IRS and FTX $885M Settlement

MEV Tax Mechanism | StarkWare on Bitcoin

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Marco Manoppo & Karon Pangestu
June 05, 2024

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Good Morning.

The chart is looking bullish today. If we do break upwards, there are a lot of short liquidations waiting to be hunted at the $72,000 level, which might propel us directly to $75,000 if we can get past those.

Sometimes I wish we still had unlimited $ from the CeFi lenders…

In Today's Email:

  • What Matters: FTX-IRS $885M settlement đź’Ľ

  • Case Study: New MEV tax mechanism đź“ť

  • Governance & Features: StarkWare 🤝 BtC  

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Narratives: Need to see how BTC performs first to decide what’s next

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WHAT MATTERS

FTX and IRS Settle for $885M

State of play: The FTX estate and the IRS proposed a settlement for the bankrupt exchange's estate to pay $885M in taxes, significantly less than the $24B initially sought by the IRS.

  • Under the proposed plan, the FTX estate will pay the IRS “priority tax claim” of $200M within 60 days of confirmation.

  • The remaining $685M will be paid “to the extent of funds available in accordance with the settlement.”

  • It means the IRS claim is a lower priority claim compared to other claims.

What’s next: A hearing on the motion is scheduled for June 25 before Judge John Dorsey.

Why it matters: The settlement resolves a major issue in FTX's bankruptcy, avoiding prolonged litigation with its largest creditor, the IRS. If the IRS claim had been upheld, it could have blocked payments to customers.

Our take: It’s jarring that the IRS still needs to fight creditors that have been done wrong.

For builders and investors: Nothing to see here, keep on building.

CASE STUDY

The New MEV Taxes Mechanism

Credits to Dan Robinson and Dave White of Paradigm for the original piece

State of play: Dan Robinson and Dave White of Paradigm introduced a new MEV tax mechanism. Robinson and White claim that this mechanism allows arbitrary apps to capture their MEV while preserving their composability.

  • Robinson and White said the new mechanism would work on OP Stack L2s, such as Optimism, Base, and Blast.

  • To implement MEV taxes, smart contracts charge a fee as a function of the priority fee of the transaction.

  • For example, charging searchers a $99 MEV tax for every $1 priority fee can capture 99% of the competitive MEV for that transaction.

  • MEV taxes use a block-building algorithm that sorts transactions by priority fee.

  • This algorithm is implemented in both geth and reth, and is the default in OP Stack chain sequencers.

MEV taxes are a flexible technique addressing three major MEV research problems:

  • Optimizing execution for DEX routers like UniswapX.

  • Minimizing LVR for AMMs.

  • Capturing "backrunning" MEV leaked by transactions for wallets.

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INSIGHTS

Binance to Restrict Stablecoins in EU

Binance announced that it will limit stablecoins in the EU by the end of June. This action follows the new MiCA regulation that mandates stablecoin issuers to be regulated.

  • Buying “unauthorized” stablecoins in the EU won’t be possible starting June 30th.

  • Binance will allow users to convert holdings in “unauthorized” stablecoins for other crypto assets during the phasing-out period.

  • Binance did not single out major stablecoins like USDT or USDC. But, there is concern that MiCA will restrict access to those tokens.

FEATURES & GOVERNANCE UPDATE

StarkWare Plans to Bring ZK Tech to Bitcoin

StarkWare plans to scale Bitcoin using its ZK technology, alongside Ethereum, through a technical proposal titled OP_CAT outlining the framework to introduce STARK scaling for Bitcoin.

  • StarkWare CEO Eli Ben-Sasson told The Block that Starknet will be the first network to settle simultaneously on Bitcoin and Ethereum.

  • This will scale Bitcoin to many thousands of transactions per second within six months after the OP_CAT Bitcoin upgrade.

  • The plan for scaling Bitcoin using Starknet does not involve creating an extra chain. It utilizes the existing Starknet network with the same governance and tokenomics.

Other notable feature updates:

QUICK BITES

  • BNB breaks through ATH of $700.

  • PumpFun passes $30M in revenue.

  • GnosisDAO approves Karpaykey’s spin-off.

  • Ark Labs launches Bitcoin L2 payments network.

  • Spot Bitcoin ETFs see $887M in daily net inflows.

  • Binance implements MiCA stablecoin regulations.

  • Polygon Labs acquires ZK research firm Toposware.

  • Worldcoin's Spain ban extended to the end of 2024.

  • Tether concerned with MiCA stablecoin requirements.

  • X bans alleged celebrity memecoin scammer Sahil Arora.

  • StarkWare sets sights on scaling Bitcoin with a $1M fund.

NOTEWORTHY READS & MEME

  • Mark Beylin’s read on in search of token-market fit.

  • Intern’s read on EVM vs SVM: how big is the EVM lead?

  • Eda’s read on EigenLayer: Intersubjective faults, token forking, bEIGEN, and more.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.