Sharplink (SBET) Q1 2026 Earnings Transcript

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Date

Monday, May 11, 2026 at 8:30 a.m. ET

Call participants

• Chairman of the Board — Joseph Lubin
• Chief Executive Officer — Joseph Chalom
• Chief Financial Officer — Robert DeLucia
• President — Dave Abbott

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Takeaways

• ETH Holdings -- As of March 31, 2026, Sharplink (NASDAQ:SBET) held 589,305 Native ETH valued at $1.2 billion, 189,327 LsETH, and 66,102 WE ETH with a combined net cost value of $487 million; by May 4, 2026, combined holdings increased to 872,984 ETH.
• Revenue -- $12.1 million for the first quarter, up from $0.7 million in the prior year period, due to the success of the ETH staking strategy and a $200 million deployment on Linea Layer 2.
• Net Realized Gain -- $12 million realized gain in the quarter from redemption of LsETH into ETH and conversion of ETH into WE ETH.
• Unrealized Loss -- $506.7 million unrealized loss at quarter end, attributed to soft ETH market conditions.
• Impairment Charge -- $191.7 million impairment due to lowest intraday pricing of LsETH and WE ETH during the quarter.
• SG&A Expenses -- $9.9 million, up from $1.1 million a year earlier, reflecting implementation and active execution of the ETH treasury strategy.
• Net Loss -- $685.6 million versus a $1 million loss in the prior year, primarily driven by impairment and unrealized losses.
• Cash on Hand -- $16.9 million at quarter end, compared to $28.5 million as of December 31, 2025.
• ETH Staking Rate Outperformance -- CEO said, "to date, we've been beating the Ethereum staking rate, and we intend to continue to do that as our benchmark and hurdle."
• On-chain Yield Fund Partnership -- Company announced a memorandum of understanding with Galaxy Digital (TSX: GLXY) to launch the Galaxy Sharplink on-chain yield fund, targeting a $125 million deployment, with Sharplink contributing roughly 80% of capital.
• ETH Treasury Management -- Nearly 100% of ETH staked from inception, combining external managers initially and moving treasury activities mostly in-house for risk-managed productivity.
• Segment Allocation -- Majority of ETH expected to remain in simple and liquid staking; minority allocated to more advanced yield strategies.
• FASB Accounting Update -- CFO referenced a pending FASB decision that, if adopted, would expand fair value accounting to LsETH and WE ETH, improving consistency with Native ETH financial reporting.

Summary

Sharplink (NASDAQ:SBET) reported a sharp year-over-year revenue increase, a significant net loss driven by impairment and unrealized losses on ETH, and substantial organic growth in ETH holdings. Management emphasized continued ETH accumulation, disciplined risk management, and outperforming the baseline staking rate through both in-house and newly announced external strategies. The launch of a co-branded on-chain yield fund with Galaxy Digital (TSX: GLXY) marks the company's first major partnership for scaling accretive ETH productivity beyond vanilla staking.

• Chairman Lubin stated, "Ethereum is already ahead of both other blockchains and traditional systems and preparing for emerging risks like quantum computing."
• CEO Chalom said recent market deleveraging has largely played out, stating, "We believe we have largely moved past these deleveraging impacts over the last few months."
• Chief Financial Officer DeLucia noted that the reported accounting losses do not reduce ETH unit holdings or represent realized economic loss.
• The company expects the forthcoming FASB accounting update to improve transparency for digital asset reporting if adopted.
• Longer-term allocation policy will keep most ETH in staking, with select minority allocations into higher-yielding, risk-managed strategies.
• Sharplink cited a strong institutional trend toward Ethereum for stablecoins, tokenization, DeFi, and emerging AI agent use cases, all supporting the underlying ETH thesis.

Industry glossary

• Native ETH: Ether tokens held directly, not through wrappers or staking derivatives.
• LsETH: Liquid staked Ether, representing ETH deposited in staking protocols that remains tradable.
• WE ETH (Wrapped Ether): Tokenized representation of Ether used to facilitate compatibility with decentralized applications and smart contracts.
• Linea Layer 2: Ethereum scaling solution supporting high-throughput, lower-cost transactions above the base layer.
• Agentic Finance: Financial activity mediated by autonomous AI agents, including micro payments and programmable transactions on-chain.

Full Conference Call Transcript

Joe Lubin, Sharplink's Chairman, Co-Founder of Ethereum and Founder and CEO of Consensys. Joe will provide a broader perspective on Ethereum's technological evolution, ecosystem development and long-term role in global financial infrastructure. Next, Sharplink's Chief Executive Officer, Joseph Chalom, will share his thoughts on the current market environment as well as Sharplink's active treasury management strategy and disciplined execution to date. Finally, our Chief Financial Officer, Bob DeLucia, will review Sharplink's financial results for the first quarter of 2026 along with key performance metrics related to our ETH treasury. I would now like to turn the call over to Sharplink's Chairman of the Board, Joseph Lubin. Good morning, Joe.

Joseph Lubin: Thank you, Dodi, and good morning, everyone. From my vantage point as Co-Founder of Ethereum and Founder and CEO of Consensys, I want to take a step back and frame the broader technological evolution that is unfolding across Ethereum. What we're witnessing is the continued maturation of a global programmable financial infrastructure. Ethereum has become the foundation for a new class of markets built on transparency, composability, credible neutrality and trust minimization. At its core, Ether is not just a digital asset. It is a productive programmable financial primitive that powers this system. It secures the network, enables economic coordination across applications and increasingly underpins a wide range of financial activity from stablecoins to tokenized assets to decentralized finance.

What differentiates Ethereum is the depth and breadth of its ecosystem. The Ethereum Foundation, alongside a global community of researchers, developers and organizations like Consensys, continues to lead in defining both the problem space and the solution space for decentralized systems. The pace of innovation and development has dramatically accelerated recently due to assist from machine intelligence. This includes advancements at the base layer, improvements in scalability through Layer 2s and critical work around privacy, security and long-term resilience. What's most exciting about Ethereum's recent trajectory is that the base layer is now scaling visibly and on a predictable cadence.

Since May of 2025, Ethereum has shipped 2 consecutive on-time hard forks, Pectra and Fusaka, raising L1 execution capacity and materially expanding data availability for Layer 2s. The next major upgrade, Glamsterdam, is currently targeted for the first half of 2026 and designed to improve block processing and supporting upgrades that will enable higher L1 throughput in the future. Ethereum's advantage is not only that it has the deepest application, developer and institutional ecosystem, it is also that the protocol continues to scale and harden at the base layer in parallel with advances at Layer 2. And recent advances in synchronous composability across L1 and L2s will soon enable cross-chain atomic transaction execution and unification of liquidity pools.

An area that has received increased attention recently is quantum computing. While quantum represents a non-zero risk over time, it is important to separate signal from noise. There will be a great deal of forensic speculation and misinformation in this space over the coming years. From our perspective, Ethereum is well positioned to lead the way for decentralized protocols into the post-quantum future. Becoming quantum safe won't be a detour for Ethereum. It is a natural outcome of the Ethereum road map involving real-time zero knowledge proving of blocks designed to grow transaction throughput by orders of magnitude. The Ethereum ecosystem has been actively researching quantum-resistant cryptography for many years.

A key design principle of Ethereum is cryptographic agility, meaning the network can evolve its underlying cryptographic perimeters as new, more secure standards emerge. This is not a reactive posture, but something that has been anticipated and designed for. We are already seeing work across the ecosystem exploring alternatives to Elliptic Curve Cryptography, including hash-based and lattice-based approaches. These are kinds of foundational upgrades that can be implemented over time in a measured and secure way, consistent with Ethereum's approach to long-term durability. Ethereum is already ahead of both other blockchains and traditional systems and preparing for emerging risks like quantum computing.

The ecosystem has been proactively developing quantum-resistant cryptography for years, supported by a core design principle of cryptographic agility that allows the network to evolve its security architecture as new standards emerge. This forward-looking approach positions Ethereum as a more secure and resilient platform relative to others but it also reinforces the importance of building systems that are adaptable and future-proof. Unlike other blockchain technologies that are very likely to get slower in order to become quantum safe, Ethereum will scale up dramatically even while hardening against quantum computing threats. Beyond security and resilience, Ethereum continues to extend its lead across the dimensions that matter most.

It has the deepest liquidity, the largest developer ecosystem and the strongest network effects in decentralized finance, stablecoins and tokenized assets. It is where institutions are choosing to build, not just experiment, and it is where new economic models, including agentic finance and autonomous on-chain activity, are beginning to take shape. As this ecosystem grows, we expect Ether to increasingly differentiate itself from other digital assets. While correlations may persist in the short term, the long-term drivers of value for ETH are fundamentally different. They're tied to network usage, economic activity and expansion of on-chain financial infrastructure. The number of transactions per day on Ethereum has risen steadily in 2026.

As Ether and Ethereum bring far greater trust to on-chain transactions, processes and agreements, various kinds of financial risks will be lessened or eliminated, and additional value will accrue to Ether in the form of a monetary premium. Over time, we believe this will lead to a meaningful decoupling to the upside from Bitcoin. Bitcoin has established itself as a store of value. Ether is also a store of value, and Ethereum is a productive, programmable platform powering a rapidly expanding digital economy. Ether's value is increasingly driven by the breadth and depth of activity happening on chain.

Ethereum is quickly becoming the settlement layer for the global digital economy, and Sharplink is positioned to translate that growth into long-term sustainable shareholder value. With that, I'd like to turn the call over to our Chief Executive Officer, Joseph Chalom, to discuss how Sharplink is positioned to capitalize on the Ethereum opportunity. Joseph?

Fedor Shabalin: Thank you, Joe. Good morning, everyone, and thank you for joining us. We are now approximately 9 months into executing our Ethereum treasury strategy and importantly, doing so in a market environment that reflects strong long-term institutional adoption despite near-term crypto price consolidation. It is important for you to understand that Sharplink is building an entirely new category in public markets, an institutional-grade ETH treasury platform designed to materially compound ETH per share through disciplined capital allocation and best-in-class yield generation. Our strategy is simple: accumulate ETH accretively, make it productive and scale that advantage over time.

Today, I'd like to discuss our thoughts on where we are in the current crypto market cycle and how we're making our Ether productive as part of our active management strategy. As many of you are aware, the market is working through a meaningful deleveraging cycle that began last fall. Periods of excess leverage can take multiple quarters to fully clear through the system. While this has affected the price of Ether, our stock price and broader sentiment towards the digital asset treasury sector, it does not change the underlying trajectory of the ecosystem. We believe we have largely moved past these deleveraging impacts over the last few months.

Ether has started a strong recovery due to that leverage mostly having been cleared from the system as well as rapidly accelerating institutional adoption. The pace of institutional adoption cannot be overstated with new announcements every day. The market is experiencing strong momentum across the 4 core pillars of growth: stablecoins, tokenization, institutional DeFi and now Agentic Finance. Stablecoins continue to scale as a core settlement layer for global payments with total supply now exceeding $320 billion and annual transaction volumes in the tens of trillions of dollars, rivaling traditional payment networks. Ethereum sits at the center of this growth, hosting more than half of all circulating stablecoin supply. This momentum is increasingly reflected at the institutional level.

Hong Kong has granted its first stablecoin issuer licenses under a dedicated regulatory framework for fiat reference stablecoins. While in Europe, the ECB has moved to the next phase of the digital euro project, targeting a potential first issuance by 2029. These developments reflect a broader global shift towards regulated local currency-denominated digital money. Tokenization of real-world assets is rapidly moving from concept to production. Just in the past month, the New York Stock Exchange announced plans for a blockchain-based platform, enabling 24/7 trading and instant settlement of tokenized U.S. equities and ETFs, while NASDAQ launched an equity token design in March 2026, putting public issuers at the center of tokenized ownership.

The DTCC recently announced plans to facilitate initial production trades of tokenized securities in July 2026 with a full-service launch in October 2026, developed alongside more than 50 financial institutions, including Goldman Sachs, BlackRock and JPMorgan. Ethereum has emerged as the dominant settlement and issuance layer for tokenized real-world assets, representing roughly 52% of the market by on-chain value. Institutional participation is accelerating in lockstep with Bullish global announcing a multibillion-dollar acquisition of transfer agent Equiniti to bring the traditional securities infrastructure needed to support tokenized markets at scale. Institutional momentum in DeFi is following a similar trajectory, albeit with important lessons still being learned.

Despite recent setbacks, the DeFi industry seems to be rallying to raise the standards that are necessary to support the next stage of institutional adoption of DeFi for borrowing, lending, swapping and other financial activity. What's notable is that this is the ecosystem solving its own problems without government intervention or regulatory bailouts that have historically characterized crises in traditional financial markets. Sharplink was pleased to play a small part in helping advise through this crisis. Importantly, the vast majority of this DeFi innovation, liquidity and institutional engagement continues to occur on Ethereum.

In addition to the well-known use cases of stablecoins, tokenization and DeFi, we're beginning to see the emergence of new category and use cases on Ethereum, such as Agentic Finance and Commerce. As AI agents begin to transact, pay for data, access services and coordinate with other agents, they will need programmable wallets, stablecoins, identity and verifiable settlement, infrastructure that Ethereum is uniquely positioned to provide given its security, liquidity, developer ecosystem and composability. The scale of this opportunity is already becoming visible. Coinbase recently cited 167 million micro payment transactions processed by AI agents, a figure that would have been unimaginable just 2 years ago.

Coinciding with the recent mainstream adoption of AI agent frameworks, Ethereum has seen its fastest-growing period of unique wallet address activity in the first quarter of 2026. We expect the advancement of AI agents to meaningfully impact and accelerate Ethereum usage metrics in the near and long term. And finally, regulatory trends in the United States are heading in the right direction. Senators Tillis and Alsobrooks released a compromise last week on the final major sticking points in the Digital Asset Market CLARITY Act, with Coinbase and Circle immediately backing the deal and urging the Senate Banking Committee to advance to markup. Progress has been positive but slow.

Its passage would extend the regulatory clarity established by last year's GENIUS Act across the broader digital asset market, a significant milestone for the industry. All of these tailwinds reinforce our long-term view. Ethereum continues to lead across these dimensions due to its security, trust, liquidity and network effects. It remains the dominant settlement layer for institutional grade activity across digital assets. For Sharplink, this is critical. We provide both institutional and retail investors the ability to express their views on this Ethereum opportunity through our public equity. We have built a foundation to operate across market cycles. In strong environments, we can access the capital markets to raise equity and grow ETH per share in an accretive manner.

In consolidation periods, our focus on productivity and optimized yield generation enables us to continue compounding ETH per share. We're designed to be productive in both environments, which brings me to our active treasury management strategy. Our North Star has not changed, to compound ETH per share over time and maximize productivity with risk management being top of mind. We often describe our model as ETH-denominated beta exposure with an alpha overlay. We've often stated that in contrast with Bitcoin, ETH is a natively productive asset. You can stake your ETH on the Ethereum network and earn the Ethereum staking rate. From day 1, we stake nearly 100% of our ETH.

What we have not shared is operational depth required to do this safely at scale. Since launching our ETH Treasury strategy, we've been singularly focused on building a durable and productive ETH accumulation engine. We've been doing that quietly and in a risk-managed manner. Sharplink aims to be the most sophisticated East capital deployer in DeFi, and we have the structural advantage of having long-term capital with scale. Unlike participants constrained by short-term liquidity requirements, we can deploy with a long-term horizon and structure bespoke opportunities that capture differentiated risk-adjusted yield. But sophistication means more than access, it means discipline. In a market structure where exploits remain a real risk, we apply rigorous due diligence to every deployment.

We take a deliberate, patient approach to evaluating opportunities. We will not sacrifice quality for yield, and we believe this discipline is itself a source of long-term competitive advantage. When we launched last June, we started with staking and liquid staking as foundational tools for making our ETH productive using 2 well-respected external managers with whom we have had a very positive experience. As we expanded our internal management capabilities, we brought the majority of our treasury management activities in-house. Our team has since been active in sourcing and evaluating a robust pipeline of ETH productivity opportunities and are actively working on new ecosystem allocations.

As an example, this morning, we announced a nonbinding memorandum of understanding for our first fund partnership with Galaxy Digital. Our diligence was supported by Crypto Insights Group, a top institutional due diligence firm specializing in digital assets. The Galaxy Sharplink on-chain yield fund will deploy roughly $125 million and be managed by Galaxy Digital's expert team. Their team will source deals, evaluate risk reward, deploy capital, conduct risk management and live on-chain oversight as well as portfolio diversification and construction. The goal of this fund is to generate yield in a risk-minded way. It will provide liquidity to on-chain protocols, helping their cold start problem.

Sharplink is contributing roughly 80% of this capital alongside Galaxy Digital as a limited partner. In exchange, the Galaxy Sharplink on-chain yield fund will receive economic incentives for being an early mover and providing longer-term capital than the industry has historically offered at scale. Since we are investing with our LsETH, we will continue earning the Ethereum staking rate and retaining our ETH exposure. We will measure the success of this fund to our shareholders by the amount of incremental ETH we can buy with the proceeds, above what we would have earned through staking alone. The opportunity cost is not dollars for just ETH, it's how much we generate above holding staked Eat for the period deployed.

This is what ecosystemaligned capitalism looks like, industry participants working together to support the growth of on-chain projects through a sustainable for-profit investment model. We believe this will be a highly effective partnership and look forward to sharing its progress over time. We selected Galaxy Digital following a rigorous and disciplined diligence process, which will serve as a benchmark as we evaluate future external strategies for a measured minority allocation of our treasury over time. Looking ahead, we expect to announce additional ETH allocations. Future ETH productivity opportunities may take different forms, including additional fund investment partnerships and active participation in on-chain vault strategies. Inbound demand and deployment opportunities have been strong, but we are not rushing.

Operational rigor is nonnegotiable. As a public company, we work alongside leading legal, audit and accounting partners and every deployment must meet institutional standards. Again, as stewards of capital, we prioritize disciplined risk management over speed. I'll close where I began. Growing ETH per share remains our North Star and doing so in a way that strengthens the Ethereum ecosystem is central to our mission. With that, I will now turn the call over to our Chief Financial Officer, Bob DeLucia, to walk through our first quarter 2026 financial results. Bob?

Robert DeLucia: Thank you, Joseph. I'll begin by encouraging everyone to review our quarterly report on Form 10-Q for the period ended March 31, 2026, which we filed this past Friday afternoon with the SEC. The 10-Q provides detailed disclosures and footnotes to complement today's discussion, offering stockholders and investors a comprehensive view of Sharplink's financial position, liquidity and its treasury performance. We will now go through the financial results for the quarter ended March 31, 2026. As we review our first quarter financial results, I'd like to remind everyone that all comparisons and variance commentary refer to the prior year quarter results unless otherwise specified.

As of March 31, 2026, Sharplink held 589,305 Native ETH with a fair value of $1.2 billion. In addition, we held 189,327 LsETH or liquid state ETH and 66,102 of WE ETH or wrapped Ether token with a combined net cost value of $487 million. Subsequent to quarter end, our combined ETH holdings have increased to 590,824 Native ETH, 209,788 as if converted LsETH and 72,372 as if converted WE ETH for a total of 872,984 ETH as of Monday, May 4, 2026. Revenue for the quarter ended March 31, 2026, was $12.1 million compared to $0.7 million for the quarter ended March 31, 2025.

The material increase in revenue was primarily due to the continued success of our ETH staking strategy during the first quarter, including our $200 million deployment on Linea Layer 2. We had a net realized gain for the 3 months ended March 31, 2026, of $12 million that was due to a combination of the redemption of LsETH into ETH and the conversion of ETH into WE ETH in the first quarter. Further, we had a $506.7 million unrealized loss at March 31, 2026, due to the ETH market conditions that were soft during the first quarter of 2026. SG&A expenses in the first quarter were $9.9 million compared to $1.1 million in the prior year quarter.

The increase in SG&A was due to the expenses incurred in the implementation and the active execution of our ETH treasury strategy started during mid-2025. Net loss for the quarter ended March 31, 2026, was $685.6 million versus $1 million loss in the prior year quarter. Net loss for the first quarter of 2026 was driven by $191.7 million impairment charge related to the lowest intraday pricing of LsETH and We ETH during the first quarter of 2026, plus the previously mentioned net of the $12 million realized gain and the $506.7 million unrealized loss.

As we previously mentioned, it is important to note that these impairment charges and unrealized losses reflect the current market pricing dynamics and follow the current U.S. GAAP accounting standards. They do not represent a realized economic loss on our ETH position nor do they reduce the number of ETH units we hold. The success of our ETH treasury strategy is measured in the prudent ETH accumulation and measuring its productivity over time. As of March 31, 2026, the cash on hand was $16.9 million compared to cash on hand of $28.5 million as of December 31, 2025.

In addition to the SEC and the CFTC announcement that Joseph mentioned previously, I would also like to highlight the vote on April 15, 2026, by the Financial Accounting Standards Boards, also known as FASB, on their unanimous decision to move forward to expand the scope of their project accounting for the transfer of crypto assets to address crypto assets that provide the holder with the right to receive another crypto assets like LsETH and WE ETH within the current fair value standard now being used for our native ETH assets.

If adopted, this would align their treatment with the fair value framework we currently apply to our native ETH holdings, which we believe would improve the consistency and transparency of our financial reporting. For additional details, our complete financial statements and accompanying footnotes, including all required disclosures and management's MD&A analysis are contained in our quarterly report on Form 10-Q for the period ended March 31, 2026, filed with the SEC. This concludes our prepared remarks. We will now open it up for questions from those participating on the call. Operator, back to you.

Operator: [Operator Instructions] Our first question is from Brian Kinstlinger with Alliance Global Partners.

Brian Kinstlinger: Can you talk about the benefits to launching the on-chain yield fund with Galaxy as opposed to Sharplink committing ETH directly into projects? And will there be an opportunity to increase the fund in size?

Joseph Chalom: Great question. Thank you. We took a step back and recognize that we have a really talented in-house team to deploy ETH to look at opportunities. But ultimately, the Galaxy partnership is the first in scaling access to a larger number of high-quality opportunities. And Brian, what makes it compelling is that it comes with institutional diligence and risk management. It will provide us access through the fund to a larger number of early-stage, high-quality opportunities within the on-chain ecosystem. And that's a big part of our ecosystem-first approach as we try to build long-term value for our stockholders. And this on-chain fund essentially debuts a new type of capital to the market.

Our goal is to help protocols break out from the cold start problem. And while VC funds, for example, target longer duration investments, they actually focus on higher risk, higher reward equity backing. And even with this funding, protocols find themselves in the feedback loop trying to get off the ground post launch. That's what we call the cold start problem. And typical liquid funds can't provide this type of time commitment needed to get the protocols off the ground. We, at Sharplink, because we have what we call near permanent capital or long-term capital, we're kind of uniquely positioned to provide that capital. In this case, with scale through the Galaxy Sharplink Fund.

And most importantly, as much as we could do some of this on our own, Galaxy has unique capabilities and scale. They have a position in the market alongside ours. They also have good visibility into deal flow, and they have an ability to filter for the best opportunities in this space. So we wanted to be selective. We want to be discerning and working with Galaxy will basically be at the top of the funnel. That's why we decided to work with Galaxy and scale. And then your second part of your question, yes, this could be the first of additional funds with Galaxy or with other asset managers or through our own investment vehicles.

But the short story is it's 2 public companies who are best-in-class partnering together to bring unique capital to the ecosystem with a level of diligence that you would expect from an institutional allocator.

Fedor Shabalin: That's great. My follow-up would be, is there a way to think about what a reasonable annual or long-term yield might be on a fund like this? Or is it too soon to say?

Joseph Chalom: I think it's too soon to say. What I will say is it's part of an overall balance sheet portfolio allocation where, as I mentioned on my call, we started by fully deploying into native simple staking and liquid staking. You saw in January, we took a portion of our portfolio around 8%, and we put it in a composable liquid restaking token alongside Consensys [indiscernible], Etherfine and [indiscernible]. You can think of this as the next step in that efficient frontier. It will be seeking higher yields than you would get in the standard Ethereum staking rate. But again, we're looking to hit singles and doubles. We're not looking for VC-like returns. So that's how I would frame it.

And I would share that in the future, we'll be more transparent as to what our collective yield and returns are as we complete these deployments. So we will be more transparent. But to date, we've been beating the Ethereum staking rate, and we intend to continue to do that as our benchmark and hurdle.

Operator: Our next question is from Lance Vitanza with TD Securities.

Lance Vitanza: My question is, I guess, what in your view is the single most underappreciated driver of Ethereum demand over the next 12 to 24 months?

Joseph Chalom: I think the most obvious answer would be stablecoins, and you're seeing them go from being a single-use crypto use case to essentially be a platform where lots of different types of payments will happen. It could be as simple as crypto pairs on chain. But more importantly, you're starting to see it being used in cross-border remittances. You're starting to see them being used intracompany for treasury operations and optimization in corporates. You're starting to see them be used for corporate payments across borders. That is something that's very sustainable, very clear. You can almost argue it's the first proof case for tokenization. But I would say the faster growing and bigger opportunity is tokenization of real-world assets.

To date, there's about $30 billion to $35 billion of on-chain real-world assets that have been tokenized. You're starting to hear movements from the New York Stock Exchange, NASDAQ, DTCC and just last week, a multibillion-dollar acquisition by the Bullish Exchange of Equiniti, a traditional transfer agent, in fact, our transfer agent, all with the goal of doing step function change in tokenization. So now you have issuers, you have platforms, you have liquidity venues. And my expectation is that will be growing exponentially. And then the final thing, which I think is in the early, early stages, and it's too soon to forecast, is the growth in agentic payments.

The Coinbase report a couple of weeks ago from Brian Armstrong, said there were about 160-plus million micro payments in Agentic Finance just in the first quarter, leveraging a protocol, an open source protocol called [ X402 ] for micro payments. These payments, whether they be stablecoins, transactions and tokenized assets, DeFi or agentic need payment rails for settlement. And to date, Ethereum has been the dominant platform, capturing over 50%. So I think it's those 4 pillars. Stablecoins are the most proven use case. I would say that tokenization is where we expect step function change. DeFi will be the rails in the future for stablecoins and tokenized assets to be traded and swapped and borrowed and lent.

And Agentic, I would say, is the wildcard. I can't tell you when, but it might be the most impactful over time. And Ethereum is not only well positioned, it has a license to win.

Lance Vitanza: So my follow-up is to the extent that activity increasingly migrates to Layer 2s, how confident are you that Ethereum captures sufficient value at the base layer? And what, if any, evidence gives you that conviction today?

Joseph Chalom: Well, I think we saw an intentional policy from the Ethereum Foundation several years back to help scale Layer 2s until such time as Ethereum Layer 1 or Mainnet had the throughput and a fee level that was necessary to support the activity. You've seen in the last several upgrades and what's coming next that Joe Lubin mentioned, Glamsterdam, you're seeing step function increases in throughput and a significant reduction in the cost per transaction. So you'll have both the capacity and the economic incentives. And I would expect more and more activity over time to return to Ethereum Layer 1 Mainnet.

And that should inure to the benefit of not only Mainnet but the Ether token that's used to secure those transactions. So years ago, you heard a lot of talk about Solana being faster and cheaper. As these upgrades are happening, Ethereum is giving Solana run for the money. But in difference -- in contrast, it has both the security, the developer community and the staking ecosystem to provide economic security. So we're quite confident that over time, more and more of the value will inure to the Layer 1, and that's positive for Ether, our treasury asset.

Operator: Our next question is from Devin Ryan with Citizens Bank.

Unknown Analyst: This is Neil [indiscernible] on for Devin. Maybe my first question on Agentic Finance. So you guys gave quite a lot of context in the opening remarks. But I guess maybe you could talk a little bit more how you see it evolving over the next 12 months? It kind of sounds like payments is probably like the big pushing point but maybe trading potentially as well. And then I guess, could you also elaborate a little more on how you think is best positioned here, maybe more from a transaction speed point as opposed to cost?

Joseph Chalom: Yes. I think we're still early, but it's unbelievably promising what we're seeing across not only Agentic Finance, but also commerce. So you have what I would consider a convergence of a handful of mega forces. The first just being the availability and growth in wallet on-chain infrastructure, smart wallets. They're somewhere between 600 million and 800 million wallets, and they are growing quite rapidly. And those wallets contain both stablecoins, Bitcoin, ETH, Solana and other tokens.

But I think what you're starting to see is increasingly, those wallets will act in a more autonomous manner, not on their own, not as the masters of individuals, but actually within the framework of x402 micro payments and a new protocol released on Ethereum called ERC-8004. These are the road rails of this agentic highway. And what you're going to be seeing is both micro payments as well as, I believe, a higher transaction volume for people who are instituting or developing autonomous trading strategies. They need guardrails and they need throughput and Ethereum Mainnet is offering that, but it will also happen on the Layer 2s.

You're starting to see this happen on-chain because of the confluence of the wallet infrastructure. You're also seeing AI agent infrastructure through Claude, through Anthropic and these capabilities being integrated with that wallet infrastructure. And then finally, when you start seeing tokenization of assets, and I don't mean illiquid assets like real estate and private equity, but I mean ETFs, money market funds as well as tokenized individual securities, you're going to see this wallet infrastructure support things that you had only seen in institutional finance on Wall Street.

So for example, the borrower lend tokenized securities and funds for yield, just like institutions have been doing for generations or yield harvesting on-chain in an automated manner, whether on DeFi or even just moving assets out of low-yielding bearing accounts into higher-yielding opportunities, including stablecoins. And that confluence of a wallet infrastructure, the automation we're describing as well as the throughput of Ethereum really creates a guide path of what we're going to see in the future. I would also just add, you're seeing a wealth transfer that's going to happen over the next decade or 2 of tens, if not $100 trillion of assets to a more AI native population.

This confluence of events is only going to accelerate agentic finance and commerce and Ether and the Ethereum opportunity are positioned to win. I can't tell you the timeline, but I think we're probably underestimating the impact on our daily lives, and that's going to be very, very beneficial for Ether as a treasury asset.

Joseph Lubin: Yes. The timeline is ramping up now. So from consensus' perspective, as we observe activity in the different Mainnet surfaces, whether it's an embedded wallet surface or APIs, SDKs or the actual mobile or extension client, we're seeing a lot of what we believe is agentic activity. And we're a privacy tool. So we're inferring certain things. But a ton of agents are using MetaMask to do different things in the space. It's people and companies doing trading strategies, setting up vaults, adjusting vaults. And we all need to be pretty careful.

As some of you probably heard, an agent can take your instructions, read your instructions, maybe compact its memory and forget what you told it to do or not to do. And so while we've seen huge ramp-up in payments in ERC-8004, which [indiscernible] consensus wrote with Ethereum personnel and Google personnel. That is all super healthy activity. We're seeing some activity that really needs to be guardrailed. And so we've launched a delegation framework and toolkit that enables you to guardrail what agents can do.

So while we love our AI agents and other forms of machine intelligence, we really need to ensure that they don't do things that with either our own MetaMask wallets or MetaMask wallets that we get them that are outside of proper behavior like exceeding their allowances or sharing information that they shouldn't be. So our ecosystem needs to take a prudent, careful approach, but it's happening really fast.

Unknown Analyst: A lot of color there. And maybe just a short follow-up. So it looks like traditional ETH is probably around a little bit below 70% of like total ETH. Is there a number kind of in the long run that you're targeting to like begin to diversify more into alternative strategies?

Joseph Chalom: I would expect into the long term that the vast majority of our ETH will stay in simple staking as well as liquid staking protocols. But it does mean that a minority of our portion of ETH of our diversified portfolio can follow the strategies that we've done and new strategies. But I do think that will be the minority of the portfolio over time. But we're thinking of it as an efficient frontier. And each step we take is more sophisticated, requires more diligence. But again, on an overall basis, we're trying to exceed the Ethereum staking rate, but we're not trying to hit triples and home runs. We're trying to hit singles and doubles in a diversified portfolio.

So I believe the majority will be -- will stay in staking. As we see opportunities, we'll be opportunistic, but we'll be prudent.

Operator: Our next question is from Fedor Shabalin with B. Riley Securities.

Fedor Shabalin: My first one is kind of a high level. Institutional adoption of ETH continues to build, yet token price has lagged the pace of that adoption. In your opinion, what explains the disconnect? And when do you expect it to close? And maybe which catalyst do you see as necessary to trigger a rating of the price of the token?

Joseph Chalom: Yes, great question. We are seeing a divergence because all the real-world signals around stablecoin tokenization, DeFi and the tail opportunity of agentic are all screaming that we're seeing a once-in-a-generation reset of financial rails. And the vast majority of this stuff is happening in the Ethereum ecosystem. So as I've explained earlier, it is leading by a wide margin in each of these domains. I think over the last year or so, both Bitcoin and ETH have become more correlated to macro geopolitical and liquidity trends than we had seen in the previous 5 to 10 years. And at the end of the day, we are trading in a band that is subject to short-term market structure.

And I think as some of the short-term market structure works itself through, whether it was the deleveraging we saw last October, whether it's some of the liquidity that's left the system and some of the geopolitical risk, we'll start seeing it trade more on its long-term fundamentals. As I mentioned on my earnings call, we think the market is working through the end of a multi-quarter deleveraging cycle. It's obviously created a disconnect between price and the underlying adoption. But fundamentals are strengthening. I've shared that earlier on my call. Historically, we've seen this pattern before, where we've seen periods of consolidation followed by even stronger price appreciation and ecosystem growth.

So I think in my view, we are seeing at this point a temporary divergence between short-term market structure and macro and what the long-term fundamentals are. But as an Ethereum treasury, we are less focused on the day-to-day. We are here to deploy long-term capital into this thesis. We view this as a temporary dislocation and not in any way structural weakness. And if anything, what you've seen is Ethereum over the last year, including the most recent releases and what's coming, really create a dominant throughput, security and trust framework that other blockchains are really going to struggle to keep up with.

So I'd be more focused on what you're hearing from Larry Fink and the likes of Franklin Templeton and [indiscernible] and NASDAQ and the DTCC than I would be in the short-term price movement. You can't overreact. You have to focus every day on what's right for the mid and long term, and that's to continue to invest in this institutional adoption. So again, a divergence between short term and long term. We're always focused on the long term.

Joseph Lubin: And let me pan out a little bit and put this into a longer time frame context. So the world is in a complicated place. We're going multipolar in terms of power structures in the world. And the world is really composed of platforms. It's platforms all the way down from software platforms like AWS, Instagram, Facebook, Twitter, nation states or platforms you can be de-platformed with respect to your citizenship or your voter roles. And that's what decentralized protocols, Bitcoin and Ether rose to address. So the value propositions of Ether and Bitcoin are credible neutrality and censorship resistance.

So Bitcoin is censorship resistant and as neutral as it can be with respect to certain aspects of money where Bitcoin is money. And Ether and Ethereum are sensorship resistant and incredibly neutral with respect to providing a decentralized platform for decentralized applications. And that's all about moving many Web2 applications and elements of traditional finance and other elements of society to something that looks like Web 3 or a decentralized worldwide web and to decentralized finance. So to accomplish this, Ether and Bitcoin need to be rigorously decentralized because of their special period of initiation and time, they're the only 2 that have been able to accomplish that and protect that.

So Ethereum now has to scale transaction throughput massively, but not ever at the expense of the core value propositions of censorship resistance and credible neutrality, and we've achieved that, and we continue to achieve that. So Ethereum has been slower as a Layer 1 than some other Layer 1s in scaling because Ethereum would not compromise its rigorous decentralization.

The hard but necessary path is achieving global scale via many improvements at Layer 1, which are going on really rapidly right now with some research breakthroughs and via further scaling mechanisms at the modular Layer 2 and the modularity at Layer 2 is incredibly valuable for scaling and providing different kinds of logical context for companies or nation states, et cetera. So all of this is now taking shape in the form of Glamsterdam, the next hard fork, [indiscernible], hard fork after that, where we scale Layer 1. We scale [indiscernible] at Layer 2, and there are some specific pieces that protect censorship resistance.

And we're at the point where we've essentially -- we're on the cusp of achieving 2 holy grails for blockchain. The first holy grail is unique -- pretty unique to Ethereum. It's real-time proving of blocks at Layer 2 and at Layer 1 and real-time proving of blocks enables something that we're calling synchronous or near synchronous composability.

And there are projects -- we have project Consensys, [indiscernible] have a project called the Ethereum Economic Zone, where we are unifying fragmented liquidity pools and unifying execution context across different Layer 2 networks and down into Layer 1, where we can initiate a transaction or set of transactions at either Layer 1 or Layer 2 and bring in transactions in the same execution context atomically so that they can draw from different pools of liquidity and happen magically via zero knowledge proofs effectively in a single transaction or in a set of transactions that are in the same block or in consecutive blocks. So we are pretty much there.

There's some details left to be worked out, but the unification of the Ethereum ecosystem, the Ethereum platform is underway.

Fedor Shabalin: It's very helpful color related to the architecture of the ecosystem. And my quick follow-up is -- has an internal nature. So about your partnership with Galaxy. So with Galaxy running the funds investment management, what's left here for Sharplink's in-house asset management team to do kind of maybe help us reconcile your focus on internal management of your majority of your assets with outsourcing this strategy to Galaxy?

Joseph Chalom: Sure. I think some of it is about the level of scale and diligence. We see a pipeline of opportunities, not just in staking, liquid restaking and through our strategic partnership with Consensys. But from time to time, we will partner with others. We are not outsourcing this to Galaxy. We founded the fund together. We are both limited partners in the fund, and this is not going to be a black box fund where we just wait to receive returns. So while they are the general manager, the general partner and manager of the fund, we are both LPs, and this is a partnership. That's why it's co-branded. So we don't view this as outsourcing.

We view this as an opportunity to capture on-chain yield opportunities and scale and frankly, in a way that others have not been able to do. And we're doing it with a partner we trust, with a partner that's best-in-class and frankly, one that has skin in the game. So I think what we're doing is first of its kind. But again, much of the asset management, in fact, the majority is happening in-house, but we will find select opportunities where partnering will yield better results for our investors, and we're doing it in a capital-efficient manner. So we will look at every opportunity at both the cost and yield perspective.

And in this case, it made more sense to partner because of the scale we can provide to deploy to multiple opportunities within a single framework. So again, you would have seen we've in-sourced the vanilla staking ETH purchases, but we will always use the best framework to generate the results. So we don't see this as being inconsistent. We see it being entirely consistent in how to build an optimized portfolio.

Operator: Our final question is from Joe Vafi with Canaccord Genuity.

Unknown Analyst: This is Will Johnson on for Joe. In the quarter, we saw some large DeFi exploits, which put some pressure on DeFi TDL. And I know you mentioned this plus some deleveraging since last fall. So just wondering if you could provide some more color on these DeFi dynamics and how if at all this has changed your view on risk on Layer 1s versus layer 2s and deploying through native versus liquid staking?

Dave Abbott: Yes. Great question. Thank you, Will. And actually very timely. There's a reason we're doing this at this time. So for more context, the recent hacks that involved the [indiscernible] obviously unfortunate. That said, we have pretty institutional and advanced partner vetting, whether it be asset management partners, whether it be protocols, we have lots of internal controls and custody that's aimed to prevent us from having exposure to things like this. And obviously, none of our assets were in any way affected. That said, it was a major stepback in the short term for the broader DeFi landscape.

We're actually really happy to see fast-moving actors, high-quality actors who are part of what they call the DeFi United Recovery Efforts, and we played a small part in helping advise on that recovery to stabilize the DeFi markets. But it's important to note, these hacks, whether it be the Solana [indiscernible] on Drift, the [indiscernible], they did not happen because of a smart contract exploit. The majority of these issues happened off-chain, essentially exploiting centralized points of failure, either at the social layer or how people, humans configured transfer of assets through bridging. The technology is secure in our view. The vast majority of these are not smart contracts. They're human exploits.

And when you have centralization and social engineering combined with AI, this can happen, including off-chain. And in our view, what is required is to continue to support further decentralization. In our view, the bar going forward needs to be higher. It needs to be at the Sharplink Galaxy institutional grade operational standard, and that's the standard we hold ourselves to and our partners to. We actually have worked closely through this situation. Our team worked closely with our strategic partner, Consensys, along with Joe Lubin, who's on the call, who've stepped in. We played a small part in helping structure the capital contribution with [indiscernible].

And at the end of the day, we believe this is a net positive for the entire ecosystem, and it helped stabilize markets. At the end of the day, you've seen issues in both traditional finance and on-chain finance. And our top priority is to safeguard our investors and our balance sheet. And we've taken an extremely conservative approach when vetting protocols. We have vetted dozens of protocols, most of which we turned away, and that will never change. And finally, it's worth noting that the security setup that was exploited in this most recent attack would not have passed our own due diligence checks. And for future deployments, we feel very comfortable with our risk management teams.

We feel comfortable with our policies. In the case of the Galaxy Sharplink Fund, we're working with a partner who has probably the largest on-chain security team for these type of deployments, and we're going to use scrutiny and take our time rather than just prioritizing yields. So when we look at future investment opportunities, the standard is going to be high. And overall, when you have institutions like ours who are setting those standards, who are holding them rigorously, this is ultimately very good for the DeFi community because you end up reinforcing those protocols who do things the right way. And those protocols who do not will not deserve to get allocations of this type of capital.

So we're not shying away from this. We're just doing it with a different set of standards than you've seen exploited in the past.

Operator: With no further questions, I would like to turn the conference back over to Joseph Chalom for closing remarks.

Dave Abbott: So first of all, thank you, everyone. And before we close, I want to leave you all with a very simple perspective. We are operating in a market that's still early, it's volatile and its progress is being built out in real time. But the direction has never been clearer and it's becoming increasingly clear that Ethereum is emerging as the foundation for a new financial system, for new financial rails and the opportunity ahead for Sharplink and our investors is extremely compelling. Our role is not to focus on or try to predict short-term market movements, but we are executing with discipline and consistency.

Sometimes we slow down in order to speed up to build a platform that compounds value over time. And we've built a model that's designed to perform across market cycles. We're focused, again, on growing ETH per share, and we're grounding our strategy in making our ETH the most productive, but in a risk-managed and a repeatable way. We've been doing it this way from day one. And what we focus on is disciplined execution, responsible growth and a real focus on long-term value creation for our shareholders. We are energized by the opportunity ahead, and we're confident in the path that we're on.

So again, thank you all for joining us today, for your continued support in Sharplink's vision, and we look forward to updating you again in the next quarter. Thank you.

Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

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