Privacy is more than a meta. Just the announcements in last one week are difficult to keep up with: 1) @zama announced Testnet v2, and the imminent launch of the Zama mainnet and token. 2) @union_build announced private bridging allowing users to stay private, even when transferring their assets across chains. It also expedites the transfers and supports more assets by combining the anonymity set of multiple chains 3) @VitalikButerin announced the launch of Kohaku wallet SDK, a privacy-first browser wallet SDK. Kohaku creates an ephemeral stealth address with public key, which lets users execute a private action without revealing the link to main wallet. 4) @Humanityprot integrated @Mastercard to bring secure, privacy-preserving financial verification on-chain 5) @anthonykrose , Product @zksync, wrote for @ethereum about Privacy and how Prividium provides enterprise-grade, configurable private blockchains anchored to Ethereum to institutions 6) @stealf_finance, a stablecoin-native neobank offering 100% anonymous transactions and building on @Arcium announced waitlist for beta testing 7) @LitProtocol, which secures millions of private data objects for DeFi automation, chain abstraction, and user owned data, is about to reach $500M in AUM I have yet only scratched the surface. Which big ones did i miss?

The Oct 10 liquidation was not just a bad day for traders. It served as a real time stress test for the crypto market. Beyond the headline losses, it revealed important lessons in transparency, design choices, and risk management that will shape how resilient our ecosystem becomes. My reflections below explore key lessons across these 3 dimensions: 1. Why Transparency Matters Exchanges: Every design decision such as the method of ADL, price oracle, insurance funds, emergency liquidity pools involves some kind of trade off. Arguments can be made around whether exchanges should prioritise obligations to its traders on the platform, or token holders or minimize the overall cascading impact. However, transparency is of utmost importance so that everyone in the ecosystem can permissionlessly verify the trades, assess the risk and take decisions accordingly. Full transparency can only be achieved by permissionless verifiability. - The biggest CEX, @binance, publishes only the latest one liquidation order within 1000ms. This can lead to liquidations being severely underreported, especially in a high volatility environment. - On October 10, over 60.65k traders were liquidated on Hyperliquid, with $1.25B in total liquidations and a staggering $7.16B in notional positions wiped out. Think of total liquidation as how much money was actually lost and notional liquidation as how big the positions were that got nuked. These numbers can be verified with on-chain data. I don’t need any statement from @HyperliquidX or @chameleon_jeff to check or trust these numbers. Market Makers: Another aspect which severely lacks transparency is the activity of market makers during such volatile events. MMs do work really hard to provide the majority of the liquidity. However, we can’t label all MMs as guardians of liquidity or as villains during a crisis. It is vital for projects or foundations to be able to track the activity of their MM in real time. Tools like @coinwatchdotco Track allow projects to monitor their MM activity using API keys, but many large MMs such as Wintermute, Selini, and Jump do not support such tools. Analysis by Coinwatch shows how a $2B+ FDV token on Binance lost 98% of liquidity in the +/- 1% depth. They also analyzed a $5B+ FDV token which had 3 MMs. During the crisis, only 1 MM continued to provide liquidity. 2. Design choices Once we agree that transparency is critical, we can look at some of the design choices that influence how traders select their venues. I am not looking to analyse every feature but a few of them stood out in the aftermath: - ADL methodology: If you are not familiar with ADL already, @0xdoug's thread is the best primer: xitter.cf/0xdoug/status/19768506…. For some reason, ADL has never been so actively discussed before the events of Oct 10. According to @binance FAQ page, “Positions that are more profitable and more highly leveraged will be queued for ADL liquidation first, ahead of positions that are less profitable and less leveraged." However, what the article fails to cover is that some entities are exempt from ADL based on signed agreements. According to @sershokunin, @ethena has negotiated ADL protections for its hedge inventory with major CEXs. This shows smart execution by Ethena but it raises the question of neutrality. Unless everyone has the option to pay for similar protection, or everyone with a similar risk profile is offered the same protection, the CEXs are not being fair to its users IMO. - Oracle risk: One of the most debated topics during and immediately after the liquidation cascade was whether the $USDe depeg actually happened. USDe price hit $0.95 on Bybit and quickly recovered but it hit $0.68 on Binance. Due to this Binance started liquidating positions which it should not have. Binance has also announced plans to compensate users with $283M for de-pegging of certain Binance Earn products related to USDe, BNSOL, and WBETH. While the compensation takes into account the losses suffered by its users, it does not account for the panic and volatility these liquidations triggered. As @omeragoldberg pointed out, CEX pricing is not equal to oracle. “A real oracle must go deeper. It must integrate every structural layer. Reserves, counterparties, redemption logic, protocol logic, and dependencies, to produce a risk-aware measure of value. Otherwise, you’re not pricing assets; you’re quoting volatility.” Major lending protocols such as @aave and @MorphoLabs hardcoded USDe’s price to $1, which prevented large scale DeFi liquidations. However, I don’t think hardcoding is the best choice here. It is true that the oracle price should not be based on a single venue (even if it is the primary trading venue) because concentration creates manipulation vulnerability. But it should not simply be hardcoded. @yq_acc goes into a lot of more details here: xitter.cf/yq_acc/status/19774339… - Liquidation Fees: When a trader's account equity drops below the maintenance margin requirement, a liquidation event is triggered. Some exchanges charge liquidation fees. Binance for example, charges 2-3% of the liquidated assets. @Bybit_Official does not charge a liquidation fee for Perpetual and Futures Trading, 0.2% for options and 2% for spot margin trading and crypto loans. Hyperliquid has no liquidation fees. If HLP vault takes over a liquidation, the profits from backstop liquidations are returned to the HLP vault and distributed to its LPs, rather than the exchange itself. How liquidations are handled and what fees is charged will matter more to traders in the future. 3. Risk Management While the liquidation cascade was ignited by escalating trade tensions between the US and China, possibly US government shutdown, there was no single catalyst like FTX, Luna, Celsius collapse that triggered the collapse. As @keyrock pointed out in their weekly analysis, “Retail FOMO, synthetic collateral, and speculative narratives around perpetual DEXs masked how thin real liquidity had become.” The 2008 Global Financial Crisis was fueled by excessive leverage and highly correlated asset exposure across the financial system. Banks and investors borrowed heavily to buy mortgage-backed securities that all depended on the same underlying housing market. When housing prices fell, these correlated assets collapsed simultaneously, wiping out capital and triggering forced deleveraging. Crypto faces a similar risk where the assets are highly correlated and can lead to significant forced liquidations and deleveraging. Most DeFi protocols only accept blue chip assets such as BTC and ETH as collateral, which played a huge role in saving DeFi. The biggest silver lining was that the DeFi stack absorbed the shock without mechanical contagion. No emergency circuit breakers were invoked, and major lending protocols like @aave cleared liquidations without incurring bad debt. @EtherFi's $weETH held its peg within 5bps of $ETH. The events also made me appreciate the work being done by @chaoslabs. Risk management is extremely nuanced and requires a deeply risk-aware oracle stack. I expect many more DeFi protocols to leverage their data going forward. Finally, this is a reminder that every market participant should be ready for tail events. If we don’t prepare ourselves for such events, markets will humble us from time to time. Closing Thoughts The ethos of decentralization, verifiability, and permissionless deployment is not enough for a product to attract users on day one. However, days like these remind us that these are essential principles. As a protocol scales and manages millions in user positions, it must steadily incorporate these foundations into its design and operations. This is also one of the best opportunities for CEXs to become gradually become more transparent, prioritise customer interest and increase their market share. Users, traders and everyone in the ecosystem should raise difficult questions and learn from this episode so that the entire space can make progress and emerge stronger.

CT debated endlessly about @stripe building an L1, but barely noticed @Fidelity choosing Ethereum. Other than @andyyy, haven’t seen much noise. Maybe we should reflect. Celebrating wins might do more for $ETH than dunking on @paradigm for not building an L2