Bitcoin already has one of the most diverse layer 2 ecosystems |
May 3, 2023
Exploring the tech behind crypto
one block at a time
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Hi, Bradley Keoun here, editor of The Protocol.
Our Frederick Munawa has a smart feature on the “Cambrian explosion” that Lisa Neigut, a top developer at the Bitcoin infrastructure firm Blockstream, sees coming to the world’s oldest and largest blockchain. (Yes, this newsletter now covers Bitcoin tech! We relaunched this newsletter as The Protocol last week to focus on all blockchain tech. The forerunner newsletter, Valid Points, was exclusively focused on Ethereum.)
Also in today’s issue, we’re covering Sports Illustrated’s new NFT ticketing platform on Polygon, Chelsea Manning’s involvement with the privacy-focused Nym network, Zcash’s latest software update and a $36 million fundraising for Standard Chartered bank’s Zodia Custody.
Proposed Bitcoin Tech Upgrades Could Spur Layer 2 Protocol Growth
The Bitcoin ecosystem, derided in some crypto developer circles for its slow pace of technological advancement, is now on the verge of a layer 2 “Cambrian explosion.”
That’s according to Lisa Neigut, a Lightning Protocol engineer for the Bitcoin infrastructure firm Blockstream, during her presentation on the “state of the chain” at CoinDesk’s Consensus 2023 conference last week.
The catalyst will be increased functionality from new features including covenants and script updates, according to Neigut. Covenants such as bitcoin improvement proposal (BIP) 118 (also known as SIGHASH_ANYPREVOUT, or APO for short) are Bitcoin smart contracts that put constraints on how a bitcoin (BTC) can be spent. Script updates include a proposal by Blockstream to introduce Simplicity, a new programming language for Bitcoin smart contracts.
The network is already in the midst of a technical renaissance attributable to the introduction of Bitcoin non-fungible tokens (NFT) via the Ordinals protocol. More than 3.3 million of these NFTs or “inscriptions” have been produced in under five months.
Bitcoin development tends to be slow and steady, but Neigut says the flywheel effect will be triggered once certain functionality is in place on the base layer.
“APO is going to, hopefully, unlock a Cambrian explosion with these script updates and new covenants,” Neigut said. “So I think a lot of new layer 2 stuff will come in the future.”
The world’s dominant blockchain already has one of the most diverse layer 2 ecosystems of any network. Bitcoin currently boasts six major layer 2 protocols – the Lightning payment network, the Liquid sidechain, the Fedimint and Cashu protocols, wrapped bitcoin (wBTC) and Bitcoin statechains.
Chelsea Manning, the former U.S. Army private who spent seven years in prison for one of the largest leaks of documents in military history,told CoinDesk’s Marc Hochstein last week in an interview that she has gotten involved in recent years with a privacy-focused token called Nym. Manning is “skeptical of speculative assets in general,” but she says the cryptographic elements of the digital-asset field intrigue her. “I’m trying to put the cryptography back in crypto,” she said. The Nym network, according to the project’s website, is a “decentralized and tokenized infrastructure providing holistic privacy from the network layer to the application layer.”
More AI functionality is coming to crypto exchanges.On Tuesday, Crypto.com unveiled “Amy,” described as an “AI companion that can help users learn about the crypto industry with near real-time information about specific tokens and projects, as well as details on price listings and historical events.” In March, Binance, the world’s largest digital-asset exchange by trading volume, released a beta version of “Bicasso,” an artificial-intelligence-powered NFT generator. Last month, the crypto protocol Fetch.ai said it plans to roll out AI-powered “agents” that could help users execute peer-to-peer trades on decentralized exchanges. At CoinDesk’s Consensus 2023 conference last week, Binance’s head of product, Mayur Kamat, said that “every company in the world will need to include it in their road map or else run the risk of being outclassed by their existing and upcoming competitors. Crypto startups are no exception.”
Standard Chartered’s Zodia Custody, crypto storage provider, raises $36M to increase token coverage and enhance its settlement product, Interchange. (SBI Holdings, SC Ventures.)
FARE Protocol, provider of “probability contracts” for decentralized applications, raises $6.2M in seed round. (Goat Capital, C Squared Ventures)
Giddy, crypto wallet startup, raises $6.9M in new funding. (Pelion Venture Partners, Peak Capital Partners, Clarke Capital; strategic investment from Fortnite co-creator Geremy Mustard.)
Deals and grants
Balaji Srinivasan, the outspoken tech entrepreneur who closed out his unsuccessful $1 million bitcoin bet, pledged $500,000 to fund Bitcoin Core development as part of $1.5 million of concessionary contributions.
LongHash: “LongHashX Accelerator launches first-ever Zero-Knowledge Accelerator Cohort to support early-stage teams in building out ZK ideas. Cohort starts around the end of July and 20-25 teams will receive mentorship support from ZK ecosystems such as zkSync, Scroll, RISC Zero, Linea, Taiko, Herodotus and others” the organization said. [Link to Apply]”
Blockchain payments company Ripple sold more than $361M worth of XRP tokens in the first quarter, a 60% increase from the previous quarter.
Data Corner
During an April when Ethereum’s Shanghai upgrade went live, a 3.3% rise in the ether (ETH) price just barely edged out that of the 2.9% gain for industry leader bitcoin (BTC). The 42-asset CoinDesk Smart Contract Platform Index (SMT) inched up 1.5% on the month, on par with the broad benchmark CoinDesk Market Index (CMI). The biggest gainer in the SMT index was the CTSI token from Cartesi, which according to its website aims to support “the development of application-specific rollups with a Linux runtime and the same security guarantees of Ethereum.”
RIP, Zelda
According to blockchain explorer beaconcha.in, CoinDesk’s Ethereum validator, Zelda, exited the Beacon chain on April 24 at 12:16 pm ET, and our staked ETH became withdrawable on April 25th at 3:34 pm ET. It took a little under two weeks from the time we put in the request for a full validator exit to when we received confirmation. One obvious takeaway for stakers is that these withdrawals do not happen instaneously. You can read about the two-year-long project here and here.
CoinDesk is coming back to Austin for Consensus 2024. Get your super early bird tickets for the lowest possible rates and join us May 29-June 1, 2024. Get your tickets now.
