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Howdy!
It seems like anyone who’s anyone in New York had their flight home canceled last night — including myself, who is writing this newsletter from North Carolina after being rugged by Spirit Airlines.
This country really needs to build more trains. Anyway:
WBTC controversy could spell opportunity on Solana
Last week, the Ethereum DeFi project MakerDAO cut off lending and borrowing of wBTC — a “wrapped” bitcoin asset issued by the crypto exchange BitGo.
Maker did so because BitGo said it would begin sharing custody of wBTC with BiT Global as part of a “strategic partnership” with Justin Sun and the Tron ecosystem. The move partly showed how polarizing Sun has become: His name is mentioned six times in the first two paragraphs of the proposal to offboard wBTC.
BitGo raced to quell fears surrounding Sun’s involvement, reversing course on having BiT Global control two of the three keys needed to control wBTC. Coinbase seized on the snafu to advertise its own wrapped bitcoin product. For an overview of where the situation stands, I recommend this excellent piece by my colleagues Macauley Peterson and Donavan Choy.
The idea behind wrapped bitcoin is pretty simple: Ethereum users, for instance, might want to use bitcoin for things like DeFi collateral, but Bitcoin and Ethereum are different blockchains with different token standards. To solve this, wrapped bitcoin issuers buy bitcoin, stash it away, and offer tokens that track the price of bitcoin but in the wrapping of an ERC-20, which is Ethereum’s token standard.
The security of this all depends on you trusting the custodian not to do nefarious things with the bitcoin, so BitGo’s Justin Sun partnership being questioned is a big deal for wBTC — and anyone hoping to claw away some of its market share.
Interestingly, the Solana DEX aggregator Jupiter’s anonymous co-founder meow was part of the founding team behind wBTC. They also helped make wBTC the largest wrapped bitcoin product on Solana: The Jupiter Liquidity Provider pool holds about $70 million in wBTC out of around $106 million that’s been brought to Solana using the Wormhole bridge.
Soon after the wBTC controversy spilled into public view, meow got on an X space with Sun and BitGo CEO Mike Belshe, where it was brought up that BiT Global could have a second “backup” key that some feared would let it gain access to wBTC’s 2/3 multisig wallet by itself.
Jupiter “would have exited [immediately]” from its wBTC exposure if this policy remained in place following the X space, meow told me in a text.
BitGo changed its model to leave Sun-affiliated BiT Global with just one key, but Jupiter will still “likely” be looking to diversify its wrapped bitcoin exposure, meow told me, noting that alternatives won’t necessarily be more secure.
Bitcoin is a big deal everywhere in crypto, though wrapped bitcoin is still bigger business on Ethereum than on Solana. There is roughly 154,000 wBTC on Ethereum, according to a Dune dashboard, compared to around 1,800 wBTC bridged to Solana via Wormhole, per Solscan. Other wrapped bitcoin alternatives are available on Solana, like tBTC and 21BTC, but neither has a significant market cap — there are around 75 tBTC and 11 21BTC on Solana.
With wrapped bitcoin facing scrutiny, now could be the time to strike for would-be wBTC competitors. I’d personally expect to see some movement happen here in the coming weeks.
“[It] seems like a good opportunity for wBTC alternatives, especially Solana focused solutions, to carve [out] some space from wBTC’s current moat,” Infra, the anonymous labs lead at Raydium told me in a text.
— Jack Kubinec
Zero In
It wasn’t a great week for SOL flows:
CoinShares data showed that around $39 million flowed out of Solana last week, which the asset manager said is SOL’s largest week of outflows on record. In a writeup, CoinShares chalked up the outflows to reduced memecoin trading volume.
One Dune dashboard indicates Solana DEX volume was at its lowest point since February last week. SOL itself has been roughly flat on the week, trading at around $144 at press time.
— Jack Kubinec
The Pulse
Google’s vetting process for apps on its Play Store is facing scrutiny after a Florida woman named Maria Vaca claimed she lost $5 million to a scam crypto app. According to Vaca’s lawsuit, it took Google three months to remove the app despite being notified by the Consumer Financial Protection Bureau. The app, masquerading as a legitimate crypto wallet, allegedly allowed cybercriminals to steal funds from unsuspecting users. Although the app wasn’t named in the lawsuit, some are speculating that it could have been a clone of Solana’s popular Phantom wallet.
The frustration with Google’s oversight was palpable, with @neoworldlife stating, “It’s about time Google adopted Apple Store level checks and compliance.” @d3fenders commented, “In a decentralized world, you are ultimately responsible for the care that you take of your crypto. It’s a shame that Google is getting fined for typical web3 thievery.” Meanwhile, @SolanaJax advised, “Get a cold wallet please – avoids a lot of these issues.”
Others questioned the severity of the issue, with @tribes_two speculating, “I bet it was user error,” while @ABCat07340480 went so far as to suggest that this case could lead to a broader crackdown, wondering, “And this can lead to a crypto wallet ban on the Play Store if this woman has her way and is lying for free money.”
Skepticism about Vaca’s chances in court was evident, with @chefderek.eth acknowledging, “All of us crypto people know she ain’t gonna win.” Others took a similarly harsh view of the situation, like @branditmanaged who asked, “Who the hell keeps even $50,000 let alone 5m in crypto on a hot wallet let alone a phone hot wallet?!?” @Plagueliche added a bit of dark humor, “I need to sue more people for my stupidity.”
However, the incident has also sparked deeper concerns about Google’s accountability. As @7Pirelli pointed out, “They don’t care about $5 million. Punish them with $50 or $500 million, then something will maybe change.” And @Coachkcrypto added, “It’s crazy that there was a scam app on the play store for MONTHS. It took Google 3 months to remove an app that stole over $5m worth of crypto… isn’t three months a little bit long?”
— Jeffrey Albus
One Good DM
A message from Tom Wan, strategy and business development at 21.co:
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