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This week, Blockworks is taking over Salt Lake City with Permissionless III — a three-day conference specially for users, founders, investors, devs and policymakers.

Our editorial team will be there in force, which means we’re scaling back the Empire newsletter format during the event. 

Enjoy the (slightly) abbreviated read, and if you haven’t secured your tickets yet, grab them here.

— David Canellis

💀 RIP FTX

We’re one step closer to wrapping up the FTX saga for good. Really.

The bankruptcy of the FTX estate — which was once one of the biggest crypto exchanges in the world — will now proceed to its final stages, after Judge John Dorsey approved the estate’s repayment plan yesterday.

Not to mention, three of the five executives charged in the downfall of FTX have been sentenced (Sam Bankman-Fried is serving 25 years, Caroline Ellison will serve two and Ryan Salame is facing 7.5). The last two, Nishad Singh and Gary Wang, are set to be sentenced next month. 

With its two-year anniversary quickly approaching, putting to bed one of crypto’s darkest moments might even come in time for the next bull run. 

But who knows. 

The repayment confirmation hearing, which started early Monday morning, lasted almost the entire day as the bankruptcy court heard objections and cross-examined witnesses. 

Alvarez & Marsal’s Steven Coverick took the stand and faced a cross-examination that touched on a, well, understandably touchy subject for a lot of FTX creditors: the matter of in-kind versus cash distributions. 

Here’s the deal. A lot of creditors pushed the debtor's estate to return their crypto as it was when FTX went bust. However, the plan that was approved yesterday returns the amount of crypto that was in wallets of former customers in cash — not their original tokens.

The caveat that lawyers representing the estate had pushed is that creditors are getting interest on top of that sum, which supposedly makes them more than whole — if we’re basing this all on November 2022 prices, which had been severely deflated by the ordeal. 

Bitcoin, for instance, currently changes hands for nearly four times what it was as FTX suspended withdrawals.

Coverick helped to shed some light on why the estate didn’t budge on its plans to distribute cash. FTX, he said, “never had the crypto.” 

The entire issue came down to the way that the estate had to scrape together the funds. “The debtors simply don’t have the crypto to make in-kind distributions” so they would then have to purchase the crypto to make in-kind distributions. It would be expensive, lower the amount returned to customers,” he explained in court to attorney David Adler, who was representing a set of objectors.

This revelation isn’t a huge surprise. We’ve known for a while that user funds were misappropriated. The FTX estate under John J. Ray managed however to find between $14.5 billion and $16.3 billion. It needed $11 billion to fully pay back customers. 

Now you might be wondering — especially if you were in Adler’s shoes — perhaps the estate could buy the crypto it owes customers to execute full and fair in-kind distributions. According to both FTX’s lawyers and Coverick, that could have ramifications for the broader market. 

Judge Dorsey agreed with them, overruling Adler, when he greenlit the plan. Adler tried to push for a distribution plan similar to BlockFi’s, but Coverick said that FTX was a “very different” case. Again, the judge seemed to agree with that reading. 

There’s “nothing in the code to require in-kind versus cash distributions and so far I’ve only heard that the suggestions for in kind could do more harm than good,” Dorsey told the court. 

What does this mean for creditors? Per the May court filing, 98% of non-government creditors will receive “at least” 118% of claims in cash within two months of the plan’s approval. 

If everything goes to plan, we could officially put FTX to rest in early 2025.

— Katherine Ross

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• BTC and ETH are mostly flat, with the former bouncing above $62,200 multiple times this morning and the latter at $2,400.

• Solana memecoin POPCAT has retraced 12% from its $1.47 all-time high set on Sunday evening. Its market cap is currently $1.2 billion, slightly trailing FLOKI.

• Ether spent most of the past day deflationary amid a jump in native DEX volumes: 23% week-on-week.

• Global NFT sales volumes are also up 21% in the past week to $91.3 million, per CryptoSlam.

• Donald Trump has taken the lead on Polymarket: 52.8% to Kamala Harris’ 46.6%.

ETFs have been a key catalyst for digital assets this year. 

BlackRock iShares manages ~$3.3T globally across their range of ETF products, and CIO Samara Cohen will be at Permissionless to share her views on the growing nexus of the digital asset class and ETFs.

Q: The topic of the Ethereum camp’s dogmatic approach to retaining solo stakers came up on today’s Empire podcast. So, is it worth sacrificing decentralization and ideology for more throughput?

Here’s my confession: I was a decentralization maxi for the first half-decade of my time in crypto. 

I identified with the hardline Bitcoiner. The tangibility of actual machines running proof-of-work is what uniquely ties blockchains to the North Star of censorship-resistance. 

As long as mining rigs hum along in a data center in some remote corner of the world, the blockchain is alive, resistant to police raids, war and other types of physical interference.

Monero was okay, too. At least it was mineable. Same with Ethereum — until it switched to proof-of-stake. 

If the seizure of bitcoin mining farms was a concern, then the potential for one machine to act as thousands, or even tens of thousands, of validators at the same time must centralize that risk.

Throughput, by that logic, is secondary. Yes, Bitcoin and Ethereum can only handle single-to-low-double-digit transactions per second. That’s just the cost of decentralization, I would say.

Besides, it’s not clear whether NFTs and memecoins really need to be onchain, forever cryptographically verified at the expense of the people managing the servers. 

We could simply inspire all that less-important compute to move to more centralized networks. (And therein lies Vitalik’s pitch for Ethereum’s scaling roadmap.)

Doing so would free up the actually censorship-resistant blockspace for folks who need it — those living under authoritarian regimes and hyperinflationary economies.

As Frictionless co-founder Logan Jastremski alluded to on Empire, goals like these are noble. The World Wide Web has such immense societal impact only because it is open source, permissionless and decentralized. 

More censored internets in places like mainnland China and North Korea are, by contrast, methods of control — not tools for freedom.

Bitcoin currently makes up over 58% of the crypto market, up from 41% at the start of last year, its highest level in over three years. But it’s obvious that the blockchain space has moved on from decentralization maximalism.

For most of the world, there is one internet. In crypto, we now have dozens (or even hundreds) of tech companies and startups building competing “finternets” — all with varying degrees of decentralization, speed and security. 

Practically none of them are even close to their final form. 

The trillion-dollar question is then: Does all that make Web3 a winner-take-all situation, with the blockchain that finally cracks the perfect balance taking the lion’s share?

It could be that we end up with two major blockchains: one “money” blockchain and one “general purpose,” with a smattering of boutique networks in their orbit, some of which could be more decentralized and censorship-resistant. They would cater to the hobbyists and those that desperately require those properties.

And, behind the scenes, the continued development of the finternet might look more like the Web2 app layer. Like how Meta runs the backbone for WhatsApp, Facebook and Instagram, and whichever outfit that wins the Web3 race maintains the tech stack for all the killer crypto apps.

In that scenario, decentralization is not the be-all-and-end-all. It’s instead replaced by strict adherence to permissionlessness: becoming an active participant in the network, say by running a high-performance full node in a server farm somewhere — may be prohibitively expensive for most, but it’s still technically possible for anyone. 

In the spirit of pragmatism over dogmatism — and until Moore’s law unlocks more possibilities for blockchain builders — maybe that’s enough.

— David Canellis