into CIMD 1, 2, 3 distributions. So it doesn't affect them.

And so they didn't vote no. And CIMD 123 did pass, but with much lower participation. and that's because it didn't have as much of that negative response from some of those validators because it was optional and they didn't think it would apply to them. Okay. All right. Well, this has been fascinating. And, you know, kudos to you for, you know, just coming on here and talking about it all

right after suffering a defeat of your proposal, but should we look for Volticoin to submit something similar again? Maybe. First, I think what I want to do is write down all of our learnings from the process. This was, like I said, a meaningful governance stress test, and it's a scaling stress test. We're going to have to learn from this and do better next time as a community. because this is not going to be the last governance question that's Lana ever has, obviously.

So my immediate focus is to think about how can the governance process be improved? And after we've had a chance to really think about that from first principles, absorb the learnings from this, talk with the whole variety of stakeholders who did participate in this vote to understand what they think, I expect we'll come back with an update to the governance process. And then after that, I think it'll be appropriate to bring up economic changes again. But the immediate thing on my mind is how do we make the governance process better and incorporate some of our lessons? All right. Well, thank you so much for coming on Unchained. Thank you for having me. Don't forget. Next up is the weekly news recap today presented

by Wondercraft AI. Stick around for this week in crypto after this short break. Mantle is revolutionizing its on-chain financial hub. Powered by a $4 billion treasury and proven products like Mantle Network and Emmeth Protocol, Mantle is launching three innovation pillars. Enhanced index fund for optimized crypto exposure, Mantle Banking for blockchain-powered banking, and Mantle X for AI-driven innovation. Experience the future of finance with Mantle and follow Mantle on X to stay tuned. Welcome to this week's Crypto Roundup. In today's recap, President Trump ends Operation Chokepoint 2.0, and Senator Cynthia

Lummis reintroduces a bill pushing a Bitcoin acquisition strategy for the U.S. government. Meanwhile, Binance lands a huge investment from Abu Dhabi. Hyperliquid faces losses from a Wales risky Ethereum trade, CBOE plans staking services for Fidelity's Ethereum ETF, and a trader suffers a dramatic loss due to a major sandwich attack on Uniswap. Thanks for tuning in to the weekly news recap. Let's begin. Trump family reportedly explores Binance. Dot-use investment. CZ denies talks.

President Trump's family has reportedly considered acquiring a stake in Binance's U.S. branch, coinciding with founder Cheng Peng Zhao's attempts to secure a pardon from Trump's administration, according to the Wall Street Journal. According to reporting from Unchained, the negotiations blindsided Binance. Dot Use's current leadership, citing a source close to the situation. Management has no connectivity to CZ, said the source. They have no idea what he is doing. Dow previously served four months in prison after pleading guilty in 2023 to charges linked to

Binance's anti-money laundering violations. The potential investment could involve World Liberty Financial, a crypto venture backed by Trump and his ally Steve Whitkoff. However, CZ denied the claims via social media, writing, the WSJ article got the facts wrong, adding, I have had no discussions of a Binance.us deal with, well, anyone. CZ characterized the report as an attempt to attack crypto and President Trump, though he humorously acknowledged, no felon would mind a pardon. Trump ends Operation Chokepoint 2.0.

At last week's White House Crypto Summit, President Trump announced that he's officially ending Operation Chokepoint 2.0, referring to allegations that previous regulators deliberately limited crypto companies' access to banking services. The summit brought together crypto industry leaders and federal officials to address concerns around restrictive financial regulations. Immediately following Trump's announcement, the Office of the Comptroller of the Currency revised its crypto-related guidelines. Acting Comptroller Rodney E. Hood clarified that banks no longer need prior OCC approval for handling cryptocurrency custody or stable coin payments, emphasizing that banks can now apply their standard risk assessment procedures. Hood stated, Today's action will reduce the burden on banks to engage in crypto-related activities.

The new guidance marks a significant shift, easing restrictions previously imposed in November 2021. US Senator reintroduces ambitious Bitcoin bill. Senator Cynthia Lummis reintroduced her Bitcoin Act on Tuesday, proposing that the U.S. government buy $1 million Bitcoin worth approximately $80 billion, Over the next five years, this legislation goes beyond President Trump's recent executive order, creating a strategic Bitcoin reserve by setting clear parameters for acquisition and long-term storage. Under Lummus's proposal, the U.S. Treasury would finance these purchases using profits from the Federal Reserve's gold reserves.

The Bitcoin acquired would be securely stored across decentralized, government-operated vaults nationwide, and must be held for at least 20 years. By transforming the president's visionary executive action into enduring law, we can ensure our nation will harness the full potential of digital innovation, said Lummus. Five Republican senators co-sponsored the bill, with companion legislation introduced in the House. U.S. House votes to repeal IRS. Crypto-broker rule targeting defy. The U.S. House of Representatives voted 292 to 132 to repeal an IRS rule requiring decentralized finance platforms,

and other crypto entities to act as brokers, collecting detailed taxpayer and transaction data. The resolution, introduced under the Congressional Review Act, overturns a Biden-era regulation finalized in December 2021. Proponents argued that DeFi platforms lack the infrastructure needed to comply, with Repereal Jason Smith stating, DeFi platforms do not and cannot even collect the information from users needed to implement this rule. However, critics such as Reparone Lloyd Doggett called the repeal special interest legislation, suggesting it could aid tax evasion and illicit financing. The Senate, which previously approved a similar measure, must pass it again before sending it to President Trump, who is expected to sign it into law.

OKX rejects claims of EU probe. OKX, one of the largest cryptocurrency exchanges, has denied reports claiming it is under investigation by European regulators for allegedly facilitating the laundering of $100 million from the recent $1.5 billion by-bit hack. According to Bloomberg, European regulators are examining OKX's decentralized Web3 services under the markets and crypto assets framework, questioning whether its permissionless wallet tools were misused by North Korea linked hackers. OKX founder Starshu denied the allegations on social media, calling the claims a misunderstanding

and blaming Byb its own insufficient security protocols. Our Web3 wallet services are no different than those provided by other industry players. OKX stated, emphasizing that it actively blocks IPs from prohibited regions. Meanwhile, By-Bit CEO Benjo detailed how the North Korean hackers converted their stolen ether into Bitcoin, noting that attackers primarily converted stolen Ethereum through various cross-chain bridges, rather than exclusively via OKX. European regulators are reportedly considering actions, including revoking OKX's MICA license,

pending further investigation. Hyperliquid Vault suffers $4 million loss. Hyperliquid, a perpetuals trading platform, reported a $4 million loss, after a trader executed a highly leveraged trade involving more than $200 million worth of Ethereum. Initially, the trader deposited $4.3 million in USDC as collateral, opening a 50x leveraged long position totaling 113,000 ETH. As the trade generated nearly 8 million in unrealized profits, the user withdrew part of their collateral, triggering liquidation. Hyperliquid's automated market-making vault was forced to absorb the large liquidation at unfavorable prices, resulting in $4 million in losses due to price slippage.

The trader ultimately walked away with approximately $1.8 million in profit. Hyperliquid clarified there was no protocol exploit or hack, but acknowledged the risk inherent in automated strategy. The platform has since reduced maximum leverage for Ethereum to 25x to mitigate similar future risks. Trader loses $714,000 in major unusual sandwich attack on Uniswap. A cryptocurrency trader suffered a significant loss on Wednesday after swapping roughly 733,000 of stablecoins coins for only about $19,000 in USDT due to an apparent sandwich attack on Uniswap V3's stable coin liquidity pool. On-chain analysts noted that an automated MEV bought withdrew liquidity just before the trader's transaction, drastically skewing the price between two stable coins pegged to $1.

Defy analyst Michael Nadeau explained the attacker, front ran the trader's transaction, causing the victim to lose about $714,000 in a single trade. Speculation quickly arose online, with Defi researcher the Defiak observing an unusual path for funds before the attack, suggesting it could potentially be linked to money laundering. Another analyst proposed the loss could be intentional, designed specifically as an indirect laundering technique, though the actual motive remains unclear.

CBOE moves to enable staking for Fidelity's Ethereum ETF. CBOEBZX Exchange has requested regulatory approval to allow staking services within Fidelity's Ethereum ETF, known as FETH. According to a recent filing with the U.S. Securities and Exchange Commission, the proposed rule change would enable Fidelity to stake part or all of the Ethereum held by its fund through selected staking providers. This staking would generate additional returns for investors, currently around 3.3% annually in ETH rewards, treated as income by the ETF. Since its approval last July, Fidelity's Ethereum ETF has become one of the largest Ethereum ETFs, managing nearly $1 billion despite recent market declines. Previously, staking wasn't permitted in approved Ethereum.

ETFs, a strategy that helped secure regulatory acceptance. Similar proposals are pending for gray scale and 21 shares ETFs. The SEC must still review and approve the rule change before Fidelity can implement staking. Binance secures landmark investment from Abu Dhabi's MGX. Binance received a $2 billion investment from MGX, an Abu Dhabi-based technology investment firm, marking Binance's first ever institutional funding. The transaction conducted in six. stable coins, grants MGX a minority stake in Binance, and represents MGX's first investment in the cryptocurrency sector. MGX managing director Ahmed Yahia stated, MGX's investment in Binance reflects our commitment to advancing blockchain's transformative potential for digital finance.

Binance, currently the world's largest cryptocurrency exchange, with daily trading volumes exceeding $20 billion, already employs around 1,000 staff in Abu Dhabi. The partnership aims to enhance innovation in AI, blockchain, and financial technologies. The transaction will be 100% in crypto, marking it the largest investment transaction done in crypto to date. Added Binance founder CZ. Also, this week, Binance introduced a new community-driven governance model, allowing users to directly influence which tokens get listed on the platform.

Projects selected by Binance from its community observation list will now undergo public voting, top-voted tokens being considered for listing after additional due diligence. Users also have the power to vote on delisting tokens that are inactive, pose investment risks, or fail to provide sufficient transparency. FunBits? Bitcoin Whale plays cat and mouse with the FBI. A man named Juan Carlos Reynoso just gave a masterclass in avoiding Bitcoin seizure, moving nearly $10 million in BTC with lightning-fast precision after the government ordered

him to surrender it. Court documents called his speedy maneuvers frenzied, executed with intuition more accurate than the Oracle at Delphi. Unfortunately for Renoso, psychic skills aren't recognized in court. He now faces fines or jail unless he returns the funds, along with a fine of $10,000 per day. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to unchainedcrypto.com newsletter, that is unchained crypto.com newsletter and sign up for our free newsletter. so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin with help from Matt Pilchard,

Juan Oranovich, Megan Gavis, Pam Majumdar, and Margaret Curia. The weekly recap was written by Juan Aronovic and edited by Stephen Erlich. Thanks for listening.