SharpLink Gaming Inc (SBET) 2025 Q3 法說會逐字稿

Good morning, everyone, and thank you for participating in today's conference call to discuss SharpLink's financial and operating results for the third quarter ended September 30, 2025.

By now, everyone should have access to the third quarter 2025 earnings press release, which was issued yesterday afternoon at approximately 4:05 PM Eastern Time. The release is available in the Investor Relations section of SharpLink's website. This call will also be available for webcast replay on the company's website. Following management's remarks, we'll open the call up for Q&A.

I will now hand the call over to SharpLink's Vice President of Business and Legal Affairs, Dodi Handy. Please go ahead.

Thank you, operator. Please see SharpLink's quarterly report on Form 10-Q filed yesterday with the SEC and the earnings press release, which crossed the wire yesterday afternoon. These documents list some of the factors that may cause the results of SharpLink to differ materially from what we say today and which identify some of the risks and uncertainties that could affect our business, prospects and future results. SharpLink assumes no duty and does not undertake to update any forward-looking statements. Any forward-looking statements made by us during this call is based only on information currently available to us and speaks only as of the date when it is made.

In addition, we may be discussing or providing certain metrics today such as ETH concentration that are not GAAP metrics. Please see our earnings press release and SEC filings for further information regarding these metrics.

To set the agenda for today's call, we will begin with SharpLink's Chairman, Co-Founder of Ethereum and Founder and CEO of Consensys, Joseph Lubin, who will provide a broader perspective on Ethereum's continued growth, institutional adoption and the evolving regulatory landscape shaping the digital asset economy. Next, Co-Chief Executive Officer, Joseph Chalom, will discuss SharpLink's progress and execution of its ETH treasury strategy, highlighting key achievements from the quarter and our areas of primary focus in the quarters ahead. Then Rob Phythian, Co-Chief Executive Officer, will share an update on SharpLink's affiliate marketing business. He'll then be followed by Chief Financial Officer, Bob DeLucia, who will be recapping the third quarter 2025 financial results and key performance metrics related to SharpLink's ETH strategy.

I would now like to turn the call over to SharpLink's Chairman of the Board, Joseph Lubin. Joe, the floor is yours.

Thank you, Dodi. Good morning, everyone. I am the Chairman of SharpLink and as many of you know, also a Co-Founder of Ethereum and the CEO and Founder of Consensys, a leading Ethereum software development company. Consensys is SharpLink's strategic adviser, offering support across a broad range of topics from product collaboration, market education, protocol due diligence and more. The strategic connectivity between Consensys and SharpLink gives SharpLink stockholders unique competitive advantages relative to other ETH digital asset treasuries.

Stockholders are starting to see early examples of this, such as the staking collaboration between Consensys and SharpLink that we announced in October to provide enhanced levels of risk-adjusted yield on a portion of our ETH capital.

Beyond this unique partnership, we're seeing incredible tailwinds that I can only describe as a massive acceleration of an institutional adoption super cycle. Wall Street and other institutions, including our own government in the U.S., are fully embracing the Ethereum opportunity. Just over the past few months, we've seen major accelerants to this adoption.

These include the SEC's project crypto announcement to support bringing capital markets on chain as a national competitive advantage, the passage of the GENIUS Act to create a regulatory framework for stablecoin adoption, JPMorgan announcing that they will allow institutional clients to use their Ether holdings as collateral for loans, governments in Japan and South Korea announcing the launch of their local currency-denominated stablecoins on Ethereum, where the bulk of the global stablecoin activity resides. Alibaba announcing the launch of their Layer 2 network built on Ethereum. At their Sibos Annual Meeting 5 weeks ago, the Swift CEO announced as a focus of his keynote that they are working with Consensys to build the Swift ledger using Linea, Consensys' Layer 2 Ethereum technology.

It was clear to everyone at Sibos that traditional finance was now moving rapidly to onboard itself onto Ethereum and various aspects of decentralized finance. And in parallel to Swift's adoption, the DTCC and other central securities depositories around the world, major stock exchanges and banks like JPMorgan and Deutsche Bank are just a few of the major financial institutions that are building on Ethereum.

I will restate our long-term thesis. Ethereum is becoming mainstream global trustware, a new kind of software platform that eliminates some traditional risks and inefficiencies and guarantees execution as advertised. And Ether is the institutional-grade trust commodity that is powering transactions, agreements and systems on the next-generation financial infrastructure. Ethereum continues to extend its massive lead in the smart contract platform space as Ethereum dominates the flows across stablecoins, tokenized real-world assets and high-quality DeFi liquidity. This institutional adoption super cycle is underway, and it is now finally supported by our regulators.

Joseph Chalom and I both attended and presented this week a very high-quality Cantor crypto event organized by Cantor Fitzgerald. It brought together many of the leading U.S. regulators and legislators with top-tier founders, C-suite execs and investors for a wide range of presentations and discussions. The institutions are present in force and accelerating their activities in the Ethereum ecosystem.

Ethereum has done the hard part, implementing the strongest security, attracting the most validators and the largest developer community while maintaining the most rigorously decentralized network, all with a track record of 100% uptime for over 10 years since inception. This has resulted in Ethereum becoming the home of most of the DeFi liquidity in the ecosystem. Now to support institutional adoption and high transaction volume, in addition to the massive scaling provided by the Ethereum Layer 2 networks, we're witnessing step function improvements in Ethereum's Layer 1 mainnet transaction throughput, scalability and efficiency.

Further improvements are coming with Ethereum's Fusaka upgrade in December, which will unlock even further much more regular parallel scaling upgrades to support the growing demand from institutions to drive transactions and value on Ethereum's mainnet, which SharpLink are executing in anticipation of a future where Ethereum becomes the settlement layer for trillions of dollars in tokenized assets, real-world instruments and on-chain liquidity, increasing ETH per share for our investors.

As a co-founder of Ethereum, I've witnessed great cyclicality and volatility in the price of digital assets, including ETH. It should not distract us from the secular paradigm shift that is now going mainstream. SharpLink is perfectly positioned to build value for shareholders at the confluence of technological scaling and maturity, regulatory clarity and institutional adoption of Ethereum.

I'd like now to turn the call over to our Co-Chief Executive Officer, Joseph Chalom, to walk through how we're positioned during this important moment in the Ethereum journey and share our third quarter operational updates. Joseph?

Thank you, Joe, and good morning, everyone. To begin, I'd like to share that we are really pleased with the results of this quarter, our first full reporting period since we launched our Ethereum treasury strategy. We'll talk through our Q3 financials in more detail later, but I want to highlight 2 very positive points.

First, we delivered approximately $10.8 million in total revenue, up over 10x year-over-year as a result of our best-in-class treasury management and staking nearly 100% of our ETH. Second, we delivered net income of approximately $104.3 million, largely driven by gains in our Ethereum holdings. These results demonstrate the strong momentum we're seeing across our business. particularly as institutions continue to build on and engage with the Ethereum ecosystem amid a new era of regulatory clarity.

What was once viewed as a major barrier to institutional participation has now been lifted with the digital asset industry gaining clear recognition and support from the U.S. government. It is not a coincidence that we're seeing a major inflection point for institutional adoption of digital assets and decentralized finance. Wall Street and governments globally are recognizing the power of stablecoins to facilitate nearly instant movement of value at no cost. The largest banks and asset managers are deploying on chain and announcing road maps for the tokenization of real-world assets.

This unlocks a new frontier of distribution and capital efficiency for investors. And we're also seeing institutions, including SharpLink, access high-quality DeFi for borrowing, lending and other financial primitive.

Given the history, security, trust and liquidity on Ethereum, it not only has the license to win, it is winning the predominance of this institutional activity. For this reason, we're building a SharpLink team capable of fully capitalizing on this paradigm shift. I'm really proud that we've been able to attract some of the brightest talent in our industry to our senior executive team, giving us greater institutional experience and expertise. Matthew Sheffield joined as our Chief Investment Officer from FalconX, where he served as the Head of U.S. Spot Trading and previously worked at Bridgewater Associates.

Mandy Campbell joined as Chief Marketing Officer from Bain Capital Crypto, where she led marketing for the firm's dedicated digital asset and early-stage venture funds and previously built brands for companies like GitHub and Facebook. And Michael Camarda joined as our Chief Development Officer from Consensys, where he led corporate development. He previously worked at JPMorgan across investment banking and strategic investments.

Leveraging our expertise and strategic partnership with Consensys, our team is laser-focused on identifying the best ETH deployment opportunities and ecosystem partnerships to maximize value creation. Since we initiated our Ethereum treasury strategy in June, we have staked nearly 100% of our ETH. This is in contrast with many of our peers and with the ETH ETFs. We're earning real on-chain yield through native staking and liquid staking protocols.

More recently, working alongside Consensys, we announced we will deploy $200 million of ETH onto its Linea Layer 2 platform in partnership with EigenCloud, ether.fi and Anchorage Digital Bank. Our scale and permanent capital base allows us to structure multiyear deals that generate yield and economic incentives that materially exceed the standard Ethereum staking rate. Importantly, we're accessing DeFi level yields while carefully managing our risk, including ensuring that this deployment and custody is maintained within Anchorage, one of our qualified custodians.

Yield opportunities like this are generally not available to individual investors or passive ETFs and highlight the enhanced value that our actively managed treasury can generate for our investors. As part of our mandate, we've been proactively sharing our long-term vision for Ethereum's role in global finance to both retail and institutional audiences. A central element of our Ethereum adoption thesis is that most financial assets, including funds, stocks and bonds will be tokenized. This means that ownership of these assets will be represented in a digital token format on the blockchain.

We're not alone in this view. Just last month, Larry Fink, the CEO of BlackRock, shared his vision that all assets will be tokenized on chain to drive both efficiency and accessibility for investors. At SharpLink, we're not a passive observer of this paradigm shift. We're helping usher it in. In September, we announced a partnership with Superstate, a digital transfer agency to become the first public company to natively issue its stock on Ethereum.

The intent of this innovative partnership is to increase both accessibility and on-chain utility of our public equity for the new digitally native investor base. We're actively working in the ecosystem to ensure there are market participants which can support this innovative new financial standard and primitive.

It's important to acknowledge that like others in our space, SharpLink share price has experienced periods of volatility. That's expected given our exposure to our reserve asset, ETH, which is volatile. What's important is that we've grown our total ETH holdings significantly over the past quarter and doubled our ETH per share concentration from 2.0 to 4.0 since the inception of our ETH treasury strategy in June.

As we have shared in the past, SharpLink is relentlessly focused on shareholder value and ETH per share accretion. We have built a team that is well positioned to navigate these volatile markets. We have the expertise and agility to take advantage of the right capital market opportunities with a strong balance sheet as our foundation. Our digital asset treasury structure gives us flexibility to make strategic decisions for the benefit of our investors.

Speaking on capital markets specifically, when our multiple to NAV is above 1, we have the ability to issue new shares and purchase ETH. This is immediately accretive to ETH per share. When our multiple to NAV is below 1, we can raise capital to fund share buybacks. We can do this by monetizing our volatility through convertible bonds or other equity-linked structures, and we can utilize a portion of the $3 billion of ETH on our balance sheet as collateral to borrow capital. In either of these scenarios, we're able to execute transactions that are accretive to stockholders and increase our ETH per share concentration.

I want to share just one example of where we found an innovative opportunity to raise capital. In October, we raised $76.5 million through a registered direct offering priced at a 12% premium to our then market price and a premium to the net asset value of our ETH holdings. This novel transaction paired an equity sale with a short-dated premium purchase agreement, enabling us to issue stock to a high-quality institutional investor interested in gaining upside exposure via this unique structure. This deal reflects the strong institutional confidence in SharpLink's strategy and long-term vision.

By raising capital at a premium, we continue to expand our ETH treasury and increased ETH per share for our stockholders. Beyond innovative treasury management, we do not have an exclusive multiyear asset management agreement in place like other treasuries. We manage the vast majority of our assets through our in-house team of institutional experts from both crypto and traditional financial markets. This allows us to raise capital, acquire ETH and maximize its productivity through in-house active management, allowing more of this value to flow to our stockholders. Together, these factors place SharpLink in a distinctly advantageous position to capitalize on the institutional adoption super cycle now unfolding across the Ethereum ecosystem.

In closing, our third quarter earnings results mark a proof point that SharpLink's Ethereum treasury model is indeed working. Our mission is to give investors the smartest and most efficient way to benefit from the long-term Ethereum opportunity. We have built what we believe is the most innovative Ethereum treasury company, providing stockholders with institutional-grade, risk-managed exposure to ETH and its yield.

With that, I will now turn the call over to my partner, Rob Phythian, to provide an update on SharpLink's Affiliate Marketing business. Rob?

Thanks, Joseph, and good morning, everyone. With the shifting of SharpLink's focus and management resources towards execution of our ETH treasury strategy, we reduced emphasis on expanding our Affiliate Marketing business. Nonetheless, this segment continues to operate steadily, providing a modest source of revenue through our performance marketing and player acquisition services.

For the 3-month reporting period ending September 30, 2025 and 2024, revenue declined to approximately $570,000 from $882,000, respectively. Our 2025 consolidated net loss from continuing operations improved with losses declining to approximately $1,800 compared to a consolidated net loss from continuing operations of $781,000 for the same 3 months in 2024. We are very pleased that our affiliate marketing segment is holding its own and operating efficiently as part of a broader business platform.

To provide you with greater insight and perspective on SharpLink's third quarter financial results, I'll now turn the floor over to Bob DeLucia. Bob?

Thank you, Rob. I'll begin by encouraging everyone listening today and those who have read our earnings release to review our quarterly report on Form 10-Q for the period ended September 30, 2025, which we filed yesterday afternoon with the SEC. The 10-Q provides detailed disclosures and footnotes that complement today's discussion, offering stockholders and investors a comprehensive view of SharpLink's financial position, liquidity and each treasury performance metrics.

We will now go through the financial results for the quarter ended September 30, 2025. As we review our third quarter income statement results, I'd like to remind everyone that all comparisons and variance commentary refer to the prior year quarter unless otherwise specified. As of September 30, the company held 580,841 ETH with a net fair value of $2.4 billion. In addition, we held 236,906 LsETH or liquid state ETH with a net cost value of $622.7 million. Subsequent to the end of the quarter, our combined ETH holdings have continued to climb, standing at 637,752 ETH and 223,499 LsETH for a total of 861,251 as of Sunday, November 9, 2025.

Revenue in the third quarter increased to $10.8 million compared to $0.9 million in Q3 of 2024. The increase was due to the success of our ETH staking strategy during the third quarter. I'd like to point out that our income statement now reflects a section presenting other operating income resulting from our ETH holdings. We believe this presentation of our income statement provides our stockholders, investors and the general public with greater clarity and ease of understanding our results when reading our financial statements.

SG&A expenses in the third quarter were $12.4 million compared to approximately $709,000 in Q3 of 2024. Net income for the third quarter increased materially to $104.3 million compared to a net loss of $0.9 million in Q3 of last year. The significant growth in net income was primarily driven by $107.3 million unrealized gain related to fair value accounting adjustments on our ETH holdings. We also had a realized gain of $6.3 million from the conversion of ETH to LsETH and a noncash impairment charge of approximately $7 million due to the lowest intraday market price for LsETH during the third quarter.

As of September 30, 2025, cash on hand was $11.1 million compared to cash on hand of $1.4 million as of December 31, 2024. Additionally, at September 30, 2025, we held $26.7 million in USDC stablecoins as a financial asset.

For additional details, our complete official financial statements and accompanying footnotes including all required disclosures and management's discussion and analysis are contained in our quarterly report on Form 10-Q for the period ended September 30, 2025, 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 to provide instructions for those who may have questions for management.

(Operator Instructions) Devin Ryan, Citizens Bank.

First question is probably for Joseph Lubin. I'd love to dig in a little bit just on kind of the Ethereum growth and particularly Linea because it just -- it seems like a ton of momentum there, and I know that can kind of trickle down into more activity here. And so huge wins like Swift. And so I'd love to just hear about what the attributes are that are driving that demand from partners? And then also, if you can just talk a little bit more about what the pipeline there looks like and any color around kind of the details of the pipeline, if you can, just in terms of what the use cases are and what most people are interested in?

So the general answer is that the institutions are finally here that financial institutions and other enterprises have recognized that digital assets are an incredibly important technology that decentralization is a direction of travel for not just the financial industry, but for the Internet and the web itself. Ethereum has executed its roll-up-centric road map for scaling and executed it remarkably well. So we have a lot of scalability capacity that has come online and much more coming nearly every day.

We are focusing on making operations more interoperable across the different networks and down to the Layer 1, even while we scale Layer 2s with enhanced BLOB, binary large object access and scaling Layer 1 as well. The Fusaka upgrade will do great things for both of those. And the Glamsterdam upgrade, hopefully, somewhere around 6 months later, will, in particular, concentrate on Layer 1 scalability. We've also decoupled the ability to upgrade BLOBs and gas limits from the traditional upgrade cycle. And so we're going to be able to accelerate both of those.

Linea is particularly exciting because it is the only Layer 2 technology, zkEVM technology that is 100% compatible with Ethereum Layer 1. Additionally, it's making use of ether for fees on that network and on subsequent implementations of the Linea technology and is burning both Ether and Linea as we speak, contributing to the financial health of the mothership Layer 1.

We -- I can't announce too much about what we're launching in the near term on Linea. And the Swift project itself is going well. We are on track to build the prototype that has been articulated. And other financial -- systemically important financial institutions are also building on Ethereum technology. We've seen actual launches from DTCC.

There are other ESDs around the world that are making use of Consensys' Ethereum technology. Major stock exchanges have announced that they are tokenizing stocks on the Ethereum technology and consensus Ethereum technology and major banks are also doing the same thing. I leave it there.

Yes. No, I appreciate all that detail. And then just one on SharpLink and kind of the broader strategy as we look into 2026, and I appreciate there's a number of variables that probably go into this. But how do you think about what percentage of ETH over kind of the intermediate term should be staked versus could be applied to enhance yield or operating earnings in other ways for the business? And so is there a percentage?

Or how are you thinking about that? And then as we think about kind of intermediate term, the incremental spread that you think your team can generate above and beyond what someone can get as kind of just a staking yield as they're an active owner of ETH?

So Devin, I'll take that. This is Joseph, and thanks for the question. I think there's 2 ways to answer it. Given ETH is a productive asset that you can stake, restake and gain yield, as a treasury, our first responsibility is to provide that yield. So I just want to say we have been staking nearly 100% of our ETH since the inception of our treasury strategy as a responsibility and as a steward of that.

Second is we don't provide guidance on the specific yield we expect to achieve from our staking and restaking opportunities. But what we will say is we are focused on a risk-adjusted yield. There may be people who swing for the fences and seek very high DeFi level yields. You would have seen our Linea and Consensys announcement just last month, where we're deploying about $200 million of our ETH -- from our ETH Treasury in a collaboration with ether.fi, Eigen, Linea and Consensys. And in that case, we're investing in a liquid restaking token, and we're getting enhanced yield without taking enhanced risk because of economic incentives from some of our collaborators and partners.

So I think what you'll hear from us is we're going to take an institutional approach to how we stake. We're going to stake nearly 100% of our ETH and seek the best risk-adjusted returns, which you can do given the scale of us being the second largest corporate holder of ETH. So we're going to participate in the ecosystem. We're going to get that yield.

The one thing we've highlighted is that this unique yield opportunity in this collaboration is still being risk managed and the liquid restaking token is sitting in Anchorage our qualified custodian. So you could think of us trying to get the best risk-adjusted yield, but we won't give a target on the spread. We will do the right thing and focus on risk management and get those best opportunities for our investors that the average retail investor cannot achieve and that an investor in an ETH ETF cannot achieve either.

And let me also emphasize that it is the relationship, the close relationship between SharpLink and Consensys that enabled us to configure a yield situation that was significantly above the staking -- the regular staking yield without increasing any risk above what one would normally do in the vanilla case. And that was directly due to the Linea relationship.

Brian Kinstlinger, Alliance Global Partners.

Great. As a follow-up to those questions, can you speak to the pipeline of other capital deployment opportunities? And will there be competition with some of the larger ETH holders as well? Or do you think some of these opportunities are exclusive to SharpLink?

I can take that one. Thanks, Brian. We are looking and surveying the entire ecosystem for opportunities, staking, restaking, liquid staking, potentially borrow and lend with our ETH in the DeFi ecosystem. That said, we've hired a really expert team with both crypto and institutional experience that is focused not only on those enhanced yield opportunities, but what are the inherent risks. And we are right now in the midst of doing a survey of the entire ecosystem for these yield opportunities.

The Consensys Linea announcement was the first in what I would expect would be more innovative announcements. And what's interesting being a large corporate holder of ETH is that we view our ETH as permanent capital. And what that means is as we approach the ecosystem, many of these ecosystem protocols are very, very interested in not only having us stake our ETH with them, but to commit to a multiyear staking relationship. And others have a very difficult time doing that, whether you're a retail investor, whether you're an ETF manager because of the daily liquidity that you may need.

So when we approach the ecosystem and are willing to provide multiyear commitments, we are seeing that they are very eager to provide enhanced incentives for that locked TVL or total value locked. So we're still surveying. You will see, I believe, additional announcements later this quarter and in quarter 2. But we're viewing it essentially as a portfolio of staking. And as an institutional investor and steward, we are looking at the efficient frontier of opportunities.

And that's how we're approaching it, like a great steward of institutional capital for our investors.

Great. And then maybe for Joe Lubin, we hear a lot about Agentic AI and autonomous digital commerce. How do you feel Ethereum is positioned for this trend compared to other chains? I know it sounded like the Osaka upgrade definitely improves the positioning, but maybe I'd love to hear your thoughts.

Yes. So we at Consensys and across the Ethereum ecosystem are very excited for our Agentic future, our hybrid human machine intelligence future. The Ethereum Foundation itself has been doing some outstanding work in figuring out the many ways that we in the ecosystem can support Agentic AI. Consensys itself has been doing some of the same. Marco De Rossi, Consensys has been working with the Ethereum Foundation and with Google to pioneer ERC-8004, which is essentially a registry for Agentic AIs to register their capabilities, be accessible by other agents or other software humans.

So it's useful for discovery, and it's useful for reputation as other agents or humans can provide feedback on the registry regarding their results with respect to certain characteristics that have been published in the registry.

Linea is going to be a very welcome home to agents. And another interesting element that I think has the potential to transform how we interact with the web quite significantly and how Agentic AI interacts with other Agentic AI is x402, the Internet and web was built without native money, native payments. and also native identity, that's a different topic. Essentially, x402 is going to enable first a holy grail, the holy grail of micro payments that makes sense to make use of because Ethereum is very inexpensive right now and getting more inexpensive to do transactions and the Layer 2s are very inexpensive.

And so it's starting to make sense to be able to pay subsecond fees for accessing data and other kinds of services on the Internet. So you can imagine as the web evolves, APIs can be wrapped in x402 and agents or people can ask for data, receive a price, pay that price and be able to access what they want from a website without having to sit through all the advertising that is currently saturating the worldwide web.

And Brian, I would just add what Joe was describing is a massive future opportunity and use case on the Ethereum network. And that will drive more usage of Ether as the native token securing it. And that's why we believe there's a long-term macro opportunity to own as much Ether as possible. And this Agentic AI use case is another tailwind for Ethereum, just like tokenized assets, stable coins and institutional adoption.

Fedor Shabalin, B. Riley Securities.

Good to see solid staking rewards contribution in 3Q revenues. And my question is about the current multiple to net asset value. The stock is trading at a discount right now. And could you provide any details on what initiatives you consider besides just share buybacks? Any color on your priorities here would be helpful.

Sure. I think we are going through a period, which we hope is temporary, where many treasury -- digital asset treasuries are seeing some compressed multiple to I do think it provides us with an opportunity to do 2 things, which are really, really important when you put shareholders first. We are set up to basically be able to deal not only with ETH price volatility, but even when our NAV is trading as a discount. Our goal continues to be ETH per share growth. And when our market multiple to NAV is above 1, we can issue equity to purchase more shares.

When it's below 1, we can buy back stock. And you would have seen that in August, our Board approved a stock buyback program. And both of these actions are accretive. So in this space, volatility can become an opportunity to capture value and not always a constraint.

I would also say that our decision framework, again, is rooted in ETH per share accretion and capital efficiency. We've built an incredible team of institutional experts who are constantly looking at opportunities both business development opportunities as well as capital market opportunities when we're in a period where our NAV is trading at a discount. We won't publicly disclose further details into our methodology for competitive purposes. But at the end of the day, we are focused on increasing ETH per share concentration, and we've disclosed that it's more than doubled from 2.0 to 4.0 through our disciplined capital management.

I appreciate the fact that we are in a position where we could raise capital in multiple ways. And when our multiple to NAV is below 1, we have to be careful in terms of how we can raise equity. But you would have seen the unique fundraising opportunity we took advantage of in October. And we are going to continue doing the right thing for investors, but with a focus on ETH concentration. Again, we are not providing guidance or detail on how we would execute on our capital market strategy or share buybacks at this time.

I appreciate this color. And my follow-up is -- has a macro nature, and this question is probably for Joe Lubin. Maybe many investors view of Solana as a competitor to ETH, citing its transaction speed and low cost as the key advantages. And how can Ethereum preserve its leading position in the face of this competition? And additionally, could you provide more details about ETH December upgrade and what the main updates will include just briefly, if you can frame it up.

Let me start with the second piece. Data availability sampling is one of the major upgrades, and that's going to enable nodes on the network to need to hold less data, but it will enable the amount of BLOBs or binary large objects to grow significantly. And there's also an upgrade that enables them to start to grow as a result of essentially something like monthly activity that called parameter-based upgrading. And so both BLOBs as well as gas limits will be upgradable on a very regular basis. So that's going to enable greater scalability at both Layer 1 and Layer 2.

Ethereum, the whole ecosystem is growing pretty dramatically in its scalability. And we already see networks on Ethereum that significantly rival or beat Solana's transaction throughput, a project that's coming online rapidly, Mega ETH operates at speeds that I believe are significantly in excess in terms of transaction per second throughput. The Solana numbers actually include in their transaction per second throughput, essentially their voting mechanism, which are not actual transactions initiated by users.

And so we'll see pretty soon the total transaction throughput of the Ethereum ecosystem eclipse what Solana is doing. And we have composability enhancements, which will enable transactions and operations across different Layer 2s and across Layer 1 to be very smooth and to have very low latency in between them. So we'll start to see applications being built that access multiple Layer 2 networks and Layer 1 in roughly the same operation.

And Fedor, it's worth noting that if you look at the most recent figures, stablecoins, which is probably the fastest-growing area of digital assets with over $300 billion, over 60% of all stablecoin activity is happening on Ethereum and its ecosystem. Ethereum has -- last time I looked, approximately 10x as much stablecoin activity as Solana. Over 80% of tokenized real-world assets, which we believe is going to be the next driver of growth is happening on Ethereum. And so we feel quite confident that institutional real activity is going to be dominated by the Ethereum ecosystem despite some of the marketing and prior hype around Solana.

Sorry, another important point to make is that many users don't need incremental transaction per second throughput. A lot of these networks are sufficiently capable of handling the volume. What a lot of the use cases do require is reliability and nothing comes close to the 10 years of uptime, noninterrupted uptime that Ethereum provides.

Kevin Dede, H.C. Wainwright.

Mr. Lubin, apologies for dragging you back over the upcoming upgrades. But I'm curious, given your insight, how you see them progressing? I know the merge pushed to the right on numerous occasions, and I'm wondering if in your negotiations with financial service institutions, whether or not that potentiality affects discussion of ETH versus Solana.

So in terms of being able to land upgrades on time, the Ethereum ecosystem has significantly matured on that front. The Ethereum Foundation is almost a brand-new foundation. It is firing on so many new cylinders and the level of breadth that it's addressing and excellence at which it's operating is incredibly exciting to all observers from deep inside the ecosystem and hopefully from outside of the ecosystem. So we're targeting more than one major upgrade to the Ethereum protocol per year, hopefully landing on an average of 2. And we're on track to accomplish that this year.

We're looking like we're on track to accomplish that next year. We do expect after Fusaka, the Glamsterdam upgrade will probably land somewhere around 6 to 8 months after Fusaka lands in December.

And as I indicated before, we've decoupled a bunch of the upgrade trajectories from the main of a mean schedule so that we'll be able to upgrade the number of logs or binary large objects on their own pace, and we're going to be able to upgrade the gas limits on its own pace. And so we look to do a number of those decouplings in parallel developments over time. As always, when we do the work, we're doing the work for the next few major upgrades. These things take time, and we've got many, many teams on a number of different clients that are always working in parallel. And an upgrade kicks from the priorities that need to be addressed and the level of maturity of that thread to determine what actually ends up in an upgrade.

Also, yes, in terms of how financial institutions impact the Ethereum upgrade cycle, I would argue that financial institutions are starting to be a forcing function in what the Ethereum ecosystem considers necessary to include in the protocol. Things like enhancements to reduce the delays on the staking queue are a very important one that is being addressed, and we've written specifications to handle that and essentially solve that problem. But other than that, because of the roll-up centric road map, much of the activity of financial institutions will be landing at Layer 2s. Layer 2s have their own upgrade schedule and often their own technologies.

And so that sort of modularity enables the Ethereum protocol proper to have an upgrade schedule and activities that are decoupled from the needs of different institutions that are making use of the technology of Layer 2. So no delays would be caused by us paying attention to the needs of financial institutions and just improvements would be driven by that.

When you look at the entire Ethereum ecosystem and some of the large treasury companies evolving, I mean, I know you know them all, BitMine, yourself, ETHzilla, The ETH Machine, all accumulating massive amounts of the token. How would you recommend we look at the inflation characteristics of token issuance?

So I can jump in there. Joseph, do you want to start?

Joe, why don't you go on token inflation, and I'll chat about competition or what I call co-opetition.

Yes. So the Ethereum issuance schedule has expected inflation below 1% annually. I think it's a little bit below Bitcoins and massively below Solanas, which I think is -- I forget what it is, but it's probably in the range of 6% to 8%. Ethereum as it gets busier, burns ether with every transaction. We do issue ether to incentivize validators to build blocks.

But you can expect that the max that could be issued in a year that if there's effectively no burning, I believe, is, I think, around 1.5%. And we're almost certainly going to be below 1%. I haven't looked recently, but my guess is it's probably around 0.7% or 0.8%. Please don't hold me to that.

And again, as the network gets busier and busier, we'll be burning more ether. We will move to net zero issuance when the network is really busy, and we'll move to being deflationary when the network gets very busy. And it's not just the Ethereum network Layer 1 that burn ether. Layer 2 Linea network is burning ether, and we look to see other projects taking up that mechanic and start burning ether as well on different networks. And so my colleague informs me that I was pretty close that median annual inflation rate is around 0.8%.

Remember.. Yes, it was deflationary after the merge for, jeez, I want to say almost a year.

For a while. Yes, exactly.

And Kevin, I just want to add from a SharpLink perspective, you spoke about some of our competitor or peer digital asset treasuries in the Ethereum ecosystem. We view that as actually very positive and a validation of the macro investment thesis that Joe and I have been speaking about. Co-opetition is actually very good. One of the most important things you've seen since the launch of this wave of digital asset treasuries in the Ethereum ecosystem since May and June is a complete change in the level of mind share and conversation, not only about Ethereum, but institutional adoption that's happening on Ethereum. And that mind share, I think, had been lost for a period of time to Bitcoin and Solana.

And I think we've regained that whole position.

I would say we're trying to differentiate ourselves from our peers who we respect in a few ways. One is we are building, as I shared, the strongest in-house team with expertise to manage the vast majority of our ETH and ETH staking. And when you can do it on team, more of the yield inures to the benefit of our shareholders. So you're not paying out 1, 2 or even a higher percent of your NAV every year to third-party asset managers. We use them selectively.

And second is our team in conjunction with our advisers at Consensys we are going to be differentiating ourselves on yield generation and finding the best opportunities and to do it in a really risk-managed way because we have a team of experts along with Consensys who know how to do that. And we are going to be committed to the North Star, which is increasing ETH concentration and making sure throughout this process, even through volatility of the price of Ether that we're transparent, and we're always going to do the right thing for investors.

So we welcome the competition. It's a validation of the thesis. And I hope the entire industry does well because that will be really, really good for not only the Ethereum ecosystem, but hopefully for the long-term price of Ether, which secures the transactions on Ethereum.

Joseph. I appreciate the color. I was curious about the collective impact on token issuance and burn because, I mean, this is unprecedented in Ether's history to have such huge accumulation held in treasury versus necessarily working on the transaction side. But I appreciate the color. Thank you for that.

On that note of working in-house, would that include at some point that SharpLink starts running its own validator nodes?

I think we started our ETH treasury strategy in late May, early June. You would have seen tremendous progress. staking nearly 100% of our ETH, accumulating over $3 billion of ETH, doing unique things in the ecosystem like our partnership and announcement with Consensys and Linea, the intent to tokenize our public equity with our collaboration with Superstate. We shared on previous calls that we are looking at what the future operating model can be and whether we will be doing things to operate companies.

I think watch for the future, but we don't have a comment on whether we're going to validate ourselves or leverage third parties like we've been doing to date through our qualified custodians and through liquid staking. Over time, we will evolve our operating business, but we have nothing to share on today's call, Kevin, but great question.

Okay. Well, I think I did ask you after the June quarter call. So I appreciate that. In light of sort of compressing premiums to NAV, I'm wondering, Mr. Chalom, how you're viewing issuing preferreds versus converts.

And I understand your financial service prowess and experience, and I value your opinion.

Sure. Kevin, I think the beautiful thing about doing this through a structure, a public company structure and a digital asset treasury structure is we have many tools available to us to raise capital. And to date, it's primarily been through issuance of common equities. You mentioned 2 others, convertibles and other equity-linked securities or prefs. There are certainly tools in the toolbox that can enable us to capture value from both ETH volatility as well as investors who may be seeking exposure to that volatility.

And in both those instances, we would be able to issue those capital structures without diluting shareholders even when we're trading below NAV.

We do view those, Kevin, as complementary tools to our at-the-market and stock buyback strategies. And as I said before, the fact that our reserve asset Ether is volatile is actually a plus. And there are many ways, as you've described, to monetize that volatility while enhancing liquidity and ETH exposure. We're not going to comment on today's call about share buybacks or our future capital raise, but there are -- those are 2 very good tools in our toolbox, and we're constantly looking at these opportunities to see how we can both raise capital and allow ourselves to capitalize on the volatility of our asset. And both converts and prefs are tools we're considering.

Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Chalom for any final comments.

Thank you all. In conclusion, I really want to thank everyone for joining us today and for your continued support and confidence in SharpLink's long-term vision. We are really proud of the progress we've made in this third quarter, our first full quarter of being an Ethereum treasury strategy, and we're very excited about what's ahead.

I need to thank our team who's worked relentlessly over this period in building and accumulating and staking our ETH and doing it, as you would expect in a risk-managed way from an institutional steward of billions of dollars of ETH on our balance sheet, and we look forward to speaking with you again on our next earnings call.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.