Eterna's Insights - November 2024

President-Elect Trump Transition Team Pro-Crypto Stance

The incoming Trump administration is signaling a pro-crypto stance with key appointments that could shape the regulatory landscape for digital assets. Scott Bessent, a hedge fund manager and Bitcoin advocate, has been nominated for Treasury Secretary, a role central to shaping the administration's approach to blockchain technology. Former SEC Chair Jay Clayton, known for his measured approach to crypto regulation, has been tapped as U.S. Attorney for the Southern District of New York, a critical position for financial enforcement.

The administration’s pro-crypto outlook is further strengthened by the appointment of Paul Atkins, a former SEC commissioner and advocate for reduced regulatory burdens, to shape crypto policy. Atkins' history of promoting balanced digital asset regulations signals a shift toward a more innovation-friendly SEC. Combined with the consideration of crypto-supportive figures like current SEC Commissioners Mark Uyeda and Hester Peirce for key roles, these appointments indicate a regulatory environment poised to foster blockchain innovation while solidifying U.S. leadership in the space.

Goldman Sachs Joins the Blockchain Race

Goldman Sachs is spinning out its enterprise blockchain platform, GS DAP, to enable institutions to trade, settle, and tokenize financial instruments using distributed ledger technology. The platform will focus on facilitating secondary transactions of tokenized assets and partnering with trading platforms like Tradeweb Markets. Scheduled to launch within 12 to 18 months, GS DAP will operate as an independent business, separate from Goldman Sachs' digital asset division.

Unveiling the Beam Chain, Ethereum’s Second Consensus Overhaul Upgrade

On November 12, Ethereum Foundation researcher Justin Drake unveiled an ambitious plan to overhaul Ethereum’s consensus protocol, introducing the "Beam Chain." This proposal aims to replace the current Beacon Chain, which has served as Ethereum’s consensus layer since the Merge upgrade. According to Drake, the Beacon Chain's design is outdated, with its specification frozen five years ago, accumulating significant technical debt. The Beam Chain aims to incorporate the latest advancements in consensus design to move Ethereum closer to its "endgame" state—a state of code ossification where the protocol becomes stable and resistant to further changes.

The Beam Chain focuses on four main objectives: faster blocks (4 seconds instead of 12), faster finality (single-slot finality), chain snarkification (using zkVMs to prove Ethereum state data), and quantum security (hash-based cryptographic signatures). The Beam Chain proposal has sparked mixed reactions within the community, with some seeing it as a necessary evolution and others criticizing it as either overly disruptive or insufficiently ambitious.

Tether Tokenizing the World

Tether has launched Hadron, an asset tokenization platform designed to help businesses, funds, and governments convert assets like stocks, bonds, and commodities into tokens. Hadron provides tools for managing the entire tokenization process, including compliance (KYC/AML), risk management, secondary market monitoring, and blockchain reporting. Currently in private beta, the platform supports multiple smart contract systems and Liquid by Blockstream, built on Bitcoin.

Court Rules in Favor of Tornado Cash

The U.S. 5th Circuit Court of Appeals overturned sanctions against Tornado Cash smart contracts, ruling that the Treasury Department exceeded its authority by adding the contracts to the “Specially Designated Nationals” list. The court found that the immutable smart contracts are not property, services, or ownable entities, and continue to operate independently of OFAC’s designation.

While the ruling is a significant win for crypto advocates like Coinbase and CoinCenter, it has limited impact on allegations against Tornado Cash founder Roman Storm. The decision addresses the sanctions but does not affect DOJ charges related to alleged facilitation of transactions with sanctioned entities. Storm’s trial has been delayed to April.

Eterna Portfolio Company Spotlight:

OpenLayer Becomes Part of the Eterna Capital Portfolio

We recently announced our investment in OpenLayer, an AI-driven data layer revolutionizing traditional data flows. By enabling authenticated, arbitrary Web2 data to flow seamlessly into the blockchain, OpenLayer opens new opportunities in areas like AI training, where massive volumes of unstructured text, image, and video data are in high demand. Eterna Capital believes that by unlocking authenticated Web2 data for blockchain applications, OpenLayer is not only addressing a critical bottleneck but also laying the foundation for a more interoperable, decentralized, and user-centric internet.