Vitalik Proposes Major Ethereum Overhaul

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Ethereum could be heading into its biggest architectural shift since the Merge. Vitalik argues incremental upgrades are not enough, pointing to the state tree and VM as the main proving bottlenecks.

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In Today's Email:

• What Matters: Vitalik Proposes Major Ethereum Overhaul 👀 

• Product of the Week: MS Seeks Bank Charter for Crypto Expansion 🚀 

• Charts: Polymarket Iran Airstrikes Insider, US Freezes $580M in Crypto 📊 

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WHAT MATTERS

Vitalik Proposes Major Ethereum Overhaul

State of play: Vitalik Buterin laid out a two part overhaul of Ethereum’s execution layer, saying deep architectural changes are necessary to achieve long term scalability.

• The first proposal would replace Ethereum’s Merkle Patricia state tree with a binary tree under EIP 7864. It could shrink Merkle branches 4x and improve proving efficiency up to 100x with newer hash functions, pending further review.

• The second proposal aims to gradually replace the EVM with RISC V, an open source instruction set widely used in zero knowledge systems.

• The plan would roll out in stages, from precompiles to native RISC V contracts, and eventually convert the EVM into a contract on the new VM.

• Buterin says the state tree and VM account for over 80% of Ethereum’s proving bottleneck, making both changes critical.

• While the binary tree work is already underway, the VM shift remains debated, with some researchers preferring WebAssembly.

Why it matters: Vitalik is signaling that small tweaks are not enough. If most of the proving bottleneck sits in the state tree and VM, fixing them could materially improve scalability and ZK performance.

Our take: Replacing the EVM with RISC V is bigger and more controversial. Expect progress on the tree first, while the VM debate drags on.

For builders and investors: We should pay attention to tooling and ZK implications and see this as Ethereum doubling down on deep upgrades to defend its long term edge.

PRODUCT OF THE WEEK

Morgan Stanley Seeks Bank Charter for Crypto Expansion

Morgan Stanley has applied for a de novo national trust bank charter that would allow it to custody digital assets, as first reported by Bloomberg. The filing was submitted on Feb. 18 through Morgan Stanley Digital Trust, according to the OCC.

• If approved, the charter would enable the bank to offer crypto custody, staking, and trading services to its investment clients.

• Recently, the firm has accelerated its crypto push, naming a digital asset lead, filing for spot BTC and SOL ETFs, and preparing to launch its own digital wallet.

• The application follows similar conditional approvals granted by the OCC to crypto native firms and major players such as Ripple, Circle, and Paxos.

Other cool products:

• Cybro, a smart hub for LP.

• OWN, a DeFi mortgages protocol.

• KOI, a liquidity hub for all projects on zkSync.

• Idle Finance, a DeFi yield automation protocol.

• Oku Trade, a non-custodial DEX trading platform and bridge aggregator.

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CHARTS OF THE WEEK

Polymarket Wallets Make $1M Before Iran Strikes

State of play: Onchain analytics firm Bubblemaps identified six newly funded Polymarket wallets that collectively made about $1M betting that the US would strike Iran by February 28, 2026.

• Most of the accounts were created and funded within 24 hours of the attack and bought “yes” shares just hours before US and Israeli airstrikes began.

• The largest wallet turned roughly $61,000 into nearly $494,000 in profit, while others posted gains ranging from about $45,000 to $174,000.

• All 6 wallets have exited their positions. Bubblemaps described the traders as suspected insiders, citing the timing, size of bets, and fresh funding patterns.

• At the same time, one trader who had built up $2M in profits betting against a strike reportedly lost $6.5M in a single day after the attacks.

• The incident adds to a growing pattern of alleged insider activity on Polymarket’s geopolitical markets, which have drawn regulatory scrutiny.

Our take: This puts prediction markets in a gray zone. Informed trading improves pricing, but when tied to sensitive events, regulatory pressure is inevitable.

US Freezes $580M in Crypto Scam Crackdown

State of play: The US Attorney’s Office for DC said its Scam Center Strike Force has frozen or seized more than $580M in cryptocurrency tied to Chinese transnational criminal organizations since November.

• The funds are tied to “pig butchering” and other crypto investment scams targeting Americans through social media and fake platforms.

• Officials estimate these schemes cost Americans nearly $10B annually.

• The task force, made up of the DOJ, FBI, Secret Service, and IRS, targets offshore scam compounds in Burma, Cambodia, and Laos.

• Authorities said they will seek forfeiture of the seized assets and aim to return funds to victims.

• Chainalysis estimates processed $16.1B in crypto in 2025, accounting for about 20% of known illicit laundering activity.

Our take: Expect more pressure on exchanges and crypto rails as regulators try to cut these flows off earlier.

QUICK BITES

• SEC is seeking to regain crypto ground.

• X allows paid crypto promotions but bans them in EU, UK.

• February crypto losses hit lowest level since March 2025.

• Morgan Stanley doubles down on crypto, files for bank charter.

• Former Mt. Gox CEO proposes hard fork to recover $5.2B in BTC.

• Judge blocks Binance from pushing class action suits into arbitration.

• Vitalik lays out a two-part plan to overhaul Ethereum's execution layer.

• Magic Eden winds down EVM, Bitcoin NFT markets to focus on gambling.

• JPMorgan says crypto market structure bill could be approved by mid-year.

• Fresh accounts netted $1M on Polymarket hours before US airstrikes on Iran.

NOTEWORTHY READS & MEME

• Brian Flynn’s read on How to Fix Tokens.

• Stani’s read on The Financial Infrastructure Layer.

• Meltem Demirors’s read on The End State of Institutional Adoption.

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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.