7Block Labs
Blockchain

ByAUJay

7Block Labs’ Take on Liquid Staking and Enterprise Use Cases

Your team wants the APR, not a governance war

Hey team! So, here’s the deal: we’ve got the job of figuring out how to put those idle ETH to good use. We’re going to be looking into liquid staking tokens (LSTs) like wstETH, rETH, and cbETH to make that happen. Let’s dive in and see what we can come up with! There’s a little hiccup, though: the custody and audit teams are kind of at a standstill, trying to figure out who can leave, when they can do it, and the whole process of how it's going to happen. “On top of that, procurement is really pushing for SOC2 and SLAs before we even consider getting our hands on the treasury keys.”

  • Your CFO is really looking for some reliable returns, but it's not as straightforward as it sounds. You know, the rewards for staking ETH can really vary. It all depends on how many validators are out there and the fees being charged on the execution layer. At the moment, the net ETH staking APR is sitting at about 3%. However, those MEV and priority fees can throw a bit of a curveball into things, making it a little less predictable. Feel free to take a look at it here!
  • And then we’ve got to talk about architecture drift. So, Dencun is just around the corner, launching on March 13, 2024, and it’s already making waves in the L2 cost models thanks to those new EIP-4844 blobs. Plus, with EIP-4788 on the scene, we’re now seeing the beacon root included in every execution block. Exciting times ahead! These really shake things up for verification and L2 economics, but honestly, our internal code just isn’t syncing up with that vibe yet. If you want to explore this topic in depth, check it out here. There’s a lot of great info waiting for you!

Hey, we shouldn't overlook the genuine risks that come with centralization and censorship. In the past couple of years, the share of OFAC-filtering MEV-Boost relays has really fluctuated. These days, non-censoring relays are pumping out most of the blocks, but the landscape is always shifting. It’s really important for us to have a solid relay policy in place to keep up with it all. If you want to dive deeper, check out mevwatch.info. It's a great resource!

  • The world of LST liquidity and validator concentration is constantly changing. It's pretty dynamic! Since 2023, we’ve noticed some big shifts in Lido’s stake in ETH staking and the total value locked (TVL) in liquid staking tokens. It's become pretty clear that depending too much on just one provider could pose some risks. I think we should definitely discuss this at the board level. If you want to dive deeper into the details, just click here. You'll find some pretty interesting stuff!

So, it turns out that the economics of restaking and the rules around slashing are still a work in progress. EigenLayer's slashing feature didn't kick in until 2025, and it's set up as something you can choose to participate in at the AVS level. This definitely changes the game when it comes to how we think about risk models! More on that here.

The real costs: audit exceptions, missed quarterly closes, and irreversible losses

Hey, do you remember the whole depeg situation and that quick Curve exit back in June 2022? It was a real eye-opener. Because of that, we saw OTC redemptions happening at a discount, which was a harsh lesson for businesses. It really drove home how crucial it is to have caps, circuit-breakers, and those dual liquidity routes in place.
If you skip these steps, you might end up facing impairment charges, especially when the market takes a sudden turn. (coindesk.com).

Hey there! Just a heads up--if you haven't set up EIP-7002 yet, your withdrawal credential won't be able to trigger those exits by itself. So, make sure to get that sorted out! If your main validator operator goes down or gets compromised, you might find your funds stuck. Once boards start realizing this risk, you can bet it’s going to raise a few eyebrows. (eips.ethereum.org).

Hey, just a heads up about restaking--be cautious if you're considering doing it without any slash-attribution limits! If you're not careful, you could end up with a single AVS error affecting your whole stake, and that’s definitely something you want to avoid.
A slashing incident isn’t just about "basis points lost"--it's serious business! It catches attention, makes the headlines, and could even lead to an audit finding. (coindesk.com).

  • If you keep the MEV policy on default settings, you might run into trouble with regulators, especially if there's a sudden increase in relay censorship. Just a heads up, Procurement won't be able to proceed with the vendor file unless you can demonstrate that you’ve got some solid diversity in your relay and a good reason for your allowlist. (mevwatch.info).

Hey there! Just a quick heads-up: if you’re doing business in the EU, don’t forget that MiCA is already in play for crypto-asset service providers and e-money or asset-backed tokens. Stay in the loop! ESAs are sounding the alarm about some providers who aren't playing by the rules, and just a heads up, the transitional arrangements will come to an end on July 1, 2026. Your program really needs to take a stance on MiCA--either dive in and embrace it or just stay away from it altogether. It’s important to be clear on which path you’re taking! (eiopa.europa.eu).

Hey, just a quick reminder about the GTM timing risk! Every extra approval or permit you have to get can really stretch out your timeline by weeks. So, keep that in mind as you plan! If you try to kick off a “DeFi-only” project without having SOC2-aligned processes in place, you can bet that the legal team will put the brakes on your launch until next quarter.

7Block Labs’ Enterprise-Grade Approach to Liquid Staking

At 7Block Labs, we like to start things off by zeroing in on yield capture and making sure everything's super clear and auditable. After we get that sorted, we focus on making things more gas-efficient and easier to move around. Our reference architecture is designed to fit right into your procurement, IAM, and risk frameworks, making it super easy to blend with what you already have going on. It’s all about streamlining your existing operations!

1) Governance, Custody, and Exits Built Right from the Start

  • Withdrawal-First Design: We’ve designed it so that you always have control over your execution layer 0x01 withdrawal credential. Whether you prefer using MPC or a multisig setup, it’s always in your hands. On top of that, we’ve got this awesome on-chain exit controller all set to roll out exits with EIP-7002 as soon as it drops. It comes packed with policy constraints and audit logs, so you can chill knowing everything’s covered. Take a look at this link: eips.ethereum.org. You'll find some cool stuff there!
  • “No Hostage” Validator Policy: We’ve designed our contracts so that operator keys won’t prevent us from making exits. This way, you can have peace of mind knowing that everything runs smoothly! If a provider can't handle this, we’ll make sure your exposure stays limited. We'll also ask for some contractual service level agreements (SLAs) to ensure they meet the exit service level objectives (SLOs).
  • Mix of Distributed Validator Technology (DVT) Operators: We really prefer to stick with LST options that support DVT (like Obol or SSV). Plus, we're all about mixing in different clients to keep the risk of correlated failures on the low side. We're also keeping tabs on Lido’s SDVT/CSM and the curated module DVT expansions. We’re checking these out as part of our risk assessment package. If you’re interested, you can check it out here: Lido Blog.

2) Treasury Vault Primitive (Solidity) You Can Actually Audit

Alright, let’s dive into the Treasury Vault that’s built on the ERC‑4626 standard. This vault is designed to wrap around some cool target LSTs, like wstETH and rETH. So, here’s what you can look forward to:

We've set some strict deposit limits for every asset and each counterparty to keep everything nice and organized. Hey there! Just wanted to let you know that we've set up programmatic circuit breakers to keep things safe. If the price oracle strays more than X% from where it should be or if the Curve/DEX depth drops below Y, we'll automatically halt deposits. It's all about protecting your investments! When it comes to exits, you've got two solid options: you can either go for protocol redemption or take the DEX OTC route with some price bands. This way, you get a bit of flexibility to choose what suits you best. So, when we talk about permit flows, we’re actually using ERC-2612 for externally owned accounts (EOAs) and ERC-1271 for smart accounts. This makes it easier to get approvals and lowers those pesky gas fees, all while ensuring that everyone's responsibilities stay clearly defined. If you want to dive deeper into the specifics, you can find all the details right here. Oh, and guess what? We’ve also rolled out some inflation-attack-safe share math using OpenZeppelin 4626 virtual offsets, and we’ve got some solid invariant tests to back it up! If you're looking for more details, check it out here. It’s got some great info!

Gas and Bytecode Discipline:

We're running a via-IR pipeline with some tweaks to make sure everything keeps flowing smoothly. We're making use of immutable parameters for those constructor-heavy configurations, and we’re also leveraging SSTORE2 for things like big static tables--think fee tiers and allowlists. This combo really helps us cut down on both deployment costs and runtime gas fees. If you're looking to explore more, you can find all the details here. Happy digging!

3) Verifiable State and Monitoring with the Beacon Root (EIP-4788)

We’re always keeping an eye on validator states and exit events in a really secure manner on Layer 1, thanks to the beacon roots contract (0x000F…Beac02). So, we don't have to depend on custom oracles for the core consensus data anymore. Plus, it’s super handy for backing up those SLAs, you know? Like when you can say, “Hey, we saw the exit signal at time T, and it got processed in epoch E.” That really helps keep everything transparent! Take a look at this: (eips.ethereum.org). So, when it comes to making sure we follow our relay policies, we've got a solid team in place. We use contracts along with some off-chain agents to keep everything on track and ensure we maintain a mix that doesn’t censor anything. Thanks to MEV Watch telemetry, we also get alerts about any changes in OFAC-relay shares. It's super handy! Learn more at (mevwatch.info).

4) Cross-chain Liquidity Without “Bespoke Bridge” Risk

We're all about making cross-chain liquid staked tokens (LSTs) easy to use, and for that, we really dig the CCIP CCT-standard setups, especially for wstETH and other major assets. This way, we can avoid those dodgy, makeshift risks and put in place a solid layer of standardized controls. We've also implemented allowlists and rate-limit guards for CCIP senders to ensure everything stays secure. If you want to dive deeper into this, be sure to head over to our blog post. It’s got all the details you need!

If you're looking to navigate multiple venues, we’ve got you covered! Our smart-account signing using ERC-1271 makes it super easy for RFQ and auction protocols. This cool feature lets treasury operations pre-sign orders while keeping the raw keys safe and sound. Curious to learn more? Check out all the juicy details in our documentation. It's a great place to get the full scoop!

  1. Zero-knowledge compliance patterns that sail through privacy reviews with ease.

So, zk-membership proofs, like Semaphore, are pretty cool because they let you manage special actions--think things like over-the-counter exit desks or large redemptions--without having to share your personal info all over the blockchain. It’s a neat way to keep things private while still getting stuff done! We take care of all the proof verification right on the blockchain, but don’t worry--your personal info stays safe and sound off-chain with your KYC provider. Take a look at this: (docs.semaphore.pse.dev). I think you’ll find it super helpful!

6) Testing, Audit, and Runtime Controls for a Smooth Procurement Experience

  • Toolchain: We’ve got Foundry fuzz in the mix, plus we’re utilizing invariant suites, Slither, and Echidna for our vault and exit controllers. It's a solid setup!
    Oh, and we’ve also laid out some official guidelines for withdrawal rights and cap invariants.
  • Runtime: We’ve set up some cool features like timelocked upgrades, an emergency pause option, and a two-person approval process on-chain. Plus, we’re keeping track of operator actions to support our SOC2 evidence.
  • Independent Audit: To ensure everything's in order, we start with a pre-audit hardening sprint. After that, we bring in a third-party auditor to take a closer look. Take a look at our security audit services to get the full scoop on what we offer and the tools we use. You might find exactly what you need!

US Fintech Treasury Program: Audited and Reversible

  • Scope: We’ve got a nice chunk of $50M in ETH sitting on our balance sheet, and we're looking to invest about 20-30% of that into LST. We've put a 7-day Value at Risk (VaR) limit in place, and we're keeping our exposure to any single operator down to a maximum of 25%.
  • Build: I set up a Treasury Vault using the ERC-4626 standard, and I made sure to include three important controls: there's a cap on deposits, a dynamic fee band for over-the-counter sales, and I've also put in place some limits on exits to keep things in check.
  • Set up a withdrawal-first validator policy based on EIP-7002. So, what this really means is that it's the withdrawal credentials that have the power to exit, not the operator. Check it out here.
  • You should create a relay policy that generally avoids censoring content. We're keeping tabs on MEV Watch and putting together an evidence pack to help with our audits.
    If you’re looking for more details, you can check it out here.
  • Result: Lately, we've been getting a net yield of about 2. 8-3. We’re keeping an eye on 2% of things every month. Good news from our audit--there are no “key person” risks flagged! Plus, we managed to wrap up procurement in only 6 weeks. That’s all thanks to our SOC2/ISO-aligned runbooks and the clear RTO and RPO declarations we had in place. Pretty efficient, right? We've lined up our APR banding with the ranges we've seen on beaconcha.in. Feel free to take a look at it here!
  • Services we’re using: We’ve got some awesome services on board: Check out our Custom Blockchain Development Services! We’re here to help you create the perfect blockchain solution tailored just for you.

EU Bank Pilot Under MiCA: Cross-Chain Liquidity within Guardrails

  • Scope: So, we’re looking at a 90-day trial run for a CASP affiliate that’s hosted in the EU. We're diving into how wstETH moves across different venues on EVM Layer 2s, while making sure we stick to MiCA's rules for custody and audits.
  • Build: So, we’ve put together a CCIP CCT-standard for connecting wstETH. This was done using an approved router, which comes with some handy features like rate limits and the ability to pause when needed. On top of that, we made sure our custody model fits right in with the MiCA regulations. Want to dive deeper? You can find more info about it here. Enjoy exploring! For our internal audits, we're relying on beacon-root verification to keep an eye on the validator state and to manage those exit proofs. If you want to dive deeper into the details, you can check it out here. We've added ESA guidance directly into our compliance memo, and we've also laid out the transitional regime timelines in our rollout plan. If you're curious to learn more about that, you can check it out here.
  • Result: The pilot has cleared legal checks and is good to go with a limited-risk setup. We're sticking to the standard monitoring protocols, so we're not using any custom bridges. This makes things a lot easier for us!
  • Services Used:

  • Check out our work on asset tokenization, especially when it comes to our accounting test dataset. It’s pretty cool stuff!

Restaking with Explicit Slashing Budgets (Pilot Only)

  • Scope: We're planning to restake 10% of the LST position, but we’re being pretty selective with the AVS choices. We're only going with those that have real-time slashing and clear slashing attribution. Gotta keep it tight, you know?
  • Build: We’re rolling out an AVS allowlist, and we’ve got some operator caps in place too. Plus, we’re keeping things in check with a “slash budget” measured in basis points directly on the chain. Also, we've got automated roll-backs in place just in case slashing doesn't go through or if the attribution reports don't turn out the way we hoped. (coindesk.com).
  • Result: By using this method, we’re able to bring in extra revenue while keeping an eye on the risks. Plus, it totally wipes out any hidden slashing risks that might pop up.

Emerging practices we recommend (and implement)

Instead of just counting on operator trust, aim for "withdrawal-credential control + EIP-7002-ready." It’s a smarter move! Seriously, this is by far the best way to amp up your exit safety! (eips.ethereum.org).

When you're choosing LST routes, make sure to focus on those that use DVT and have a mix of different clients. It really makes a big difference! Think of those validator diversity stats as crucial, not just an extra feature. (blog.lido.fi).

Hey there! Just a quick heads-up: be sure to use beacon-root proofs (EIP-4788) in your project. It’s way better than relying on any custom consensus oracles. Trust me, it’ll make things smoother! This makes it easier to manage supply-chain risks and keeps your monitoring tasks a bit simpler. (eips.ethereum.org).

Make sure to watch out for a non-censoring relay mix, and try not to just go with the usual MEV-Boost relay setup. Monitoring it is key. (mevwatch.info).

Make sure to use ERC-4626 along with some virtual offset defenses. Also, don’t forget to run invariant tests to spot any inflation attacks or rounding problems. It's all about keeping things secure and reliable! And hey, if you could, try not to whip up your own vault math from scratch. Thanks! (openzeppelin.com).

When it comes to cross-chain solutions, it's better to opt for CCIP or CCT instead of trying to build your own custom bridges. Trust me, sticking with these options will save you a lot of hassle! To tie everything together, set up your spending limits and allowlists. Don't forget to ensure that it all works seamlessly with your SIEM. (blog.chain.link).

Just a quick reminder: gas discipline is a big deal when it comes to governance! Make sure you’re using via-IR, immutable, custom errors, and those SSTORE2/CREATE2 patterns. They’ll really help you manage things effectively! Think of these as key pieces of your unit economics, not just some “cool tech” gimmicks. ” (alchemy.com).

What This Delivers in Business Terms (GTM Metrics We Commit To)

  • Time-to-Pilot: So, once we get the SOW signed, you can expect it to take about 8 to 10 weeks before you’re ready to launch the gated mainnet pilot. It’s going to come fully loaded with treasury caps and SOC2-aligned runbooks!
  • Due Diligence Made Easy: Get ready for vendor security reviews to speed up by a whopping 30 to 40%! We've prepped everything you need--think ready-to-go policies, IAM models, and logging hooks that all line up with SOC2/ISO controls. It's all set for you to dive right in!
  • Gas Savings: You can expect to see your deployment and runtime gas costs go down by about 18 to 30% when you compare it to the usual setups. We pull this off using via-IR, immutable, packed storage, and SSTORE2. And hey, if you're curious about how much you're saving, you can always take a look at your gas reports to see the numbers for yourself! (alchemy.com).
  • Liquidity Resiliency: With our dual-route exits, you can reduce slippage by more than 50 basis points in tough situations, especially when you compare it to sticking with just a single-route redemption. The historical depeg conditions really highlight why this is so crucial! Check out this article from CoinDesk for more details: coindesk.com.
  • Compliance Confidence: We offer reporting on relay and validator diversity that fits right in with what you need for internal audits, especially when it comes to conversations around MiCA and SEC custody. (eiopa.europa.eu).

Implementation plan (90 days)

Weeks 1-2 -- Stakeholder and control mapping

Start by organizing a risk workshop that brings together the Treasury, Legal, and Security teams. It’s a great way to get everyone on the same page! Alright, so here's the plan: First, pick out the LST/L2 venues that we want to focus on. Next, let's put some limits on our exposure to ensure we're not going overboard. Lastly, we need to figure out our relay and AVS policies. Sound good?

Weeks 3-6 -- Build and test

Let’s get the ERC-4626 Treasury Vault up and running, and don’t forget to roll out the exit controller too! Oh, and while we're at it, let’s make sure we integrate the beacon-root verification with EIP-4788. Sounds like a solid plan! Hey! So, let’s dive into the Foundry fuzz and invariant suites first. After that, we can run a Slither static analysis to check for any issues. Once we've got that sorted, we can knock out any pre-audit fixes that come up. Sound good?

Weeks 7-9 -- Integrations and operations

  • Begin pulling in on-chain events into the ERP and BI systems, set up some SIEM hooks, and kick off the relay and DVT telemetry. If you're planning to go multi-chain, make sure to set up CCIP/CCT. Also, don't forget to get the ERC-1271 order flow prepped for those OTC/RFQ venues. It’s a good way to stay ahead! (blog.chain.link).

Weeks 10-12 -- Audit and go-live

Alright, here’s the game plan: First, let's bring in an independent auditor to take a good look at everything. Next up, we need to whip up some runbooks that outline our Recovery Time Objectives (RTO) and Recovery Point Objectives (RPO). After that, it’s time to roll up our sleeves and run some disaster recovery drills. And finally, we want to get the green light from the red team to make sure we’re all set. Sounds good? Make sure to manage the mainnet resources wisely within those deposit limits, and don’t forget to establish on-call rotations for the SRE team.

Weeks 13+ -- Optimize

Alright, it's time to tackle some gas optimization! If you signed up for it, take a moment to check out the AVS yield. And hey, remember to send those monthly stewardship reports over to the CFO and Audit team. They’ll appreciate it!

Where 7Block Fits

  • Strategy and Design: We put together treasury program designs that your audit committee will actually be impressed by. Check this out: web3 development services and also take a peek at our blockchain development services. You might find just what you’re looking for!
  • Build and integrate: We whip up top-notch vaults, set up exit controllers, and get CCIP routers running smoothly. Plus, we handle relay/DVT telemetry and even throw in some handy hooks for ERP/BI.
  • Take a look at this: blockchain integration. You'll find some interesting info there!
  • Harden and operate: We kick things off with pre-audit sprints, create detailed incident playbooks, set up monitors that stay consistent, and manage external audits. Want to kick things off? Check out our security audit services to get started!
  • Expand (optional): Want to take your game to the next level? We’ve got your back! Whether you’re interested in DeFi integrations like AMMs and RFQs, exploring cross-chain liquidity, or diving into restaking, we’re here to help. Plus, we’ll make sure to keep a close watch on those slash budgets for you. Let’s make it happen!
  • Dive right in! Check out our DeFi development services, explore some cool cross-chain solutions development, and don’t miss our take on blockchain bridge development. Happy exploring!

Brief, In-Depth Technical Notes

  • APR Modeling: We're exploring how the rewards from consensus, which depend on the validator set, interact with the crazy world of execution-layer fees--think priority fees and MEV. It's a bit unpredictable, but that's what makes it interesting! As of now, the 31-day APR for major pools is hovering around 2%. 9-3. 1%. We've gathered some interesting insights on how your CFO could react to shifts in validator percentages and fee structures. Check it out here.
  • Key Details About EIP-4788: You can check out the beacon roots contract at 0x000F3d…Beac02. It has a history buffer length of 8191, which is roughly a day’s worth of data. No need to stress about system call semantics munching on your block gas--they're totally free! This gives you the freedom to design proofs against the latest consensus states on Layer 1 without having to rely on any complicated setups. How cool is that? Get more info here.
  • Dencun/EIP-4844: Make sure to watch the L2 fees tied to blob markets. You might notice some fluctuations in fees--think of those spikes you see with Base or Zora blobs. It's a good idea to give users a bit of a buffer to help them manage those fees. Our SDK is set up to manage fee limits and has built-in retry logic to ensure everything runs smoothly. Learn more here.
  • Restaking Guardrails: Hey, just a quick note--opt-in slashing isn’t a blanket solution for everyone. It’s really important to tie in AVS inclusion with those “slash-attribution proofs.” Also, think about setting specific caps for each AVS and don’t forget to implement automatic deallocation if there’s any shift in policy. It's all about keeping things in check! If you want to dive deeper, you can check out all the details here.
  • ERC-4626 Safety: If you want to protect against inflation attacks, it’s a good idea to use virtual assets or shares as offsets. This is actually something that OpenZeppelin is recommending now. We’ve also added some invariant tests to make sure that share conversion stays on point and consistent. Check it out here.
  • Cross-Chain Standardization: Honestly, CCIP CCT is the way to go. It’s great to see major assets getting on board, and with the news about wstETH migrating, it just makes even more sense to hop on this train! This method will help you avoid making those one-off bridges, which means you'll end up with fewer custom runbooks to juggle. Plus, it sets up standardized rate limits and allowlists, making everything a lot smoother. Discover more here.

If you’re running a business, I bet you’re not exactly thrilled about sitting through yet another presentation on liquid staking.
What you really want is a secure vault, a solid plan for getting out when you need to, and a production path that your CFO and CISO have given the thumbs up.

Book a 90-Day Pilot Strategy Call

Are you ready to launch your project or business? Let’s chat! How about a 90-day pilot strategy call? It’s a great chance for us to really dig into your goals and map out a plan to help you reach them.

What to Expect

During our call, we’re going to cover a few key points:

  • Goal Setting: Alright, let’s take some time to figure out what you really want to accomplish in the next 90 days.
  • Strategy Development: Let’s team up to come up with some practical steps that will help us hit those goals.
  • Resource Allocation: We’ll take some time to figure out what tools and resources you’re going to need as we go.
  • Keeping Tabs on Your Progress: I'll walk you through some simple ways to track how far you've come, so you can make sure you're moving in the right direction.

Why a Pilot Strategy Call?

Diving into something new can feel really daunting at times. Jumping on a call with someone really helps you nail down your vision and create a clear plan moving forward. Plus, it's a fantastic opportunity to get personalized advice from the experts!

Ready to Get Started?

Don’t wait around! Go ahead and click the link below to schedule your 90-day pilot strategy call today. Let’s get things rolling!

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Citations

Check out these awesome links to dive into our services!

Book a 90-Day Pilot Strategy Call

Are you all set to jump into your business goals? Let's get started with a 90-Day Pilot Strategy Call! In this chat, we'll team up to create a plan that really fits your needs. Hey there! If you're looking to give your growth a little nudge, face some challenges head-on, or just want to chat and get a new perspective, I'm here for you. Let’s tackle it together!

Why Book a Call?

  • Expert Insight: Reach out and let me share my expertise to provide you with personalized advice that fits your needs perfectly!
  • Clear Roadmap: We'll put together a detailed plan for the next 90 days, breaking it down into easy-to-follow steps.
  • Accountability: I’m here to support you every step of the way, making sure you stay on track and hit those important milestones.

What to Expect

1. Pre-Call Prep: Before we hop on a call, I’ll shoot you a quick questionnaire. It'll help me understand your business and what you're aiming for. 2. Let's Chat: In our call, we'll dive into what's going on with you right now, any hurdles you’re facing, and what you’re hoping to achieve. 3. Strategic Planning: Let’s work together to create a clear plan with some practical steps you can tackle in the next three months. 4. Follow-Up: After our chat, I’ll shoot you a quick summary of what we talked about, along with your tailored strategy!

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