The Protocol: Peter Todd Wants to Fix Satoshi’s Bitcoin Bugs

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In this week’s edition of my favorite newsletter, The Protocol, I delve into the technological intricacies that power the crypto world, one digital brick at a time. Don’t miss out on this fascinating journey; subscribe here to have it delivered straight to your inbox every Wednesday.

Network news

Screengrab from Polymarket prediction market on HBO documentary. (Polymarket)

SATOSHI NAKAMOTO CONTENDERS ON POLYMARKET: Wagerers on Polymarket, a prediction market running on the Polygon network, experienced fluctuating bets as speculation swirled around the identity of Satoshi Nakamoto, the supposed inventor of Bitcoin, in an HBO documentary. At first, the attention centered on Len Sassaman due to his extensive academic background in cryptography and his staunch ideological leanings towards privacy and decentralization. (However, he passed away in 2011 after a struggle with depression, and the theory that he was Satoshi has largely been debunked.) Over time, as snippets from the documentary began to circulate, the odds on Polymarket started favoring Peter Todd, an early figure in Bitcoin development. In a dramatic scene near the film’s end, accompanied by ominous music, director Cullen Hoback confronted Todd about being Satoshi. Todd dismissed the theory as absurd in the uncomfortable exchange. Later, Todd spoke to CoinDesk and stated emphatically, “I am not Satoshi.” Additionally, Todd expressed his agreement with Craig Wright’s less-than-PG opinion that the HBO documentary was unreliable on social media.

Interestingly, or perhaps appropriately, it seems that Todd is attempting to rectify some of Satoshi’s past oversights. Recently, in a detailed blog post discussing Bitcoin layer-2 technologies, he admitted that Satoshi was not flawless when first coding the blockchain. He pointed out several areas where Satoshi erred, such as scripting Denial-of-Service attacks, the timewarp attack, and issues with the merkle tree. Todd proposed a potential solution called a “consensus cleanup soft-fork” – essentially a fix to address these bugs. Isn’t it intriguing? Although we’re joking, this could make for an exciting continuation of the story.

ELSEWHERE:

EigenLayer’s EIGEN Token Floating Low as Criticisms Mount

I’ll admit it: I’ve watched multiple times a marketing video from Eigen Foundation linked to the EIGEN token release. In one frame, it seems like a stray sperm-like figure jumps from a spherical object falling into an endless tunnel made of overlapping squares, all shaded in blues. (Eigen Foundation)

As an analyst, I recently noticed that EigenLayer successfully transferred its previously non-transferable EIGEN tokens into The Protocol, a significant move that came to light just as we were preparing our latest report. However, the events and debates surrounding this action extended over several days, revealing a series of fresh disclosures, heated accusations, and skeptical reflections that brought to light some questionable funding practices within the cryptocurrency sector.

Initially, we find a common practice where investors who have tokens locked up for another year can start staking their tokens now, earning extra tokens that are not bound by any lock-up period. These tokens can be sold right away. Some critics on X forum argue that there are numerous token vesting protocols in existence, and projects could create their own vesting contracts, but instead they often ask investors to “please hold off selling for a while.” Viktor Bunin, a U.S. crypto exchange Coinbase protocol specialist, explained that Eigen Labs collaborated with companies such as Toku, Coinbase, and BitGo to distribute tokens. These companies enforce vesting agreements outside of the blockchain (rather than using on-chain vesting contracts). He further noted that this practice is widespread among protocols, to which a user from X forum sarcastically commented, “remarkable that this is considered standard practice in our industry.” To clarify, EigenLayer revised its project documentation to state that investors are not obligated to wait before staking EIGEN and the tokens earned through staking will not be subject to the lock-up schedule. In other words, at least there’s a bit more flexibility for those investors.

One contentious issue under discussion was the custom of using a project’s “fully diluted value” as proof of its worth, especially when the trading “float” – which comprises tokens that can theoretically be traded freely – constitutes only a minor fraction of the total potential supply. In numerous instances, these tokens may not even become available for trade until far into the future. As Binance analysts pointed out in their May report, when the float is scarce, “tokens can exhibit significant price surges due to limited liquidity at launch.” Tracy Wang, a former CoinDesk reporter now with Framework Ventures, highlighted in her February 2022 article on well-known crypto trader GCR that his successful “Big Short” trade involved a strategic bet against tokens whose fully diluted valuations were disproportionately high compared to their float.

Regarding the EigenLayer, an excited headline from Bankless announced that EIGEN debuted with a fully diluted value of $7 billion. In a similar fashion, we at CoinDesk reported something comparable, but Oliver Knight soon after shared an article emphasizing “supply issues,” pointing out that the circulating supply was worth only $650 million. Critics like @DefiIgnas on social media have expressed concern that EIGEN is a “venture capital-backed token with low float and high fully diluted value.” However, he also mentioned that several other similar tokens trade at even more extreme ratios.

Money Center

Fundraisings

Layer co-founders Sam Cassatt, Jake Hartnell and Ethan Frey (Layer)

Deals and grants

Screen grab from a demo video for the Archiv3 project (Archiv3)

EXCLUSIVE FOR PROTOCOL VILLAGE: Bluwhale, a cutting-edge AI startup in Web3, is currently hosting a node sale aiming to gather up to $10 million. The event runs until the end of November, as stated in a press release sent to CoinDesk. By joining this node sale, Bluwhale users can earn passive income on their smartphones by keeping the app active and contributing data, with potential future contributions of storage and computing power. Any user with over 500 BLUAI points can stake them to manage Master Nodes on mobile devices. Additionally, there are three seasons of airdrops reserved for all node owners. A total of 100,000 network nodes will be offered in this sale.

Data and Tokens

Regulatory and Policy

Ether’s ‘Ultrasound Money’ Status in Question: Binance Research

There’s been a great deal of debate among blockchain developers, cryptocurrency traders, and digital asset analysts regarding the “parasitic” nature of Ethereum’s scaling strategy. The concern is that by moving most transactions to layer-2 networks, there will be less activity on the primary blockchain itself, leading to potential issues in the future.

Binance Research recently released their October “Market Insights” report, featuring the graph you see above that highlights the overall effect.

The analysts expressed concern about the validity of the ‘Ultrasound Money’ concept after this rise, as they believe that for Ethereum to reclaim its deflationary nature, a significant uptick in activity on the mainnet could be essential. Yet, as L2 solutions expand, users are increasingly attracted to these scalability options due to their enhanced user-friendliness and reduced fees.

Protocol Village

Here are some of the most significant updates and headlines from the previous week in our Blockchain Digest section, covering notable advancements and breaking news within the blockchain technology sphere.

Diagram of Mobius Development Stack, from the project’s litepaper (Axelar)

Anduro, a multichain layer-2 network nurtured by Marathon Digital Holdings (MARA), has devised a platform for the emission and investment in tangible assets outside the digital realm, specifically Bitcoin. This platform, named Avant, jointly developed with tokenization expert Vertalo, is set to initiate a trial run, aiming to convert whiskey barrels into digital tokens, as per an announcement made exclusively to CoinDesk.

Hex Trust, a well-established digital asset custodian managing over $5 billion in assets, has teamed up with Clearpool, a decentralized finance (DeFi) credit protocol, to introduce Ozean. Ozean is touted as the blockchain for Return on Asset (RWA) yield and operates on Optimism. The partnership aims to leverage Hex Trust’s top-tier services, extensive institutional client base of over 270 entities, and regulated infrastructure with Clearpool’s RWA lending proficiency. By doing so, the team hopes to position Ozean as the go-to blockchain for unlocking DeFi potential in the RWA sector, backed by the CPOOL token.

Calendar

Oct. 9-11: Permissionless, Salt Lake City.

Oct. 9-10: Bitcoin Amsterdam.

Oct. 10-12: Bitcoin++ mints ecash: Berlin.

Oct. 13-16: Future Blockchain Summit, Dubai Harbour.

Oct. 15-17: Meridian, London.

Oct. 17: Worldcoin’s A New World, San Francisco.

Oct. 18-19: Pacific Bitcoin Festival, Los Angeles.

Oct. 21-22: Cosmoverse, Dubai.

Oct. 23-24: Cardano Summit, Dubai.

Oct. 25-26: Plan B Forum, Lugano.

Oct. 30-31: Chainlink SmartCon, Hong Kong.

Nov. 9-11: NEAR Protocol’s [REDACTED], Bangkok.

Nov 12-14: Devcon 7, Bangkok.

Nov. 15-16: Adopting Bitcoin, San Salvador, El Salvador.

Nov. 20-21: North American Blockchain Summit, Dallas.

Dec. 5-6: Emergence, Prague

Jan. 21-25: WAGMI conference, Miami.

Jan. 30-31: PLAN B Forum, San Salvador, El Salvador.

Feb. 19-20, 2025: ConsensusHK, Hong Kong.

May 14-16: Consensus, Toronto.

May 27-29: Bitcoin 2025, Las Vegas.