TRON Industry Weekly Report: The macro environment stabilizes as the crypto market enters the "flat long exit" phase, detailing the one-stop cross-chain liquidity routing and asset exchange infrastructure LI.FI

Jan 19, 2026 16:35:01

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# I. Outlook

## 1. Summary of Macroeconomic Environment and Future Predictions

Last week, the core feature of the U.S. macro environment was the release of inflation data and the market's recalibration of interest rate cut expectations. The December inflation-related data released during the week showed a generally mild performance, with no significant rebound. However, the service items and wage-related sub-items still exhibited some stickiness, making the path for inflation to decline appear "slow and not smooth."

Looking ahead, the market's focus will shift from "whether to cut interest rates" to whether the pace of rate cuts will be delayed. With inflation not rapidly returning to target and employment only moderately cooling, the Federal Reserve is likely to maintain a wait-and-see approach in the short term, awaiting more data to confirm whether the economic slowdown is sustainable.

## 2. Market Changes and Warnings in the Crypto Industry

Last week, the core feature of the cryptocurrency market was a noticeable weakening after repeated resistance at key pressure points. Bitcoin attempted to break through several times but failed to effectively surpass and stabilize above, with selling pressure continuing to concentrate and ultimately triggering a price drop, falling back into the previous range of fluctuations. During the decline, trading volume increased, indicating that this was not merely a volume-reducing pullback, but rather that funds were actively reducing positions at the pressure point. Major cryptocurrencies faced overall pressure, with altcoins experiencing more significant declines, especially the MEME and high-volatility sectors that had previously seen large gains, which quickly retraced after hitting resistance, leading to a rapid cooling of market risk appetite.

From a risk perspective, the failure at the pressure point reinforces the judgment of "a rebound rather than a reversal." As long as Bitcoin cannot effectively break through and stabilize at the key threshold of $100,000, the market may continue to maintain a weak oscillating structure, or even test support levels further downward. Coupled with the ongoing verification period for macro data, if liquidity expectations change unfavorably, further attempts near the pressure point may continue to evolve into selling triggers. Overall, the crypto market remains in a defensive phase below the pressure point in the short term, and caution is warranted regarding the emotional and price exhaustion caused by repeated resistance.

## 3. Industry and Sector Hotspots

Total funding of $159.3 million, led by A16z and Paradigm, with participation from Hashkey ------ Aztec, a privacy-focused Ethereum Layer 2 network based on zero-knowledge proofs; total funding of $2.2 million, led by Robot Ventures, with participation from Solana ------ Asgard aims to become the "Credit Layer" of Solana DeFi by releasing DeFi capital efficiency through on-chain credit.

# II. Market Hotspot Sectors and Potential Projects of the Week

## 1. Overview of Potential Projects

1.1. Analysis of Total Funding of $159.3 Million, Led by A16z and Paradigm, with Participation from Hashkey ------ Aztec, a Privacy Layer 2 on Ethereum Based on Zero-Knowledge Proofs

Introduction

Aztec is a privacy-focused Ethereum Layer 2 network that combines zero-knowledge rollups with programmable privacy to enable encrypted smart contracts. It allows developers to build applications with default privacy, ensuring that data—including balances, transactions, and business logic—remains private while inheriting Ethereum's security.

Aztec employs a hybrid execution model that supports the simultaneous execution of public and private functions within the same contract, unlocking numerous use cases such as privacy DeFi, confidential payments, secure identity processes, and compliance-friendly privacy applications. Its innovative zk architecture significantly reduces gas costs while providing infrastructure-level support for the scalable implementation of privacy applications.

Core Mechanism Overview

Aztec adopts a dual execution environment architecture of "private first, public last": private computations are completed locally by the user and generate zero-knowledge proofs, while public computations are executed by network nodes, ultimately packaged and verified on Ethereum.

1. Aztec Transaction Process (From User to Ethereum)

The user initiates a transaction via aztec.js
Similar to web3.js / ethers.js, but supports both private and public logic.
Private functions are executed locally (PXE)

Completed on the user's device
Generates zero-knowledge proofs locally
Private data does not leave the device

Proof + state updates are submitted to the public execution layer (AVM)

Does not expose private data
Only verifies "you calculated correctly"

Public functions are executed in the AVM

Handles public state
Can execute DeFi, settlement, bridging, and other logic

The AVM packages the block and submits it to Ethereum

Includes state changes
Includes zk proofs
Ethereum only verifies, without viewing private content

Final Effect:
Ethereum ensures security, Aztec ensures privacy.

2. Dual Execution Environment: Why Split into "Private + Public"

a. Private Execution Environment (PXE, Client-Side)

Core Function: Privacy + Local Computation

Execution Location: User device (browser / local node)
Execution Content:
Private functions
Private state updates
Zero-knowledge proof generation
Management Content:
User keys
Private assets (Notes)
Nullifier (anti-double spending)

Benefits

Private data is never uploaded
No issue of "nodes spying on transactions"
True end-to-end encrypted execution

Costs

Poorly written private logic can make "proofs expensive"
High requirements for developers (Noir optimization is crucial)

b. Public Execution Environment (AVM, Network)

Core Function: Consensus + Composability

Execution Location: Aztec node network
Similar to: EVM
Execution Content:
Public functions
Public state changes
Rollup packaging

Key Rules (Very Important)

Private functions → Can call public functions
Public functions → Cannot call private functions

Reason:
To prevent reverse inference of private data

3. Private State vs Public State (Essential Differences)

a. Private State (UTXO / Notes Model)

Data Form: Notes (similar to UTXO)
Storage Structure:
Note Tree (append-only)
Nullifier Tree (cancellation markers)
Operation Method:
Create commitments
Generate nullifiers upon cancellation

Characteristics

Strong privacy
Cannot be queried directly
More like "encrypted asset certificates"

b. Public State (Account Model)

Similar to Ethereum
Direct read/write
Stored in Public Data Tree

Characteristics

High composability
Easy integration with DeFi
No privacy protection

4. Account and Key System

a. Native Account Abstraction (AA)

Each account is a smart contract
Customizable:
Signature logic
Nonce management
Gas payment methods
Multi-signature / social recovery

No "default EOA private key."

b. Three Sets of Keys (For Privacy Services)

Each account has 3 sets of keys:

Nullifier Key

Prevents double spending

Incoming Viewing Key

For receiving assets

Outgoing Viewing Key

Allows the user to view outgoing transaction records

Implementation:

Others cannot see you
You can still keep accounts
Compliance allows selective disclosure

5. Noir: Aztec's "Privacy Solidity"

Zero-knowledge dedicated DSL
Used to write:
Private contracts
zk circuits
Features:
Default provable
Strong typing
Privacy-oriented design

Tron Comments

Aztec's core advantage lies in its privacy-native architecture: by placing private computations on the user's local device and delegating public execution to the network, while connecting the two with zero-knowledge proofs, it achieves default encrypted smart contracts, end-to-end privacy protection, and compliance-friendly optional disclosure, while still inheriting Ethereum's security and significantly reducing gas costs in privacy scenarios. However, its disadvantages are also apparent—high technical complexity and steep development barriers (Noir and provable programming require a new way of thinking), client-side execution demands higher standards for user devices and toolchains, and its ecological maturity and general composability are currently weaker than mainstream EVM L2, making it more suitable for high-end DeFi and institutional applications with very high privacy, security, and compliance requirements, rather than current low-barrier mass application scenarios.

1.2. Interpretation of Total Funding of $2.2 Million, Led by Robot Ventures, with Participation from Solana ------ Asgard, a Credit Layer Infrastructure on Solana to Release DeFi Capital Efficiency

Introduction

Asgard is a DeFi protocol built on Solana, aiming to become the "Credit Layer" of Solana DeFi by introducing composable credit mechanisms to enhance the capital efficiency of the entire Solana ecosystem.

Overview of Credit Layer Architecture

Credit Synthesizer
Without changing the security of existing over-collateralized lending protocols, it synthesizes "quasi-credit" positions with higher capital efficiency, allowing users to gain larger exposures with the same principal.

Core Idea
Traditional lending protocols follow an invariant: deposit X, and you can withdraw at most ≤ X in value. Asgard overlays leverage on this rule through structured operations, transforming X into a position with a value > X.

Two Key Paths

Recursive Deposits (Looping)

Collateralize assets
Borrow another asset
Exchange back to the original collateralized asset
Re-collateralize and repeat
Issues: cumbersome operations, high slippage, high fees, very low manual execution efficiency

Flash Loans

Borrow precisely calculated temporary funds in one go
Complete collateralization, borrowing, and re-collateralization in a single atomic transaction
Use borrowed funds to repay the flash loan immediately
Advantages: one-click completion, efficient, low slippage, low friction

Key Breakthrough

Flash loans not only enhance capital efficiency but also expand the design space for lending
Not only can you "leverage buy tokens," but you can also:
Collateralize to purchase NFTs (e.g., Mad Lads)
Future support for tokenizable real-world assets (e.g., real estate)
The reason is that NFTs are non-fungible, while flash loans allow for "whole mortgage-style purchases" to be completed in a single transaction, which recursive deposits cannot achieve.

Phase Significance
The Credit Synthesizer lays the foundation for Asgard to build the Solana DeFi Credit Layer, marking the first step from "over-collateralization" to "structured credit."

2. Prime Brokerage (On-chain Prime Broker)

Building on Phase 1, it further expands the upper limit of decentralized "quasi-unsecured" credit, providing users with higher leverage and capital efficiency without sacrificing protocol security.

Core Concept: Borrowing in a Bubble

Asgard's core idea is to create a controlled lending environment:

On the surface, it appears to be low collateral / quasi-unsecured
Technically, it always maintains over-collateralization
The ultimate control of assets remains with the protocol

This is like borrowing money in a "bubble":
You can operate freely within the bubble, but funds cannot escape the bubble.

TradFi Counterpart: Prime Brokerage

In traditional finance, prime brokers:

Provide clients with leverage and financing
Execute trades on behalf of clients
Strictly limit the use of funds and risk exposure

Asgard natively transfers this model on-chain:

The protocol does not directly send money to the user's wallet
Instead, it places it in a restricted on-chain account
All operations are executed within clearly defined rule boundaries

Algorithmic Security

Achieves security through code rather than trust:

Cannot maliciously run away: the code does not allow it
Cannot arbitrarily transfer funds
Can only execute permitted operations

Final Effect:

The protocol remains controllable
Users still have a high degree of strategic freedom
Risks are confined to computable and manageable ranges

Result: Higher LTV → Higher Leverage → Higher Capital Efficiency

Key Components

Credit Accounts

Restricted smart contract wallets
Hold both user collateral and borrowed funds
Prohibit arbitrary withdrawals or transfers to external wallets

Whitelisted Protocols

Only allow interaction with selected DeFi protocols and assets
Balance between profit opportunities and risk control

Risk Assessment Engine

Real-time assessment of asset risk and strategy risk
Dynamically adjust available leverage and position boundaries

Liquidation Mechanisms

Automated liquidation processes
Ensure that from the protocol's perspective, it is always "over-collateralized"
Even if users experience a "quasi-unsecured experience"

Phase Significance

Phase 2 upgrades Asgard from a "leverage synthesizer" to a credit infrastructure on Solana:

Natively implements TradFi's Prime Brokerage
Safely releases higher leverage in DeFi
Lays the foundation for a true on-chain credit market

This is a key transitional phase for Asgard to become the Solana Credit Layer.

Tron Comments

Asgard's core advantage lies in its credit-centric design philosophy, providing users with high leverage and capital efficiency close to an unsecured experience through flash loans, recursive synthesis, and the "controlled account (Credit Account) + algorithmic security" Prime Brokerage model, significantly expanding the design space of Solana DeFi, especially suitable for complex strategies, NFT/non-standard asset "mortgage-style" usage, and other advanced scenarios;

However, its disadvantages are also apparent—complex system structure, reliance on detailed risk assessment and whitelisting governance, and once parameter design or protocol integration deviates, it may amplify systemic risks in extreme market conditions. Meanwhile, the "controlled environment" also somewhat limits the complete freedom of DeFi composability, resulting in a higher understanding and usage threshold for ordinary users.

## 2. Detailed Explanation of Key Projects of the Week

2.1. Detailed Explanation of Total Funding of $52 Million, Led by Multicoin and CoinFund --- One-stop Cross-chain Liquidity Routing and Asset Exchange Infrastructure LI.FI

Introduction

LI.FI is a cross-chain liquidity aggregation protocol that connects developers and users to various cross-chain bridges, DEXs, and decentralized liquidity sources through a unified API, SDK, or component (Widget). It supports the exchange and transfer of any asset to any asset across 30+ blockchains, finding the optimal price, lowest cost, and highest security path through smart routing between different bridges and exchanges. LI.FI completely abstracts the complexity of underlying cross-chain bridges and DEXs, enabling applications to provide users with a seamless one-stop cross-chain exchange and asset transfer experience at a very low integration cost.

Architecture Overview

LI.FI is a multi-chain liquidity aggregation and smart routing layer that helps dApps and users achieve optimal asset exchanges and cross-chain transfers through off-chain routing + on-chain modular execution.

Core Component Breakdown

dApp Interface (Integration Party)
The front end that users directly interact with.

Initiates quote and path requests to the LI.FI API
After user confirmation, the dApp initiates on-chain transactions

LI.FI API (Off-chain Aggregation and Routing Layer)
The brain of the system, responsible for "calculating paths."

Requests quotes from multiple bridges, DEXs, and Solvers
Compares prices, fees, and security
Returns the optimal trading path to the dApp

LI.FI Diamond Contract (On-chain Entry)
A unified entry for on-chain execution.

Receives transactions submitted by dApps
Distributes transactions to corresponding modules (Facet) based on the path
Uses a Diamond structure for easy expansion and upgrades

Facet Contracts (Functional Modules)
Adaptation layer for different types of liquidity:

Bridge Facet: Connects to cross-chain bridges
DEX Facet: Connects to single-chain DEXs
Solver Facet: Connects to market makers / advanced liquidity

Underlying Liquidity Protocols
The bridge, DEX, or Solver contracts that ultimately execute the transactions.

Complete Transaction Process (End-to-End)

User initiates a request: requests cross-chain or single-chain exchange in the dApp
Path Calculation: LI.FI API aggregates multiple quotes and selects the optimal path
Submit Transaction: After user confirmation, the transaction is sent to the Diamond contract
On-chain Execution: Diamond → Corresponding Facet → Actual Liquidity Protocol
Asset Arrival: Transaction completed, assets returned to the user

Smart Contract Architecture

LI.FI's on-chain contracts are built using the EIP-2535 (Diamond / Multi-Facet Proxy) standard, modularly executing different business logic through a unified entry contract.

Core Design Philosophy

Single entry, multi-module execution
All user interactions enter the LI.FI Diamond contract
Business logic modularization (Facet)
Different functions (cross-chain, DEX, Solver) are split into independent Facet contracts
Delegatecall Execution
The Diamond contract calls the logic in the Facet through DELEGATECALL
Expandable and Upgradable
Adding or replacing Facets does not require migrating the main contract or user assets

Contract Execution Process

Using Stargate cross-chain as an example:

User calls the LI.FI Diamond contract
Diamond identifies the target Facet based on the function selector
Calls StargateV2Facet
StargateV2Facet further calls the official Stargate contract
Completes cross-chain asset transfer

Users always interact only with the Diamond contract, and the underlying complexity is completely abstracted.

Facet Contracts (Business Modules)

All core business logic is written in src/Facets
Different Facets correspond to different liquidity sources or functions
Bridge Facet
DEX Facet
Solver Facet

Diamond Auxiliary Contracts (Helper Contracts)

Deployed alongside the Diamond contract, used for:

Adding / upgrading / removing Facets
Managing method mappings to Facets
Contract ownership and permission control
Asset and fee extraction

All these mechanisms are designed in accordance with the EIP-2535 standard.

Tron Comments

LI.FI's core advantage lies in its strong cross-chain abstraction and engineering capabilities: through a unified API and Diamond contract architecture, it aggregates a large number of bridges, DEXs, and Solvers, providing applications and users with optimal routing for any chain and any asset, significantly reducing the integration and usage costs of cross-chain and multi-step transactions, while also ensuring high scalability and maintainability;

However, its disadvantages are also clear— the system is highly dependent on off-chain routing and quoting layers, has high architectural complexity, and requires a higher understanding cost and operational requirements from developers. Additionally, cross-chain still inherits the security risks of underlying bridges and external protocols, and if any integrated component encounters issues, the overall experience and risk exposure may be affected.

# III. Industry Data Analysis

1. Overall Market Performance

1.1. Price Trends of Spot BTC vs ETH

BTC

ETH

2. Summary of Hot Sectors

# IV. Review of Macroeconomic Data and Key Data Release Points for Next Week

The U.S. December unadjusted CPI year-on-year data released last week showed that inflation continues to exhibit a mild decline but is not rapidly decreasing. The overall CPI year-on-year rate further declined from the previous month, primarily due to falling energy prices and continued weakening of goods inflation, indicating that the previous high inflation's transmission effect on the real economy is diminishing. However, at the same time, housing and some service prices remain relatively resilient, making the path for inflation to decline appear slow and uneven.

This result reinforces the market's judgment of "downward inflation trends but still sticky," and provides a basis for the Federal Reserve to maintain a wait-and-see approach, awaiting more confirmation signals—neither forcing it to cut rates quickly nor reducing the necessity to tighten policies again.

# V. Regulatory Policies

United States: Key Legislation Enters Review Process

Core Progress: A legislative draft called the "Digital Asset Market Clarity Act" was announced on January 12 and is scheduled for debate and revision by the Senate Banking Committee on January 15.
Key Points of the Bill: The bill aims to clarify regulatory responsibilities, specify when cryptocurrencies should be classified as securities or commodities, and plans to authorize the U.S. Commodity Futures Trading Commission (CFTC) to regulate the spot cryptocurrency market. The bill also addresses stablecoin regulation, proposing to prohibit companies from paying interest solely because customers hold stablecoins, but allowing rewards linked to specific activities such as payments and staking.
Market Impact: This move is seen as a key step towards seeking long-term regulatory certainty. However, due to changes in the congressional political agenda, there remains uncertainty about whether the bill will ultimately pass.

France / European Union: Compliance Phase-Out Under MiCA Regulations

Regulatory Dynamics: As part of the EU's "Markets in Crypto-Assets" (MiCA) regulations, French regulators are intensifying the implementation of licensing requirements.
Specific Progress: Among approximately 90 cryptocurrency companies registered in France, 40% of unlicensed firms have not applied for MiCA licenses, and another 30% have not responded to regulatory inquiries. Regulators have warned that these non-compliant firms may be required to shut down by July 2026. This reflects that the MiCA regulations are entering a strict enforcement phase after unifying the EU market.

Kazakhstan: Signed Bill to Ease Regulations

Policy Direction: The president signed the "Banking and Banking Activities Law" and the "Financial Market Regulation and Development Amendment" on January 16.
Key Content: The new bill aims to relax cryptocurrency trading rules and formally define digital financial assets as new asset categories, including stablecoins and tokenized physical assets. In the future, the National Bank of Kazakhstan will be responsible for issuing exchange licenses and establishing a compliant token list.

Thailand: Plans to Strengthen Anti-Money Laundering Tracking

Regulatory Plan: Reports indicate that Thailand plans to strengthen cryptocurrency reporting requirements, implement the Financial Action Task Force's "travel rule," and establish a national data center to track illegal funds flowing between traditional finance and digital assets.

Nigeria: Incorporating Exchanges into Tax Reporting System

Tax Reform: Nigeria has initiated tax reforms that incorporate cryptocurrency exchanges into an identity-based tax reporting system. This move aims to reshape the integration of digital assets with the traditional economy and strengthen tax regulation.

(Source)