The Protocol: Crypto Fundraising, Job Losses, Juicy Payouts, Grants for Devs

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:

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:

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

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:

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:

Fundraisings

Nillion architecture, from the project documentation (Nillion)

Deals and grants

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

Data and Tokens

Regulatory and Policy

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

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)