1. Major market trend

Market sentiment is largely bearish, with some trading groups focusing solely on chart patterns seeing losses below 50,000. Research analysts are also very pessimistic, generally believing that new innovations are unlikely to emerge, and that the AI sector is severely draining attention and capital.

The strategy we discussed last week was to abandon most altcoins and shift to mainstream assets, mainly focusing on BTC and ETH. We only kept a few altcoin projects with cash flow businesses, such as AAVE and LINK. We switched to ETH for public chains and L2 blockchains.

Compared to the previous cycle, I feel I've become much more conservative. During the bear market after LUNA, I bought a lot of altcoins at the bottom. Although I ultimately made a profit and even witnessed projects like AAVE rise again, I also experienced too many stories of things going to zero.

The situation is a bit different this cycle. I think there are very few counterfeit products that have been wrongly killed. The market's calculation and evaluation capabilities have greatly improved, and it's not so easy to "pick up bargains".

In particular, this cycle has a large number of projects without actual business operations, as well as projects that were reborn to complete previous financing tasks. These projects are very risky.

Of course, I would still buy if a good opportunity came along, but it's practically impossible to find one now.

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2. Governance Power Dispute between Aave DAO and Aave Labs

The debate has been fierce lately, and I wrote an article about it, which I recommend reading. This reflects the governance dilemmas faced by the entire industry.

3. Aave V4 has updated its liquidation mechanism, reducing excessive liquidation.

4. Regarding the stablecoin public chains that have become incredibly popular during this period.

This sector is in a somewhat awkward position right now, and the market's interpretation of it is also problematic. When Plasma was first launched, many people thought it would destroy the livelihoods of other public chains and take away USDT's share. However, in reality, it has had very little impact on Ethereum and Tron. Even with a large amount of token rewards, it has not gained a significant market share.

The real narrative of this track is to open up the stablecoin market outside the circle. After all, with the passage of the stablecoin compliance bill in this cycle, stablecoin startups are in a track with favorable timing and location. However, we have not seen any company that has been able to make this happen. Of course, it is also very difficult. I think this is the key factor that will test a stablecoin's L1 level in the future, rather than constantly trying to take over the existing stablecoin market.

5. Stock tokenization and RWA track

The SEC's approval of DTCC's asset tokenization plan has once again drawn market attention to this sector. From a policy perspective, the SEC has adopted a very open and supportive attitude in promoting this, with documents, detailed rules, and standards in place.

DTCC (Depository Trust & Clearing Corporation) is a leading global provider of financial market infrastructure, handling more than 90% of U.S. stock, bond, and Treasury transactions worldwide.

First, here are some criteria for a "compliant blockchain" as defined in the SEC's no-objection letter: (excerpt)

• Reliability and resilience : Blockchain networks must demonstrate high reliability and resilience, including assessments based on availability, performance, and historical outage records, to prevent operational disruptions.

• Compliance features supported : Only DTCC participants can register wallets and are fully responsible for their wallet activities. The network must support compliance-aware features, including distribution controls (preventing transfers to unregistered wallets) and transaction reversibility (allowing DTCC participants to force conversions or transfers via the root wallet to handle "reversal conditions" such as erroneous entries, lost tokens, or malicious activity).

• Observability : Even with privacy features such as zero-knowledge proofs, the network must allow DTCC to observe all token transfers directly or through supporting technologies.

• Wallet screening : DTCC is required to screen registered wallets themselves to confirm compliance with the Office of Foreign Assets Control (OFAC) requirements.

I've pasted the source file link here → Click to read

If I had to choose from existing public blockchains, I still believe Ethereum/L2 is the most suitable, especially since the SEC's original document mentioned ERC-3643, which was explicitly mentioned in the SEC letter as an example of a compliance-aware protocol, supporting distribution control and transaction reversibility. Furthermore, the DTCC has previously used Ethereum for a pilot project (Project Whitney in 2020).

Another point is the impact on existing RWA projects. Many market interpretations are negative, but there are misunderstandings here. My personal interpretation is still more positive.

Firstly, this service is intended for institutional clients (primarily DTC participants and their clients, who are typically financial institutions such as banks, brokers, and asset management companies), and has no direct relation to retail investors. Therefore, it does not conflict with existing stock tokenization products such as Ondo (the market has misinterpreted this point). For institutional clients, it improves settlement and efficiency, opens up the possibility of 24/7 trading, and enables some automated management through smart contracts (reducing human intervention).

From a retail investor's perspective, faster and lower-cost institutional settlements could lead brokers (such as Robinhood or Fidelity) to reduce fees or commissions, passing the cost on to retail investors. When retail investors trade through institutional products (such as ETFs or mutual funds), they may experience faster order execution and better price discovery. Similarly, they could theoretically benefit from using products like Ondo, as it also relies on the execution efficiency of off-chain institutions.

So this relationship is quite delicate. The SEC has begun to support stock tokenization in terms of attitude and has started to advance the technology, but it hasn't clearly defined how to regulate "grey area" businesses like Ondo, which can still benefit from existing policies. It's estimated that in the short term, things will remain relatively unregulated. This may change as the scale grows; we'll see then. For now, my interpretation is positive.

(This month, the U.S. Securities and Exchange Commission (SEC) officially concluded its two-year investigation into Ondo Finance and confirmed that it would not bring any charges against the company.)

6. Ondo's stock tokens can support single transactions of up to $100,000 on-chain.

There isn't actually such a large pool on the blockchain. How is this achieved?

It uses a very clever approach: it mines its own stablecoin, USDon, and then mines stock tokens directly when there is demand for them, using its own USDon as a bridge. This eliminates the need for external liquidity, as it controls both the stock tokens and USDon, theoretically allowing for unlimited liquidity. Conversely, when someone sells, it first burns the stock tokens, then converts them into USDon based on the Oracle quote, and finally exchanges them for the on-chain assets the user wants.

Regarding USDon, its collateral consists of highly liquid assets such as US dollars and US Treasury bonds, held in a regulated brokerage account. On-chain, it shares a swapper contract with USDC, using USDon as the intermediary asset when transactions occur.

For example, to buy NVDAon, the user enters USDC → the swapper converts it to USDon → the USDon mint NVDAon is used, all in a single transaction.

Swapper is a smart contract pool that holds liquidity for USDon and USDC. If liquidity is sufficient, conversions can be completed instantly at a 1:1 ratio. For larger amounts exceeding the liquidity threshold, conversions will require waiting or can be done in batches. The liquidity of this contract is maintained by Ondo itself.

In theory, Ondo can increase the supported single transaction size by injecting more USDon (or the corresponding USDC) into the Swapper. The only problem is that if demand increases, high-frequency trading may expose the Swapper's bottlenecks, which will put the on-chain performance and Ondo's ability to rebalance and manage the Swapper to a greater test.

While Ondo currently boasts the best implementation and liquidity, it's largely unrelated to the ONDO token. Furthermore, the project's potential for significant scale and potential regulatory issues remain uncertain. It currently operates in a "grey area." However, if you're willing to embrace the narrative of stock tokenization, Ondo is an unavoidable consideration.

7. Ethena updated its Season 4 airdrops, adding HyENA-related content.

• For users with more than 200 million in rewards, they need to deposit and hold HLPe or USDe on HyENA for at least 2 consecutive weeks. The deposit amount requirement is 1 USDe for every 2 million in rewards. Based on the minimum reward of 200 million, that is 100 USDe.

• In addition to depositing funds, users need to make a transaction of any size on HyENA. Rewards are distributed in uENA (the ENA version on Hyper), with the first batch starting in late December and a two-month window lasting until the end of February. During these two months, users can choose any two consecutive weeks to deposit funds.

This is essentially a forced traffic redirection to HyENA, as Ethena highly values its Perps business (after all, it's very profitable).

8. tempo launched on the testnet.

Stripe and Paradigm co-incubated and developed the product, with partners including Anthropic AI, Coupang, Deutsche Bank, DoorDash, Lead Bank, Mercury, NuBank, OpenAI, Revolut, Shopify, Standard Chartered, and Visa.

Tempo aims to address the pain points of existing blockchains in the payment field, such as high fees, latency, and uncertainty, and to make stablecoins a mainstream payment tool.