Exploring the tech behind crypto one block at a time |
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Hi, Bradley Keoun here, editor of The Protocol. The big story this week in crypto is just how much strain is being put on the biggest blockchains, Bitcoin and Ethereum – resulting in an astonishing rise in transaction fees. An explosion in the use of the Ordinals protocol on Bitcoin to mint thousands of tokens (most of arguably dubious value) has clogged up the world’s largest and most valuable blockchain, while a speculative frenzy in frog-themed PEPE tokens has strained the Ethereum blockchain. Also in today’s issue, we highlight CoinDesk’s coverage of the activist investor campaign hounding the Aragon DAO. Our feature today is a spotlight on the not-quite-crypto project Urbit, which closed out the Protocol Village session at CoinDesk’s Consensus 2023 conference a couple weeks ago. What’s interesting is that Urbit is trying to solve many of the same problems of peer-to-peer networking that a lot of blockchain projects are tackling. |
Urbit’s Peer-to-Peer Network Gains Traction |
Urbit isn’t a blockchain, but it was started seven years before bitcoin, with a similar idea of attempting to create a peer-to-peer network that is free from the influence of big companies or the government. That’s a key reason Urbit often gets discussed in the context of crypto and invited to blockchain-industry conferences. One doesn’t have to spend a lot of time on Urbit’s website to come across some of the themes popular among blockchain advocates - the idea of trying to short-circuit middlemen and centralized applications that currently dominate online activity. “We think the internet can’t be saved. The way things are going, MEGACORP will always control our apps and services because we can no longer run them ourselves,” the site reads. Users are identified on the network by their Urbit IDs – four-syllable pronounceable names generated by an algorithm from a number, then registered as an NFT on the Ethereum blockchain. (For example, according to the website, the Urbit ID ~dalwel-fadrun ties back to the number 3,509,632,436.) “Your Urbit ID is meant to feel a bit like a secret code name,” the website reads. “We want Urbit to be a single, simple interface for your whole digital life.” |
Chart of Urbit “ships” since late 2022 shows growth on the network. (Urbit) |
This sort of clubbiness, of course, is a major part of the exercise with any blockchain ecosystem, where building a community of staunch followers is one of the hardest parts. And lately, Urbit appears to be getting some traction. The number of users is growing, partly due to the introduction of personal-server hosting services and better user interfaces made it easier for normies (non-technical types) to join. The number of developers has doubled over the past year; there’s now about 90 monthly active developers working on the project – on par with some of the 20 largest blockchain projects. “For a long time Urbit wasn’t really growing at all,” acknowledges Josh Lehman aka ~wolref-podlex, who serves as executive director of the Urbit Foundation. “It was just enthusiasts.” |
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The Bitcoin blockchain has been suddenly overwhelmed by the minting of BRC-20 tokens on the Ordinals protocol, creating a backlog of transactions and sending transaction fees soaring. The dynamic has brought a windfall to bitcoin miners, as fees shot up eightfold to about $20 per transaction. Devotees of the blockchain, who have long cringed at the idea of using any token besides its native cryptocurrency, bitcoin, claimed the network was under attack. Everyday users in Africa have had to scout for new options, including using stablecoins and resorting to using the Lightning Network. Binance, the world’s biggest crypto exchange, temporarily halted withdrawals on Sunday and said it would move to integrate Lightning. As of Monday, more than 11,000 tokens – led by ORDI, the first – had been issued, with a cumulative market capitalization of $1.6 billion. Wu Blockchain, a crypto content provider, noted that BRC-20 tokens “currently lack practical application value,” though the blockchain analytics firm Coin Metrics pointed out that high transaction fees “help the market clear” when demand for blockspace outstrips supply. Meanwhile, on Ethereum, an explosion of trading in the frog-themed meme coin PEPE is pushing up transaction fees, in another instance of limited blockchain bandwidth. The PEPE price at one point shot to a $1 billion market cap, saddling short-sellers with millions. One pseudonymous trader “dimethyltryptamine.eth” turned a $263 purchase into a multimillion-dollar profit. The trading activity was so intense that Ethereum’s median gas fee surged to a 12-month high, as users had to pay up to get their transactions prioritized – spreading the wealth to validators on the blockchain. But frogs that go up must come down, and on Monday the coin’s price tumbled 50% as traders took profits. It probably goes without saying that “the price of meme coins can be highly volatile and influenced by market sentiment and social media trends,” as the blockchain analytics shop Coinfirm put it.
The limits of decentralized autonomous organizations are getting exposed by the drama surrounding Aragon DAO, as chronicled exclusively by CoinDesk’s Danny Nelson. At stake is whether holders of the project’s ANT tokens should be allowed to wield broad powers over a $200 million treasury. On Tuesday, the Aragon Association, the Swiss entity that oversees Aragon, said it “acted on its fiduciary duty to secure its treasury and mission” after encountering a “51% attack” from activist investors. The move came hours after Nelson reported that the crypto money manager Arca joined the activist campaign, demanding that Aragon DAO conduct buybacks of the tokens. The melee had been brewing at least since last week, when Aragon’s key backers defended the controversial banning of Discord members.
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| Pudgy Penguins, NFT project, raises $9M. (1kx, Big Brain Holdings, Kronos Research, the founders of LayerZero Labs, Old Fashion Research, and CRIT Ventures) Artifact Labs, Web3 firm, raises $3.25M. (Blue Pool Capital, Animoca Ventures) Blockworks, crypto media outlet, raises $12M at $135M valuation. (10T Holdings, Framework Ventures, Santiago Santos) |
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“PEPE’s meteoric rise is unlike anything we’ve witnessed in crypto history,” the analysis firm Messari wrote Tuesday in a report. The chart below illustrates the coin’s 22-day climb toward an adoption threshold of 100,000 holders on-chain, versus the comparatively shallow historical growth of tokens previously considered to have gone viral, including SHIB, YFI and YAM. The decentralized stablecoin project MakerDAO’s DAI “provides a benchmark of 225 days to reach the 100,000 holder mark.” |
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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. |
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