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Key Takeaways

Rehypothecation happens when a crypto lending platform lends out your deposited assets to earn a return, through practices such as staking or yield farming on your behalf, creating exposure to third-party counterparty risk.

If a borrower defaults, the lending platform may become insolvent and be unable to return your funds. 

In decentralized finance (DeFi), rehypothecation is generally more transparent, but smart contract risk still applies.

Keeping assets in a self-custodied wallet is the most direct way to avoid rehypothecation risk entirely.

Introduction

Earning passive income through crypto lending platforms has become a popular strategy. Users deposit digital assets to earn an annual percentage yield (APY), similar to a savings account. However, unlike traditional banking, the mechanisms generating these yields often involve a practice known as rehypothecation.

While rehypothecation is a standard practice in traditional finance (TradFi), its application in the crypto sector operates with fewer protections. Understanding this concept is important for anyone entrusting their assets to a centralized exchange or lending platform.

Understanding Hypothecation vs. Rehypothecation

Hypothecation is the act of pledging an asset as collateral to secure a loan. When you take out a mortgage, your house is hypothecated to the bank. You retain ownership, but the bank has a claim on it if you default. In crypto, this happens when you lock bitcoin to mint a stablecoin or take a cash loan.

Rehypothecation occurs when the entity holding your collateral takes those pledged assets and uses them for its own purposes. In practice, the platform lends your deposited assets to a third party. You lend your crypto to a platform, and the platform lends your crypto to someone else.

How Rehypothecation Works in Crypto

Rehypothecation is the engine behind many high-yield crypto accounts. Here is a simplified example of how the flow works:

Deposit: You deposit 1 BTC into a centralized lending platform offering 5% APY.

Re-lending: The platform lends your 1 BTC to an institutional borrower, such as a hedge fund or market maker, at 8% interest.

The spread: The platform pays you 5% and keeps the 3% difference as profit.

From the platform's perspective, this maximizes capital efficiency. However, your bitcoin is no longer in the platform's secure storage. It is in the hands of a third party, and your ability to withdraw depends on that party's financial health.

The Core Risks of Rehypothecation

When assets are rehypothecated, you take on counterparty risk. This can create a chain of dependency where the failure of one entity triggers the collapse of others.

Counterparty insolvency

If the borrower makes bad trades and loses the BTC they borrowed, they can't repay the platform. The platform then has a shortfall and can't repay you. You are relying on the financial health of entities you don't know or have visibility into.

Bank run risk

In periods of market volatility, users often rush to withdraw funds at the same time. If a platform has lent out most of its deposits into illiquid assets or long-term loans, it likely won't have enough liquid funds to honor all withdrawal requests at once. This typically leads to withdrawal freezes and, in severe cases, bankruptcy.

Unsecured creditor status

In traditional finance, rehypothecation is capped and insured. In crypto, regulations are still developing. Many lending platforms state in their Terms of Service that depositing transfers asset ownership to the platform. In the event of bankruptcy, depositors are often classified as unsecured creditors, meaning they are last in line to receive any recovered funds.

Lessons from the 2022 Crypto Lending Crisis

The risks of rehypothecation became visible during the crypto market downturn of 2022. Several major platforms collapsed due to aggressive rehypothecation strategies.

In the first half of 2022:

Celsius Network rehypothecated user funds into high-risk DeFi protocols and loans. When the market turned, they couldn't recall liquidity fast enough to meet withdrawal requests. 

Voyager Digital lent hundreds of millions of dollars of user assets to a single hedge fund. When that fund defaulted due to trading losses, Voyager became insolvent.

In the second half of 2022:

The collapse of FTX, a major centralized exchange, revealed similar patterns of commingling (illegal pooling or mixing) and lending of customer funds. The combined effect of these failures resulted in billions of dollars in user losses and accelerated calls for regulatory action in multiple jurisdictions.

CeFi vs. DeFi Rehypothecation

It's worth distinguishing between centralized finance (CeFi) and DeFi approaches to rehypothecation. CeFi operations are generally opaque. Users often deposit funds without knowing who the counterparty is or how much leverage is being applied.

DeFi rehypothecation exists, often through liquid staking or wrapped tokens, but it is generally more transparent. Users can verify on the blockchain where their assets are deployed. However, DeFi introduces smart contract risk, where vulnerabilities in code can result in loss of funds.

How to Protect Yourself from Rehypothecation Risk

Self-custody is the most direct protection. Holding assets in a non-custodial wallet, where you control the private keys, means the platform cannot lend out your assets. Controlling your private keys means only you can authorize transactions with those funds.

If you plan to use custodial platforms, it helps to understand the difference between hot or cold wallet storage options, since cold storage typically offers stronger security for assets you don't need to access frequently.

Before using any centralized lending platform, make sure to read the Terms of Service. Look for clauses about the platform's right to pledge, re-pledge, or hypothecate your assets. If the terms state that depositing transfers ownership, your assets can be lent out.

Be skeptical of unusually high yields. If a platform offers significantly higher interest than the market average, it may be engaging in riskier rehypothecation strategies to generate that return. Higher yield typically means higher risk.

FAQ

What does rehypothecation mean in crypto?

Rehypothecation in crypto means a lending platform takes assets you have deposited and lends them to a third party, such as a hedge fund or institutional borrower. The platform earns interest on the loan and pays you a portion as yield. Your funds are no longer held securely by the platform; they are with a borrower whose ability to repay is uncertain.

Is rehypothecation illegal?

Rehypothecation is not inherently illegal and is common in traditional finance. In crypto, it is largely unregulated in most jurisdictions, though this is changing. Frameworks like the European Union's Markets in Crypto-Assets (MiCA) regulation are introducing custody and asset segregation rules that affect how platforms can handle customer funds.

What happened to Celsius and Voyager?

Both Celsius Network and Voyager Digital collapsed during the 2022 crypto downturn after they were unable to meet user withdrawal requests. Celsius had rehypothecated user funds into high-risk DeFi protocols. Voyager had concentrated a large portion of user assets in a single institutional borrower that defaulted. Both cases resulted in bankruptcy proceedings and significant losses for depositors.

Can DeFi platforms rehypothecate your assets?

DeFi protocols can involve forms of rehypothecation, such as liquid staking derivatives and wrapped tokens, but the process is generally transparent and visible on-chain. You can usually verify where your assets are deployed. Smart contract vulnerabilities are typically a more pertinent risk in DeFi compared to opaque third-party lending.

How can I avoid rehypothecation risk?

The most reliable way to avoid rehypothecation risk is to hold your assets in a wallet where you control the private keys. If you do use centralized platforms, read the Terms of Service carefully, understand how the platform generates yield, and consider distributing assets across multiple platforms to reduce concentration risk.

Closing Thoughts

Rehypothecation is a trade-off between yield and security. It provides the liquidity that allows platforms to offer attractive interest rates, but it introduces systemic risks that can lead to significant losses during market downturns.

For individual investors, the choice comes down to how much risk they are comfortable taking. Keeping direct control over your funds provides the strongest protection against rehypothecation risk, though it does mean giving up any platform-generated yield.

Further Reading

Custodial vs. Non-Custodial Wallets: What's the Difference?

What Are Wrapped Tokens?

Hot vs. Cold Wallet: Which Crypto Wallet Should You Use?

What Are Flash Loans in DeFi?

What Are Real World Assets (RWA) in DeFi and Crypto?

Disclaimer: This content is presented to you on an "as is" basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.

Key Takeaways

CLMMs allow liquidity providers to allocate capital within a custom price range on a decentralized finance (DeFi) protocol, rather than spreading funds across all possible prices.

By concentrating funds near the current market price, providers may earn more trading fees with the same amount of capital compared to traditional AMM models.

CLMMs require active management. If the market price moves outside a provider's chosen range, the position stops earning fees until the price returns or the range is adjusted.

The risk of impermanent loss can be amplified in CLMMs because capital is more exposed to price movements within a narrow range.

Introduction

In the early days of decentralized finance (DeFi), providing liquidity was mostly a passive activity. You deposited two tokens into a liquidity pool, and the underlying smart contract spread your funds across every possible price. This model, known as the standard Automated Market Maker (AMM), was simple to use but not particularly efficient.

Concentrated Liquidity Market Makers (CLMMs) changed this. Instead of spreading your capital across all prices, CLMMs let you focus it where trading actually happens. This makes your funds more useful, which can mean higher fee earnings on less capital.

You can think of it like this: in a standard AMM, you're setting up a shop on every mile of a highway crossing the entire country, including deserted stretches. CLMMs let you open your shop only on the busy sections. Your investment goes further because it's positioned where demand exists.

What Is Concentrated Liquidity?

Concentrated liquidity means capital that is allocated within a specific price range you choose. In earlier AMM versions, liquidity was distributed uniformly across all prices. A large portion of the assets in a pool was often never used for trading, especially for stablecoin pairs where prices rarely deviate far from $1.00.

With CLMMs, you can choose to provide liquidity only between, say, $0.99 and $1.01 for a stablecoin pair. This concentrates your capital right where trades are most likely to occur, making it far more efficient than spreading it thinly across distant price levels.

How Do CLMMs Work?

Ticks

To make custom price ranges possible, CLMMs divide the price spectrum into small, discrete steps called ticks. Ticks act as the boundaries between price areas. When you create a position, you choose a lower tick and an upper tick to define the edges of your LP tokens range. Your capital sits between these two boundaries and earns fees from all trades that pass through your range.

Active liquidity

Your position is only "active" when the current market price is within the range you selected. While the price stays inside your range, you earn a share of trading fees from the pool. If the price moves up or down and crosses your chosen tick boundaries, your position becomes inactive. You stop earning fees until the price returns, or until you manually adjust your range.

Capital efficiency

The central benefit of CLMMs is capital efficiency. Because you aren't spreading capital across distant price levels, you can earn a similar amount of fees with less total capital compared to a standard AMM. A provider in a tightly concentrated range may earn the same daily fees with $1,000 as a provider in a standard pool earns with $5,000, simply because the concentrated capital is being used by more trades.

The Risks of CLMMs

CLMMs can offer better fee income than standard AMMs, but they require more active involvement and carry specific risks.

Going out of range

If the price exits your chosen interval, your position effectively converts fully into one of the two assets in the pair. At this point, you hold only one token and earn no fees. You need to either wait for the price to return or close and reopen your position with a new range.

Amplified impermanent loss

Because your liquidity is concentrated, impermanent loss can be amplified compared to standard AMMs. If the market moves sharply against your position, the value of your holdings may decline faster than in a traditional pool. This is especially relevant during volatile market conditions.

Active management required

Standard AMM pools are relatively hands-off. CLMMs are not. You need to select a price range, monitor market movements, and rebalance your position when necessary. Some users employ active management strategies, adjusting ranges frequently based on price action. Others use automated CLMM management tools that rebalance positions on their behalf.

Uniswap V4 and the Next Generation of CLMMs

Uniswap V4, which launched in early 2025, pushed the CLMM model further. V4 introduced "hooks," which are pieces of custom code that developers can attach to a pool to modify its behavior. Hooks can enable features like dynamic fee adjustment, on-chain limit orders, or custom oracles built directly into the pool logic.

This development has expanded what is possible with concentrated liquidity. Pools are no longer fixed in their mechanics. Developers can build highly specialized market structures on top of the same core CLMM framework. This has contributed to continued growth in DeFi liquidity depth and the range of trading tools available to users.

FAQ

What is the difference between a CLMM and a standard AMM?

A standard AMM spreads a provider's capital across all price levels from zero to infinity, making most of it inactive at any given time. A CLMM lets providers choose a specific price range to supply liquidity in. This makes the capital more efficient, but requires active management to stay effective.

Can I lose money providing liquidity in a CLMM?

Yes. Liquidity providers in CLMMs are exposed to impermanent loss, which can be greater than in standard AMMs due to the concentrated nature of positions. If the market price moves outside your range, you hold only one asset and earn no fees. Fees earned may offset these losses over time, but this is not guaranteed.

What happens when my position goes out of range?

When the market price exits your chosen range, your position becomes entirely composed of one of the two tokens in the pair. You stop earning trading fees. You can either wait for the price to re-enter your range, or you can close your position and create a new one centered around the current price.

What is a tick in a CLMM?

A tick is one of the discrete price steps that CLMMs use to divide the price spectrum. Ticks function as the boundaries of a liquidity position. When you create a position, you select a lower tick and an upper tick. Your capital earns fees from all trades that occur between these two boundaries.

Where can I use a CLMM?

CLMMs are available on several decentralized exchange (DEX) protocols. Uniswap V3 and V4 are among the most widely used. Other protocols on various blockchains have adopted the same model. Always research the specific protocol, its fees, and associated risks before providing liquidity.

Closing Thoughts

Concentrated Liquidity Market Makers have made DeFi markets significantly more capital-efficient. They allow traders to access tighter spreads and deeper liquidity, while providers can earn higher fees on the same amount of capital.

That said, CLMMs transform liquidity provision from a passive activity into an active one. Managing price ranges, monitoring positions, and understanding impermanent loss are all part of the experience.

If you're new to DeFi, consider starting with standard AMM pools to get familiar with how liquidity provision works before moving to CLMMs.

Further Reading

What Is Yield Farming in Decentralized Finance (DeFi)?

What Is Uniswap V4?

Impermanent Loss Explained

What Is an Automated Market Maker (AMM)?

Staking vs. Yield Farming: Which One Is Better?

Disclaimer: This content is presented to you on an "as is" basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning, and Binance Academy Terms.

Key Takeaways

CLMMs allow liquidity providers to allocate capital within a custom price range on a decentralized finance (DeFi) protocol, rather than spreading funds across all possible prices.

By concentrating funds near the current market price, providers may earn more trading fees with the same amount of capital compared to traditional AMM models.

CLMMs require active management. If the market price moves outside a provider's chosen range, the position stops earning fees until the price returns or the range is adjusted.

The risk of impermanent loss can be amplified in CLMMs because capital is more exposed to price movements within a narrow range.

Introduction

In the early days of decentralized finance (DeFi), providing liquidity was mostly a passive activity. You deposited two tokens into a liquidity pool, and the underlying smart contract spread your funds across every possible price. This model, known as the standard Automated Market Maker (AMM), was simple to use but not particularly efficient.

Concentrated Liquidity Market Makers (CLMMs) changed this. Instead of spreading your capital across all prices, CLMMs let you focus it where trading actually happens. This makes your funds more useful, which can mean higher fee earnings on less capital.

You can think of it like this: in a standard AMM, you're setting up a shop on every mile of a highway crossing the entire country, including deserted stretches. CLMMs let you open your shop only on the busy sections. Your investment goes further because it's positioned where demand exists.

What Is Concentrated Liquidity?

Concentrated liquidity means capital that is allocated within a specific price range you choose. In earlier AMM versions, liquidity was distributed uniformly across all prices. A large portion of the assets in a pool was often never used for trading, especially for stablecoin pairs where prices rarely deviate far from $1.00.

With CLMMs, you can choose to provide liquidity only between, say, $0.99 and $1.01 for a stablecoin pair. This concentrates your capital right where trades are most likely to occur, making it far more efficient than spreading it thinly across distant price levels.

How Do CLMMs Work?

Ticks

To make custom price ranges possible, CLMMs divide the price spectrum into small, discrete steps called ticks. Ticks act as the boundaries between price areas. When you create a position, you choose a lower tick and an upper tick to define the edges of your LP tokens range. Your capital sits between these two boundaries and earns fees from all trades that pass through your range.

Active liquidity

Your position is only "active" when the current market price is within the range you selected. While the price stays inside your range, you earn a share of trading fees from the pool. If the price moves up or down and crosses your chosen tick boundaries, your position becomes inactive. You stop earning fees until the price returns, or until you manually adjust your range.

Capital efficiency

The central benefit of CLMMs is capital efficiency. Because you aren't spreading capital across distant price levels, you can earn a similar amount of fees with less total capital compared to a standard AMM. A provider in a tightly concentrated range may earn the same daily fees with $1,000 as a provider in a standard pool earns with $5,000, simply because the concentrated capital is being used by more trades.

The Risks of CLMMs

CLMMs can offer better fee income than standard AMMs, but they require more active involvement and carry specific risks.

Going out of range

If the price exits your chosen interval, your position effectively converts fully into one of the two assets in the pair. At this point, you hold only one token and earn no fees. You need to either wait for the price to return or close and reopen your position with a new range.

Amplified impermanent loss

Because your liquidity is concentrated, impermanent loss can be amplified compared to standard AMMs. If the market moves sharply against your position, the value of your holdings may decline faster than in a traditional pool. This is especially relevant during volatile market conditions.

Active management required

Standard AMM pools are relatively hands-off. CLMMs are not. You need to select a price range, monitor market movements, and rebalance your position when necessary. Some users employ active management strategies, adjusting ranges frequently based on price action. Others use automated CLMM management tools that rebalance positions on their behalf.

Uniswap V4 and the Next Generation of CLMMs

Uniswap V4, which launched in early 2025, pushed the CLMM model further. V4 introduced "hooks," which are pieces of custom code that developers can attach to a pool to modify its behavior. Hooks can enable features like dynamic fee adjustment, on-chain limit orders, or custom oracles built directly into the pool logic.

This development has expanded what is possible with concentrated liquidity. Pools are no longer fixed in their mechanics. Developers can build highly specialized market structures on top of the same core CLMM framework. This has contributed to continued growth in DeFi liquidity depth and the range of trading tools available to users.

FAQ

What is the difference between a CLMM and a standard AMM?

A standard AMM spreads a provider's capital across all price levels from zero to infinity, making most of it inactive at any given time. A CLMM lets providers choose a specific price range to supply liquidity in. This makes the capital more efficient, but requires active management to stay effective.

Can I lose money providing liquidity in a CLMM?

Yes. Liquidity providers in CLMMs are exposed to impermanent loss, which can be greater than in standard AMMs due to the concentrated nature of positions. If the market price moves outside your range, you hold only one asset and earn no fees. Fees earned may offset these losses over time, but this is not guaranteed.

What happens when my position goes out of range?

When the market price exits your chosen range, your position becomes entirely composed of one of the two tokens in the pair. You stop earning trading fees. You can either wait for the price to re-enter your range, or you can close your position and create a new one centered around the current price.

What is a tick in a CLMM?

A tick is one of the discrete price steps that CLMMs use to divide the price spectrum. Ticks function as the boundaries of a liquidity position. When you create a position, you select a lower tick and an upper tick. Your capital earns fees from all trades that occur between these two boundaries.

Where can I use a CLMM?

CLMMs are available on several decentralized exchange (DEX) protocols. Uniswap V3 and V4 are among the most widely used. Other protocols on various blockchains have adopted the same model. Always research the specific protocol, its fees, and associated risks before providing liquidity.

Closing Thoughts

Concentrated Liquidity Market Makers have made DeFi markets significantly more capital-efficient. They allow traders to access tighter spreads and deeper liquidity, while providers can earn higher fees on the same amount of capital.

That said, CLMMs transform liquidity provision from a passive activity into an active one. Managing price ranges, monitoring positions, and understanding impermanent loss are all part of the experience.

If you're new to DeFi, consider starting with standard AMM pools to get familiar with how liquidity provision works before moving to CLMMs.

Further Reading

What Is Yield Farming in Decentralized Finance (DeFi)?

What Is Uniswap V4?

Impermanent Loss Explained

What Is an Automated Market Maker (AMM)?

Staking vs. Yield Farming: Which One Is Better?

Disclaimer: This content is presented to you on an "as is" basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning, and Binance Academy Terms.

Key Takeaways

An Ethereum Improvement Proposal (EIP) is a formal document used to suggest new features or changes to the Ethereum network.

EIPs are the primary mechanism for community governance and protocol upgrades in Ethereum's decentralized ecosystem.

EIPs are divided into types: Core EIPs affect the base protocol, while ERCs define application-layer standards like token formats.

Major upgrades such as EIP-1559 (fee reform) and EIP-7702 (account abstraction in Pectra) have changed how Ethereum works for millions of users.

Introduction

An Ethereum Improvement Proposal (EIP) is a formal document that describes a proposed change to the Ethereum network. It can suggest a new feature, a process improvement, or an update to how the protocol works. EIPs are the standard way anyone in the Ethereum community can propose how the network should evolve.

Unlike a centralized software company where a small leadership team decides what changes to ship, Ethereum relies on a public, collaborative process. Anyone can write an EIP and submit it for community review. This makes EIPs a cornerstone of Ethereum's open and decentralized governance model.

How EIPs Function in Governance

The EIP process is how decisions get made on Ethereum. Every significant network upgrade starts as one or more EIPs that are proposed, debated, and eventually accepted or rejected. If accepted, client developers implement the changes so the network can move forward in consensus. Disagreements about major EIPs can result in hard forks and soft forks, with hard forks requiring all nodes to upgrade, and soft forks being backward-compatible.

The governance challenge became visible early in Ethereum's history. In 2016, a vulnerability in a smart contract project led to significant fund losses. The community had to debate whether to intervene. They ultimately chose a hard fork to reverse the damage. This moment showed that even code-based systems require human judgment in exceptional circumstances.

Today, the process is more structured. Proposals go through draft, review, and final comment stages before being accepted or rejected. Vitalik Buterin and core developers review proposals and share research publicly, but the process is open to all contributors.

Types of EIPs

Not all EIPs are the same. They are divided into categories based on what they affect:

Core EIPs: These change the core protocol and require a network upgrade (hard fork) to take effect. EIP-1559 is an example.

ERCs (Ethereum Request for Comments): These define application-layer standards, such as how tokens behave. ERC-20 (fungible tokens) and ERC-721 (non-fungible tokens) are widely used examples.

Networking EIPs: These improve how Ethereum nodes communicate with each other.

Interface EIPs: These establish standards for how applications interact with the Ethereum network, such as API and ABI specifications.

Meta EIPs: These describe processes, guidelines, or changes to the EIP process itself rather than the protocol.

Understanding these types helps clarify why some proposals require the whole network to upgrade while others are optional standards that applications can choose to adopt.

Real-World Example: EIP-1559

One of the most impactful EIPs to date is EIP-1559, implemented during the London Hard Fork in August 2021. Before this change, users had to guess how much to pay validators in order for their transactions to be included in the next block. This often led to overpayment during busy periods and delays during quieter times.

EIP-1559 replaced this guessing game with a more predictable system. Every transaction now has two fee components:

Base fee: A minimum fee calculated automatically based on how full the previous block was. This fee is burned, meaning the ETH is permanently removed from circulation.

Priority fee (tip): An optional extra amount you can add to get your transaction processed faster by validators.

By mid-2025, the cumulative ETH burned through the EIP-1559 base fee mechanism had exceeded 4.5 million ETH, making it one of the most significant deflationary mechanisms in Ethereum's history.

Real-World Example: EIP-7702 and the Pectra Upgrade

A more recent example is EIP-7702, which was activated as part of the Ethereum Pectra upgrade in 2025. EIP-7702 allows regular Ethereum wallets (known as externally owned accounts, or EOAs) to temporarily take on smart contract code during a transaction. This is a step toward account abstraction, which aims to make Ethereum wallets more flexible and user-friendly.

For everyday users, EIP-7702 can eventually enable features like paying gas fees in tokens other than ETH, batching multiple transactions into one, and setting spending limits on a per-application basis. It represents how the EIP process continues to drive practical improvements to the user experience.

The Role of Consensus and Upgrades

EIPs are about reaching consensus, not just writing code. Before a proposal is accepted, it goes through public debate among developers, researchers, and community members. Disagreements can delay or block proposals entirely. The Merge, which transitioned Ethereum from proof-of-work to proof-of-stake, was years in the making and involved dozens of interconnected EIPs.

Not every proposal succeeds. Some are rejected because they introduce security risks, create unfair advantages, or simply don't reach sufficient community support. This iterative debate process is intentional: it helps prevent poorly designed changes from being deployed to a network used by millions of people.

FAQ

What is an Ethereum Improvement Proposal (EIP)?

An EIP is a formal document that proposes a change, new feature, or process improvement for the Ethereum network. Anyone in the Ethereum community can submit an EIP. After community review and debate, accepted EIPs are implemented by client developers and activated through network upgrades.

What is the difference between an EIP and an ERC?

An EIP is the broad category covering all types of Ethereum proposals. An ERC is a specific type of EIP focused on application-layer standards, such as how tokens or NFTs should behave. All ERCs are EIPs, but not all EIPs are ERCs.

Who can submit an EIP?

Anyone can write and submit an EIP. There is no requirement to be a core developer or Ethereum Foundation member. However, proposals must follow a defined technical format and go through a structured review process. In practice, most EIPs come from experienced protocol or application developers due to the technical depth required.

What happens if an EIP is not accepted?

If an EIP does not reach consensus among the community, it can be withdrawn, deferred for future consideration, or simply remain inactive. Rejected proposals are documented on the EIP repository, which helps future contributors understand what has already been tried and why it did not proceed.

Closing Thoughts

Ethereum Improvement Proposals are the structured mechanism through which a decentralized network agrees on how to evolve. From EIP-1559's fee reform to EIP-7702's account abstraction features, EIPs have shaped how Ethereum works at every level.

Further Reading

What Is Ethereum and How Does It Work?

What Is the Ethereum London Hard Fork?

The Merge Ethereum Upgrade: All You Need To Know

What Is the Ethereum Pectra Upgrade?

Hard Forks and Soft Forks Explained

Disclaimer: This content is presented to you on an "as is" basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.

Key Takeaways

An Ethereum Improvement Proposal (EIP) is a formal document used to suggest new features or changes to the Ethereum network.

EIPs are the primary mechanism for community governance and protocol upgrades in Ethereum's decentralized ecosystem.

EIPs are divided into types: Core EIPs affect the base protocol, while ERCs define application-layer standards like token formats.

Major upgrades such as EIP-1559 (fee reform) and EIP-7702 (account abstraction in Pectra) have changed how Ethereum works for millions of users.

Introduction

An Ethereum Improvement Proposal (EIP) is a formal document that describes a proposed change to the Ethereum network. It can suggest a new feature, a process improvement, or an update to how the protocol works. EIPs are the standard way anyone in the Ethereum community can propose how the network should evolve.

Unlike a centralized software company where a small leadership team decides what changes to ship, Ethereum relies on a public, collaborative process. Anyone can write an EIP and submit it for community review. This makes EIPs a cornerstone of Ethereum's open and decentralized governance model.

How EIPs Function in Governance

The EIP process is how decisions get made on Ethereum. Every significant network upgrade starts as one or more EIPs that are proposed, debated, and eventually accepted or rejected. If accepted, client developers implement the changes so the network can move forward in consensus. Disagreements about major EIPs can result in hard forks and soft forks, with hard forks requiring all nodes to upgrade, and soft forks being backward-compatible.

The governance challenge became visible early in Ethereum's history. In 2016, a vulnerability in a smart contract project led to significant fund losses. The community had to debate whether to intervene. They ultimately chose a hard fork to reverse the damage. This moment showed that even code-based systems require human judgment in exceptional circumstances.

Today, the process is more structured. Proposals go through draft, review, and final comment stages before being accepted or rejected. Vitalik Buterin and core developers review proposals and share research publicly, but the process is open to all contributors.

Types of EIPs

Not all EIPs are the same. They are divided into categories based on what they affect:

Core EIPs: These change the core protocol and require a network upgrade (hard fork) to take effect. EIP-1559 is an example.

ERCs (Ethereum Request for Comments): These define application-layer standards, such as how tokens behave. ERC-20 (fungible tokens) and ERC-721 (non-fungible tokens) are widely used examples.

Networking EIPs: These improve how Ethereum nodes communicate with each other.

Interface EIPs: These establish standards for how applications interact with the Ethereum network, such as API and ABI specifications.

Meta EIPs: These describe processes, guidelines, or changes to the EIP process itself rather than the protocol.

Understanding these types helps clarify why some proposals require the whole network to upgrade while others are optional standards that applications can choose to adopt.

Real-World Example: EIP-1559

One of the most impactful EIPs to date is EIP-1559, implemented during the London Hard Fork in August 2021. Before this change, users had to guess how much to pay validators in order for their transactions to be included in the next block. This often led to overpayment during busy periods and delays during quieter times.

EIP-1559 replaced this guessing game with a more predictable system. Every transaction now has two fee components:

Base fee: A minimum fee calculated automatically based on how full the previous block was. This fee is burned, meaning the ETH is permanently removed from circulation.

Priority fee (tip): An optional extra amount you can add to get your transaction processed faster by validators.

By mid-2025, the cumulative ETH burned through the EIP-1559 base fee mechanism had exceeded 4.5 million ETH, making it one of the most significant deflationary mechanisms in Ethereum's history.

Real-World Example: EIP-7702 and the Pectra Upgrade

A more recent example is EIP-7702, which was activated as part of the Ethereum Pectra upgrade in 2025. EIP-7702 allows regular Ethereum wallets (known as externally owned accounts, or EOAs) to temporarily take on smart contract code during a transaction. This is a step toward account abstraction, which aims to make Ethereum wallets more flexible and user-friendly.

For everyday users, EIP-7702 can eventually enable features like paying gas fees in tokens other than ETH, batching multiple transactions into one, and setting spending limits on a per-application basis. It represents how the EIP process continues to drive practical improvements to the user experience.

The Role of Consensus and Upgrades

EIPs are about reaching consensus, not just writing code. Before a proposal is accepted, it goes through public debate among developers, researchers, and community members. Disagreements can delay or block proposals entirely. The Merge, which transitioned Ethereum from proof-of-work to proof-of-stake, was years in the making and involved dozens of interconnected EIPs.

Not every proposal succeeds. Some are rejected because they introduce security risks, create unfair advantages, or simply don't reach sufficient community support. This iterative debate process is intentional: it helps prevent poorly designed changes from being deployed to a network used by millions of people.

FAQ

What is an Ethereum Improvement Proposal (EIP)?

An EIP is a formal document that proposes a change, new feature, or process improvement for the Ethereum network. Anyone in the Ethereum community can submit an EIP. After community review and debate, accepted EIPs are implemented by client developers and activated through network upgrades.

What is the difference between an EIP and an ERC?

An EIP is the broad category covering all types of Ethereum proposals. An ERC is a specific type of EIP focused on application-layer standards, such as how tokens or NFTs should behave. All ERCs are EIPs, but not all EIPs are ERCs.

Who can submit an EIP?

Anyone can write and submit an EIP. There is no requirement to be a core developer or Ethereum Foundation member. However, proposals must follow a defined technical format and go through a structured review process. In practice, most EIPs come from experienced protocol or application developers due to the technical depth required.

What happens if an EIP is not accepted?

If an EIP does not reach consensus among the community, it can be withdrawn, deferred for future consideration, or simply remain inactive. Rejected proposals are documented on the EIP repository, which helps future contributors understand what has already been tried and why it did not proceed.

Closing Thoughts

Ethereum Improvement Proposals are the structured mechanism through which a decentralized network agrees on how to evolve. From EIP-1559's fee reform to EIP-7702's account abstraction features, EIPs have shaped how Ethereum works at every level.

Further Reading

What Is Ethereum and How Does It Work?

What Is the Ethereum London Hard Fork?

The Merge Ethereum Upgrade: All You Need To Know

What Is the Ethereum Pectra Upgrade?

Hard Forks and Soft Forks Explained

Disclaimer: This content is presented to you on an "as is" basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.

Key Takeaways

Kite is developing a blockchain platform for agentic payments, enabling autonomous AI agents to transact with verifiable identity and programmable governance.

The Kite blockchain is an EVM-compatible Layer 1 network designed for real-time transactions and coordination among AI agents.

The platform features a three-layer identity system that separates users, agents, and sessions to enhance security and control.

KITE is the network’s native token. The token’s utility launches in two phases, beginning with ecosystem participation and incentives, and later adding staking, governance, and fee-related functions.

What Is Kite?

Kite is an EVM-compatible Layer 1 blockchain designed for agentic payments, enabling you to create and manage autonomous artificial intelligence (AI) agents. The platform provides a secure and verifiable environment where agents can hold unique identities, process payments, and operate according to programmable rules defined by their users.

AI Agents

AI agents are autonomous programs that can perform tasks, make decisions, and manage digital interactions on your behalf. While most existing agents can generate content or analyze data, they typically rely on centralized platforms and may lack the means to handle financial transactions independently.

Kite is developing the infrastructure that provides AI agents with verifiable identities, permission controls, and programmable rules that define how they operate. With state channel payment rails, Kite aims to enable AI agents to send and receive real-time, low-cost micropayments securely across the network.

The Kite blockchain

The Kite blockchain uses a Proof of Stake (PoS) consensus mechanism to support real-time and low-cost transactions. The network acts as the coordination layer for autonomous AI agents, enabling fast payments, secure data attribution, and on-chain reputation tracking.

Kite features a modular ecosystem called Modules, where users can access or host AI services, including datasets, models, and computational tools. Each module connects to the main blockchain for settlement and governance, forming an open marketplace where developers can publish, deploy, and monetize their work. 

Modules operate as semi-independent communities, focusing on specific use cases such as large-scale data processing, privacy-preserving computation, or AI model training. Module owners oversee membership, invite contributors, and manage the distribution of rewards.

Participants can earn KITE, the network’s native token, based on their involvement in the ecosystem. Contributors who build or provide AI services are rewarded for the usage of their assets. Module owners receive income tied to on-chain activity within their modules, and validators earn staking rewards for maintaining network security.

Architecture

Kite uses a three-layer identity architecture that defines how users, agents, and sessions interact within the network.

User: The user is the main owner and source of trust. They manage the master wallet, set overall policies, and decide what their AI agents can do. All permissions and spending limits originate from the user’s authority. 

Agent: Each agent receives its own wallet address, derived from the user’s master key, using the BIP-32 standard, a protocol that allows for the secure creation of multiple linked wallets from a single root key. This allows users to delegate control safely without sharing private keys.

Session: A session is a temporary identity for short-lived actions, such as a single payment or API call. Session keys are randomly generated and expire after each use, reducing exposure in the event of a compromise.

If a session key is compromised, it only impacts a single interaction. If an agent’s key is exposed, its actions are still restricted by the user’s predefined rules. This layered design provides multi-level protection, while each interaction also contributes to a shared reputation system that reinforces trust across the network.

Payment Rails

Kite introduces payment rails designed for AI agents, using state channels to enable fast and efficient transactions. Instead of going through multiple intermediaries, agents can transact directly through secure, off-chain channels. 

Only the opening and closing of each channel are recorded on-chain, while all other transactions occur instantly between participants. This design supports microtransactions, making it easier for autonomous agents to exchange value, pay for services, or access data in a verifiable and scalable manner.

Use Cases

Kite can support a variety of applications by enabling automated payments and authenticated AI transactions, including:

Retail transactions: AI agents can handle online shopping for consumers, with Kite enabling secure delegation and verified payments through the Kite Passport and the Kite Payment API.

Manufacturing: Manufacturers can automate sourcing and supplier orders using AI agents, while Kite provides delegation proof and stablecoin payments to reduce foreign exchange costs. 

Portfolio management: AI agents can manage portfolios automatically, with Kite adding programmable risk controls and guardrails for safer and more transparent trading.

Digital services: AI agents can pay for APIs, data, and tools directly, using the Kite Passport and the Layer 1 blockchain for stablecoin transactions.

The KITE Token

KITE is the native token of the Kite protocol, with a maximum supply of 10 billion tokens. The token’s features will be introduced in two phases to support early participation and long-term ecosystem growth, with the second phase launching alongside the mainnet.

Phase 1

Liquidity: Module owners must lock KITE in liquidity pools paired with their module tokens to activate and maintain their modules.

Ecosystem access: Builders and AI service providers need to hold KITE to participate in the ecosystem.

Incentives: A portion of KITE is distributed to users and businesses that contribute value to the network

Phase 2

AI service commissions: The protocol converts a small fee from AI service transactions into KITE and then redistributes it to modules and the Kite Layer 1 blockchain.

Staking: Users can stake KITE to secure the network and earn rewards. Module owners, validators, and delegators align their incentives by staking on specific modules they support.

Governance: KITE holders can participate in governance by voting on proposals related to protocol upgrades, incentive programs, and performance standards.

Kite (KITE) on Binance Launchpool

On October 31, 2025, Binance announced KITE as the 71st project on the Binance Launchpool. Users who locked their BNB, FDUSD, and USDC during the farming period were eligible to receive KITE rewards. A total of 150 million KITE tokens were allocated to the program, accounting for 1.5% of the total token supply.

After the farming period, KITE will be listed for trading on Binance with the Seed Tag applied, allowing for trading against the USDT, USDC, BNB, and TRY pairs.

Closing Thoughts

Kite is a Layer 1 blockchain to support the integration of AI agents into digital economies. With features such as verifiable identity, programmable governance, and real-time payments, the platform allows these agents to operate securely and transparently. Kite’s modular design connects users, developers, and validators, creating an open framework where AI agents can transact and collaborate within on-chain environments. 

Further Reading

Blockchain Layer 1 vs. Layer 2 Scaling Solutions

Top 6 Artificial Intelligence (AI) Cryptocurrencies

What Are Appchains (Application-Specific Blockchains)?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Key Takeaways

Kite is developing a blockchain platform for agentic payments, enabling autonomous AI agents to transact with verifiable identity and programmable governance.

The Kite blockchain is an EVM-compatible Layer 1 network designed for real-time transactions and coordination among AI agents.

The platform features a three-layer identity system that separates users, agents, and sessions to enhance security and control.

KITE is the network’s native token. The token’s utility launches in two phases, beginning with ecosystem participation and incentives, and later adding staking, governance, and fee-related functions.

What Is Kite?

Kite is an EVM-compatible Layer 1 blockchain designed for agentic payments, enabling you to create and manage autonomous artificial intelligence (AI) agents. The platform provides a secure and verifiable environment where agents can hold unique identities, process payments, and operate according to programmable rules defined by their users.

AI Agents

AI agents are autonomous programs that can perform tasks, make decisions, and manage digital interactions on your behalf. While most existing agents can generate content or analyze data, they typically rely on centralized platforms and may lack the means to handle financial transactions independently.

Kite is developing the infrastructure that provides AI agents with verifiable identities, permission controls, and programmable rules that define how they operate. With state channel payment rails, Kite aims to enable AI agents to send and receive real-time, low-cost micropayments securely across the network.

The Kite blockchain

The Kite blockchain uses a Proof of Stake (PoS) consensus mechanism to support real-time and low-cost transactions. The network acts as the coordination layer for autonomous AI agents, enabling fast payments, secure data attribution, and on-chain reputation tracking.

Kite features a modular ecosystem called Modules, where users can access or host AI services, including datasets, models, and computational tools. Each module connects to the main blockchain for settlement and governance, forming an open marketplace where developers can publish, deploy, and monetize their work. 

Modules operate as semi-independent communities, focusing on specific use cases such as large-scale data processing, privacy-preserving computation, or AI model training. Module owners oversee membership, invite contributors, and manage the distribution of rewards.

Participants can earn KITE, the network’s native token, based on their involvement in the ecosystem. Contributors who build or provide AI services are rewarded for the usage of their assets. Module owners receive income tied to on-chain activity within their modules, and validators earn staking rewards for maintaining network security.

Architecture

Kite uses a three-layer identity architecture that defines how users, agents, and sessions interact within the network.

User: The user is the main owner and source of trust. They manage the master wallet, set overall policies, and decide what their AI agents can do. All permissions and spending limits originate from the user’s authority. 

Agent: Each agent receives its own wallet address, derived from the user’s master key, using the BIP-32 standard, a protocol that allows for the secure creation of multiple linked wallets from a single root key. This allows users to delegate control safely without sharing private keys.

Session: A session is a temporary identity for short-lived actions, such as a single payment or API call. Session keys are randomly generated and expire after each use, reducing exposure in the event of a compromise.

If a session key is compromised, it only impacts a single interaction. If an agent’s key is exposed, its actions are still restricted by the user’s predefined rules. This layered design provides multi-level protection, while each interaction also contributes to a shared reputation system that reinforces trust across the network.

Payment Rails

Kite introduces payment rails designed for AI agents, using state channels to enable fast and efficient transactions. Instead of going through multiple intermediaries, agents can transact directly through secure, off-chain channels. 

Only the opening and closing of each channel are recorded on-chain, while all other transactions occur instantly between participants. This design supports microtransactions, making it easier for autonomous agents to exchange value, pay for services, or access data in a verifiable and scalable manner.

Use Cases

Kite can support a variety of applications by enabling automated payments and authenticated AI transactions, including:

Retail transactions: AI agents can handle online shopping for consumers, with Kite enabling secure delegation and verified payments through the Kite Passport and the Kite Payment API.

Manufacturing: Manufacturers can automate sourcing and supplier orders using AI agents, while Kite provides delegation proof and stablecoin payments to reduce foreign exchange costs. 

Portfolio management: AI agents can manage portfolios automatically, with Kite adding programmable risk controls and guardrails for safer and more transparent trading.

Digital services: AI agents can pay for APIs, data, and tools directly, using the Kite Passport and the Layer 1 blockchain for stablecoin transactions.

The KITE Token

KITE is the native token of the Kite protocol, with a maximum supply of 10 billion tokens. The token’s features will be introduced in two phases to support early participation and long-term ecosystem growth, with the second phase launching alongside the mainnet.

Phase 1

Liquidity: Module owners must lock KITE in liquidity pools paired with their module tokens to activate and maintain their modules.

Ecosystem access: Builders and AI service providers need to hold KITE to participate in the ecosystem.

Incentives: A portion of KITE is distributed to users and businesses that contribute value to the network

Phase 2

AI service commissions: The protocol converts a small fee from AI service transactions into KITE and then redistributes it to modules and the Kite Layer 1 blockchain.

Staking: Users can stake KITE to secure the network and earn rewards. Module owners, validators, and delegators align their incentives by staking on specific modules they support.

Governance: KITE holders can participate in governance by voting on proposals related to protocol upgrades, incentive programs, and performance standards.

Kite (KITE) on Binance Launchpool

On October 31, 2025, Binance announced KITE as the 71st project on the Binance Launchpool. Users who locked their BNB, FDUSD, and USDC during the farming period were eligible to receive KITE rewards. A total of 150 million KITE tokens were allocated to the program, accounting for 1.5% of the total token supply.

After the farming period, KITE will be listed for trading on Binance with the Seed Tag applied, allowing for trading against the USDT, USDC, BNB, and TRY pairs.

Closing Thoughts

Kite is a Layer 1 blockchain to support the integration of AI agents into digital economies. With features such as verifiable identity, programmable governance, and real-time payments, the platform allows these agents to operate securely and transparently. Kite’s modular design connects users, developers, and validators, creating an open framework where AI agents can transact and collaborate within on-chain environments. 

Further Reading

Blockchain Layer 1 vs. Layer 2 Scaling Solutions

Top 6 Artificial Intelligence (AI) Cryptocurrencies

What Are Appchains (Application-Specific Blockchains)?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Key Takeaways

Story (IP) is a blockchain platform specifically designed to build a peer-to-peer intellectual property (IP) network.

It provides a universal ledger for registering, exchanging, and monetizing knowledge and creative assets without relying on centralized intermediaries.

Story features a multi-core architecture, including specialized execution cores that handle intellectual property as a native asset class.

The platform enables programmable IP markets and supports the integration of artificial intelligence (AI) by acting as a settlement layer for AI transactions involving intellectual property.

Its native token, IP, facilitates transactions, staking, and incentivizes honest participation within the network.

Introduction

In today's digital world, intellectual property plays an important role in creativity, innovation, and knowledge sharing. But traditional IP systems often depend on centralized institutions, which can create inefficiencies and limit the fair monetization and exchange of intellectual assets.

Story (IP) aims to address these challenges by offering a blockchain protocol that enables individuals and entities to register, trade, and monetize intellectual property assets directly, transparently, and programmatically.

What Is Story (IP)?

Story is a blockchain network designed to create a programmable marketplace for knowledge and creativity. It allows intellectual property assets (e.g., creative works, scientific data, machine learning models, etc.) to be represented and exchanged as native digital assets on an open ledger.

Story offers a universal repository for IP assets combined with a programmable market where these assets can be traded, licensed, or monetized under customizable terms set by their owners. This peer-to-peer system removes the need for intermediaries and reduces transaction costs, increasing the accessibility and liquidity of intellectual property.

How Does Story Work?

Multi-core architecture

Story uses a multi-core execution environment, with a main core compatible with Ethereum Virtual Machine (EVM) and multiple other specialized cores. One key specialized core is the Intellectual Property (IP) core, which manages IP registration, licensing, and economic relationships on-chain. This core supports complex IP graphs that track ownership, licenses, and derivations of assets.

Proof of Creativity Protocol

Built on the IP core, the Proof of Creativity (PoC) protocol serves as an open IP repository. It records the genealogy of intellectual property assets as they evolve, are expanded, and monetized across applications. PoC introduces programmable licenses and royalty modules, allowing IP holders to automate licensing terms and revenue sharing. This structure ensures transparent and fair compensation throughout the value chain of any IP asset.

The IP Token

The native IP token is used as the medium of exchange within the Story network. It enables payment of fees, incentivizes validators who maintain the network’s security through staking, and facilitates economic flows related to intellectual property usage, such as royalties and licensing fees. The IP token also supports AI-related transactions and communications between autonomous agents operating within the network.

Cross-chain and off-chain integrations

Story supports cross-chain communication, allowing IP assets to be used across blockchains and decentralized finance (DeFi) platforms without losing ownership or control. It also integrates oracles and off-chain services that attest to IP authenticity, validate ownership, and assist with legal disputes.

Use Cases and Applications

Story’s framework enables a variety of novel use cases in the intellectual property and AI domains:

Universal market for intellectual property: Allows direct, programmable peer-to-peer IP transactions, which can include licensing, revenue sharing, and fractionalization of IP assets.

AI model and dataset markets: Registers and monetizes AI training datasets, foundation models, and fine-tuning packages.

Agent-based commerce: Enables autonomous AI agents to negotiate, license, and transact IP assets on behalf of users in a trustless way.

Legal and compliance: Through programmable licenses and off-chain attestations, Story can create enforceable agreements and dispute resolution mechanisms.

Closing Thoughts

Story offers a new model for intellectual property management using blockchain technology. By creating a decentralized network, Story can help reduce dependence on central authorities and improve transparency, fairness, and efficiency in IP management.

Further Reading

Top 6 Artificial Intelligence (AI) Cryptocurrencies

What Is NEAR Protocol (NEAR)?

What Is Bittensor (TAO)? 

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Key Takeaways

Story (IP) is a blockchain platform specifically designed to build a peer-to-peer intellectual property (IP) network.

It provides a universal ledger for registering, exchanging, and monetizing knowledge and creative assets without relying on centralized intermediaries.

Story features a multi-core architecture, including specialized execution cores that handle intellectual property as a native asset class.

The platform enables programmable IP markets and supports the integration of artificial intelligence (AI) by acting as a settlement layer for AI transactions involving intellectual property.

Its native token, IP, facilitates transactions, staking, and incentivizes honest participation within the network.

Introduction

In today's digital world, intellectual property plays an important role in creativity, innovation, and knowledge sharing. But traditional IP systems often depend on centralized institutions, which can create inefficiencies and limit the fair monetization and exchange of intellectual assets.

Story (IP) aims to address these challenges by offering a blockchain protocol that enables individuals and entities to register, trade, and monetize intellectual property assets directly, transparently, and programmatically.

What Is Story (IP)?

Story is a blockchain network designed to create a programmable marketplace for knowledge and creativity. It allows intellectual property assets (e.g., creative works, scientific data, machine learning models, etc.) to be represented and exchanged as native digital assets on an open ledger.

Story offers a universal repository for IP assets combined with a programmable market where these assets can be traded, licensed, or monetized under customizable terms set by their owners. This peer-to-peer system removes the need for intermediaries and reduces transaction costs, increasing the accessibility and liquidity of intellectual property.

How Does Story Work?

Multi-core architecture

Story uses a multi-core execution environment, with a main core compatible with Ethereum Virtual Machine (EVM) and multiple other specialized cores. One key specialized core is the Intellectual Property (IP) core, which manages IP registration, licensing, and economic relationships on-chain. This core supports complex IP graphs that track ownership, licenses, and derivations of assets.

Proof of Creativity Protocol

Built on the IP core, the Proof of Creativity (PoC) protocol serves as an open IP repository. It records the genealogy of intellectual property assets as they evolve, are expanded, and monetized across applications. PoC introduces programmable licenses and royalty modules, allowing IP holders to automate licensing terms and revenue sharing. This structure ensures transparent and fair compensation throughout the value chain of any IP asset.

The IP Token

The native IP token is used as the medium of exchange within the Story network. It enables payment of fees, incentivizes validators who maintain the network’s security through staking, and facilitates economic flows related to intellectual property usage, such as royalties and licensing fees. The IP token also supports AI-related transactions and communications between autonomous agents operating within the network.

Cross-chain and off-chain integrations

Story supports cross-chain communication, allowing IP assets to be used across blockchains and decentralized finance (DeFi) platforms without losing ownership or control. It also integrates oracles and off-chain services that attest to IP authenticity, validate ownership, and assist with legal disputes.

Use Cases and Applications

Story’s framework enables a variety of novel use cases in the intellectual property and AI domains:

Universal market for intellectual property: Allows direct, programmable peer-to-peer IP transactions, which can include licensing, revenue sharing, and fractionalization of IP assets.

AI model and dataset markets: Registers and monetizes AI training datasets, foundation models, and fine-tuning packages.

Agent-based commerce: Enables autonomous AI agents to negotiate, license, and transact IP assets on behalf of users in a trustless way.

Legal and compliance: Through programmable licenses and off-chain attestations, Story can create enforceable agreements and dispute resolution mechanisms.

Closing Thoughts

Story offers a new model for intellectual property management using blockchain technology. By creating a decentralized network, Story can help reduce dependence on central authorities and improve transparency, fairness, and efficiency in IP management.

Further Reading

Top 6 Artificial Intelligence (AI) Cryptocurrencies

What Is NEAR Protocol (NEAR)?

What Is Bittensor (TAO)? 

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Key Takeaways

Bittensor is a decentralized Layer 1 blockchain that organizes AI and computing resources into incentive-driven marketplaces called subnets, rewarding contributors with its native token, TAO.

The dTAO upgrade, deployed in February 2025, replaced centralized emission control with a market-driven model in which each subnet operates its own AMM pool and issues subnet-specific alpha tokens.

TAO has a hard cap of 21 million tokens, mirrors Bitcoin's supply schedule, and completed its first halving in December 2025, reducing daily issuance from approximately 7,200 to 3,600 TAO.

Introduction

The development of artificial intelligence has historically been concentrated in a small number of large technology companies, raising concerns about centralized control over critical infrastructure. By combining blockchain-based incentives with specialized computational marketplaces, Bittensor aims to enable open participation in the development and provisioning of AI resources.

What Is Bittensor?

Bittensor is a decentralized computing platform that creates interconnected digital commodity markets for AI-related resources. The network is organized into subnets, each functioning as an independent marketplace for a specific type of AI or computational task. These tasks range from text generation and machine learning model pretraining to financial prediction, code generation, and decentralized compute provision.

Unlike standard blockchains that perform all validation on-chain, Bittensor separates transaction recording from validation computations. Validation of AI outputs is handled off-chain through the Yuma Consensus mechanism, with only the agreed results recorded on-chain. This architecture allows the network to support computationally intensive workloads that would be impractical to run directly on a blockchain.

In this sense, Bittensor shares characteristics with decentralized physical infrastructure networks (DePIN), which use token incentives to build and maintain real-world resource networks without centralized operators.

Core Components of the Bittensor Platform

Subnets: incentive-based AI marketplaces

Each subnet operates as a specialized community producing a distinct type of AI commodity. Subnets consist of miners, who contribute the computational resources or AI outputs, and validators, who assess the quality of those contributions against subnet-specific criteria. By late 2025, the network had over 100 active subnets, covering categories such as AI inference, large language model pretraining, proprietary trading signals, decentralized storage, and compute markets.

Yuma Consensus

Yuma Consensus is Bittensor's mechanism for reaching agreement on the quality and validity of subnet outputs. Because AI outputs are often probabilistic rather than deterministic, standard blockchain consensus algorithms are not well suited to evaluating them. Yuma Consensus addresses this by performing validation off-chain and recording only the agreed results on the blockchain, allowing validators to assess complex, subjective AI outputs efficiently and at scale.

The Bittensor blockchain and TAO token

The Bittensor blockchain functions as the system of record for token balances, transactions, and staking activity. TAO, the network's native token, incentivizes participation by rewarding miners and validators based on their performance within subnets. Token holders can also stake TAO to validators or, under the dTAO model, directly into subnet pools.

Bittensor SDK

Bittensor provides an open-source Software Development Kit (SDK) with tools, documentation, and tutorials. The SDK enables miners, validators, and developers to interact with subnets and the blockchain, lowering the technical barrier for new contributors to join the network.

Dynamic TAO (dTAO)

On February 13, 2025, Bittensor deployed the dTAO upgrade, the most significant architectural change since the network's launch. Before dTAO, a set of 64 validators on the root subnet (Subnet 0) controlled how emissions were distributed across all subnets, creating a centralized point of influence in an otherwise decentralized system. The dTAO upgrade replaced this with a fully market-driven model.

Alpha tokens and subnet AMMs

Under dTAO, each subnet operates its own automated market maker (AMM) liquidity pool that pairs TAO with a subnet-specific alpha token. To participate in a subnet's reward flows, holders stake TAO into that subnet's pool and receive alpha tokens in return. The price of a subnet's alpha token reflects market demand: subnets that attract more participants and deliver more useful outputs tend to see their alpha token price rise, while underperforming subnets see it fall.

Market-driven emission distribution

Each block, the protocol evaluates alpha token prices across all active subnets and allocates newly minted TAO proportionally. Subnets with higher alpha token prices receive a larger share of TAO rewards. This creates a feedback loop where demonstrated utility drives continued reward allocation, and subnets that fail to attract demand receive progressively fewer emissions. The process works as follows:

1.

TAO holder stakes TAO into a subnet's AMM pool

2.

The pool issues subnet-specific alpha tokens in return

3.

The protocol reads alpha token prices each block across all subnets

4.

Subnets with higher alpha prices receive a larger share of newly minted TAO

5.

Miners and validators in high-demand subnets earn more TAO rewards

This model replaced the fixed, committee-determined emissions schedule with a dynamic, demand-responsive one. It also means that TAO holders effectively vote for the subnets they believe deliver the most value by allocating capital into those pools.

TAO Tokenomics and Supply

TAO's tokenomics are modelled closely on Bitcoin's supply design. The token has a hard cap of 21 million, with issuance distributed through a halving schedule rather than a fixed emission rate.

Parameter

Value

Total supply cap

21,000,000 TAO (identical to Bitcoin)

Circulating supply (late 2025)

Approx. 10.8 million TAO

Pre-halving daily issuance

Approx. 7,200 TAO 

Post-halving daily issuance

Approx. 3,600 TAO (from Dec 14-15, 2025)

Next halving trigger

At 15.75 million total TAO issued

Next halving emission rate

Approx. 1,800 TAO per day

Bittensor completed its first halving on December 14-15, 2025, reducing daily issuance from approximately 7,200 TAO to 3,600 TAO. The next halving triggers when total issued supply reaches 15.75 million TAO. As with Bitcoin's model, each halving reduces the rate at which new tokens enter circulation, progressively extending the time required to approach the supply cap.

A significant portion of the currently circulating supply, approximately 10.8 million TAO, is staked across the network's subnets, which affects the liquid supply available on exchanges at any given time.

Who Participates in Bittensor?

Developers

Developers can build and deploy AI-related incentive mechanisms on Bittensor without creating a new blockchain. The subnet model allows teams to design commodity markets for compute, storage, data, or AI intelligence within the existing TAO token economy, using the Bittensor SDK.

Businesses and enterprises

Businesses can access AI and computing resources through Bittensor's decentralized marketplace without relying on centralized providers. The subnet architecture consolidates multiple AI infrastructure functions under a single token system.

Miners and validators

Miners contribute compute or AI outputs to their chosen subnets and earn TAO rewards based on the quality of their work as assessed by validators. Validators assess miner outputs using Yuma Consensus and earn TAO proportional to their stake and performance. Under dTAO, both groups operate within subnet-specific alpha token economies.

Token holders

TAO holders can stake tokens into subnet pools under the dTAO model, receiving alpha tokens in return. This gives holders both economic participation in subnet reward flows and indirect influence over which subnets receive the most TAO emissions, since demand for a subnet's alpha token affects its emission share.

Bittensor vs. Other AI Blockchain Projects

Bittensor differentiates itself through its subnet architecture, which creates separate specialized marketplaces for different AI tasks rather than a single general-purpose AI layer. The dTAO upgrade adds a market-driven emission model where demonstrated subnet utility directly influences reward allocation. Its Bitcoin-modelled supply cap and halving schedule also distinguish it from most other AI-focused tokens, which typically do not use a fixed supply with halvings.

Closing Thoughts 

Bittensor represents a distinct approach to the intersection of artificial intelligence and blockchain, one that prioritises open participation and market-driven coordination over centralised control. Where most AI development concentrates resources within a small number of vertically integrated organisations, Bittensor creates a public infrastructure layer where contributors can build, validate, and monetise AI capabilities within an open token economy. 

Further Reading

Top Artificial Intelligence (AI) Cryptocurrencies

What Is DePIN in Crypto?

What Is Staking?

What Is Internet Computer (ICP)?

What Is NEAR Protocol (NEAR)?

Disclaimer: This content is presented to you on an “as is” basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.

Key Takeaways

Bittensor is a decentralized Layer 1 blockchain that organizes AI and computing resources into incentive-driven marketplaces called subnets, rewarding contributors with its native token, TAO.

The dTAO upgrade, deployed in February 2025, replaced centralized emission control with a market-driven model in which each subnet operates its own AMM pool and issues subnet-specific alpha tokens.

TAO has a hard cap of 21 million tokens, mirrors Bitcoin's supply schedule, and completed its first halving in December 2025, reducing daily issuance from approximately 7,200 to 3,600 TAO.

Introduction

The development of artificial intelligence has historically been concentrated in a small number of large technology companies, raising concerns about centralized control over critical infrastructure. By combining blockchain-based incentives with specialized computational marketplaces, Bittensor aims to enable open participation in the development and provisioning of AI resources.

What Is Bittensor?

Bittensor is a decentralized computing platform that creates interconnected digital commodity markets for AI-related resources. The network is organized into subnets, each functioning as an independent marketplace for a specific type of AI or computational task. These tasks range from text generation and machine learning model pretraining to financial prediction, code generation, and decentralized compute provision.

Unlike standard blockchains that perform all validation on-chain, Bittensor separates transaction recording from validation computations. Validation of AI outputs is handled off-chain through the Yuma Consensus mechanism, with only the agreed results recorded on-chain. This architecture allows the network to support computationally intensive workloads that would be impractical to run directly on a blockchain.

In this sense, Bittensor shares characteristics with decentralized physical infrastructure networks (DePIN), which use token incentives to build and maintain real-world resource networks without centralized operators.

Core Components of the Bittensor Platform

Subnets: incentive-based AI marketplaces

Each subnet operates as a specialized community producing a distinct type of AI commodity. Subnets consist of miners, who contribute the computational resources or AI outputs, and validators, who assess the quality of those contributions against subnet-specific criteria. By late 2025, the network had over 100 active subnets, covering categories such as AI inference, large language model pretraining, proprietary trading signals, decentralized storage, and compute markets.

Yuma Consensus

Yuma Consensus is Bittensor's mechanism for reaching agreement on the quality and validity of subnet outputs. Because AI outputs are often probabilistic rather than deterministic, standard blockchain consensus algorithms are not well suited to evaluating them. Yuma Consensus addresses this by performing validation off-chain and recording only the agreed results on the blockchain, allowing validators to assess complex, subjective AI outputs efficiently and at scale.

The Bittensor blockchain and TAO token

The Bittensor blockchain functions as the system of record for token balances, transactions, and staking activity. TAO, the network's native token, incentivizes participation by rewarding miners and validators based on their performance within subnets. Token holders can also stake TAO to validators or, under the dTAO model, directly into subnet pools.

Bittensor SDK

Bittensor provides an open-source Software Development Kit (SDK) with tools, documentation, and tutorials. The SDK enables miners, validators, and developers to interact with subnets and the blockchain, lowering the technical barrier for new contributors to join the network.

Dynamic TAO (dTAO)

On February 13, 2025, Bittensor deployed the dTAO upgrade, the most significant architectural change since the network's launch. Before dTAO, a set of 64 validators on the root subnet (Subnet 0) controlled how emissions were distributed across all subnets, creating a centralized point of influence in an otherwise decentralized system. The dTAO upgrade replaced this with a fully market-driven model.

Alpha tokens and subnet AMMs

Under dTAO, each subnet operates its own automated market maker (AMM) liquidity pool that pairs TAO with a subnet-specific alpha token. To participate in a subnet's reward flows, holders stake TAO into that subnet's pool and receive alpha tokens in return. The price of a subnet's alpha token reflects market demand: subnets that attract more participants and deliver more useful outputs tend to see their alpha token price rise, while underperforming subnets see it fall.

Market-driven emission distribution

Each block, the protocol evaluates alpha token prices across all active subnets and allocates newly minted TAO proportionally. Subnets with higher alpha token prices receive a larger share of TAO rewards. This creates a feedback loop where demonstrated utility drives continued reward allocation, and subnets that fail to attract demand receive progressively fewer emissions. The process works as follows:

1.

TAO holder stakes TAO into a subnet's AMM pool

2.

The pool issues subnet-specific alpha tokens in return

3.

The protocol reads alpha token prices each block across all subnets

4.

Subnets with higher alpha prices receive a larger share of newly minted TAO

5.

Miners and validators in high-demand subnets earn more TAO rewards

This model replaced the fixed, committee-determined emissions schedule with a dynamic, demand-responsive one. It also means that TAO holders effectively vote for the subnets they believe deliver the most value by allocating capital into those pools.

TAO Tokenomics and Supply

TAO's tokenomics are modelled closely on Bitcoin's supply design. The token has a hard cap of 21 million, with issuance distributed through a halving schedule rather than a fixed emission rate.

Parameter

Value

Total supply cap

21,000,000 TAO (identical to Bitcoin)

Circulating supply (late 2025)

Approx. 10.8 million TAO

Pre-halving daily issuance

Approx. 7,200 TAO 

Post-halving daily issuance

Approx. 3,600 TAO (from Dec 14-15, 2025)

Next halving trigger

At 15.75 million total TAO issued

Next halving emission rate

Approx. 1,800 TAO per day

Bittensor completed its first halving on December 14-15, 2025, reducing daily issuance from approximately 7,200 TAO to 3,600 TAO. The next halving triggers when total issued supply reaches 15.75 million TAO. As with Bitcoin's model, each halving reduces the rate at which new tokens enter circulation, progressively extending the time required to approach the supply cap.

A significant portion of the currently circulating supply, approximately 10.8 million TAO, is staked across the network's subnets, which affects the liquid supply available on exchanges at any given time.

Who Participates in Bittensor?

Developers

Developers can build and deploy AI-related incentive mechanisms on Bittensor without creating a new blockchain. The subnet model allows teams to design commodity markets for compute, storage, data, or AI intelligence within the existing TAO token economy, using the Bittensor SDK.

Businesses and enterprises

Businesses can access AI and computing resources through Bittensor's decentralized marketplace without relying on centralized providers. The subnet architecture consolidates multiple AI infrastructure functions under a single token system.

Miners and validators

Miners contribute compute or AI outputs to their chosen subnets and earn TAO rewards based on the quality of their work as assessed by validators. Validators assess miner outputs using Yuma Consensus and earn TAO proportional to their stake and performance. Under dTAO, both groups operate within subnet-specific alpha token economies.

Token holders

TAO holders can stake tokens into subnet pools under the dTAO model, receiving alpha tokens in return. This gives holders both economic participation in subnet reward flows and indirect influence over which subnets receive the most TAO emissions, since demand for a subnet's alpha token affects its emission share.

Bittensor vs. Other AI Blockchain Projects

Bittensor differentiates itself through its subnet architecture, which creates separate specialized marketplaces for different AI tasks rather than a single general-purpose AI layer. The dTAO upgrade adds a market-driven emission model where demonstrated subnet utility directly influences reward allocation. Its Bitcoin-modelled supply cap and halving schedule also distinguish it from most other AI-focused tokens, which typically do not use a fixed supply with halvings.

Closing Thoughts 

Bittensor represents a distinct approach to the intersection of artificial intelligence and blockchain, one that prioritises open participation and market-driven coordination over centralised control. Where most AI development concentrates resources within a small number of vertically integrated organisations, Bittensor creates a public infrastructure layer where contributors can build, validate, and monetise AI capabilities within an open token economy. 

Further Reading

Top Artificial Intelligence (AI) Cryptocurrencies

What Is DePIN in Crypto?

What Is Staking?

What Is Internet Computer (ICP)?

What Is NEAR Protocol (NEAR)?

Disclaimer: This content is presented to you on an “as is” basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.

Key Takeaways

Enso is a decentralized Layer 1 network designed to simplify how developers interact with smart contracts across multiple blockchains and rollups.

The protocol uses Tendermint consensus and acts as a coordination layer that compiles executable bytecode for smart contracts across different chains.

The network features four participant roles: Consumers, Action Providers, Graphers, and Validators. 

Enso introduces a shared network state where smart contract abstractions, known as Actions, are contributed by developers and combined by Graphers to produce executable solutions.

What Is Enso?

Enso is a decentralized Layer 1 network designed to simplify how developers interact with smart contracts across multiple blockchains, rollups, and appchains. The protocol acts as a coordination layer that connects smart contracts from many chains, allowing developers to build across ecosystems without dealing with complex technical details. 

Enso introduces two main ideas called Intents and Actions. Intents let developers or users describe what they want to do, such as swapping tokens or moving assets between chains, without needing to define every technical step. 

Actions represent these smaller operations, like sending tokens or staking assets. The network combines and executes the right Actions to complete the Intent efficiently. By transforming complex blockchain interactions into intent-based requests, Enso aims to make decentralized applications more composable and user-friendly.

How Enso Works

The shared network state 

Enso’s shared network state acts as a global database that stores information about smart contracts from different blockchains and rollups. It allows developers to work from a single, consistent source of data rather than managing separate integrations for each blockchain.

Each smart contract is recorded as an entity with all the details needed to generate executable bytecode, which is the low-level code blockchains use to process and run smart contract instructions. Each entity is also linked to its corresponding chain ID, so the network knows where it is deployed.

For example, Aave’s lending protocol on Ethereum is stored as an entity with a “Lend” action type. When a developer wants to interact with a lending protocol across multiple chains, Enso can automatically gather the necessary components from the shared state to generate bytecode for that specific request. This approach helps simplify multi-chain development by turning complex smart contract interactions into standardized and reusable components.

Network Participants 

Enso’s design is built around four key participants, each playing a distinct role in processing requests and keeping the network running smoothly:

Consumers

The end users or developers who submit intents to the Enso network. They describe the outcome they want to achieve, such as swapping tokens or performing a DeFi action, and let the network handle how it’s executed.

Action Providers

Developers who contribute reusable smart contract modules called Actions. These Actions describe how specific blockchain operations work and can be combined to fulfill different user intents.

Graphers

Specialized participants who search through Enso’s shared network state to link relevant Actions together. They build optimized, executable bytecode that delivers the best possible result for a user’s intent.

Validators

Network nodes are responsible for verifying proposed solutions. They simulate and test the generated bytecode across blockchains to ensure it runs correctly, selecting the most efficient and secure execution solution.

The Enso workflow usually consists of the following steps:

Intent creation: A user submits an intent to the network specifying a desired outcome, such as a token swap or lending action, without detailing how it should be executed.

Action contribution: Action Providers publish reusable smart contract abstractions, known as Actions, that define how specific operations, such as swaps or deposits, can be performed.

Pathfinding: Graphers analyze the shared network state to combine relevant Actions and generate executable bytecode that fulfills the intent in the most efficient way.

Validation: Validators simulate the proposed bytecode on forked chain states to ensure it executes correctly and securely, confirming valid state transitions.

Solution selection: The network compares all valid solutions, selecting the one with the best output and lowest cost while discarding the rest.

Execution: The winning solution is returned to the user for direct execution. Execution fees embedded in the bytecode are distributed through an auction system, rewarding Graphers, Validators, and Action Providers in ENSO tokens.

Use Cases

Enso can be integrated across DeFi applications that require liquidity management, asset movement, and automation, including:

DEXs and aggregators: Enso can reduce friction in liquidity provision with simple zaps, allowing users to move positions more easily and optimize liquidity. 

Wallets: Wallet platforms can use Enso to offer smooth token swaps, cross-chain transfers, and direct access to DeFi earning opportunities, keeping user assets productive.

Stablecoins: Projects can mint tokens from a single origin and bridge them securely across chains. This allows the launch of yield-bearing stablecoins on multiple networks without separate contract deployments.

Vault deposits: Platforms can accept any token for deposits and simplify vault migrations to keep capital within their ecosystem and enhance user participation.

Market makers: Enso can automate DEX market making, arbitrage, and liquidity pool rebalancing. Its automated responses to market conditions can help improve capital efficiency.

The ENSO Token

ENSO is the native token of the Enso protocol, with a maximum supply of 127,339,703 tokens. It follows a controlled inflation schedule that gradually decreases over time and ceases entirely after ten years. It’s used within the ecosystem for many purposes, including:

Governance: ENSO holders can stake their tokens to vote on protocol upgrades and smart contract improvements. Voting does not provide staking rewards, and proposals must reach a quorum before they can be implemented.

Security: ENSO can be staked to support network validation and maintain system integrity. Validators use a Proof of Stake (PoS) mechanism and simulation tools to verify data accuracy. 

Delegation: ENSO holders can delegate their staked tokens to Validators and earn a portion of the validation revenue. This allows users to support the network’s operations and share in its rewards without running validation software themselves.

Enso (ENSO) on Binance HODLer Airdrops

On October 14, 2025, Binance announced ENSO as the 52nd project on the Binance HODLer Airdrops. Users who subscribed their BNB to Simple Earn and/or On-Chain Yields products from October 7 to 9 were eligible to receive ENSO airdrops. A total of 1.75 million ENSO tokens were allocated to the program, accounting for 1.75% of the genesis total token supply.

ENSO was listed with the Seed Tag applied, allowing for trading against the USDT, USDC, BNB, FDUSD, and TRY pairs.

Closing Thoughts

Enso is designed to make it easier for developers to build and connect applications across different blockchains. By combining intent-based requests with a shared network state, the protocol allows users to describe the outcome they want while the network handles how to achieve it. The protocol brings together Action Providers, Graphers, and Validators to generate and verify bytecode on-chain, reducing manual integrations and improving cross-network interaction between smart contracts.

Further Reading

Blockchain Layer 1 vs. Layer 2 Scaling Solutions

What Are Appchains (Application-Specific Blockchains)?

What Is Cross-Chain Interoperability?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Key Takeaways

Enso is a decentralized Layer 1 network designed to simplify how developers interact with smart contracts across multiple blockchains and rollups.

The protocol uses Tendermint consensus and acts as a coordination layer that compiles executable bytecode for smart contracts across different chains.

The network features four participant roles: Consumers, Action Providers, Graphers, and Validators. 

Enso introduces a shared network state where smart contract abstractions, known as Actions, are contributed by developers and combined by Graphers to produce executable solutions.

What Is Enso?

Enso is a decentralized Layer 1 network designed to simplify how developers interact with smart contracts across multiple blockchains, rollups, and appchains. The protocol acts as a coordination layer that connects smart contracts from many chains, allowing developers to build across ecosystems without dealing with complex technical details. 

Enso introduces two main ideas called Intents and Actions. Intents let developers or users describe what they want to do, such as swapping tokens or moving assets between chains, without needing to define every technical step. 

Actions represent these smaller operations, like sending tokens or staking assets. The network combines and executes the right Actions to complete the Intent efficiently. By transforming complex blockchain interactions into intent-based requests, Enso aims to make decentralized applications more composable and user-friendly.

How Enso Works

The shared network state 

Enso’s shared network state acts as a global database that stores information about smart contracts from different blockchains and rollups. It allows developers to work from a single, consistent source of data rather than managing separate integrations for each blockchain.

Each smart contract is recorded as an entity with all the details needed to generate executable bytecode, which is the low-level code blockchains use to process and run smart contract instructions. Each entity is also linked to its corresponding chain ID, so the network knows where it is deployed.

For example, Aave’s lending protocol on Ethereum is stored as an entity with a “Lend” action type. When a developer wants to interact with a lending protocol across multiple chains, Enso can automatically gather the necessary components from the shared state to generate bytecode for that specific request. This approach helps simplify multi-chain development by turning complex smart contract interactions into standardized and reusable components.

Network Participants 

Enso’s design is built around four key participants, each playing a distinct role in processing requests and keeping the network running smoothly:

Consumers

The end users or developers who submit intents to the Enso network. They describe the outcome they want to achieve, such as swapping tokens or performing a DeFi action, and let the network handle how it’s executed.

Action Providers

Developers who contribute reusable smart contract modules called Actions. These Actions describe how specific blockchain operations work and can be combined to fulfill different user intents.

Graphers

Specialized participants who search through Enso’s shared network state to link relevant Actions together. They build optimized, executable bytecode that delivers the best possible result for a user’s intent.

Validators

Network nodes are responsible for verifying proposed solutions. They simulate and test the generated bytecode across blockchains to ensure it runs correctly, selecting the most efficient and secure execution solution.

The Enso workflow usually consists of the following steps:

Intent creation: A user submits an intent to the network specifying a desired outcome, such as a token swap or lending action, without detailing how it should be executed.

Action contribution: Action Providers publish reusable smart contract abstractions, known as Actions, that define how specific operations, such as swaps or deposits, can be performed.

Pathfinding: Graphers analyze the shared network state to combine relevant Actions and generate executable bytecode that fulfills the intent in the most efficient way.

Validation: Validators simulate the proposed bytecode on forked chain states to ensure it executes correctly and securely, confirming valid state transitions.

Solution selection: The network compares all valid solutions, selecting the one with the best output and lowest cost while discarding the rest.

Execution: The winning solution is returned to the user for direct execution. Execution fees embedded in the bytecode are distributed through an auction system, rewarding Graphers, Validators, and Action Providers in ENSO tokens.

Use Cases

Enso can be integrated across DeFi applications that require liquidity management, asset movement, and automation, including:

DEXs and aggregators: Enso can reduce friction in liquidity provision with simple zaps, allowing users to move positions more easily and optimize liquidity. 

Wallets: Wallet platforms can use Enso to offer smooth token swaps, cross-chain transfers, and direct access to DeFi earning opportunities, keeping user assets productive.

Stablecoins: Projects can mint tokens from a single origin and bridge them securely across chains. This allows the launch of yield-bearing stablecoins on multiple networks without separate contract deployments.

Vault deposits: Platforms can accept any token for deposits and simplify vault migrations to keep capital within their ecosystem and enhance user participation.

Market makers: Enso can automate DEX market making, arbitrage, and liquidity pool rebalancing. Its automated responses to market conditions can help improve capital efficiency.

The ENSO Token

ENSO is the native token of the Enso protocol, with a maximum supply of 127,339,703 tokens. It follows a controlled inflation schedule that gradually decreases over time and ceases entirely after ten years. It’s used within the ecosystem for many purposes, including:

Governance: ENSO holders can stake their tokens to vote on protocol upgrades and smart contract improvements. Voting does not provide staking rewards, and proposals must reach a quorum before they can be implemented.

Security: ENSO can be staked to support network validation and maintain system integrity. Validators use a Proof of Stake (PoS) mechanism and simulation tools to verify data accuracy. 

Delegation: ENSO holders can delegate their staked tokens to Validators and earn a portion of the validation revenue. This allows users to support the network’s operations and share in its rewards without running validation software themselves.

Enso (ENSO) on Binance HODLer Airdrops

On October 14, 2025, Binance announced ENSO as the 52nd project on the Binance HODLer Airdrops. Users who subscribed their BNB to Simple Earn and/or On-Chain Yields products from October 7 to 9 were eligible to receive ENSO airdrops. A total of 1.75 million ENSO tokens were allocated to the program, accounting for 1.75% of the genesis total token supply.

ENSO was listed with the Seed Tag applied, allowing for trading against the USDT, USDC, BNB, FDUSD, and TRY pairs.

Closing Thoughts

Enso is designed to make it easier for developers to build and connect applications across different blockchains. By combining intent-based requests with a shared network state, the protocol allows users to describe the outcome they want while the network handles how to achieve it. The protocol brings together Action Providers, Graphers, and Validators to generate and verify bytecode on-chain, reducing manual integrations and improving cross-network interaction between smart contracts.

Further Reading

Blockchain Layer 1 vs. Layer 2 Scaling Solutions

What Are Appchains (Application-Specific Blockchains)?

What Is Cross-Chain Interoperability?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Key Takeaways

Walrus is a decentralized storage and data availability protocol designed for blockchain applications and autonomous agents.

The protocol stores large files like media, AI datasets, and archives off-chain while keeping metadata and availability proofs on the Sui blockchain.

Walrus uses Red Stuff, a custom erasure-coding algorithm, to split data into fragments distributed across storage nodes, allowing recovery even if some nodes go offline.

WAL is the native token used to pay for storage, secure the network through delegated staking, and participate in governance.

Introduction

Walrus is a decentralized storage and data availability network built on the Sui blockchain. It provides a scalable, verifiable way to store large files, such as images, videos, and datasets, that would be too costly or inefficient to store directly on a blockchain.

Originally developed by Mysten Labs, Walrus now operates as an independent decentralized network. It is governed through its native token, WAL, and supported by the Walrus Foundation. The protocol is intended to serve as a storage layer for a range of applications, from Web3 platforms to AI systems.

How Walrus Works

Encoding and off-chain storage

When data is uploaded to Walrus, it is split into smaller pieces called slivers using Red Stuff, the network's custom erasure-coding algorithm. Red Stuff distributes encoded fragments across multiple storage nodes rather than storing full copies on each one, which reduces replication overhead.

Storage nodes are periodically required to verify that they still hold their assigned fragments, helping to maintain ongoing availability. Even if several nodes go offline, the original data can be rebuilt from a subset of slivers. This approach allows Walrus to stay resilient while using fewer total data copies than traditional full-replication systems.

On-chain metadata

In Walrus, large files are stored as blobs, which are bundles of unstructured data such as images, videos, or datasets. Instead of placing these large blobs on the blockchain, Walrus stores only their metadata and availability proofs on Sui. Developers can reference and validate stored blobs inside smart contracts written in the Move programming language.

Availability proofs are cryptographic records confirming that storage nodes still hold their assigned data fragments. Anyone can verify that a blob remains accessible without downloading the full file, keeping verification lightweight.

Data retrieval

When you request a stored file, an aggregator gathers the required slivers from multiple nodes and reconstructs the original data. The content can then be delivered through a content delivery network (CDN) or cache for faster access. Because only small fragments are transferred and recombined, the retrieval process stays efficient even for large datasets.

Walrus Sites

Walrus Sites are decentralized websites hosted directly on the Walrus and Sui networks, offering an alternative to traditional web hosting. Developers upload static files using the site-builder tool, and the content is stored permanently across decentralized nodes.

Each site is tied to a Sui address, can be associated with non-fungible tokens (NFTs), and supports SuiNS for simple, human-readable domain names. Because the content is distributed, it remains available and resistant to censorship. Developers can also connect wallets and use smart contracts to add interactive features and on-chain functionality.

Use Cases

Walrus can be integrated with other blockchains to support applications that require decentralized and scalable data storage. Key use cases include:

NFTs and DApps: Walrus can store and deliver media files such as images, videos, and audio, allowing developers to build multimedia decentralized applications (DApps) and NFTs with reliable off-chain storage.

Artificial intelligence: Walrus can store verified datasets, AI model weights, and proofs of correct training, helping ensure the availability and authenticity of AI data and outputs.

Blockchain data archiving: Walrus can serve as an alternative storage layer for blockchain history, such as Sui checkpoints, transaction records, and historical snapshots.

Data availability: Walrus supports Layer 2 networks by certifying the availability of off-chain data, including blobs, validity proofs, and zero-knowledge proofs (ZKPs) required for verification and auditing.

Decentralized web hosting: Walrus can host complete decentralized websites, letting both front-end and back-end components operate without centralized infrastructure.

The WAL Token

WAL is the native token of the Walrus protocol, built on the Sui blockchain. It has a maximum supply of 5 billion tokens and follows a deflationary model that reduces supply through token-burning mechanisms. WAL serves three main purposes in the ecosystem:

Payment: Users pay for data storage on Walrus using WAL. Payments are distributed over time to storage nodes and stakers as rewards.

Security: WAL supports network security through delegated staking. Users can stake or delegate tokens to storage nodes and may earn rewards based on node performance. When slashing is introduced, penalties will apply to underperforming nodes.

Governance: WAL holders can participate in network governance by voting on key parameters and penalty settings.

Walrus (WAL) on Binance HODLer Airdrops

On October 10, 2025, Binance announced WAL as the 50th project on the Binance HODLer Airdrops program. Users who subscribed their BNB to Simple Earn and/or On-Chain Yields products from October 1 to 3, 2025, were eligible to receive WAL airdrops. A total of 32.5 million WAL tokens were allocated to the program, representing 0.65% of the total token supply.

WAL was then listed with the Seed Tag applied.

FAQ

What is Walrus?

Walrus is a decentralized storage and data availability protocol built on the Sui blockchain. It allows applications to store large files such as media, datasets, and archives off-chain, while keeping lightweight availability proofs and metadata on-chain. It was developed by Mysten Labs and is now governed independently through the WAL token.

How does Red Stuff work?

Red Stuff is Walrus's custom erasure-coding algorithm. When a file is uploaded, Red Stuff splits it into fragments called slivers and distributes them across many storage nodes. Only a subset of those slivers is needed to reconstruct the original file. This means the network can recover data even if some nodes go offline, while avoiding the cost of storing full copies everywhere.

What is WAL used for?

WAL is the native token of the Walrus protocol. It is used to pay for storage on the network, to stake or delegate to storage nodes to help secure the system, and to vote on governance decisions. WAL follows a deflationary model with a maximum supply of 5 billion tokens.

What are Walrus Sites?

Walrus Sites are static websites hosted on the Walrus and Sui decentralized networks. Developers upload content using the site-builder tool, and the files are stored permanently across the network. Each site can be associated with a Sui address and a SuiNS domain name, making it resistant to takedowns and centralized hosting failures.

Closing Thoughts

Walrus combines decentralized storage with blockchain technology to provide a way to manage large amounts of data in a verifiable, cost-efficient manner. With features such as Walrus Sites and WAL-based governance, it offers developers an alternative for building data-driven applications in a decentralized environment.

Further Reading

What Is Data Tokenization and Why Is It Important?

What Is EIP-4844 in Ethereum and How Can It Benefit Users?

What Is Sui (SUI)?

Blockchain Layer 1 vs. Layer 2 Scaling Solutions

What Is Liquid Staking?

Disclaimer: This content is presented to you on an "as is" basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.

Key Takeaways

Walrus is a decentralized storage and data availability protocol designed for blockchain applications and autonomous agents.

The protocol stores large files like media, AI datasets, and archives off-chain while keeping metadata and availability proofs on the Sui blockchain.

Walrus uses Red Stuff, a custom erasure-coding algorithm, to split data into fragments distributed across storage nodes, allowing recovery even if some nodes go offline.

WAL is the native token used to pay for storage, secure the network through delegated staking, and participate in governance.

Introduction

Walrus is a decentralized storage and data availability network built on the Sui blockchain. It provides a scalable, verifiable way to store large files, such as images, videos, and datasets, that would be too costly or inefficient to store directly on a blockchain.

Originally developed by Mysten Labs, Walrus now operates as an independent decentralized network. It is governed through its native token, WAL, and supported by the Walrus Foundation. The protocol is intended to serve as a storage layer for a range of applications, from Web3 platforms to AI systems.

How Walrus Works

Encoding and off-chain storage

When data is uploaded to Walrus, it is split into smaller pieces called slivers using Red Stuff, the network's custom erasure-coding algorithm. Red Stuff distributes encoded fragments across multiple storage nodes rather than storing full copies on each one, which reduces replication overhead.

Storage nodes are periodically required to verify that they still hold their assigned fragments, helping to maintain ongoing availability. Even if several nodes go offline, the original data can be rebuilt from a subset of slivers. This approach allows Walrus to stay resilient while using fewer total data copies than traditional full-replication systems.

On-chain metadata

In Walrus, large files are stored as blobs, which are bundles of unstructured data such as images, videos, or datasets. Instead of placing these large blobs on the blockchain, Walrus stores only their metadata and availability proofs on Sui. Developers can reference and validate stored blobs inside smart contracts written in the Move programming language.

Availability proofs are cryptographic records confirming that storage nodes still hold their assigned data fragments. Anyone can verify that a blob remains accessible without downloading the full file, keeping verification lightweight.

Data retrieval

When you request a stored file, an aggregator gathers the required slivers from multiple nodes and reconstructs the original data. The content can then be delivered through a content delivery network (CDN) or cache for faster access. Because only small fragments are transferred and recombined, the retrieval process stays efficient even for large datasets.

Walrus Sites

Walrus Sites are decentralized websites hosted directly on the Walrus and Sui networks, offering an alternative to traditional web hosting. Developers upload static files using the site-builder tool, and the content is stored permanently across decentralized nodes.

Each site is tied to a Sui address, can be associated with non-fungible tokens (NFTs), and supports SuiNS for simple, human-readable domain names. Because the content is distributed, it remains available and resistant to censorship. Developers can also connect wallets and use smart contracts to add interactive features and on-chain functionality.

Use Cases

Walrus can be integrated with other blockchains to support applications that require decentralized and scalable data storage. Key use cases include:

NFTs and DApps: Walrus can store and deliver media files such as images, videos, and audio, allowing developers to build multimedia decentralized applications (DApps) and NFTs with reliable off-chain storage.

Artificial intelligence: Walrus can store verified datasets, AI model weights, and proofs of correct training, helping ensure the availability and authenticity of AI data and outputs.

Blockchain data archiving: Walrus can serve as an alternative storage layer for blockchain history, such as Sui checkpoints, transaction records, and historical snapshots.

Data availability: Walrus supports Layer 2 networks by certifying the availability of off-chain data, including blobs, validity proofs, and zero-knowledge proofs (ZKPs) required for verification and auditing.

Decentralized web hosting: Walrus can host complete decentralized websites, letting both front-end and back-end components operate without centralized infrastructure.

The WAL Token

WAL is the native token of the Walrus protocol, built on the Sui blockchain. It has a maximum supply of 5 billion tokens and follows a deflationary model that reduces supply through token-burning mechanisms. WAL serves three main purposes in the ecosystem:

Payment: Users pay for data storage on Walrus using WAL. Payments are distributed over time to storage nodes and stakers as rewards.

Security: WAL supports network security through delegated staking. Users can stake or delegate tokens to storage nodes and may earn rewards based on node performance. When slashing is introduced, penalties will apply to underperforming nodes.

Governance: WAL holders can participate in network governance by voting on key parameters and penalty settings.

Walrus (WAL) on Binance HODLer Airdrops

On October 10, 2025, Binance announced WAL as the 50th project on the Binance HODLer Airdrops program. Users who subscribed their BNB to Simple Earn and/or On-Chain Yields products from October 1 to 3, 2025, were eligible to receive WAL airdrops. A total of 32.5 million WAL tokens were allocated to the program, representing 0.65% of the total token supply.

WAL was then listed with the Seed Tag applied.

FAQ

What is Walrus?

Walrus is a decentralized storage and data availability protocol built on the Sui blockchain. It allows applications to store large files such as media, datasets, and archives off-chain, while keeping lightweight availability proofs and metadata on-chain. It was developed by Mysten Labs and is now governed independently through the WAL token.

How does Red Stuff work?

Red Stuff is Walrus's custom erasure-coding algorithm. When a file is uploaded, Red Stuff splits it into fragments called slivers and distributes them across many storage nodes. Only a subset of those slivers is needed to reconstruct the original file. This means the network can recover data even if some nodes go offline, while avoiding the cost of storing full copies everywhere.

What is WAL used for?

WAL is the native token of the Walrus protocol. It is used to pay for storage on the network, to stake or delegate to storage nodes to help secure the system, and to vote on governance decisions. WAL follows a deflationary model with a maximum supply of 5 billion tokens.

What are Walrus Sites?

Walrus Sites are static websites hosted on the Walrus and Sui decentralized networks. Developers upload content using the site-builder tool, and the files are stored permanently across the network. Each site can be associated with a Sui address and a SuiNS domain name, making it resistant to takedowns and centralized hosting failures.

Closing Thoughts

Walrus combines decentralized storage with blockchain technology to provide a way to manage large amounts of data in a verifiable, cost-efficient manner. With features such as Walrus Sites and WAL-based governance, it offers developers an alternative for building data-driven applications in a decentralized environment.

Further Reading

What Is Data Tokenization and Why Is It Important?

What Is EIP-4844 in Ethereum and How Can It Benefit Users?

What Is Sui (SUI)?

Blockchain Layer 1 vs. Layer 2 Scaling Solutions

What Is Liquid Staking?

Disclaimer: This content is presented to you on an "as is" basis for general information and or educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.