September 27, 2023

Exploring the tech behind crypto

one block at a time

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Hi, Bradley Keoun here, editor of The Protocol.  

Alert readers of The Protocol will remember our smart feature last month on the concept of “restaking” on Ethereum – essentially a way of sharing the blockchain’s security among other protocols and networks. For today’s issue, our Margaux Nijkerk sat down for an interview with Sreeram Kannan, the University of Washington computing professor who now serves as founder of EigenLayer, the most well-known among restaking pioneers. (Spoiler alert: He acknowledges the systemic risks flagged by Ethereum co-founder Vitalik Buterin.) 

Also in this week’s issue:

EigenLayer’s Sreeram Kannan on the Hot (and Risky) Ethereum Trend of ‘Restaking’

EigenLayer founder Sreeram Kannan. (Bradley Keoun)

Sreeram Kannan was a professor at the University of Washington, Seattle, when he started working for its blockchain research lab in 2017.

It was there while working at the lab that he founded his company, EigenLabs, the organization behind EigenLayer – a blockchain protocol considered a pioneer in a just-now-arriving trend in the Ethereum ecosystem known as restaking. The idea is to repurpose ETH tokens staked on the Ethereum blockchain for double duty, using them to provide security for other applications.

EigenLayer has been in the news lately, as the restaking ecosystem starts to take shape. Some top Ethereum figures have also raised flags about the risks; Ethereum co-founder Vitalik Buterin at one point cautioned that the new feature could ultimately pose systemic risks to the main blockchain’s stability.

We spoke with Kannan last week, where we asked him questions about EigenLayer and restaking. Some highlights include:

On August 17, 2023, the Court approved Celsius Network LLC, et al.’s Disclosure Statement for the Joint Chapter 11 Plan of Reorganization of Celsius Network LLC and Its Debtor Affiliates (the “Disclosure Statement”) [Docket No. 3337] and established a timeline to solicit votes on the Joint Chapter 11 Plan of Reorganization of Celsius Network LLC and Its Debtor Affiliates [Docket No. 3319] (the “Plan”).  A hearing is scheduled to begin on October 2, 2023, at 2:00 p.m., prevailing Eastern Time, at which time the Court will consider Confirmation of the Plan.  All those eligible to vote on the Plan should carefully read the Disclosure Statement filed at Docket No. 3332 before deciding whether to vote to accept or reject the Plan.  The deadline to vote on the Plan and/or to object to Confirmation of the Plan is September 22, 2023, at 4:00 p.m., prevailing Eastern Time.

Network News

James Tromans, Google Cloud’s head of Web3. (CoinDesk TV) 

GOOGLE BLOCKCHAIN: In a sign that big tech companies are nosing into blockchain, Google’s cloud-computing division is increasingly popping up in crypto news headlines, and top executives focused on Web3 are making the rounds with media. Last week, Google Cloud announced it would add 11 networks including Polygon, Optimism and Polkadot to its ‘BigQuery’ program for public datasets, originally set up for Bitcoin in 2018 and later expanded to additional chains including Ethereum, Litecoin and Dogecoin. “Over the past 18 months we’ve been investing in this space, we’ve continued to hire, we’ve continued to grow not only our business development and our go-to-market teams but also our product and engineering capabilities,” James Tromans, Google Cloud’s global head of Web3, told CoinDesk TV in an interview last week. “We’re not just fly-by-night.” On Sept. 14, Orderly Network, a decentralized exchange designed for white-labeling, posted on X that it would “exclusively develop off-chain components of DeFi infrastructure” on Google Cloud, and that it would be “actively involved in alpha testing Google’s Web3 innovations.” Over the past couple years, Google has announced business initiatives with BNB Chain, Celo, Polygon, Celo, Axie Infinity, LayerZero Labs, Solana and Tezos. It bears reminding readers that Google’s push to develop quantum computing has been posited as an existential threat to the blockchain industry, since theoretically such ultra-fast machines might be able to crack the cryptography underpinning digital-asset networks. 

ETHEREUM’S BAD RAP: How has the Ethereum blockchain performed since April’s Shapella upgrade, which allowed staking withdrawals for the first time? It might depend on whom you ask, and how you ask the question. In a widely-circulated report, JPMorgan analysts noted that “the increase in network activity has been rather disappointing.” According to the bank’s calculations, the daily transaction count over the network has fallen by 12%, and daily active addresses are down 20%. The analysts acknowledged the steep drop in Ethereum’s energy consumption as a result of the “Merge” shift to a proof-of-stake network a year ago, as well as the overall reduction in issuance of new ETH – a bullish factor. But Akash Mahendra, director of Haven1 Foundation, which supports the Haven1 network, notes that the acute focus on Ethereum alone might take too myopic a view – since it might ignore the rapid growth of layer-2 networks that work atop Ethereum and have absorbed many of the transactions that might otherwise take place on the layer-1 blockchain. The build-out “yielded substantial improvements in scalability and alleviated congestion on the mainnet,” Mahendra said in emailed comments. Even so, transaction activity on Ethereum has been so anemic lately that the supply curve has recently reverted to being inflationary. A fresh source of criticism is that Ethereum developers appear to have fallen behind in their push toward the next big upgrade, known as Dencun. Galaxy’s Christine Kim wrote last week that the developers are now cautioning that they are unlikely to activate Dencun this year if they can’t get the upgrade launched on a test network before Devconnect, an Ethereum-focused conference set for mid-November in Istanbul.  

YOU SNOOZE, YOU LOSE: Arbitrum Foundation, which maintains the development of the Arbitrum blockchain, said Sunday it had transferred 69 million (worth $59 million) in unclaimed ARB tokens to the network’s treasury, after the claim period ended.

BUT ARE YOU WINNING? The median pay globally among 570 blockchain engineers surveyed was $120,000, with those in North America getting $193,000, up 1.5% versus the prior year, according to a new Pantera study. (The study also found that 97% of crypto-industry employees take their salaries in fiat currencies, and that 88% of roles are remote.)

Also:

Schematic of the invalid block on the main Bitcoin network. (OxB10C/X)

Protocol Village

Money Center

Is Crypto Winter Starting to Thaw?

Crypto funding by category over the past three weeks. (FundStrat)

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