November 6, 2024

Exploring the tech behind crypto

one block at a time

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Hi, Bradley Keoun here,

A lot of people are saying, people inside CoinDesk, that nobody's going to read anything on Wednesday that isn't elections-related. Well maybe they don't know about all the INCREDIBLE CONTENT we have assembled in this week's The Protocol newsletter? There's even an ongoing election to keep you entertained.

FEATURING:

U.S. election coverage roundup: Trump wins, Gensler loses, bitcoin jumps.
It's make-or-break for Maker's 'Sky' rebrand.
Ethereum Foundation researchers renounce paid EigenLayer gigs.
Trump family-backed crypto project World Liberty Financial cuts fundraising target by 90%.
Hullabaloo over token listing fees.
Crypto commercials evolve past "total cringe."
MUST READ by CoinDesk's Margaux Nijkerk: Is Optimism's 'Superchain' Winning the Ethereum Layer-2 Race?
$75 million of blockchain project fundraisings.
Top picks from the past week's Protocol Village column: Pundi AI, MultiversX, Privado ID, River, Llama, Towns, SheFi.

Network News

U.S. ELECTION COVERAGE HIGHLIGHTS:

POLLS STILL OPEN: In another vote taking place, not due to close for several more hours, community members of the DeFi project MakerDAO are expressing their opinions on what to do with the Sky brand. As reported in The Protocol last month, the project formerly known as Maker rebranded to Sky in August, but the move received a lukewarm reception, and now holders of the MKR tokens are being asked to weigh in on whether a de-rebranding should be considered. As reported by CoinDesk's Sam Reynolds, the poll is not binding. Early participation was quite limited.

MEA CULPA, TABULA RASA: Ethereum Foundation researchers Dankrad Feist and Justin Drake have resigned from their advisory roles at EigenLayer, months after a controversy erupted over potential conflicts of interest within the Ethereum community. In the spring, Drake and Feist publicly confirmed that they had each accepted advisory roles with EigenLayer. Each researcher was allotted a significant sum of EIGEN tokens in exchange for helping guide the upcoming project and its roadmap. "While I believe that the role was negotiated in good faith and with the aim of making sure that EigenLayer is well aligned with Ethereum," Feist said in an X post, "I understand that the perception of this relationship has been different and that for many the conflict of interest this creates is difficult to reconcile with my role as an Ethereum researcher."

TRUE CONCESSION: It turns out that making money in crypto isn't quite as easy as it might seem: Crypto buyers, burned so many times over the years, are quite leery of newcomers — and skeptical when it comes to examining new token offerings. That appears to be the case for World Liberty Financial, the crypto project backed by former President and now President-Elect Donald Trump and his sons, Don Jr. and Eric. As detailed in The Protocol last month, project officials initially talked up their big plans, with a fundraising goal of $300 million, and released a "Gold Paper" with lots of fine print, including the revelation that the initial $30 million of "net protocol revenues" would be set aside to cover expenses, indemnities and obligations. The rest would go to a company called "DT Marks DEFI LLC," whose owners and principals include Donald Trump. But sales of the tokens never passed $15 million. As scooped last week by CoinDesk's Danny Nelson, the project now has made a filing with the U.S. Securities and Exchange Commission saying that the sales will be terminated as soon as the $30 million target is reached. The concession to market realities could put an end to the bizarre effort, which left many analysts scratching their heads at how Trump had time to promote a crypto project while in the throes of an intense campaign for president.

ALSO:

Coinbase CEO Brian Armstrong's claim in a post on X that listings on the U.S. crypto exchange are "free" drew protests from project leaders including Sonic Labs' Andre Cronje and Tron's Justin Sun. Bitget, a rival crypto exchange, took advantage of the topic's salience to open a new listing application portal on its platform, stating that it's "transparent about its listing procedures and thrives to provide token projects with the ease of exposure at best possible initial investments for its community," along with the following testament: "Importantly, Bitget strongly emphasizes that it does not charge any fees related to the listing application process, such as commission fees, brokerage fees, application fees or assessment fees. Tokens provided by project teams will be fully allocated to Bitget users based on the agreed-upon marketing and promotional plan."

SPICY SPOTS: Crypto commercials have come a long way since Crypto.com's notoriously cringe-y "Fortune Favors the Brave" ad starring Matt Damon. A couple videos circulating this week actually approached the not-inconsiderable triple-achievement of "surprisingly clever" and "refreshingly dark" while remaining "uncannily crypto-native."

Here's one from Solana poking fun at other unspecified blockchains' penchant for "infra" buildout.
And here was one promoting the Polygon Labs-sponsored AggLayer, comparing various blockchain ecosystems to a series of dysfunctional couples undergoing therapy.

Is Optimism's 'Superchain' Winning the Ethereum Layer-2 Race?

Optimism Foundation Chief Growth Officer Ryan Wyatt (Optimism Foundation)

One of the biggest trends of 2023 among the leading layer-2 projects on Ethereum was the emergence of "blockchain in a box," where the teams encouraged developers to clone their code to spin up new layer 2s.

Now, one project in particular appears to be pulling away as the clear leader. And as is often the case in blockchain development, a crucial factor is the money changing hands behind the scenes.

Optimism, one of the major layer-2 networks, has managed to get a slew of clients and firms to deploy their own blockchains using Optimism's technology, with the OP Stack, under open-source software licenses.

It's a crucial development in the evolution of the broader blockchain universe, since layer-2 networks stand at the heart of developers' efforts to make transactions faster and cheaper in the Ethereum ecosystem.

Part of the Optimism Foundation's strategy to get new networks to use their technology is to give out large sums of OP tokens in the form of grants.

Ultimately, the goal is to reach critical mass — perhaps not unlike the ascendance in the 1980s of VHS over Betamax as the dominant videotape technology.

Click here for the full article by Margaux Nijkerk

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

Hubert Rachwalski von Rejchwald, founder and CEO of vlayer Labs (vlayer Labs)

Vlayer, a data-infrastructure project relying on zero-knowledge proofs, with privacy and verification tools, has secured $10 million in funding from a16z crypto CSX, Credo Ventures and Blocktower VC, along with builders from Aztec Protocol, Worldcoin, Eleven Labs. According to the team: "Open Alpha Launch is coming in days, just nine months driven by a team of over 20 experts across the U.S., U.K. and Poland. Vlayer extends Ethereum's functionality with four new Solidity functions. It provides smart contracts with access to on- and off-chain data through features such as Time Travel, Teleport, Web Proofs (zkTLS) and email proofs (zkEmail)."
Others (Details in Protocol Village column): Ellipsis ($21M), Glow ($30M), Spire Labs ($7M), Phylax Systems ($4.5M), Axal ($2.5M).

Deals and Grants

Bea O'Carroll (Kadena)

Kadena, a layer-1 proof-of-work blockchain, has appointed Beatrice O'Carroll as a strategic advisor. According to the team: "With over 20 years of experience in financial services and crypto markets, including roles at Citibank, Deutsche Bank and Circle, O'Carroll will support Kadena's growth in digital assets and decentralized finance. Her appointment aligns with Kadena's initiatives to expand its presence in institutional markets, develop new products, and strengthen its team.
TON Accelerator and Mantle are launching a $5 million cross-chain initiative to drive innovation across TON and EVM ecosystems.
JPMorgan Renames Blockchain Platform to Kynexis, to Add On-Chain FX Settlement for USD, EUR
Citi, Fidelity Exhibit Proof-of-Concept for Real-Time Forex Swap Onchain
New Global Dollar Stablecoin Backed by Robinhood, Kraken, Paxos and Other Crypto Heavies
Chainlink, UBS Asset Management, Swift Complete Pilot to Extract Cash From Tokenized Funds

Data and Tokens

Memecoin Share of Altcoin Market Doubles to 11% Amid Backlash Against 'Low Float, High FDV'

We were forwarded a copy of Binance Research's just-out report, "Understanding the Rise of Memecoins" and found it curiously intellectual — tracing the rise of the asset class through an economic prism, noting that "financial nihilism might be growing particularly among younger generations."

The report suggests that memecoins' combined share of the altcoin market has doubled from 2023 levels to about 11% currently. (See chart above.)

There was also this high-minded takeaway, flicking at an increasingly common refrain heard, a backlash against the idea of venture capital-backed projects using retail investors as exit liquidity:

"Projects have turned towards private VC funding rounds in order to raise capital. This practice has grown significantly in recent years, leading to an industry wide 'Low Float, High FDV,'" the report reads. "A symptom of this problem is that many of the new altcoins with the most exciting narratives and visions now face significant supply unlocks in the coming years, effectively turning retail traders into potential exit liquidity for VCs that got into early stage private rounds. This tokenomics problem created by the prominence of private token sale rounds is likely one of the factors at the forefront of the market's shift towards the fair launch, transparent memecoins."

Ranking Node-as-a-Service Providers

Top 16 providers of native staking, as ranked on assets-under-management by the website Staking Rewards (Staking Rewards)

Earlier this week I had a fascinating conversation with Pablo Larguia, co-founder and CEO of Buenos Aires-based SenseiNode, a provider of institutional grade staking-as-a-service — essentially operating blockchain nodes on behalf of big investors.

The fast-growing business involves taking non-custodial token allocations and then managing the mostly data-center-oriented business of running nodes and staking on behalf of third parties.

This activity appears to fall somewhere between the proof-of-stake equivalent of bitcoin mining and the 21st century version of a bond manager.

Larguia showed us how to find the industry-standard rankings for this cottage industry within the blockchain space. It involves first going to the tracking website Staking Rewards and then filtering for "native staking." P2P.org is tops with $6.12 billion of assets under management, followed by Kiln at No. 2 with $4.91 billion, then Allnodes with $3.89 billion and stakefish with $2.6 billion. SenseiNode is No. 14 at $859.6 million, for what it's worth. (Please see the image above for the full rankings.)

Protocol Village

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

Screengrab from Pundi AI Data demo video. This is an example of "bounding box annotation" where the user takes a "scenic image containing wild animals" and draws a box around them (Pundi AI)

PROTOCOL VILLAGE EXCLUSIVE: Pundi AI, a decentralized AI training platform, has launched the testnet of its decentralized data annotation platform, Pundi AI Data, to democratize global AI data collaboration. According to the team: "Leveraging blockchain, the platform allows individuals and organizations to contribute, verify, and curate diverse, unbiased datasets. Users can earn through a 'Tag to Earn' model by annotating data for AI training, while blockchain-backed transparency ensures data integrity and trust. This testnet launch furthers Pundi AI's mission of equitable AI development, enabling a secure, open and decentralized ecosystem for AI data and innovation."
MultiversX, a leading layer-1 blockchain for next-gen applications, reports that a tech enthusiast set up a MultiversX testnet node on a Samsung Galaxy S24 Ultra, "showing that blockchain participation could soon require only a smartphone." According to the team: "Traditionally needing high-performance servers, this experiment suggests blockchain may soon be accessible on high-end mobile devices, paving the way for a more inclusive, democratized network." In an Oct. 27 post on X, @MantorMBU wrote that, "So far, the node is syncing and operating with surprising smoothness. However, the real test will be in its sustained performance over time, especially under load conditions."
Privado ID (formerly Polygon ID), a privacy-focused digital identity platform, announced the launch of a "multi-chain, device-agnostic identity attestation protocol that allows people to seamlessly verify their credentials across multiple EVM-compatible blockchains," an achievement it describes as an "industry first." Evin McMullen, co-founder and chief strategy officer, said in a press release: "This protocol is the currently missing middleware infrastructure that mainstream Web3 ecosystems need to drive value continuously from the infrastructure toward the application layer."
River, a protocol for securing communication for end users, has acquired Llama, a protocol for decentralized governance, to strengthen on-chain governance across its platforms, including Towns, its largest project, which launched in early October. According to the team: "This acquisition streamlines governance for communication platforms with customizable DAO permissions, allowing role-based control over actions like protocol upgrades, fund transfers and emergency pauses. Llama's integration enhances token governance on River and adds built-in governance contracts for current and future platforms built on the protocol, expanding its capabilities."
SheFi, a global Web3 educational community, has launched its first mobile wallet app, powered by Mobile Stack's decentralized protocol. According to the team: "This secure, user-friendly wallet provides seamless access to crypto and DeFi with built-in educational tools, empowering users as they explore Web3. With support for stablecoin pools, cross-chain swaps and over 100 dApps, plus security features like biometric verification, it's a comprehensive gateway to DeFi. Available on Google Play and the App Store, it's accessible to all who want to join the SheFi experience."