The Protocol: Bitcoin NFT Debacle, Vitalik’s 30th, Farcaster Frames, ‘Private Mempools’

Ok,
sure,
humans
invented
blockchains.
But
why
do
they
have
to
mess
it
all
up?

In
this
week’s
issue
of
The
Protocol
newsletter,
we’ve
got
lots
of
humans
doing
things
in
blockchain
–
some
quite
impressive,
not
all
so
successful.
There
was
the
messy-and-ultimately-suspended
sale
by
Taproot
Wizards
of
its
inaugural
“NFTs-on-Bitcoin”
collection
“Quantum
Cats,”
and
Wednesday
brought
news
of
a
reported
hack
at
Ripple.

Our
Sam
Kessler
writes
about
the
“private
mempools”
that
Ethereum
users
are
relying
on
to
keep
transactions
from
getting
picked
off
by
front-running
“MEV”
bots,
and
Margaux
Nijkerk
reports
on
the
growing
use
of
“councils”
–
call
them
blockchain
boards
–
that
projects
are
creating
to
provide
adult
supervision
over
still-quite-adolescent
networks.

PLUS
–
January’s
leaders
and
laggards
among
the
CoinDesk
20
digital
assets.

This
article
is
featured
in
the
latest
issue
of


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Protocol,
our
weekly
newsletter
exploring
the
tech
behind
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one
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ME-OUCH!
With

robust
development
and

NFT
minting
atop
once-sleepy
Bitcoin
tipped
to
be
one
of
blockchain’s
hottest
trends,
this
week’s
sale
of
the
“Quantum
Cats”
digital-art
series
from
the
Ordinals
inscriptions
project
Taproot
Wizards
was
supposed
to
be
the
cat’s
meow.
After
all,
it
was
only
a
couple
months
ago
when
Taproot
Wizards,
led
by
Udi
Wertheimer
and
Eric
Wall,

raised
$7.5
million
from
investors
amid
a
wave
of
euphoria
over
“NFTs
on
Bitcoin.”
And
earlier
this
month,
the
first-in-series
“Genesis
Cat”
fetched
a
fur-fluffing

$254,000
at
the
venerable
auction
house
Sotheby’s.
Remaining
Quantum
Cats
were
set
for
a
fixed
sale
price
of
0.1
BTC,
or
about
$4,300
at
the
current
bitcoin
market
price.
But
when
the
Taproot
Wizards
minting
website
opened
on
Monday
to
whitelisted
buyers,
there
was

more
sour
milk
than
catnip.
Frustrated
claimants
filled
up
the
Taproot
Wizards
Discord
channel
with
screenshots
showing
web
glitches
and
hung
transactions.
“This
has
got
to
be
one
of
the
worst
mint
experiences
I’ve
ever
seen,”
one
user
wrote.
Taproot
Wizards
suspended
the
process
after
about
1,000
of
the
3,000
images
were
sold,
according
to
project
officials,
delaying
the
remainder
until
Tuesday,
and
then
subsequently

delaying
it
again
until
Thursday.
“We
didn’t
live
up
to
your
expectations
of
us
and
to
our
expectations
of
ourselves,”

Wertheimer
posted
on
X.
At
this
point
nobody’s
talking
about
purr-fection.

BLOCKCHAIN
BOARDS:
“Trust
the
humans”
might
be
the
new
mantra
for
Ethereum’s
top
layer-2
projects.
As
our
Margaux
Nijkerk

reported
this
week,
that
principle
stands
at
the
core
of
a
new
trend
in
the
blockchain
industry,
where
overseers
of
various
networks
are
establishing
groups
of
people
to
help
steer
protocol
changes
and
ensure
security.
The
goal
of
these
“protocol
councils,”
sometimes
called
“security
councils,”
is
to
nudge
the
nascent
networks
toward
increasing
decentralization,
by
gradually
removing
them
from
under
the
control
of
their
original
developers.
Before
cutting
the
cord
completely,
where
the
networks
essentially
run
automatically,
or
subject
to
some
sort
of
democratic
process,
the
thinking
is
that
a
panel
of
well-meaning
humans
can
serve
as
the
ultimate
guardians
–
able
to
step
in
quickly
when
emergencies
arise,
or
providing
the
final
sign-off
on
major
protocol
changes.
Polygon,
the
Ethereum
layer-2
network,
has
a
13-person
“Protocol
Council.”
Arbitrum,
another
major
Ethereum-focused
layer-2,
has
a
“Security
Council,”
while

Optimism
also
has
a
“Security
Council.”
A
member
of
the
Polygon
council,
Mehdi
Zerouali,
who
is
the
director
of
Sigma
Prime,
a
blockchain
security
firm,
told
CoinDesk
that
“This
is
a
necessary
evil.”

Top
picks
of
the
past
week
from



our
Protocol
Village


column,
highlighting
key
blockchain
tech
upgrades
and
news.

See
the
entire
Protocol
Village
list
from
this
past
week
here.

Ethereum
is
swarming
with
bots
that
are
programmed
to
front-run
transactions.
The
bots
exploit
the
brief
window
of
time
between
when
transactions
are
submitted,
and
when
they’re
officially
finalized,
to
copy
trades
from
other
users,
quickly
execute
them,
and
in
doing
so
eat
into
any
would-be
profits.

It’s
a
practice
called

maximal
extractable
value
(MEV),
and
it’s
a
huge
nuisance
to
novice
crypto
traders
and
to
veterans
alike.

But
Ethereum’s
transaction
pipeline
has
undergone
a
quiet
shift
over
the
past
two
years
as
more
of
the
chain’s
users
have

embraced
“private
mempools”
to
execute
their
trades
–
bypassing
the
blockchain’s
“public”
transaction
lobby
to
avoid
broadcasting
trades
to
the
whole
world
before
they’re
finalized.
This
helps
to
prevent
MEV
and
help
users
get
better
settlement
for
their
transactions.

While
there
are
obvious
benefits
to
this
stealthier
mode
of
using
Ethereum,
experts
say
private
mempools
carry
risks
of
their
own.

“I
think
most
everyone,
including
myself,
expects
there
to
be
more
private
transactions
moving
forward,
not
less,”
Matt
Cutler,
CEO
of
MEV
firm
Blocknative,
told
CoinDesk.
“I
think
the
big
question
in
my
mind
is,
would
more
private
transactions
be
a
good
thing
or
a
bad
thing
for
the
network?”

Read
the
full
story
by
Sam
Kessler
here

Fundraisings

Deals
and
Grants

Data
and
Tokens

Our
colleagues
at
CoinDesk
Indices
earlier
this
month
unveiled
a
new
“CoinDesk
20”
index,
positioned
as
the
new

benchmark
for
crypto-markets
performance
–
the
blockchain
industry’s
version
of
the
Dow
Jones
Industrial
Average.
It’s
a
market-capitalization-weighted
selection
of
the
biggest
digital
assets
in
the

CoinDesk
Market
Index
(CMI).

Through
the
first
30
days
of
January,
the
CoinDesk
20
slid
5.1%,
underperforming
the
Standard
&
Poor’s
500
Index,
a
benchmark
for
the
stock
market:

Luckily
for
The
Protocol
readers,
we
can
track
the
leaders
and
laggards
in
the
CoinDesk
20
each
month
to
monitor
who’s
up
and
who’s
down
among
the
biggest
blockchain
projects,
at
least
in
the
eyes
of
crypto
traders.

Big
losers
in
January
included
XRP,
which
tumbled
18%;
Polygon’s
MATIC,
down
16%;
and
Filecoin’s
FIL,
off
16%.
The
big
winner
was
the
proof-of-work
blockchain
Ethereum
Classic’s
ETC,
which
gained
14%
despite
the
project
being
a
bit
of
an
afterthought
in
crypto
developer
circles.
Bitcoin
(BTC),
by
far
the
biggest
member
of
CD20,
with
an
$854
billion
market
cap
that’s
roughly
equivalent
to
all
other
blockchains
combined,
managed
to
eke
out
a
gain,
its
fifth-straight
month
in
the
green.
So
did
Ethereum’s
native
cryptocurrency,
ether
(ETH):