The market capitalization of compliant euro stablecoins grew 128% in the year leading up to the end of the Markets in Crypto-Assets Regulation (MiCA) transition period, according to payments infrastructure firm Decta.

Decta said in a Sunday report that the combined market cap of eight MiCA-compliant euro stablecoins rose to $673.9 million on June 28, 2026, from $295.6 million on June 30, 2025. Trading volume rose 43.1% to $67.3 million from $47 million. The number of MiCA-compliant euro stablecoins tracked in the report also rose to eight from five over the period.

Decta tracked eight euro stablecoins that were actively issuing tokens and had market capitalization and trading volume during the study period. By contrast, the European Securities and Markets Authority interim MiCA register lists a broader set, including tokens that may not meet Decta’s activity criteria.

The report found that euro-denominated stablecoins are growing under MiCA but from a small base in a market still dominated by dollar-backed tokens. CoinGecko data shows US dollar-pegged stablecoins at about $300 billion in market capitalization. The combined market capitalization of Decta’s eight actively traded, MiCA-compliant euro stablecoins was 0.22% of the dollar stablecoin market.

From July 1, firms offering crypto-asset services in the European Union generally needed MiCA authorization. Decta’s data sample ends days before the close of MiCA’s crypto-asset service provider (CASP) transition period.

Market capitalization of the top eight euro-pegged stablecoins. Source: Decta

Euro stablecoin growth amid MiCA competitiveness debate 

The report adds to a debate among policymakers and industry groups over whether MiCA’s stricter stablecoin rules are helping the euro ecosystem grow or limiting its competitiveness against dollar-backed tokens.

On April 27, a Blockchain for Europe report argued that MiCA had made euro stablecoins safer but commercially weaker. The report said MiCA’s reserve requirements and ban on interest payments left euro tokens at a disadvantage. 

Related: EU crypto rulebook faces enforcement challenge as MiCA transition ends

The debate intensified in May after a policy paper from Brussels-based think tank Bruegel called for easing liquidity requirements for stablecoin issuers and potentially granting them access to European Central Bank funding. The paper argued that looser rules could help the euro stablecoin market compete with dollar-backed tokens. 

However, the European Central Bank (ECB) pushed back. On May 23, the ECB warned EU finance ministers that expanding issuance of euro stablecoins could weaken bank lending and complicate monetary policy. The ECB also dismissed concerns that stricter EU rules would accelerate digital dollarization.

Magazine: Bitcoin slides to $58K, XRP hits $1 but onchain data promising: Market Moves

Bitcoin (BTC) has further to fall for one of its “cleanest cycle clocks” to signal a bear-market bottom, new analysis says.

Key points:

• One of Bitcoin’s “cleanest cycle clocks” suggests that new macro lows are needed this bear market.
• The NUPL metric is still in positive territory, setting it apart from previous bear markets.
• Analysis expects history to repeat with a higher low on a long-term NUPL moving average.

CryptoQuant: Bitcoin NUPL contains “level to watch”

In research published on Monday, onchain analytics platform CryptoQuant flagged an incoming profitability floor for the BTC supply.

The onchain metric involved was Net Unrealized Profit/Loss (NUPL), which measures the portion of the supply being held at a higher or lower price versus that at which it last moved. Its score is currently 0.158, a level last seen in early 2023.

“Smoothed into its 30 and 100-day exponential moving averages (EMAs), it becomes one of the cleanest cycle clocks on-chain,” contributor TheChessOnChain commented.

An accompanying chart shows the 100-day EMA of NUPL slowly trending toward cycle bottom levels below zero.

“Every time the 100-day EMA of NUPL fell below zero, Bitcoin was carving its cycle bottom: late 2011 (low near $2), January 2015 ($182), the 2018 bear ($3,206 in December 2018), and the 2022 FTX bottom ($15,792 in November 2022),” TheChessOnChain noted.

Bitcoin NUPL data (screenshot). Source: CryptoQuant

At just above $60,000, BTC/USD corresponds to an NUPL 100-day EMA of 0.215, signalling plenty of room left to drop in order to match previous bear-market lows.

CryptoQuant acknowledged that NUPL has put in higher lows throughout Bitcoin’s history, meaning that even a trip below the zero line may not be essential.

“That leaves two paths,” it continued, describing the four extant zero-line crosses as a “pattern, not a law.” 

“Either the 100-day EMA crosses zero as it did at every prior bottom, or this becomes the first cycle to bottom without it, which would fit the shallower-each-time trend.”

No time frame was given for when the next bottom could occur, with CryptoQuant specifying the zero line as the “level to watch in the coming weeks.”

Bear market reversal signals copy history

As Cointelegraph reported, multiple bear-market reversal signals have come from onchain sources in recent weeks, echoing 2022.

Related: $60.4K Becomes ‘most important area’: Five things to know in Bitcoin this week

Despite these now locking in, market participants broadly expect new macro lows to enter before bulls regain the upper hand.

Last week, fellow CryptoQuant contributor Axel Adler Jr. highlighted other supply data presenting mixed signals over short and mid-term BTC price action. Supply in loss, Adler calculated, could still be two months off levels that traditionally correspond to the end of Bitcoin bear markets.

“Until then, it is more accurate to treat capitulation as a process rather than a completed fact,” he wrote.

Privacy-focused layer-1 blockchain Secret Network is proposing to move from its longtime home on Cosmos to Ethereum layer-2 Arbitrum, citing security risks from artificial intelligence, among other reasons. 

Secret Network has been running privacy-preserving smart contracts on Cosmos since 2020, as the ecosystem had strong momentum back then, but the “environment has changed,” the team said Tuesday.  

“The security risk is the part we take most seriously,” it said. “Old code is becoming dramatically easier to analyze … With AI, the cost of attacking stale code is falling across the board.” 

The recent Axelar-Secret IBC bridge exploit highlighted growing security risk from aging, under-maintained code — a risk the team argues AI-assisted exploitation is making worse. The release of advanced AI models such as Anthropic’s Claude Mythos 5 has dramatically increased the capabilities for discovering and potentially exploiting code vulnerabilities. 

Liquidity has thinned

The Secret team described Arbitrum as having “deep liquidity, tooling, wallet and exchange support, and thousands of builders composing with one another,” and said “liquidity has thinned” on Cosmos while builders have “drifted to other ecosystems.”

“The tooling you’d want to count on is shakier than it used to be, and a number of projects that once anchored Cosmos have migrated,” it added. 

“Attacks that used to take deep manual effort are getting cheaper as models get better at reading contracts, tracing assumptions, and turning a forgotten edge case into a working exploit.”

The proposal, which requires a governance vote, follows a bridge exploit in June that resulted in the loss of $4.7 million in bridged assets but did not affect Secret’s native token, SCRT.

Related: Secret Network bridge exploited for $4.7M with ‘infinite mint’ bug

For SCRT to endure, it needs a new stable home, and the Ethereum ecosystem is that home, the team said. 

The team is planning a one-time snapshot of SCRT balances on Sept. 1, which will be used to issue a new ERC-20 SCRT contract on Arbitrum.

Dwindling DeFi value locked 

The total value locked in the Cosmos ecosystem is around $2 billion, down 88% from its peak during the 2021 bull market. Comparatively, Arbitrum is the leading layer-2 network by total value secured, which is $17.4 billion, according to L2Beat. 

Secret Network has just $1.3 million in TVL on Cosmos, according to DefiLlama. 

SCRT holders did not react well to the news, with the token tanking 24% over the past 24 hours to 4.1 cents, down more than 99% from its 2021 peak, according to CoinGecko. 

Secret is not the only network to leave Cosmos. In February, privacy-focused blockchain NilChain, built with the Cosmos SDK, left the ecosystem in a move to Ethereum. 

The Sei Network completed a full Cosmos-to-EVM transition in June, closing down its native Cosmos transaction layer entirely and becoming Ethereum-based. 

Stablecoin blockchain Noble also announced it was moving from the Cosmos ecosystem to Ethereum in January. 

Features: The biggest blockchain upgrades still to come in 2026

XRPPower integrates AI analysis, automated management, and risk monitoring as investors explore new digital finance solutions amid global market uncertainty.

Entering 2026, global financial markets remain highly focused on the Federal Reserve’s interest rate policy. In recent years, the Fed has maintained relatively high interest rates to combat inflation, and whether it will continue to cut rates or maintain high rates in the future will continue to influence global capital flows and remain a key focus for investors.

While the crude oil market presents investment opportunities, prices are often influenced by multiple factors, including the global economy, geopolitics, and supply and demand. A sudden event can disrupt the existing market rhythm.

Gold has long been considered a safe-haven asset, but its price can also experience corrections when the dollar strengthens or interest rates remain high.

While real estate possesses long-term investment value, it is easily affected by changes in loan interest rates, the economic environment, and market demand. It involves long capital ties and relatively limited liquidity.

For many investors, the real regret is not missing out on a price surge, but watching their assets shrink amidst market volatility, unable to find a more suitable investment approach.

With the continuous integration of AI and fintech, the digital finance industry in 2026 is entering a more intelligent and efficient development phase. More and more investors are beginning to pay attention to the new changes brought about by technological innovation. XRPPower, keeping pace with this trend, continuously upgrades its AI intelligent system, integrating intelligent analysis, automated management, and risk monitoring into platform operations. It constantly optimizes product experience and operational processes, making the platform safer, more transparent, and more convenient. Both new and long-term users can easily understand platform rules and experience more efficient digital asset services.

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Learn more on the official website.

The US Commodity Futures Trading Commission has sued a North Carolina man, accusing him of operating a commodity pool featuring crypto that defrauded investors of more than $14 million.

The CFTC’s lawsuit, filed in federal court on Tuesday, alleged that Trevor Vernon and his company, Argent Capital Management, operated a commodity pool featuring equity index futures, options on equity index futures and crypto.

The agency alleged that from March 2022 to February 2026, Vernon solicited $14.8 million from at least 60 investors and falsely claimed he was a successful trader, even though his trading actually “resulted in consistent and catastrophic losses” for the pool’s investors.

The lawsuit is a rare crypto-related enforcement action from the CFTC, which is angling to oversee the crypto industry while facing questions from some lawmakers about whether it has the resources to police the complicated and rapidly growing sector.

The agency alleged that as part of the scheme, Vernon traded crypto, including Bitcoin (BTC) and Ether (ETH), which the CFTC asserted were commodities.

CFTC alleges Vernon ran pool “akin to a Ponzi scheme”

The CFTC alleged in its complaint that Vernon made false statements to existing and potential investors, including in quarterly account updates and monthly performance emails.

The agency claimed Vernon’s trading of crypto, as well as futures and options on stock indices, resulted in losses of more than $8.6 million.

Related: CME Group sues CFTC over crypto perpetual futures 

The CFTC said Vernon never disclosed the losses to investors and alleged he misappropriated $3 million to pay investors “in a manner akin to a Ponzi scheme” to hide his losses. He also allegedly misappropriated $136,000 for private air travel, according to the lawsuit. 

The CFTC accused Argent Capital Management of failing to register with the agency as required by federal commodities law, and claimed Vernon made false statements to the regulator in January about the issues alleged in its complaint.

The CFTC charged Vernon with seven counts related to fraud, failure to register and making false statements.

It asked the court to permanently ban Vernon from registration and trading, along with disgorgement, penalties and restitution.

Features: From Bitcoin critics to blockchain believers: The 5 biggest crypto backflips

Staking locks your crypto and earns yield. Liquid staking hands you a tradeable receipt for that locked position, so the same capital can earn twice. It is one of DeFi’s largest markets, and it comes with a specific danger most guides skip: the receipt can trade below what it represents. Here is how liquid staking tokens work, and where the risk actually lives.

Staking a proof-of-stake asset like Ether involves a trade-off that used to be absolute: lock your tokens to help secure the network and earn rewards, and accept that the locked tokens are frozen and useless for anything else. Liquid staking removes the second half of that bargain. You deposit your tokens with a protocol, the protocol stakes them for you, and in return you receive a new token, a liquid staking token, that represents your staked position and can be freely traded, sold, or put to work elsewhere in decentralized finance. The original capital keeps earning staking rewards; the receipt token lets that same capital do a second job.

That double-duty is why liquid staking became one of the largest categories in all of DeFi, with tens of billions of dollars flowing into it. It is also why it carries a risk that plain staking does not. The receipt token is only useful if the market treats it as equal in value to the asset it represents, and there are moments, usually the worst possible moments, when the market does not. A liquid staking token can trade below the value of the staked asset behind it, an event called a depeg, and understanding when and why that happens is the difference between using this tool safely and being surprised by it.

This guide explains what liquid staking tokens are, the two designs they come in, how the peg is supposed to hold and how it breaks, the concentration risk hiding behind the biggest provider, the way these tokens get stacked into leverage across DeFi, and the practical questions to ask before holding one. The star example throughout is stETH, the largest liquid staking token, but the mechanics apply across the category, from Rocket Pool’s rETH on Ethereum to the staked-asset tokens on other proof-of-stake networks. The goal is to leave you able to hold one of these tokens understanding exactly what it is, what backs it, and under what conditions its price can part ways with the asset it represents.

The problem liquid staking solves

To see why liquid staking exists, start with the friction of ordinary staking. On Ethereum, running your own validator requires locking thirty-two ether, operating node software with constant uptime, and accepting that your stake is subject to exit queues when you want out. For most holders this is impractical: they lack thirty-two ether, do not want to run infrastructure, and dislike freezing capital they might need, especially as Ethereum reworks its staking and consensus layers in ways that will reshape validator economics for years.

Staking pools solved the first problems by letting many users combine smaller amounts under professional validators, but the funds were still locked. Liquid staking solves the last problem, the lock itself. When you deposit into a liquid staking protocol, it pools your tokens with everyone else’s, stakes them across a set of validators, and mints you a token representing your share of the staked pool plus its accruing rewards. You no longer need thirty-two ether, you never touch validator software, and, crucially, your position is now liquid: the receipt token sits in your wallet and can move freely while the underlying stake keeps earning.

A coat-check analogy captures it. You hand over your coat and receive a claim ticket. The coat stays safely in the cloakroom earning nothing, but the ticket is now in your hands, and while you cannot wear the ticket, you can hold it, hand it to a friend, or even sell it. Liquid staking works the same way: the staked asset stays locked and productive, while the token proving your claim to it circulates freely. Whoever holds the ticket holds the claim, so selling the token means selling the staked position along with it.

The result is capital efficiency that plain staking cannot match. A holder can stake, receive the token, and then lend it, use it as collateral, or provide it as liquidity, earning a second layer of return on top of the base staking reward, all without unstaking. That stacking is the appeal and, as later sections show, the source of the systemic worry.

Two designs: rebasing and value-accruing

Liquid staking tokens come in two flavors, and the difference matters for how rewards show up in your wallet and how the token behaves in DeFi.

A rebasing token keeps its price pegged to the underlying asset one to one and delivers rewards by increasing the number of tokens you hold. Lido’s stETH is the classic example: hold it, and your stETH balance grows a little each day, with each stETH meant to remain worth roughly one ether. The appeal is transparency, since your balance visibly climbs, but the growing balance complicates integrations, because many DeFi protocols were not built to handle a token quantity that changes on its own.

A value-accruing token keeps the token count fixed and delivers rewards by rising in value against the underlying asset. Rocket Pool’s rETH works this way, as does the wrapped version of stETH, wstETH. You hold the same number of tokens over time, but each one is redeemable for progressively more ether as rewards accumulate; stake when one token equals one ether and, a year later, that token might redeem for meaningfully more. This design integrates more smoothly across DeFi because the balance is stable, which is why wrapped, value-accruing versions dominate in lending and liquidity protocols and increasingly appear in the institutional DeFi rails being built on other ledgers too.

The distinction is easy to miss and important in practice. A rebasing token used as collateral can behave strangely because its balance shifts; a value-accruing token trades at a price that is intentionally above one-to-one and rising, so seeing rETH or wstETH quoted above the price of ether is normal and correct, not a premium to fear. Knowing which design you hold prevents misreading its price and misusing it in a protocol.

How the peg holds, and how it breaks

The entire usefulness of a liquid staking token rests on the market valuing it close to the staked asset it represents. That relationship is a soft peg, maintained by arbitrage and redemption instead of any hard guarantee, and understanding the mechanism explains exactly when it can slip.

In normal conditions the peg holds tightly because of a redemption path. A stETH is a claim on staked ether, and once the protocol’s withdrawal queue is functioning, that claim can be redeemed for actual ether. If stETH ever trades meaningfully below one ether on the open market, arbitrageurs buy the discounted stETH, redeem it for a full ether through the queue, and pocket the difference, and that buying pressure pushes the price back toward parity. Deep secondary-market liquidity reinforces this: research on stETH has found that most deviations beyond a small threshold correct within hours, because the arbitrage is reliable and the market is deep.

The peg breaks when the redemption path is slow and the market panics faster than arbitrage can act. Redeeming a liquid staking token for the underlying asset is not instant; it runs through the network’s validator exit queue, which can take days when many people withdraw at once. In a stressed market, holders who want out immediately cannot wait for the queue, so they sell on the open market instead, and a wave of forced selling can push the token below the value of the asset behind it. This is a depeg: not a loss of the underlying stake, but a temporary discount on the receipt.

The defining real-world case came in 2022, when stETH traded as low as roughly a nickel under parity during a broad market crisis. Large holders facing liquidation needed liquidity immediately, the withdrawal path at the time did not allow direct redemption, and the resulting sell pressure drove stETH to a visible discount to ether. Critically, the underlying staked ether was never lost or impaired; the discount reflected the mismatch between an instant desire to exit and a redemption process that could not move instantly. Once redemption became possible and panic subsided, the peg restored. The episode is the template: a liquid staking token depeg is almost always a liquidity-and-timing event, not a solvency event, but that distinction is cold comfort to someone forced to sell at the discount.

How the yield actually stacks

A concrete walk-through of the returns shows both why liquid staking is popular and where the layers of risk enter, because each layer of yield is also a layer of exposure.

Start with the base. Staking ether on Ethereum earns a network reward, a modest annual percentage that comes from new issuance and transaction fees paid to validators for securing the chain. A holder who simply stakes and holds a liquid staking token captures this base reward with almost none of the friction of solo staking: no thirty-two-ether minimum, no node to run, no direct exit-queue management. For many holders, that is the entire appeal, and it is a reasonable, relatively conservative use of the tool.

The second layer comes from putting the token to work. Because the liquid staking token is freely tradeable, a holder can deposit it into a lending protocol to earn interest, supply it to a liquidity pool to earn trading fees, or use it as collateral, each adding a return on top of the base staking reward. This is the capital efficiency that plain staking cannot match: the same underlying ether earns its staking reward and a second yield simultaneously. It is also where smart-contract risk begins to compound, because the token now passes through a second protocol’s code in addition to the staking protocol’s own.

The third layer, and the dangerous one, is leverage, described earlier: borrowing against the token to acquire more of it and repeating the loop. Each turn of the loop multiplies the base yield, which is why advertised returns on some liquid staking strategies look far higher than the underlying staking reward could ever justify. The arithmetic that produces those headline numbers is leverage, and leverage is precisely what converts a survivable depeg into a forced liquidation.

The practical takeaway is to read any liquid staking yield as a signal of how many layers are involved. A return close to the base staking reward is a plain, relatively safe position. A return well above it means the token is deployed into other protocols, adding smart-contract exposure. A return far above the base almost always means leverage, and therefore liquidation risk in a depeg. The yield number is not just a reward; it is a readout of the risk stack beneath it, and matching the layer you accept to the risk you understand is the whole discipline of using these tokens well. The same logic governs every layered yield strategy in DeFi: more yield is always more of something else at risk.

The concentration problem

Beyond the depeg risk sits a subtler, more structural concern: one protocol dominates Ethereum liquid staking to a degree that worries people who think about the network’s health.

Lido, the issuer of stETH, has for long stretches controlled roughly a third of all staked ether, a share large enough that Ethereum researchers openly discuss it as a risk to the network itself. The reasoning is about consensus: if a single staking entity controls too large a fraction of validators, it gains outsized influence over block production and could, in extreme scenarios, threaten the neutrality or censorship-resistance the network depends on. This is not an accusation that Lido would misbehave; it is a structural observation that concentration itself is a vulnerability, regardless of the operator’s intentions, and it is why parts of the community actively encourage stakers to choose smaller providers.

Concentration also compounds the token-level risks. When one liquid staking token is embedded as collateral across nearly every major lending protocol, a serious problem with that token, a smart-contract bug, a governance failure, or a severe depeg, is not one protocol’s problem but a shock that ripples through all of DeFi at once. The dominant token’s ubiquity, which is a convenience in calm markets, becomes a transmission channel in stressed ones. The same dynamic appears wherever a single asset becomes foundational infrastructure, from stablecoins to the restaking protocols that layer additional yield on top of staked positions: dominance buys efficiency and sells fragility.

For an individual holder, concentration risk is mostly about awareness. Using the largest, most liquid token gives the tightest peg and the deepest DeFi integration, which is a real benefit; it also means holding the asset most entangled with everything else, so a systemic event touches it first. Diversifying across providers reduces personal exposure and, in aggregate, improves the network’s health, at the cost of slightly thinner liquidity in the smaller tokens.

The leverage stack, and why it magnifies everything

The feature that makes liquid staking tokens powerful, their usability across DeFi, also enables a leverage loop that turns a modest depeg into a cascade. Understanding this loop is essential to understanding why depegs matter beyond the inconvenience of a discount.

The loop works like this. A user stakes ether and receives a liquid staking token. They deposit that token as collateral in a lending protocol and borrow ether against it. They stake the borrowed ether, receive more of the liquid staking token, deposit that as collateral, and borrow again. Repeated, this stacks several layers of leverage on a single underlying position, each layer amplifying the yield in calm markets. It is a popular strategy precisely because the base staking reward, multiplied by leverage, produces attractive returns.

The danger is what happens when the token depegs. Each borrowing position has a liquidation threshold tied to the value of the collateral, and a depeg lowers that value. As the token slips below parity, leveraged positions approach liquidation; liquidations force the collateral token to be sold; that selling deepens the depeg; the deeper depeg triggers more liquidations. In stressed markets this becomes a self-reinforcing spiral, a domino run dressed in yield-farm packaging. The 2022 depeg was made sharper by exactly this dynamic, as leveraged holders were forced to unwind into a falling market.

The lesson for holders is that a liquid staking token held plainly is a fairly conservative instrument: it earns staking yield and, absent a solvency failure in the protocol, its worst realistic outcome is a temporary discount that arbitrage eventually closes. The same token levered several times over is a very different risk, one where a discount that a plain holder could simply wait out becomes a forced liquidation. The token did not change; the leverage around it did. Anyone evaluating liquid staking yields that look unusually high should assume leverage is involved and price the liquidation risk accordingly.

What to check before holding one

Liquid staking is a genuinely useful tool, and using it well comes down to a handful of concrete checks, not blanket caution.

Confirm the token design. Know whether you hold a rebasing token, whose balance grows, or a value-accruing one, whose price rises, because the two behave differently in your wallet and in any protocol you deposit them into. Value-accruing wrapped versions are generally the smoother choice for DeFi use.

Assess the redemption path. The peg’s strength depends on being able to redeem the token for the underlying asset, so check that direct withdrawals are live and how long the exit queue runs. A token with a fast, functioning redemption path has a stronger peg than one where exit depends entirely on selling into secondary-market liquidity.

Gauge the liquidity and the provider. Deep secondary-market liquidity is what lets arbitrage defend the peg between redemptions, so a token with thin liquidity is more prone to slipping and slower to recover, the same slippage dynamics that govern any thinly-traded swap. Weigh the largest provider’s tight peg and deep integration against its concentration risk, and consider whether spreading across providers suits your risk tolerance and, incidentally, helps the network.

Respect the layered smart-contract risk. Your capital passes through the staking protocol’s contracts, and if you deploy the token into lending or liquidity protocols, through those as well. Each layer is code that can contain bugs, and stacking layers stacks the places something can break, the same concentration-of-risk lesson that runs through every major bridge exploit. Favor audited, long-lived protocols, and treat any strategy promising outsized yield as a signal that leverage, and its liquidation risk, is present.

Held with these checks in mind, a liquid staking token does what it promises: it unlocks the value of a staked position so the same capital can work twice, earning a base reward while remaining liquid and productive. The depeg risk that defines the category is real but specific, a timing-and-liquidity event instead of a loss of the underlying stake, and it is most dangerous not to plain holders but to those who lever the token into a stack that turns a temporary discount into a forced sale. Understand which of those two users you are, and the risk becomes something you can size instead of something that surprises you.

The broader significance is worth a closing thought. Liquid staking tokens have become foundational plumbing for proof-of-stake economies: tens of billions of dollars of staked value now circulate as these receipts, and they underpin lending, trading, and collateral across DeFi. That ubiquity is a genuine achievement, turning otherwise idle staked capital into productive infrastructure. It also means the health of a few dominant tokens matters to the whole system, which is why the concentration and depeg risks discussed here are not merely individual concerns but systemic ones.

Using these tokens knowledgeably, favoring strong redemption paths, deep liquidity, and audited protocols, and staying alert to the leverage hiding behind unusually high yields, is how an individual participates in that system without being surprised by its failure modes.

Frequently asked questions

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Digital asset markets are volatile and you can lose your entire investment. Always do your own research. Information current as of July 7, 2026.

This is Part 3 in the technical article series about Bitcoin covenants by Cointelegraph Research. To read the previous article click here. 

SIGHASH_ANYPREVOUT, as proposed in BIP 118, builds on the earlier SIGHASH_NOINPUT concept mentioned in the 2015 Lightning Network paper by Joseph Poon and Thaddeus Dryja, and later formally proposed by Joseph Poon on the bitcoin-dev mailing list in February 2016.

SIGHASH_ANYPREVOUT is not a new opcode but a proposed new value for the SIGHASH flag, designed to be deployed as a soft-fork upgrade to Bitcoin. The SIGHASH flag is appended to a signature and determines which parts of a transaction are signed and will be checked by the CHECKSIG opcode. The selected flag is chosen by the signer, not enforced by the scriptPubKey. Due to the technical details related to upgradability in a softfork, the SIGHASH_ANYPREVOUT proposal only extends to spends from taproot addresses.

A variety of standard SIGHASH modes already exist, as illustrated in Figure 1. If the flag is set to SIGHASH_ALL, the signature must cover all inputs, all outputs, and the specific outpoint being spent, thus cryptographically binding the authorization to that exact UTXO. An outpoint is the combination of a transaction ID and an output index that together uniquely identify which UTXO a transaction is consuming. With SIGHASH_NONE, only the inputs need to be signed, leaving the outputs unconstrained. The SIGHASH_SINGLE variant signs all inputs, but only the output at the same index as the input being signed. The ANYONECANPAY modifier introduces further flexibility by allowing a single input to be signed independently of the others. Crucially, none of these existing modes allows a signature to omit commitment to the outpoint. That restriction is what SIGHASH_ANYPREVOUT removes.

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BIP-118 defines two ANYPREVOUT variants that differ in how much of the previous output they omit from the digest, summarised in Figure 2. Under SIGHASH_ANYPREVOUT, the outpoint is excluded from the digest, but the signature still commits to the amount and scriptPubKey of the previous output, as well as the input’s nSequence. Under SIGHASH_ANYPREVOUTANYSCRIPT, the amount and scriptPubKey are also excluded, meaning the signature is not bound to the locking script of the spent output at all. All other commitments follow the standard Taproot signature message construction and depend on the selected base flag, such as SIGHASH_ALL or SIGHASH_SINGLE.

Because the outpoint is omitted from the digest, the same signature can authorize spending any compatible UTXO that satisfies the remaining committed fields. For example, a transaction pre-signed with ANYPREVOUT | ALL to produce a 0.5 BTC output can be reused if the same address later receives another UTXO of 0.5 BTC, even if the private key used to create the original signature is no longer available. If the new UTXO holds more than 0.5 BTC, however, the excess will be lost to miners unless the original signature included a change output. This rebinding property is what makes ANYPREVOUT useful for layer-2 protocols, where the same pre-signed transaction must apply to multiple possible on-chain UTXOs without requiring new signatures for each one.

For covenant-like applications, the ANYPREVOUT variants preserve commitment to the scriptPubKey of the previous output, and are typically the most relevant. They allow signatures to be reused across compatible UTXOs while ensuring funds remain bound to the same locking script. ANYPREVOUTANYSCRIPT removes this binding entirely and is therefore less suited to covenant-style applications.

Similar to OP_CTV, SIGHASH_ANYPREVOUT improves on the logic already achievable with pre-signed transactions but does not by itself enable recursive covenants or transaction introspection. Instead, it relaxes the binding between a signature and a specific UTXO, allowing a signature to be reused across multiple compatible UTXOs.

Some research has also noted that removing the outpoint commitment makes recovered-key constructions possible — that is, a public key can be derived from a fixed signature and message pair such that the corresponding private key is provably unknown to anyone, making the UTXO’s key path provably unspendable and forcing any spend through the script path. It would avoid the need for temporary keys, which are otherwise required to make the key path unspendable in constructions that rely on script-path-only enforcement. This observation appears in Bitcoin Covenants: Three Ways to Control the Future by Jacob Swambo et al. (2020), although it remains a theoretical construction rather than a design proposed in BIP-118.

The primary risk associated with SIGHASH_ANYPREVOUT signatures is signature replay. Because these signatures do not commit to a specific outpoint, the same signature can be used to spend a different UTXO than the one originally intended, provided the new UTXO satisfies the remaining committed fields. This risk becomes more pronounced in specific configurations: when ANYPREVOUT | SINGLE is used and output amounts can be rearranged; when a separate UTXO exists with the same scriptPubKey and amount, in the case of ANYPREVOUT; when the same public key appears in a compatible script, in the case of ANYPREVOUTANYSCRIPT; or when a miner can influence transaction ordering and inclusion to exploit these conditions. However, these scenarios require either deliberate misuse or a failure of the user or developer to account for replay conditions during protocol design.

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In our next article we will commence our discussion of Opcodes that serve as supporting tools. These extend the expressiveness of Bitcoin script or data handling but do not implement covenant functionality unless combined with other opcodes. In this next category, we will discuss OP_CHECKSIGFROMSTACK and OP_CAT.