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Bitcoin and Ethereum Face Sharp Decline: $320M Liquidated in 24 Hours

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In the past 24 hours, major cryptocurrencies, including Bitcoin and Ether, have slumped. While Bitcoin dropped by 7% to $58,034, ETH fell to $2,392, losing 9.4%. The overall markets also withstood part of the $320 million in liquidated positions across the entire network. Most of these liquidations were long orders of about $285.68 million, while short orders saw a liquidation of $34.99 million.

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Source: Coinglass

Santiment Insights: Bitcoin Funding Rates and Market Reactions

This retracement develops when there is increased activity in the market, particularly on the exchanges such as dYdX. Data from Santiment has shown that long positions have been slowing down at the fastest pace since Bitcoin’s peak in March, which reflects a surge in market optimism-or maybe greed-around August 25th.

Nevertheless, this upbeat attitude encountered the tidal wave of liquidations which provoked the steep market correction. Such situations are not rare in the cryptocurrency space, where the extreme funding rates usually cause the abrupt reversals when the market resets.

Santiment’s data indicate that these instant fluctuations are the result of the imbalance caused by too much leverage. When the funding rates – which are the main factor of the cost of keeping a levered position – become too uneven, it can be an indication of a future market correction.

This phenomenon is caused by the futures market, where positions can be forcefully ended if they go too far against the holder. Consequently, extreme funding rates that are bullish or bearish mostly come before a reversal, as traders have to unwind their positions, thus a cascading effect is created.

However, market observers should be aware of funding rates in the near term. A shift towards more equal rates, or even a short bias, may point to the market being poised to bounce back. This is in line with the view of some traders who think that the current support levels may hold and, hence, a recovery will be triggered.

One such trader, Nihilus, took to X to express a cautiously optimistic view, suggesting that the market may be nearing a turning point. “I believe our time is running out,” he tweeted, hinting at a potential recovery in the fourth quarter.

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Nihilus opines that the market is presently at a crucial support level and may respond over the coming weekend. He has also warned, though, that if this support is broken, then there could be more downward movement ahead. Such is the nature of crypto world volatility and only time will judicate.

Related Reading | Bitcoin’s Breakout Spurs Renewed Market Activity Amid Rising Volatility

Ethereum and Tokenization: Could $1.3T in Assets Transform Fee Structures?

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Jamie Coutts, Realvision’s Chief Crypto Analyst, projected that asset management will change dramatically over the next 5 to 10 years, with Ethereum playing an integral part in tokenizing $10 trillion to $30 trillion in traditional assets.

This ambitious projection seems particularly bold when compared with BlackRock’s current $10 trillion dollar under management. Based on the existing two-year compounded annual growth rate of 121%, tokenized traditional assets might reach approximately $1.3 trillion by 2030.

Estimating the blockchain fee income from this projected $1.3 trillion in tokenized assets is complex, but we can draw some insights from traditional financial metrics. In 2023, the S&P 500 stocks saw $130 trillion in volume traded against a $40 trillion market cap, leading to a turnover ratio of approximately 317%.

Applying this turnover ratio as a benchmark for blockchain transactions might offer a conservative estimate, given the higher trading velocity typical of decentralized finance (DeFi) platforms.

Imagine using Apple stock as collateral for a loan, receiving Ethereum, and staking it on platforms like Allstake to support Avalanche’s blockchain. This blend of traditional finance and DeFi, known as “DeFi legos,” suggests blockchain fees could drop to 1 basis point compared to the 10 basis points typical in traditional finance.

Potential Impact on Ethereum

However, if $1.3 trillion in real-world assets (excluding stablecoins) were tokenized and governed on-chain, it would disperse and fuel increases in activity across different crypto sectors like NFTs, social platforms, and gaming. Ethereum would experience huge but hard-to-estimate effects that are determined by the market share of layer-1 solutions compared to layer-2 solutions.

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As more activity potentially moves to permissioned rollups, those developed by firms like Robinhood or Interactive Brokers or established layer-2 solutions such as Base and Arbitrum, Ethereum’s role could get more complex.

Layer-2 solutions would naturally want to take a major share of the revenue, and that can even be as high as 95-99%, taking only a small fraction of the settlement costs for Ethereum. On the contrary, if layer-2 solutions finally enable a fee switch, it would be highly advantageous for token-holders.

Presently, Ethereum continues to be among the leading platforms in asset tokenization in traditional finance as companies such as BlackRock and Franklin Templeton managed to secure more than $900 million worth of the total $1.4 billion in tokenized US Treasuries. This emphasizes Ethereum’s importance towards finance and blockchain-based assets.

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Bitcoin Drop Triggers 7.5% Fall in Open Interest: Altcoins Gaining Traction

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Bitcoin is down just 2.2% in price in the past 24 hours, yet this relatively modest decline has set off a more dramatic 7.5% reduction in total open interest on exchanges. According to data from Santiment, this disparity underlines a growing divergence in trader behavior as Bitcoin saw a more pronounced drop in open interest compared to other major cryptocurrencies, including Ethereum and Solana, which have barely seen any drop.

This shift in open interest perhaps indicates that traders are increasingly focused on altcoins. Ethereum and Solana, among other altcoins, have been pretty resilient since the crash on August 5, and such recovery might foremost attract more attention from traders.

The reduced sensitivity of Ethereum and Solana to Bitcoin’s price fluctuations this month also indicates a possible shift in market dynamics. Traders might be reducing their exposure to Bitcoin, perhaps due to increasing uncertainty in its price action, and rotating their capital into altcoins in search of higher returns.

The drop in Bitcoin’s open interest can be taken as a sign of a broader market mood. The August rebound, which is now showing signs of fading, can be interpreted in the way that traders may be trying to sell at the top. The nature of such behavior shows that traders are not very aggressive and are probably expecting the end of the recent rally and thus are trying to cash in on profits.

Will Bitcoin Top Out by 2025?

Analysts are also keeping a close eye on BTC’s long-term trajectory. According to Mags, Bitcoin has historically topped out several months after each halving event. In previous cycles, Bitcoin saw substantial gains, peaking 406 days after the halving in 2013, 511 days in 2017, and 546 days in 2021.

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If this pattern remains constant, Bitcoin could reach its peak possibly between June and October 2025, or roughly 400-550 days from now. Even with a more conservative estimate of growth, BTC’s value would rise by about 300% from the current levels to hit approximately $200,000.

Nevertheless, it will depend on how BTC relates with altcoins to shape future markets in cryptocurrencies. Such moments as open interest and market sentiments are changing constantly and giving hints about where capital may go within the next month.

Related Reading | Stablecoin Marketcord High, Exceeds $168 Billion with Rising Institutional Interest

Solana Virtual Machine Set To Dominate Modular Blockchains

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Solana’s SVM, a high-performance virtual machine, is turning out to be a crucial component in the modular blockchain landscape. In contrast to Ethereum L1s that rely on existing developer bases and liquidity, Solana’s SVM rollups are taking a novel approach: targeting ETH and BTC liquidity while attracting new developers skilled in Rust, C++, and other mainstream languages.

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As per Delphi Digital’s report, Solana’s influence extends beyond its native ecosystem, impacting Ethereum and Bitcoin. As the industry shifts towards modularity, Solana’s components, including its SVM and consensus mechanism, are becoming valuable building blocks for other blockchains. Some key takeaways from the report are:

The recent decoupling of SVM from validator clients has opened up new possibilities for modularity, allowing it to be integrated into various configurations. SOL’s SVM rollups aim to attract developers and liquidity from Ethereum and Bitcoin, expanding its reach beyond its native ecosystem. To further enhance the developer appeal, the SVM’s support for Rust, C++, and other mainstream languages makes it attractive to a wider range of developers.

Moreover, Solana’s consensus mechanism can be used to sequence rollups on other chains, demonstrating its versatility. Lastly, the blockchain’s own need for L2 solutions is driving the development of SVM-based rollups, further strengthening its position in the modular landscape.

Overall, Solana’s SVM is playing a key role in shaping the future of modular blockchains. By offering a high-performance virtual machine that can be integrated into various configurations, Solana is attracting developers and liquidity from other ecosystems. This expansion not only benefits the chain but also contributes to the broader development of modular blockchain technology.

Solana ETFs Gain Momentum

In other developments, Brazil’s regulator has greenlighted the second Solana exchange-traded fund [ETF] as per the CVM database. The SOL ETF is issued by Brazil-based asset manager Hashdex with over $962 million in assets under management — in partnership with the local investment bank BTG Pactual. Brazilian Securities and Exchange Commission or CVM stated that the new fund is in a pre-operational phase.

Earlier CVM approved the first-ever SOL spot ETF. The fund is provided by QR—a prominent player known for its Bitcoin and Ethereum ETFs—and will be managed by Vortx. At present, the ETF awaits final approval from B3, Brazil’s main stock exchange, It is expected to hit the market within 90 days.

Ethereum Co-Founder Addresses Misconceptions About Prediction Markets

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In a recent social media discussion, Ethereum creator Vitalik Buterin commented on the criticism of prediction markets such as Polymarket. As Buterin explains, what many people misunderstand is that labeling these markets as gambling fundamentally misses the point of what they are and at what value they come.

According to Ethereum co-founder Buterin, prediction markets serve as valuable social and epistemic tools, offering insights into public sentiment and future events with less susceptibility to biased reporting compared to traditional media.

The controversy started when crypto philosopher Milli expressed skepticism about Buterin’s opinion on decentralized finance (DeFi). Milli’s tweet pointed out the contradiction in Buterin’s statements on Ethereum’s value being primarily dependent on its use in DeFi applications and his lack of interest in DeFi applications.

Milli voiced his reservations about Buterin’s support for stablecoins like USDC but did not seem to favor DeFi innovations. This resulted in a greater argument concerning the destination of Ethereum and its connection with DeFi principles.

Ethereum co-founder’s Clarification on DeFi and Stablecoins

Ethereum co-founder clarified his position by emphasizing his support for decentralized applications that are sustainable and abide by decentralization and permissionlessness principles. He imparted with intense joy on decentralized exchanges (DEXes) and stablecoins like RAI while admitting the centralization of USDC to a certain extent.

Buterin stressed that even though USDC may not be the best for decentralization it makes international transactions extremely easy and could be a starting point for more decentralized options. Buterin continued explaining that his criticism goes not only to financial schemes with unsustainable yields but also to those which the liquidity farming craze of 2021 was a main contributor.

He emphasized the necessity of comprehending the basis of yields and their sustainability in the long run, which was his careful stance towards financial innovations.

After highlighting the prediction markets’ importance, Buterin repeated what he had said earlier. These are not just gambling platforms, he explained again. They help in revealing various societal trends and outcomes that might occur in future.

He further mentioned about their applicability in governing and decision-making processes, emphasizing the fact that these markets are objective compared to traditional news outlets that are sometimes subjective. From this point of view, he is convinced that there is a role for them as an instrument of civic education and democracy.

Related Reading | Altseason 2.0: Mapping the Path to the Next Crypto Boom

Bitcoin and Ethereum Short Interest Dives to Record Lows on Bitfinex

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Recently, interest in short positions for Bitcoin and Ethereum on Bitfinex has reached all-time lows, according to Alphractal, a professional platform for investment data analysis. This trend marks an enormous shift in market dynamics: historically, a rapid increase in long positions on Bitfinex was usually followed by a market decline.

In the case of Bitcoin, this relationship is very distinct, with an increase in long positions leading normally to a price drop. Bitcoin long positions have been soared to 62,570 BTC, while BTC short positions have remained at a mere 418.5 BTC since March 2024, thus, there are 149 times more longs than there are shorts.

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Ethereum represents a new case. Up to 2022, this was the major conflict between long and short positions. Nonetheless, the trend has shifted recently, with short positions decreasing markedly against longs. Remember in 2021 when the total of short positions was higher than long positions? Ethereum was at its cycle peaks at that point.

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As of now, 63,860 ETH are in long positions compared to 3,334 ETH in shorts, which is approximately a 19x difference. While most exchanges indicate dominance of long positions, the continuous rise in longs on Bitfinex could suggest potential price declines and forced liquidations of traders. However, a price correction might also present a buying opportunity for market participants.

Bitcoin Demand Growth Declines, Prices Drop

Meanwhile, a CryptoQuant report reveals that Bitcoin’s demand growth has been lackluster and has even turned negative recently. BTC’s apparent demand had significantly slowed since early April, when BTC was trading at around $70,000. The demand fell from a 30-day growth of 496,000 Bitcoin, the highest since January 2021, to a current negative growth of 25,000.

Due to reduced demand, Bitcoin prices have fallen from around $70,000 to $49,000. A recovery in price is dependent on renewed interest. This decline is also seen in the slowing growth of large Bitcoin holders, or “whales,” whose 30-day holdings growth dropped from 6% in February to just 1% now. Historically, whale growth of over 3% has correlated with rising BTC prices.

Furthermore, slowing demand is indicated by reduced purchases of Bitcoin by US spot ETFs. This would, therefore, require increased ETF activities to drive BTC demand higher and consequently move prices up. Despite weak prices, some metrics, such as accumulation by long-term holders and growing market capitalization for stablecoins, suggest that there is underlying strength in cryptocurrency markets.

Related Reading | BNB Investor Turns $1.46M into $4.45M in Just Five Hours Amid Crypto Market Revival

Crypto Bull Run Fueled by Macro Factors: Exciting Catalysts Await

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Recently, DeFi researcher Ignas shared his insights on X: while personally believing that the current crypto bull run is mostly driven by external macro factors, he thinks that there are several launches and upcoming crypto catalysts within the space that will serve to further ignite its internal dynamics. In his thread, he revealed some key developments about which one needs to be particularly watchful.

Monad is the first project on his list. Monad is expected to go live on its mainnet in 2024. The big question is whether Monad will be just another low-float, high-FDV alt-L1 or whether it will attract unique decentralized apps (dApps) that are not mere forks of existing projects.

Another project to keep track of is MegaETH, which is also looking to launch its mainnet by the end of 2024. This one is to be a more versatile version, not just a layer 2 solution. With claims of 100,000 transactions per second (TPS) and 1ms block times, it aims to become a new player in Ethereum’s modular scaling strategy. On the other hand, there are doubts if the company can live up to these high expectations.

Moreover, Symbiotic is expected to launch its mainnet in Q3. There’s speculation that it might outshine Eigenlayer by capturing the restaking hype with its token generation event (TGE). The Ethereum Pectra upgrade, slated for Q1 2025, is also on Ignas’s radar, particularly because of EIP-7702’s potential to streamline token approvals and its possible impact on Ethereum’s price.

Fantom’s Sonic Rebrand: Revitalizing the Crypto Narrative

Besides, the internal rebranding of Fantom to Sonic, which includes a new token ($S) and chart, could be an indicative model for other crypto projects to bring new life to their narratives and attract market appeal. Likewise, Maker’s move towards NewGovToken and NewStableToken could help clear up its complicated structure, thereby, likely, positively affecting DAI supply growth.

Igno also mentions Pudgy Penguin’s L2 platform and Sony’s Soneium launch, which, in turn, could bring about a new monetization model for the AI era. He points out Fractal Bitcoin and OP_CAT advancements as the reasons for rekindling interest in Bitcoin’s native ecosystem, while Stacks’ Nakamoto upgrade set to come through the next few days could be a major driver for more users and TVL.

Ignas finally points at Coinbase’s cbBTC launch that could be classified as a possible game-changer; this is because the management of wBTC has changed hands, and with it, some significant amounts of TVL might be locked up in it.

In addition to this, Ignas feels that if the Uniswap protocol introduced $UNI fee sharing, it would bring back real yield interests in DeFi. Ignas had even come out openly as a delegate for Uniswap DAO in support for this suggestion and called on people to delegate their $UNI tokens to him.

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Solana’s Critical Crossroad: Is It Time to Consider Smaller Altcoins?

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Solana (SOL), once a standout in the cryptocurrency market, is now navigating a challenging period, raising concerns within the crypto community. Investors are increasingly wary as the token’s performance falters, casting doubt on its once-promising future.

Currently, Solana is clinging to its $140 support level, with market movements suggesting uncertainty. Over the past month, SOL has experienced a significant decline, dropping nearly 20%. In the last week, the token saw a slight decrease of 0.39%.

As of now, Solana is trading at $143.07, with a 24-hour trading volume of $5.10 billion. Its market cap stands at $64.30 billion, giving it a market dominance of 2.99%. Despite recent setbacks, SOL has managed a modest 1.21% increase in the last 24 hours, providing a glimmer of hope for investors.

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Solana Stuck in Sideways Pattern – What’s Next?

Solana’s price action is currently locked in a sideways pattern, reflecting a state of uncertainty among investors. This medium-to-long-term horizontal trend channel has kept Solana’s movements confined, as market participants wait for a definitive signal that could dictate the next major shift.

The cryptocurrency is currently trading within a rectangular range, with its support level set at 122 and resistance at 190. This consolidation phase suggests that the market is undecided, with a decisive move beyond either of these levels likely to trigger a significant change in direction.

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Solana's Critical Crossroad: Is It Time to Consider Smaller Altcoins? 12

As Solana’s price inches closer to the 123 support level, traders are on high alert. A bounce off this support could spark a positive rally, indicating renewed buying interest. On the other hand, should the price break below 123, it would likely be interpreted as a bearish signal, potentially leading to a downward trend.

For now, the market remains in a holding pattern, with Solana’s future trajectory dependent on which direction it ultimately breaks. Investors are advised to watch closely for any signs of movement that could signal the next big move for this digital asset.

Opportunities Amidst Stagnation: Small Caps vs. Giants

Over the past few weeks, many altcoins have surged, some even doubling or tripling in value. These smaller assets have shown impressive growth, with gains of 30-60% in a single day, continuing to climb to 100%, 200%, or even 300% within a week. This surge comes in the aftermath of the market crash on August 5th, 2024.

In stark contrast, major players like Solana, Bitcoin, and Ethereum have been stagnant. Solana, in particular, has remained in a sideways pattern with a bearish bias since mid-March 2024, marked by lower lows and lower highs.

For those holding Solana or other crypto giants with hopes of growth, the past five months have offered little to celebrate. These major assets appear to be stuck in a distribution phase, showing minimal movement.

To put this into perspective, let’s examine Cardano (ADA). Its price is currently hovering around levels last seen in November 2023. Other cryptocurrencies are trading near their lows from June 2022, indicating significant declines from their previous bullish peaks. Meanwhile, Solana and Bitcoin are trading at the same levels as they did in March 2024, indicating a lack of progress.

While Solana and its peers linger near their all-time highs, many smaller altcoins have already completed their corrections and are poised for growth. Historically, these smaller coins have led the way in both bullish and corrective market waves, and the current trend suggests that they might do so again.

Consider the examples of BLUR and Curve (CRV), which are trading at bottom prices with potential for significant upside. NULS, trading at October 2023 levels, is another case where a low price signals potential for an upward movement. Even Gala Games (GALA) has shown a pattern of strong bullish waves followed by corrections, now trading near its long-term support.

The takeaway here is clear: while the big names in crypto are treading water, the smaller altcoins are seizing the moment, showing remarkable growth. These assets, with their low prices, present opportunities that the giants currently do not.

Related Reading | Dogecoin (DOGE) Poised for 22% Rally Following Elon Musk’s Recent Influence

Vitalik Buterin’s Vision for Crypto’s Governance Evolution: Plurality

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Co-founder of Ethereum, Vitalik Buterin, has brought to the crypto space a new approach to governance called “Plurality.” Recently, in his blog, he explored the tension between the roots of crypto in the cypherpunk movement and the call for effective governance as the industry continues to mature.

Plurality does this by underlining a wide array of perspectives and bridging among these people to come up with more efficient forms of governance and social systems. The philosophy seeks to transcend many founding ideologies of the crypto world by means of fostering collaboration and public goods at a larger scale.

Buterin commented that while cryptic emerged from the cypherpunk movement, which values independence from external constraint, more recent constructs, like blockchains and DAOs, have a need to build in their governance intrinsically.

He reasoned that this would call for a shift in mindset, as the survival of these structures over a longer period of time is contingent upon public goods such as mathematical research and open source software.

Plurality’s objective is to find a balance between coordination and freedom of technology. According to Buterin, the ideology of this crypto space needs to evolve beyond its origins. He referred to examples like the banning of lab-grown meat in Florida and Google’s anti-scam feature in order to show the need for nuanced balancing between personal freedoms and collective benefits.

Harnessing Diverse Viewpoints with Crypto’s Plurality

Buterin emphasized that Plurality is not just about enabling diverse viewpoints but also about harnessing them effectively. The concept advocates for building higher-level institutions that maximize positive-sum interactions between different groups while minimizing conflict.

A key characteristic of Plurality is the view that connections between the individuals should be treated as a first-class object in mechanism design, in contrast to looking at the individual solely. This approach could result in more sophisticated governance models that better describe the complex web of relationships typical in today’s society.

Buterin’s work to flesh out Plurality builds off his earlier work in crypto governance, most importantly the ideas of quadratic funding. It is evolutionary thinking in how decentralized systems could effectively self-govern while preserving essential values of autonomy and collaboration. However, now with the introduction of Plurality, the crypto sector has increased regulatory pressure, which calls for more robustness in governance structures.

Related Reading | Bitcoin’s Dominance Surges to 56%, Long-Term Holders Stand Firm

Ethereum’s 2025 Catalyst: How Pectra Could Transform DeFi Interaction

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The second most significant milestone in the journey of the Ethereum network is the Pectra upgrade, set for release in Q1 2025, which is the buzz around DeFi today. According to Ignas, Co-founder of PinkBrains.io DeFi Creator Studio, while Ethereum has underperformed against both Solana and Bitcoin, the Pectra upgrade could prove to be a compelling reason to turn bullish on ETH.

Ethereum has gone through a number of significant upgrades in the last couple of years, among which are Proof of Stake (PoS), ETH burning, and reducing gas fees via data blobs. Even with these technological advancements, the Pectra upgrade has not been greeted with the same enthusiasm, and the reason may be upgrade fatigue. Nevertheless, Ignas emphasizes that Pectra will be able to bring in some revolutionary tools.

Ethereum’s Account Abstraction: Powering Up EOAs

One of the upgrade’s key elements is Account Abstraction (AA) which addresses a longstanding issue in the ecosystem of Ethereum. Back in the day, the use smart contract accounts in DeFi dApps has been a real pain in the neck with frequent missed airdrops and a not-so-great user experience in general.

EOAs are the standard user accounts on Ethereum that have been largely preferred by users because of their simplicity. On the other hand, EIP-7702, which is an important proposal under the Pectra upgrade, is designed to solve this problem.

EIP-7702 will give EOAs the capability of functioning as smart contract wallets for a short while during transactions with this other account. With the introduction of this feature, EOAs will be able to perform functions that only smart contract wallets had, thus, greatly improving the user experience.

Among the benefits is the ability to batch multiple actions into a single transaction, sponsorship where another account can cover transaction fees, and privilege management through sub-keys with limited permissions.

These improvements will definitely help to make dApps more secure and user-friendly, simplify fund management, automate many processes, and enable interaction with dApps without the need to explicitly hold ETH. For example, users can now approve and swap assets within one transaction, making it much more streamlined and less frictionary.

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