CLOB Battles, Disclosure Fights, and the Meme-ification of Circle – The Chopping Block - Ep. 858
🎯 Summary
Podcast Summary: CLOB Battles, Disclosure Fights, and the Meme-ification of Circle – The Chopping Block - Ep. 858
This episode of The Chopping Block centers on the critical need for token transparency and standardized disclosures in the crypto ecosystem, using the recent Blockworks Token Transparency Report as the primary catalyst for discussion. The conversation explores the framework’s components, the challenges of adoption, and the broader implications for market integrity, contrasting the current state with traditional finance (TradFi) disclosure norms.
1. Focus Area: Crypto/Web3, specifically focusing on token standardization, market structure, governance disclosures, and regulatory parallels.
2. Key Technical Insights:
- The Blockworks framework proposes a 40-point, binary disclosure system covering product/team, token supply/allocation, market structure (OTC/market maker deals), and financial reporting (treasuries).
- A major technical/legal hurdle identified is the disclosure of market-making agreements, as existing case law suggests that supporting an asset’s liquidity can make it appear more security-like.
- The discussion highlights the potential for automated verification (e.g., using LLMs) to ensure self-reported data aligns with on-chain activity, moving beyond manual checks.
3. Market/Investment Angle:
- Widespread adoption of such a framework, particularly if mandated by major exchanges for listing consideration, could significantly increase market confidence and differentiate legitimate projects.
- There is a recognized gap in current token disclosures compared to IPOs, specifically regarding the cost basis and precise allocation held by large investors (those above a certain threshold).
- The framework is seen as a necessary step to combat the “jelly jellies” (low-quality or fraudulent tokens) by providing investors with necessary data points to assess risk.
4. Notable Companies/People:
- Blockworks: Initiator of the 40-point Token Transparency Report framework.
- Gido and Camino: Mentioned as examples of Solana-based projects that participated in the initial cohort and largely complied with disclosures.
- Wintermute: Mentioned specifically in the context of market maker details, where investors might want to know the strike price or loan structures related to their holdings.
- Lydian (Vlad): Participated as a token founder, generally supportive of the framework as a way to build trust against negative assumptions about pre-TGE projects.
5. Regulatory/Policy Discussion:
- The framework is presented as a voluntary, self-regulatory effort in the absence of concrete SEC proposals for non-security token disclosures.
- Participants debated whether ecosystem buy-in (from exchanges) would be enough to drive adoption, or if regulatory inspiration/adoption would be necessary.
- A key tension exists regarding investor disclosures: while teams are expected to disclose everything, the framework currently stops short of mandating wallet addresses for large investors (e.g., >1-2%), contrasting with TradFi requirements for shareholders over 5%.
6. Future Implications:
- The framework is expected to be a Version 1 that will iterate based on market feedback and adoption rates.
- It could lead to a separation in perception between projects that comply and those that do not, potentially influencing exchange listing decisions.
- The conversation suggests a future where transparency standards might even be adapted for assets like memecoins, albeit with lighter requirements (e.g., omitting revenue streams).
7. Target Audience: Crypto professionals, DeFi developers, venture capitalists, legal/compliance officers in the Web3 space, and project founders seeking to build trust and navigate the evolving regulatory landscape.
Comprehensive Narrative Summary:
The episode opens by framing the current crypto environment as one demanding greater accountability, catalyzed by the release of Blockworks’ proposed Token Transparency Report. The panelists dissect this 40-point framework, noting its comprehensive scope covering team structure, token economics, and market operations. The core thesis is that while the SEC focuses on securities, there is a massive gap for non-security tokens regarding standardized, accessible information.
The discussion quickly moves to the incentives for adoption. Tom points out that for any voluntary standard to succeed, there must be a “stick and a carrot”—the carrot being exchange listings and community trust, and the stick being the potential for fraud liability (though the consensus is that most projects will simply not disclose rather than lie). Vlad, representing a founding team, views the framework positively as a necessary tool to combat inherent community skepticism regarding token allocations and side deals.
A significant portion of the debate centers on the limits of the framework. While the initial cohort showed high compliance, resistance appears strongest around disclosing market-making agreements due to legal concerns about security classification. Furthermore, the panelists critique the binary nature of the disclosures, arguing that knowing who the market maker is (e.g., Wintermute) is less useful than knowing the economics of their involvement (e.g., strike prices or loan structures).
The most contentious point is investor disclosure. The Blockworks team’s rationale—that investors are expected to sell while the team is expected to stay—is challenged by Robert, who draws parallels to TradFi IPOs where large shareholders (>5%) must report transactions. The group generally agrees that a threshold (perhaps 1% or 2%) for disclosing wallet addresses or significant stake changes is necessary for true market integrity, though practical concerns about noise and policing such rules in a global market remain. Ultimately, the framework is viewed as a crucial, albeit imperfect, “V1” step toward establishing market legitimacy and restoring retail
🏢 Companies Mentioned
💬 Key Insights
"Right now, the part of ZK-SNARKs that we've leveraged is like the S part [Soundness], but actually the the ZK kind of what what the ZK part is actually supposed to mean is like being able to do the privacy for those blocks and so that so then that we can actually like, this architecture would allow for dark pool in a very natural way, right?"
"And like, I guess if you don't have that, that means that the core operation of an exchange is a black box, right? And so, then, yeah, we can, then we're kind of back to kind of trust me, bro, right?"
"The huge innovation with zero-knowledge proofs. And, you know, I think there's like the technical term for the stuff is, you know, there's like ZK-SNARKs and ZK-STARKs. And I guess what all that means is there's the actual kind of ZK part, which is privacy, but the more important part like the S in SNARK and STARK is like the soundness, right? Which means that you can compress a lot of information into a very small amount of kind of block size on the L1."
"I think time will tell which approach wins out in the end. I think for us, like the idea is we build on top of Ethereum, we inherit the security, then we have kind of verifiability. But then once we have that, we can actually run the L2 in a way that's like as efficient as a centralized exchange because if everything is proven, then you know, you don't need to wait for consensus like at the time of the execution."
"For us, we have a very specific kind of vision on what the technical stacks should look like in terms of verifiable, making finance verifiable using ZK."
"It does kind of make sense why that bit obviously would have been showing up in the roadshow. I mean, obviously materially to obviously G-U-S-A passing the Senate and like overall, it feels like there's a break in the, you know, regulatory clouds and there's a light at the end of the tunnel."