The Protocol: Death Cross, Dip Buying and Developer Nerves

Here at The Protocol newsletter, we're focused on blockchain tech and usually don't go too deeply into crypto markets. But after a week like this, how can we not? Founders and developers have learned the hard way how the vagaries of price-go-down can affect the industry's fortunes. Read on.

Ronin's latest $12M exploit puts two-year-old "rigorous" security focus under microscope.
Nearly $50 million of blockchain project fundraisings: Curio, Andrena, Daylight, Cartridge, Zoth, Khalani, Pichi.
Arthur Hayes unveils Bitcoin Ordinals release "Airheads," invests in Oyl wallet.

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Network News

Bitcoin price (seen here as the chain of red and green candles) plotted against its 50-day and 200-day simple moving price averages – now converging toward a "death cross." (Omkar Godbole/CoinDesk/TradingView)

DEATH CROSS! Crypto markets suffered one of their worst sell-offs in years, a week-long tumble that took the bitcoin (BTC) price down to $50,000 , from $70,000 just last week – darkening the mood across a blockchain industry that until very recently seemed to be approaching ebullient . Despite a slight price rebound on Tuesday and Wednesday, all members of the benchmark CoinDesk 20 index remain deeply in the red over the past week, with ether (ETH) suffering its biggest single-day price drop since May 2021. Alternative.me's frequently cited " Fear and Greed Index " of crypto-market sentiment swung to "extreme fear" from "greed," and a dreaded pattern known as the " death cross " is now forming in bitcoin's price chart, as spotted by CoinDesk's Omkar Godbole.

For now, the default view is that this is a market blip and will quickly pass. (Memecoins appear to already be back .) The question is whether questions might again start to percolate in the blockchain industry – if developers, project employees and fundraising founders will soon endure another round of the bruising existential nerviness that permeated the industry as recently as late last year.

Macroeconomic and crypto-native factors were cited as catalysts for the past week's selling: the prospect of rising Japanese interest rates ( since walked back ), a weaker-than-expected U.S. jobs report, tensions in the Middle East, poor earnings at tech firms, deflating of the AI hype, bitcoin miner selling and rumors that market maker Jump Trading might be selling ETH due to speculation it would be forced to exit the crypto business due to regulatory investigations. The end result was some $1 billion in crypto-futures liquidations, along with $350 million of decentralized-finance (DeFi) liquidations.

As is often the case, there were some winners, along with opportunists who tried to buy the dip or disseminate words of encouragement. As a group, bitcoin whales , as large holders are known, accumulated more of the cryptocurrency during the market squall, though small investors were apparently so unnerved that they reduced their stakes, CoinDesk's Krisztian Sandor reported, citing data from blockchain analytics firm IntoTheBlock. Bitcoin exchange-traded funds (ETFs) held up surprisingly well, with just $168 million of net outflows on Monday – versus the " couple billion " that Bloomberg Intelligence senior ETF analyst Eric Balchunas said he was expecting. Ethereum ETFs actually scored net inflows .

An address linked to the infamous $200 million Nomad cross-chain bridge exploit in 2022 was apparently tempted off the sidelines, spending about $40 million in stablecoins to buy up ETH at the heavily discounted price, The Defiant reported. Tron founder Justin Sun chimed in on X to say "we're creating a $1 billion fund to combat FUD," which is short for "fear, uncertainty and doubt." Notably, DeFi platforms maintained operations throughout the drama, successfully processing liquidations of crypto collateral , and the lending protocol Aave even reportedly generated a tidy windfall of $6 million in fee revenue .

Sean Farrell, a crypto analyst at FundStrat, wrote Tuesday that while he was "encouraged" by the "impressively strong" market bounce, "We think it’s right to keep some dry powder on hand over the next couple of weeks."

This is a T-shirt I bought at Goodwill a couple years ago for $3.99. I have no idea what it was originally supposed to stand for, but in my mind it stands for a less G-rated version of, "Buy the Freaking Dip." (Bradley Keoun)

RONIN RUN-IN: It's only been two years since the Ronin Network made headlines from suffering a $625 million exploit , one of the largest attacks of all time in the history of decentralized finance (DeFi), which is rife with reports of massive hacks. The episode was so jarring for Ronin – an Ethereum-compatible blockchain forged for gaming, launched by Axie Infinity creator Sky Mavis – that the project's documentation refers specifically to the lessons learned: "This incident led Sky Mavis to become a fully antifragile, zero-trust organization. Sky Mavis has implemented rigorous internal security measures to prevent future attacks. All code has been fully reviewed and optimized, with security experts auditing the entire architecture." Well, on Monday, Ronin posted on X that an upgrade of its bridge had "introduced an issue" that ultimately allowed hackers to make off with about $12 million worth of ETH and the stablecoin USDC. Ronin Network co-founder Aleksander Larsen tweeted that some $850 million of funds were safe on the project's bridge, and it was later disclosed that the hackers were apparently of the "white hat" variety – willing to return the stolen funds, typically in exchange for a bounty. The project's official account on X went out of its way to point out that the ETH and USDC tokens taken out in a single transaction withdrawal represented the "maximum amount" that was possible to extract: "The bridge limit serves as a critical safeguard to increase the security of large fund withdrawals, and it effectively prevented further damage in this exploit." A full post-mortem is expected next week.

Trump Sneakers
, a website owned by former President Donald Trump that sells themed footwear and perfumes, earlier this week started listing a range of limited-edition sneakers including a Bitcoin-themed, high-top version that costs $499 a pair on pre-order. There are just 1,000 pairs of the bright orange version, and they
already sold out
.
The shares of bitcoin miner Core Scientific (CORZ)
surged as much as 17% on Tuesday
, outperforming other crypto-linked stocks, after the company signed an extension of its earlier high-performance computing (HPC) contract with CoreWeave. (According to its
website
, CoreWeave is a "specialized cloud provider, delivering a massive scale of GPUs on top of the industry’s fastest and most flexible infrastructure.")

Protocol Village

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

Chart illustrating the drop in latency from a blockchain switching to the Mysticeti-C consensus on 106 independently run validators. (Mysticeti white paper authors)

1. Mysticeti, a consensus protocol based on directed acyclic graphs (DAG) that "cuts consensus latency to 390 milliseconds and establishes Sui as the fastest consensus layer in the industry," has been deployed on Sui mainnet after a successful run on testnet, according to the team.

2. Polyhedra Network, a team building a crucial blockchain component known as a cryptographic "prover," released a new platform called "Proof Arena" that will "allow ZK-proof system creators to compare their systems against others in a clear and scientific manner while ensuring that all controllable variables are held constant," according to a press release Wednesday. Initially, the project will be set up to generate benchmarks for Polyhedra's own "Expander" ZK-proof system, Polygon's Plonky3, StarkWare's Stwo and Linea's Gnark. "The team plans to support all open-source proof systems and will provide benchmarks for frequent ZK tasks like Keccak and Poseidon hash verification run on a variety of machine configurations," according to the press release.

3. Stakers on the Injective blockchain on Thursday passed the "Altaris Mainnet Upgrade Proposal," also known as "IIP-420," and deployment of the upgrade began soon afterward, according to social-media posts by the project. In a message to Protocol Village, the team described Altaris as "a major update enhancing the trader, staker, developer and end-user experience. It includes an advanced RWA Oracle for expanded tokenized offerings, improved INJ Burn Auction mechanics and market enhancements like perpetual market launch permissions for native DEXs. Altaris introduces SDKs for Python, Go and TypeScript for developers, enriched interoperability with IBC hooks, streamlined governance, enhanced security for the Injective Bridge and Ledger wallet integration."

4. Transak , a Web3 payments infrastructure provider, has "officially launched wire transfers as a new payment method for U.S. users to purchase cryptocurrencies," according to the team. "Implementing wire transfers for cryptocurrency transactions involves intricate processes, from handling bank transfers to ensuring accurate fund reconciliation. This is far from a streamlined task and requires a robust and lengthy product development cycle. Transak has invested significant time in building a comprehensive system that ensures smooth fund flow, demonstrating its commitment to providing a seamless user experience."

5. Succinct, a platform for developers to build decentralized apps with zero-knowledge proofs (ZKPs), announced SP1 1.0, the production-ready release of their zkVM, "enabling builders to write real-world ZKPs with Rust and affordably generate proofs in real time," according to the team: "The co-founder and CEO is Uma Roy. The platform has delivered up to a 10x performance gain in latency/cost, already securing over $1 billion in TVL, with thousands of proofs. With more than 100 billion CPU cycles proven on the prover network’s private beta, Succinct is trusted by Polygon and Celestia." According to a blog post: "We benchmark SP1 against RISC0 on three real-world workloads (Tendermint, Reth Block 17106222, and Reth Block 19409768) using a variety of cost-efficient AWS and Lambda Labs GPUs with on-demand pricing." Also: "SP1 is 100% open-source, allowing teams like Argument (formerly known as Lurk Labs) and Scroll to implement custom precompiles for their own use-cases that have dramatically decreased cycle count and accelerated proof-generation time."

Money Center

Video walk-through of "Duper," a game on the Arbitrum One blockchain from the on-chain gaming studio Curio (Curio via YouTube)

Wireless internet provider Andrena has raised $18 million in funding to develop a protocol for decentralized broadband. The protocol, known as DAWN, is a decentralized physical infrastructure network (DePIN), designed to provide homes with internet without having to rely on centralized providers. DAWN is currently operating in a testnet environment ahead of launching on Solana, Andrena announced via email on Wednesday.
Daylight, building a decentralized protocol that will eventually allow users to build "virtual power plants" using "distributed energy resources" (DERs), launched a testnet and announced a $9 million funding round led by the venture capital firm a16z. Framework Ventures and existing investors Lerer Hippeau, Lattice Fund and Escape Velocity also participated.
Cartridge, a developer of provable games and the tooling and infrastructure that powers them, has completed a $7.5 million Series A funding round, led by Bitkraft Ventures with additional participation from Fabric, Dune, StarkWare, Primitive and Ergodic.
Zoth
, a DeFi yield infrastructure company, raised $4 million in a strategic round to accelerate the launch of its Tokenized Liquid Note ($ZTLN). According to the team, the fundraising attracted "significant investment from Taisu Ventures, G20, Fat Cat Ventures, GemHead Capital and other prominent companies."
Blockscout, an open-source block explorer for EVM-based chains, completed a $3M seed round led by 1kx with participation from Primitive Ventures and Gnosis, according to the team.
EXCLUSIVE: Khalani, pioneer of a decentralized solver platform designed to unleash the full potential of intents,
raised $2.5M
in a seed round led by Ethereal Ventures, with participation from Nascent and Figment Capital. According to the team, angels include Arthur Hayes via Maelstrom, Jan Xie and Nick White.
Pichi Finance, a trustless points trading protocol offering price discovery to tokens pre and post-TGE, completed a $2.5 million seed funding round, led by UOB Venture Management, Signum Capital and Mantle Network.

Screen grab from Arthur Hayes's post on the 'Airheads' Bitcoin Ordinals collection (Arthur Hayes/Airheads)

Arthur Hayes, co-founder of the BitMEX crypto exchange who now serves as chief investment officer of his own private-wealth office, Maelstrom, announced his first NFT collection, Airheads, using the Bitcoin Ordinals protocol, and disclosed an investment in Oyl wallet. According to a blog post by Hayes: "Each Airhead is an inflatable, balloon-like character generated using recursive art to visually represent the size and value of your digital portfolio at the point of mint.
The venture arm of cryptocurrency exchange OKX and the Aptos Foundation, which supports the development of the Aptos protocol, set up a $10 million fund to encourage the growth of the Aptos ecosystem and broader adoption of Web3. The accelerator fund, named Ankaa, will be used to develop projects built on Aptos, according to an emailed announcement. Ankaa will be run by Aptos, OKX Ventures and Alcove, Aptos' accelerator established last November.