Howdy!

It’s one of those weeks for changing my LinkedIn bio to “Fintech reporter.”

Today, we’ve got the exclusive on Zeta’s rebrand, plus insights on a major regulatory shift. Let’s dive in!

Solana DEX bets on network expansion to stay ahead

Solana-based perpetual futures exchange Zeta Markets has shipped testnet for Bullet, a low-latency “network extension,” the team told Lightspeed exclusively. The platform’s mainnet launch is planned for early Q2 of this year.

The move comes as Solana perps developers face competition from Hyperliquid, a new perps DEX operating as a layer-1. The chain is currently secured by four validator nodes all co-located in Tokyo, which has raised some centralization concerns. However, Hyperliquid has still vaulted past other perps DEXs. It processed roughly 6x as much perps volume as every Solana perps DEX combined last week, according to DeFiLlama. 

“Solana has simply lacked a reliable and performant perps DEX,” Zeta Markets co-founder Anmol Singh said in an email. “[Hyperliquid] has shown where the bar is, Bullet pushes this bar further.”

Bullet plans to pull this off with a network extension, which is kind of a Solana version of an Ethereum layer-2. Like a layer-2, Bullet will process transactions with a sequencer before batching and settling the transactions to Solana. Bullet’s zero-knowledge virtual machine lets transactions be verified with fraud proofs.

So, is it really fair not to call this thing a layer-2? Perhaps not. In the past, Bullet co-founder Tristan Frizza told me network extensions were mostly a Solana marketing term. I would think Zeta morphing into a form that looks a whole lot like an ETH L2 will ruffle some feathers in Solana land. 

Still, Hyperliquid’s launch made it seem apparent that users care about performance and UX above all else. Bullet claims it can achieve 2ms latency, which would be much faster than Hyperliquid’s median of 200ms. Of course, take such claims with a grain of salt for now, given that Bullet is still in testnet and has yet to operate in a real-world environment. 

Bullet will roll out lending and spot trading and hopes to become a foundation for DeFi apps. This diversification looks like a growing trend among perps DEXs, which may be realizing that a single perps product does not a thriving business make. 

The Solana perps DEX Drift also rolled out lending, and the rest of the sector has alternate business lines as well. Jupiter is popular for its swap aggregator, and Raydium gets a lot of volume from pump.fun graduations (for now).

— Jack Kubinec

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A few days ago, the Office of the Comptroller of the Currency (OCC) reaffirmed that US banks can custody crypto, hold stablecoin reserves, and run onchain nodes. 

In other words, the regulatory path is clearing up for banks to explore blockchain-based financial infrastructure — including, potentially, public networks like Solana.

Regulatory clarity aligns with adoption at last! But note the scale mismatch: $218 billion in stablecoins vs. $18 trillion in US retail deposits. That’s one heck of a gap. The ceiling for tokenized finance is clearly higher by orders of magnitude. 

So who captures that value? Well, if banks integrate tokenized finance at scale — whether via stablecoins, tokenized bank liabilities or reserve-backed assets — even a single-digit percentage shift could massively expand stablecoin market value. 

Imagine what absorbing that level of institutional demand would do to valuations across Web3.

Takeaway: Cue the war drums. The banks are coming.

— Jeffrey Albus