Welcome to The Protocol, CoinDesk’s insightful weekly roundup that highlights the most significant developments in cryptocurrency technology. I’m Ben Schiller, the Opinion and Features Editor at CoinDesk.
In this edition, we explore:
– Ethereum’s ambitious Wall Street aspirations
– Avalanche slashes transaction costs by 75%
– Arbitrum expands its horizons by integrating Bitcoin
– UBS conducts trials with ZKSync for gold transactions
This article is part of our latest issue of The Protocol, our weekly newsletter that delves deep into the technology behind cryptocurrency, one block at a time. Sign up here to receive it directly in your inbox every Wednesday.
Network Developments
Ethereum’s Wall Street Aspirations
Ethereum is currently grappling with an identity crisis as its native token, ether (ETH), struggles to keep pace with its competitors. Many long-time developers are raising concerns about whether Ethereum’s technology is becoming outdated and if its community is losing direction. The Ethereum Foundation, the non-profit organization responsible for guiding the blockchain’s development, has faced scrutiny for the network’s recent challenges.
In response to these issues, co-founder Vitalik Buterin is initiating a significant leadership overhaul within the organization. However, his dominant role in this restructuring has sparked further debate and controversy. Meanwhile, competing platforms like Solana are seizing the moment, attracting top-tier talent and outperforming Ethereum in the market.
Amid this turmoil, a new initiative called Etherealize is emerging to connect Ethereum with the Wall Street financial ecosystem. Founded by former banker Vivek Raman, Etherealize aims to position ETH as a credible asset class within traditional finance. Raman’s decade-long experience in banking gives him a unique perspective, and he has spent the last four years laying the groundwork for this project. With plans to launch in January—coinciding with a surge of optimism in the crypto market—Etherealize is navigating a landscape filled with internal disputes and stagnant prices. In a recent interview, Raman elaborated on the vision for Etherealize and how it plans to market ETH on Wall Street, as well as insights into banks’ perspectives on layer-2 rollups.
Avalanche Cuts User Costs Significantly
Avalanche, a blockchain focused on decentralized finance (DeFi) and smart contracts, has made headlines by reducing its transaction fees by 75% following the implementation of the Avalanche9000 upgrade on December 16. This dramatic drop in costs has led to a substantial increase in network activity, with daily transactions surging by 38% to an average of 354,691.
As the fifth-largest smart-contract blockchain by market capitalization, Avalanche operates on a multichain structure, consisting of the C-Chain for smart contracts, the P-Chain for staking and validator coordination, and the X-Chain for asset transfers. The recent upgrade included seven proposals, notably ACP-125, which reduced the base fee for smart contract execution on the C-Chain from 25 nAVAX to just 1 nAVAX. Additionally, the upgrade replaced the previously high validator fee of 2,000 AVAX with a more manageable monthly subscription ranging from 1 to 10 AVAX. This move aims to make Avalanche more accessible to projects of all sizes, fostering innovation within its ecosystem.
UBS Tests ZKSync for Gold Transactions
In a noteworthy development, Swiss banking giant UBS has successfully completed a proof-of-concept for its UBS Key4 Gold product using the Ethereum layer-2 solution, ZKsync. This trial indicates a growing interest in blockchain technology among traditional financial institutions. UBS is not new to blockchain experimentation; it previously introduced a tokenized money market investment fund called uMint, also built on Ethereum.
UBS’s Key4 Gold allows Swiss clients to invest directly in physical gold, offering advantages such as fractional investment options, real-time pricing, deep liquidity, secure storage, and optional physical delivery. While the project is currently operational on the bank’s private blockchain, the UBS Gold Network, the team sought to explore scaling solutions while maintaining privacy. According to Pearl Imbach, a Senior Business Development Manager at Matter Labs (the developer behind ZKsync), the decision to adopt zero-knowledge technology was driven by its potential to enhance scalability and privacy for existing products.
The trial conducted on ZKsync’s test network could signal UBS’s intention to further integrate layer-2 technologies into its operations, although the bank has not yet confirmed plans to develop its own layer-2 solution.
Arbitrum Expands Bitcoin Integration
Arbitrum, a leading Layer-2 network, has announced a new partnership with BitcoinOS to facilitate Bitcoin integration. This collaboration introduces a “hybrid rollup” that enhances interaction possibilities between Bitcoin holders and the Ethereum ecosystem. Nina Rong, Head of Partnerships at Arbitrum Foundation, emphasized that this integration showcases Arbitrum’s capability to support innovative expansions within the Bitcoin ecosystem while upholding core security principles.
With Arbitrum currently holding the highest total value locked (TVL) among Ethereum Layer-2 solutions—approximately $16 billion—this partnership aims to unlock a massive $2 trillion liquidity pool associated with Bitcoin for decentralized finance and smart contract applications.
Financial Highlights
Noteworthy Investments
– Taproot Wizards is set to utilize $30 million in new funding to cultivate a range of applications leveraging the OP_CAT Bitcoin improvement proposal, which introduces Ethereum-like smart contract capabilities to Bitcoin.
Decline in Ransom Payments
– According to Chainanalysis, there has been a noticeable decline in the volume of ransoms paid in Bitcoin, as more victims are opting not to comply with demands.
Regulatory Developments
– New stablecoin legislation is on its way to the U.S. Senate. This bill, spearheaded by Senator Hagerty of Tennessee, proposes a dual oversight model for stablecoin issuers, distributing responsibilities between state and federal authorities.
Upcoming Events
– February 1-6: Satoshi Roundtable, Dubai
– February 19-20, 2025: ConsensusHK, Hong Kong
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– February 23-March 2: ETHDenver
– March 18-19: Digital Asset Summit, London
– May 14-16: Consensus, Toronto
– May 27-29: Bitcoin 2025, Las Vegas
Stay tuned for more updates on these exciting developments in the world of cryptocurrency and blockchain technology!
