October 30, 2024

Exploring the tech behind crypto

one block at a time

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Hi, Bradley Keoun here,

In an industry where the whole point is to revolutionize the business of money, the hunt for actual money is quite real. Sometimes it comes in tokens, sometimes in cash; when teams run out of money, jobs are lost. When projects hit a stride, developers reap windfalls – though not always. We've got all sorts of money stories this week – from a report on funding for Bitcoin Core developers, to the Optimism Foundation's $42.5 million grant to crypto exchange Kraken (a scoop!), to the Stratos report on crypto venture capital firms. I almost decided to call this, "The Money issue," or something like that. But it all just sort of happened organically, so here you go.

OTHER HIGHLIGHTS:

Polymarket is a huge success for Polygon – just not the fees. (Spoiler alert: That's the whole point.)
Kraken's decision to build its new layer-2 network on the OP Stack came with a juicy grant from the Optimism Foundation.
Layoffs hit Consensys and dYdX.
Profile of Sovryn founder Edan Yago.
Top picks from the past week's Protocol Village column: Nil, Stacks, Space and Time, BOB, Optimism, Theta.
Nearly $60M of blockchain project fundraisings.
CoinDesk's Sam Reynolds reports from Hong Kong – on Chainlink's new big thing, and Animoca's new big office.

Network News

Cumulative gas fees Polymarket on Polygon PoS in 2024 have totaled just over $27,000 this year, through Oct. 23. (Token Terminal)

POLYCONOMY: Polymarket – the decentralized predictions market – has been a massive success for the Polygon blockchain team. The betting app has been organically breaking out, getting mainstream usage and attention – speculation on presidential elections! And the Satoshi HBO documentary! But according to data, Polymarket has only brought in a meager $27,000 in fees on Polygon's PoS blockchain in 2024, CoinDesk's Margaux Nijkerk reported in her incredibly smart and surprising dive into the topic. How is this possible? Polygon Labs CEO Marc Boiron agreed that $27,000 is a low figure, but he told Nijkerk that the dynamic illustrates just how cheap it is to use the blockchain – a selling point. The fee for a transaction on Polygon PoS is about $0.007, easily below the sub-cent threshold that several teams have targeted. Boiron arguest that apps like Polymarket aren't expected to bring in large revenues in transaction fees, as one might expect from more transaction-intensive applications like decentralized crypto exchanges. "The question is, like, Why is Polymarket so interesting if they are only bringing $20K?" Boiron told CoinDesk. "The obvious reason is just, let's call it attention." The success shows that "you can have an amazingly successful app on Polygon PoS that, like you can, you hardly even know that you're using a blockchain," Boiron said.

BOUGHT DEAL? It was big enough news last week when the U.S. crypto exchange Kraken announced that it is launching its own layer-2 network atop the Ethereum blockchain, based on technology borrowed from Optimism – the same provider that powers rival Coinbase's layer-2 network, Base. Ink, as Kraken's new network is known, is being built on the OP stack, a customizable toolkit that lets developers create their own blockchains using Optimism's technology. The network is expected to go live in early 2025. (CoinDesk broke the news about a year ago that Kraken was considering following Coinbase into the layer-2 space.) The immediate takeaway was that Optimism and its "Superchain" appear to be winning the layer-2 race versus competitors like Arbitrum and Polygon. But as these things go, sometimes it takes a little extra time for the full story to dribble out. CoinDesk's Margaux Nijkerk, after some hard-nosed reporting, extracted the crucial detail that the Optimism Foundation paid Kraken a grant of some 25 million OP tokens (worth $42.5 million at the current price) to build on OP Stack. Lest this lead to head-scratching — don't customers usually pay suppliers? — what is actually happening here is that the foundation is using its considerable warchest of spare tokens to encourage new networks to join the Superchain, and subsidize their development – with the ultimate goal of reaching critical mass (and potentially an insurmountable lead). The foundation's chief growth officer, Ryan Wyatt, posted on X (after the story ran) that the "Collective is not going to stop investing in developers."

LAYOFFS! Consensys, one of the main supporters of the Ethereum network, announced plans on Tuesday to lay off 20% of its workforce, blaming broader macroeconomic conditions and ongoing regulatory uncertainty, including the Securities and Exchange Commission's (SEC) "abuse of power" in the space. Later in the day, the news emerged that, dYdx, the company building an on-chain crypto derivatives exchange, had fired 35% of its core team. The shake up adds more turbulence to dYdx's 2024 staffing woes, which had already seen CEO Antonio Juliano step down from the leadership post, only to return in early October.

ELSEWHERE:

DWF Labs, a crypto trading firm, said it fired one of its partners following social media allegations that one of its employees had spiked a woman's drink at a Hong Kong bar. In a press release, the company said it dismissed a partner from "management and operational roles effective immediately" and called the allegations "deeply concerning." The company, which said it's investigating the matter, did not name the partner.
U.S. President Joe Biden called Bola Tinubu, the president of Nigeria, on Tuesday to personally thank him for the recent release of detained American Binance executive Tigran Gambaryan. Gambaryan, head of financial crime compliance at Binance, was released on humanitarian grounds last week, eight months after he was first taken into Nigerian custody and subsequently charged with money laundering and tax evasion as a proxy for his employer. The charges were later dropped.
U.S. President Joe Biden called Bola Tinubu, the president of Nigeria, on Tuesday to personally thank him for the recent release of detained American Binance executive Tigran Gambaryan. Gambaryan, head of financial crime compliance at Binance, was released on humanitarian grounds last week, eight months after he was first taken into Nigerian custody and subsequently charged with money laundering and tax evasion as a proxy for his employer. The charges were later dropped.
JUST IN: Inspired by Trump, Florida Official Eyes State Bitcoin Stockpile for Retirees
ICYMI: From Smuggling Gold Out of Africa to Bridging Bitcoin and Cardano — the story of Sovryn and BitcoinOS founder Edan Yago, a self-described "bitcoin accelerationist."
HYPERSPEED: Starknet Claims to Shatter Transaction Speed Record Among Ethereum Layer-2 Networks

From Smuggling Gold Out of Africa to Bridging Bitcoin and Cardano

Edan Yago (Courtesy: BitcoinOS)

From ages 9 to 11, Edan Yago smuggled gold, hidden in his clothes by his mother, out of South Africa.

The apartheid government had instituted capital controls to stabilize the rand amid international sanctions. The authorities were hunting some of his family members whom it had designated as "terrorists."

"Eventually, we were forced out of South Africa," Yago told CoinDesk in an interview.

His family were no strangers to tyranny. Some relatives had survived the Holocaust; others weren't so lucky.

That background, combined with his education in neuroscience and data science, led him to a career working in Bitcoin, with its value proposition of wealth that governments can't easily confiscate and transactions that central authorities can't veto.

"Throughout, my focus has been on trying to develop tools for greater sovereignty," Yago said.

A self-described "bitcoin accelerationist," Yago is the founder of Sovyrn, a decentralized bitcoin lending and trading platform. He is building BitcoinOS, a "rollup" stack for the world's largest cryptocurrency designed to process more transactions and more complex operations like smart contracts than the blockchain could handle otherwise.

CLICK HERE FOR THE FULL ARTICLE BY AMITOJ SINGH

Report on Bitcoin Core Funding Highlights Just How Dependent the World's Biggest Blockchain is on Volunteers

The chart illustrates just how much smaller Bitcoin's ecosystem spending is compared with that of the newer blockchain Polkadot – despite a market capitalization that's 82 times bigger. (1A1z)

A pair of researchers from an organization called 1A1z, which describes its focus as "Bitcoin and freedom technologies," published a fascinating report aiming to identify sources of funding for developers working on "how Bitcoin protocol development is funded in a decentralized project with no funding."

The report lays out the premise: "Unlike most successful open source projects, it doesn't have a corporate creator or foundational home. It has a market capitalization of around $1.2 trillion, but unlike most trillion dollar technologies, it has no ability to raise capital. Bitcoin is a commodity, but unlike gold it is running software that needs to be maintained. It has no company, no foundation, no treasury, no employees… no representatives of any kind. And yet it is live, running, production software, securing a large amount of value that needs to be maintained, patched and improved. But those that buy it, hold it, use it, or build on it have no obligation to fund it. It is a public good that suffers from a free rider problem."

CoinDesk's Protocol Village column has chronicled a few grants to Bitcoin Core developers, specifically from BitMEX founder Arthur Hayes's family office, Maelstrom – here and here. Last week we wrote about the first-ever Bitcoin grant from a donor-advised fund, on the recommendation of a donor through a partnership with Unchained. But it's all pretty sporadic.

Some of the sobering findings from the report, written by Dan O'Prey and Mas Nakachi:

"Bitcoin currently is actively maintained by around 40 developers, many of them volunteers."
"Many of these developers are volunteers; many are sustained not through steady employment but an ad hoc system of short-term grants."
"Most could make more money as developer number 20,001 at Meta. But without them, Bitcoin would not be what it is and would not exist a decade from now."
There are only five "core maintainers" for the project – meaning they have the ability to merge code proposed by core developers to the main branch of the Bitcoin Core software. "This relatively small number of people for such a valuable and monumental project may be quite surprising to many. Upon learning it for the first time, it also was surprising to us, longtime Bitcoiners that have benefited from the work of these developers."

Arbitrum Foundation Biggest Investor in Crypto Deals <$5M, Stratos Report Shows

The crypto VC firm Stratos published a new report, "State of Crypto Venture Q3 2024." The data for the report was pulled from Token Terminal and Artemis. Here are some key takeaways, according to the team:

"Out of almost 3K funds and angels investing in crypto since 2023, less than 25 have proven their ability to invest at scale in winners. This means the crypto industry should consolidate and get smaller.
Crypto venture firms in aggregate will likely underperform holding BTC by a wide margin.
Of the ~$88B deployed into crypto venture, half of that was invested in the top 4 categories: Finance ($12.6B), Web3 ($12.5B), DeFi ($10.2B), and Gaming ($7.6B).
On an FDMC basis, the protocol layer takes the cake, representing $245B of $439B aggregate."

The First 40+ Speakers Announced for Consensus Hong Kong

The industry's most influential event in Web3 and digital assets is coming to Asia with a stellar lineup of 40+ global thought leaders already confirmed. Be part of the game-changing discussions, key announcements, and high-impact deals that will shape the future of innovation.

Register today before prices increase and use code TP15 for an additional 15% off.

Money Center

Fundraisings

Nillion architecture, from the project documentation (Nillion)

Privacy-focused blockchain project Nillion has raised $25 million in a funding round led by Hack VC and including backing from angel investors and strategic contributors from projects including Arbitrum, Worldcoin and Sei. Nillion builds its service around the concept of "blind computing," the processing of data without having to reveal its contents, which allows for the creation of an ecosystem of applications co-operating without having to reveal sensitive information.
Also (Details in Protocol Village column): Sapien ($10.5M), Variational ($10.3M), Naphtha AI ($6M), Hana Network ($4M), KRNL ($1.7M), Rocketon Labs ($1.2M).

Deals and Grants

Main quadrangle on Emory University's Druid Hills campus (Wikipedia)

Add Atlanta-based Emory University to the list of institutional investors taking a shine to bitcoin (BTC). The university disclosed ownership of more than $15 million worth of shares of the Grayscale Bitcoin Mini Trust (BTC), according to a Friday filing with the U.S. Securities and Exchange Commission. According to a top ETF analyst, the announcement marks the first endowment to publicly report exposure to bitcoin. Emory also reported holding 4,312 shares of Coinbase, valued at $922,639 as of press time, CoinDesk's Helene Braun reported. The university's total assets stood at $21 billion as of August 2023, according to its most recent annual report.
Wall Street Financial Services Firm Lazard Plans to Create Tokenized Funds with Bitfinex Securities
Neo Blockchain Announces 'Neo X Grind Hackathon' With >$22M in Prizes (Details in Protocol Village.)
Lisa Neigut's Base58 Gets First-Ever Bitcoin Grant From Donor-Advised Fund, Via UI Charitable on Recommendation of Donor Through Partnership With Unchained (Details in Protocol Village.)

Data and Tokens

Regulatory and Policy

Netherlands Starts Consulting on Crypto Tax Reporting Bill

FROM COINDESK'S SAM REYNOLDS IN HONG KONG: Chainlink Unveils 'Chainlink Runtime Environment,' Aiming for Better Blockchain Workflows

Chainlink's Sergey Nazarov presents at SmartCon in Hong Kong on Wednesday. (Chainlink)

HONG KONG – Chainlink on Wednesday unveiled Chainlink Runtime Environment (CRE), designed for developers to create custom applications across multiple blockchains.

The new offering was unveiled during Chainlink's Smartcon, a side event to Hong Kong Fintech Week.

On stage, Chainlink co-founder Sergey Nazarov said he hoped history would view CRE as important for bringing traditional finance (TradFi) to Web3 as Cobol — a legacy programming language developed in the late 1950s — was for initially automating finance and the Java Runtime Environment was for bringing finance to the internet in the 1990s.

"The Chainlink Runtime Environment is the computing environment in which you can run code to interconnect all blockchains, interconnect all the Oracle networks, interconnect all the existing APIs and messages and payment systems into a single application," Nazarov said in an interview with CoinDesk.

BONUS FROM SAM REYNOLDS IN HONG KONG: As Hong Kong Firms Downsize, Animoca Built a Workspace the Size of 10 Tennis Courts

Protocol Village

Top picks of the past week from our Protocol Village column, highlighting key blockchain tech upgrades and news.

Diagram showing how Nil organizes execution shards (Nil)

Nil Foundation, the team behind Nil, an Ethereum layer-2 network powered by zkSharding, announced the launch of Testnet v1. According to the team: "Following the successful Devnet launch in July, Testnet v1 is a key milestone on the Nil product roadmap. This release includes several protocol upgrades, DevEx improvements, and concrete examples for how to use the network, including porting and integrating Uniswap V2 code to show how DEXs can work in sharded environments." Telegram group here: https://t.me/NilDevnetTokenBot.
Stacks, a layer-2 blockchain project atop Bitcoin, confirmed on Tuesday the activation of its Nakamoto upgrade, designed to make transactions faster. The project's official account on X posted that "Stacks transactions once confirmed are now at least as irreversible as Bitcoin's," and that there is a "significant reduction in transaction times." The upgrade also will provide a "technical foundation for sBTC launching later this year," according to the post.
Space and Time Labs, developer of a sub-second zero-knowledge coprocessor and blockchain indexer, has launched its SXT Chain testnet — "a blockchain using zero-knowledge (ZK) proofs for verifiable data delivery to smart contracts." According to the team: "With ZK-proven data access, developers can tackle smart contracts' challenge of secure, large-scale data handling. The testnet enables data-heavy applications, like on-chain credit scoring, using SQL interfaces with ZK verification."
Ethereum layer-2 Optimism's "Superchain" has added a Bitcoin-native project to its ecosystem for the first time, CoinDesk is first to report. BOB, a Bitcoin layer-2 project looking to expand development on the world's oldest blockchain, has integrated with the Superchain ecosystem, built on Optimism's OP Stack framework. The team is awaiting final approval of a pending grant from the Optimism Foundation of 500,000 OP tokens, worth about $870,000 at the current price, project officials told CoinDesk.
The University of Oregon's Distopia Lab has begun using Theta EdgeCloud for AI research and model training, according to the team: "This collaboration marks Theta's first U.S. academic partnership, following successful engagements with top South Korean universities. Led by Professor Suyash Gupta, the lab focuses on distributed systems, blockchain and federated learning. Theta EdgeCloud offers over 80 PetaFLOPS of distributed GPU compute power, enabling faster and more cost-effective AI research.