KuCoin Ventures Weekly Report 20250414-0420

2025/04/23 13:10:15

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KuCoin Ventures Weekly Report: ZK's Harsh Reality, ETH's Strategy Shift, Cautious Markets & Deep Dives into Unichain/Raydium

1. Weekly Market Highlights

zkSync Token Abnormal Minting Incident Exposes Scars of the ZK Narrative

On April 15th, zkSync, a star player in the Ethereum ZK L2 space, encountered a "black swan" event. The admin private key for its ZK token airdrop contract was allegedly leaked, allowing a hacker to mint and sell off approximately 111 million ZK tokens that were supposed to be unclaimed, causing a sharp drop in the token price.

Although the zkSync team responded quickly, claiming the protocol and token contract themselves remain secure and user funds are safe, attributing the cause to a "management oversight" in the airdrop distribution contract, the incident undoubtedly cast a shadow over the halo of ZK L2. Looking back at zkSync's journey, it started as a small German team at EthCC in 2019, subsequently establishing Matter Labs and raising over $250 million through 4 funding rounds within 4 years, attracting multiple investments from top VCs like a16z and Dragonfly.

However, following the highlights, the reality is somewhat stark: the ZK token price has now fallen by 84.17% from its post-issuance high, with an FDV (Fully Diluted Valuation) of approximately $1.09 billion. The on-chain TVL for zkSync Era is only $55.1 million, and its daily active addresses have been continuously declining, dropping to 17,900 on April 14th. The contrast between the spotlight and reality is quite jarring.

Data Source: DeFillama https://defillama.com/chain/zksync-era

Data Source: token terminal https://tokenterminal.com/explorer/projects/zksync-era

ZK Narrative Disillusionment: StarkNet, the Star-Studded ZK Top Student, Also Faces Cold Reception

Coincidentally, another "king" in the ZK space—StarkWare (the team behind StarkNet)—faces a similar predicament. StarkWare's background is quite impressive, boasting a top-tier cryptography team. Back in its 2018 seed round, it received investments from Pantera, Polychain, etc., and Vitalik himself was also an early supporter. Its Series D funding in 2022 raised $100 million at a staggering $8 billion valuation. In 2024, StarkNet launched its STARK token, with its circulating market cap reaching $1.3 billion at one point.

However, the market's response has been less than satisfactory. Currently, the STARK token price is down 94.21% from its peak, and its total valuation has shrunk to $1.35 billion. On-chain data also reflects the challenges: StarkNet's TVL is only $108 million, and both its TVL and bridged TVL have been continuously declining since their rebound peak at the end of 2024. User data shows even more fatigue; according to the latest data, daily active unique addresses are around 3,300, and total daily active addresses are about 5,500.

Data Source: DeFillama, https://defillama.com/chain/starknet

Data Source: Dune Analytics, https://dune.com/starknet_foundation/starknet-activity

Tokenterminal, https://tokenterminal.com/explorer/projects/starknet

The much-anticipated "showdown between the ZK titans" scenario now seems more like a competition of who shrinks in market cap and loses users slower. The grand narrative of ZK L2 appears to be undergoing a severe test.

Ethereum's Roadmap Wobbles, Vitalik Falls Back in Love with L1

The struggles of the leading ZK projects are not isolated incidents. Honestly, if it weren't for this ZK hacking incident, it feels like we haven't heard major news about ZK Rollups for a long time. This also reflects broader market sentiment—even discussions about Ethereum itself have recently been often filled with FUD (Fear, Uncertainty, Doubt), or a sense of helpless self-deprecation and jokes among community members. Against this backdrop, the latest moves from Ethereum's core layer and Vitalik become even more interesting.

Vitalik, Ethereum's spiritual leader, was once the staunchest supporter of L2s (especially ZK Rollups), proclaiming L2 as the future. Back then, he even declared that ZK-Rollups would defeat Optimistic Rollups in Ethereum's Layer 2 scaling war. However, entering 2024-2025, especially with L2s showing lackluster performance, community complaints rising, and even founders of several Ethereum OG projects publicly "pressuring the palace," the tide seems to be quietly turning. Vitalik's recent statements and proposals reveal more complex and pragmatic strategic considerations:

Acknowledging L1 Value, Planning for the Long Term: In early April, he proposed an L1 privacy roadmap. More significantly, on April 20th, he suggested replacing the EVM with the RISC-V architecture in the long run. This isn't about abandoning L2 but targets future L1 execution efficiency bottlenecks, intending to fundamentally enhance L1 performance and simplify the core layer. It's an ambitious vision aimed at solving ZK proof computation bottlenecks, potentially offering over 100x efficiency gains, though implementation will take time.
L2 Remains the Main Force but Needs a Push: Responding to community doubts, Vitalik clearly stated that L2 remains the primary scaling path but also directly addressed L2 challenges—insufficient Blob space, poor interoperability . He called for L1 to accelerate Blob scaling, while L2s must improve security , standardize interoperability , and shorten deposit/withdrawal times.
Can't Forget ETH Economics: Vitalik has also begun to seriously address ETH's value capture in the L2 era, proposing strategies like encouraging L2s to support ETH (burning fees, staking, etc.), utilizing Rollups to capture MEV, and considering Blob price mechanisms.

Overall, Ethereum's strategy looks more like a "two-pronged approach" after some internal struggle: short-term acceleration of L1 data layer scaling (to feed L2s), medium-term push for L2's own evolution, and long-term planning for a fundamental upgrade of the L1 computation layer (from EVM to RISC-V). This is both a response to current pressures and a layout for future challenges.

Meanwhile, the Solana community has consistently been a staunch "critic" of L2 solutions, believing L1 is fast and cheap enough. Solana co-founder Toly thinks L2s won't significantly help reduce user fees on Solana, and major investor Kyle from Multicoin has bluntly expressed skepticism about the mass adoption of Solana L2s. Although key figures remain reserved, spontaneous exploration within the ecosystem has begun, with some Solana Layer 2 concept projects currently under development and launching. The market currently leans towards interpreting this not as Solana quietly pivoting to the L2 path, but more as supplementary solutions meeting specific needs, or perhaps narrative patching.

Considering the current market performance, the SOL/ETH exchange rate has been continuously strengthening since the end of 2023, seemingly reflecting the pricing of different roadmaps, project management styles, and ecosystem support methods.

Data Source: TradingView, SOL/ETH Trading Pair from Binance

The zkSync incident and the plight of the ZK titans have poured cold water on the once-hot ZK L2 narrative. Ethereum's "wobble" and "integration" between L1 and L2, along with its long-term future plans, show its complexity and determination in facing challenges. The emergence of L2 sprouts in the Solana ecosystem adds more variables to this scaling race.

Ultimately, technical terms and grand narratives must translate into tangible reality. Whether it's L1 or L2, ZK or OP, RISC-V or EVM, only platforms that offer security, affordability, speed, developer-friendliness, and a smooth user experience can win the favor of developers and users in this fierce competition. This race for scaling and the future is far from over.

2. Weekly Selected Market Signals

Market Sentiment Remains Fragile, BTC Dominance Strengthens, Liquidity Still Cautious

Although concerns over recent tariff issues have eased somewhat, they have not been fully resolved, which continues to dampen the overall rebound momentum of risk markets. The market's focus has partially shifted from geopolitical tensions to interpreting and debating the future path of monetary policy. However, no dovish signals have emerged from the policy front. U.S. Federal Reserve Chair Jerome Powell and several 2025 FOMC voting members reiterated their commitment to controlling inflation in public remarks this week and warned of stagflation risks, further dispelling expectations of near-term Fed intervention to “rescue the market.” The prevailing consensus is that unless clear and severe signs of economic recession emerge, the Fed will likely keep the current benchmark interest rate unchanged and maintain the ongoing quantitative tightening path throughout the first half of 2025.

Against this macro backdrop, the crypto market continued to exhibit a strong correlation with U.S. equities this week. Although overall sentiment has slightly improved from the extreme fear seen in the previous two weeks, the CMC Crypto Fear and Greed Index only rebounded to 33, remaining within the “Fear” range — indicating a limited recovery in investor confidence.

Internal market divergence has intensified: Bitcoin demonstrated notable relative strength, with its dominance briefly surpassing 62%, marking the highest level since March 2021. This is often interpreted as a risk-off move, with capital rotating from higher-risk altcoins to Bitcoin as a perceived safe haven. In contrast, altcoins remained broadly sluggish, failing to mirror BTC's rebound. One notable exception was Solana (SOL), which showed a relatively stronger recovery, driven in part by a modest revival in its on-chain activity, particularly from certain meme-based projects.

From a liquidity perspective, inflows of new capital into the market remain weak. The total circulating supply of the two major stablecoins, USDT and USDC, recorded only marginal growth this week, with a notably low week-over-week growth rate. This reflects a continued cautious stance among off-chain capital regarding large-scale entry into the crypto market amid macroeconomic and monetary policy uncertainties. Combined with the current relatively stable on-chain lending rates and funding rates — which show no signs of extreme stress — this also indirectly confirms the lack of strong incremental liquidity momentum.

Resolv Labs Raises $10M Seed Round, Delta-Neutral Stablecoins in the Spotlight

Delta-neutral stablecoin protocol Resolv Labs announced a $10 million seed funding round this week, co-led by Cyber.Fund and Maven11, with participation from Coinbase Ventures, Arrington Capital, Animoca Ventures, and others. The project’s core product, the USR stablecoin, adopts a delta-neutral strategy — similar in principle to Ethena — by holding crypto assets like ETH while opening equal-sized short positions in perpetual futures to hedge against price volatility. This allows USR holders to earn stable yields.

USR is designed with a two-tiered structure: the senior tranche (USR holders) receives stable but lower yields, while the junior tranche (RLP holders) takes on greater risk in exchange for higher potential returns. This design is inspired by traditional structured financial products and aims to improve yield predictability while maintaining decentralization.

From a sectoral perspective, the high-profit potential of yield-generating stablecoins is attracting increasing attention, with several global banks also exploring entry into the stablecoin market. Amid heightened macroeconomic uncertainty, demand is rising for crypto assets capable of delivering stable returns. Resolv Labs’ delta-neutral strategy and structured design offer investors a new option in this space, and we expect this segment to remain closely watched going forward.

3. Project Spotlight

Unichain: Scarce High-Quality Farming Opportunities, Whales Dominate

The Uniswap Foundation has proposed funding a long-term liquidity incentive program for Unichain and V4, supported by Gauntlet and Merkl. The plan aims to deploy ～$60 million in incentives in Unichain’s first year, targeting a TVL of $750 million and a cumulative trading volume of $11 billion within three months. In the first two weeks, ～$5 million UNI incentives were provided to 12 Unichain pools. The impact was immediate: the TVL of these 12 pools surged from about $1 million before incentives to over $350 million in less than a week, with the USDC/USDT0 stablecoin pool alone exceeding $110 million, accounting for nearly one-third of the total.

Taking the USDC/USDT0 0.01% pool as an example, this pool receives ～$42k worth of UNI daily as incentives. Currently, Merkl’s frontend shows an annualized return of 13.5% for this stablecoin pool post-incentives. However, as V4 allows LP to set custom price ranges, most profits flow to LP with liquidity concentrated within the pool’s price range, with narrower ranges yielding higher returns. The largest LP in the USDC/USDT0 pool, address 0xa8...9bfb, provides $31.05 million in liquidity (28% of the pool) within an extremely tight range of 0.9999–1.00. This single LP has already earned over 13,000 UNI rewards (～$72k), dominating both pool share and rewards due to its precise range.

Data Source: Uniswap, https://app.uniswap.org/positions/v4/unichain/57789?lng=en-US

Beyond retail investors essentially being sidelined in a game dominated by whales, this incentive program focuses solely on TVL without addressing trading volume, resulting in persistently low trading activity on Unichain. Taking the USDC/USDT0 0.01% pool as an example, with daily trading volume only in the millions of dollars, daily LP fees amount to just a few hundred dollars. Excluding UNI incentives, the pool’s base annualized return is less than 0.3%.

The initial two-week incentive program may have been a test of market response. While TVL has surged significantly, a deeper look reveals that whales are primarily seeking a safe haven for farming. Without continued liquidity incentives, TVL could plummet. Incentives should instead focus on boosting Unichain’s network activity and expanding V4 adoption.

Raydium LaunchLab: A Counterattack Against Pump Fun’s PumpSwap

Pump Fun’s innovative asset issuance model has elevated the speed of on-chain asset creation to a new level, making it one of the most profitable applications in this cycle. Raydium, which facilitates the migration of internal liquidity to the DEX’s external market, has directly benefited, surpassing Orca to become the largest DEX on Solana. However, in late March, Pump Fun launched its own DEX, PumpSwap. Memecoins that complete their internal bonding curve will now migrate liquidity directly to PumpSwap, bypassing Raydium. This shift has transformed Raydium and Pump Fun from collaborators into competitors.

To counter potential revenue declines and the challenge posed by PumpSwap, Raydium announced the launch of its own Pump-like launch tool, LaunchLab, in mid-April. Unlike Pump Fun, LaunchLab’s Bonding Curve caps at 85 SOL, higher than Pump Fun’s 69 SOL. Additionally, 25% of LaunchLab’s transaction fees are allocated to RAY token buybacks.

Data Source: Dune Analytics, https://dune.com/adam_tehc/launchlab

Over the past week, LaunchLab created ～3.9k tokens, showing a gradual downward trend over time, with launch speeds far behind Pump Fun. Currently, Pump Fun accounts for 60% of the daily token creation on the Solana network. A DEX’s moat is its liquidity. The process of asset issuance to trading is seamlessly connected, flowing from internal to external markets, and whichever DEX the issued assets migrate to establishes a first-mover advantage for those assets. On Solana, Pump Fun has already captured the mindshare of users creating new assets, making it a formidable challenge for LaunchLab to compete. If Pump Fun continues to consistently produce new assets with high-mc, it’s likely only a matter of time before PumpSwap surpasses Raydium. For Raydium, LaunchLab not only needs to create high-mc assets but also requires established meme devs to migrate to its platform.

About KuCoin Ventures

KuCoin Ventures, is the leading investment arm of KuCoin Exchange, which is a top 5 crypto exchange globally. Aiming to invest in the most disruptive crypto and blockchain projects of the Web 3.0 era, KuCoin Ventures supports crypto and Web 3.0 builders both financially and strategically with deep insights and global resources. As a community-friendly and research-driven investor, KuCoin Ventures works closely with portfolio projects throughout the entire life cycle, with a focus on Web3.0 infrastructures, AI, Consumer App, Defi and PayFi.