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In this installment of "The Protocol," hosts Brad Keoun, the founding editor of The Protocol Newsletter, and tech journalists Sam Kessler and Margaux Nijkerk, explore the following stories:
Cosmos - Cosmos' founder Jae Kwon favors splitting the blockchain into two
Cosmos Hub is an intermediary among all independent blockchains created within the Cosmos network. ATOM powers the Cosmos ecosystem of blockchains programmed to scale and interoperate with each other
Ethereum Name Service (ENS), in an intellectual-property dispute with rival Unstoppable Domains.
ENS Founder Nick Johnson told CoinDesk he’s unhappy with Unstoppable Domains's patenting of work that he claims he produced and published earlier.
PROTOCOL VILLAGE SEGMENT
BLAST
The idea of a yield-paying layer-2 blockchain atop Ethereum has demonstrated market allure. However, even the project's biggest investor has taken issue with the execution and marketing surrounding the initial rollout.
And something hot off the presses - CELO
With hot competition between layer-2 technology providers like Optimism, Polygon, and Matter Labs, Celo's choice is being closely watched by the blockchain industry.
EPISODE LINKS |
Cosmos Founder Calls for Chain Split; ATOM Down 3%
'We Are Prepared to Go to the Mat:' ENS Founder on Patent Dispute With Unstoppable
Celo Developer Proposes Mid-January Timeline for Evaluating Closely Watched Layer-2 Move
Blast's One-Week, $600M Haul Shows Promise of Yield, Pitfalls of Hype
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Audio Transcript: This transcript has not been edited and may contain errors.
Brad
Hello and welcome to the protocol podcast. I'm Brad Kound here with my co-hosts, Margo Nykerk and Sam Kessler. First, before we get into it, please do not forget to subscribe to our weekly newsletter, the protocol on coindesk.com. And now let's get into it as we say with the latest news and developments in technology behind crypto and blockchains. In our first segment, we're gonna be talking about Cosmos.
and the big story this week from our colleague, Omkar Godbala. Cosmos founder calls for chain split. This is kind of an interesting one, Sam. Why don't you just start off by kind of summarizing what was this story?
Sam
Yeah, so Cosmos is, for those who aren't familiar, like this family of blockchains that are all connected using this similar sort of technology, kind of like in some ways to what we talk about with optimism, arbitrum, and some of these other things that are doing similar stuff in the Ethereum layer 2 space. But anyway, Cosmos has been doing this for a while, and one of the founders, Jay Kwan, and we can get into this in a little bit, he is a bit of a controversial figure in that ecosystem. And after losing a governance vote,
that would change the tokenomics for Adam, which is one of the tokens that runs the Cosmos Hub, which is one of the blockchains, or the blockchain that kind of originated the Cosmos ecosystem. He's proposed a chain fork after losing this governance vote that would change, like I said, the tokenomics, in specific, the inflation rate of Adam, this token. And that all just sounds like kind of a mess of words, but...
It does kind of show a lot about this Cosmos ecosystem. And it matters because not necessarily does this fork matter and that's something I kind of think would be fun to tease out, but it matters because it just does show that there is kind of like vibrancy going on outside of the Ethereum sphere that we focus on so much in this podcast.
I don't know, do you guys have any thoughts, any questions about what's going on in Cosmos Land? Because it is a mess that I had to report on a ton last year, which was really hard for me to get up to speed on.
Margaux
Yeah, so I mean, maybe for someone who's not so familiar with what's going on in the Cosmos ecosystem, maybe we can take a step back and sort of like high level. Why? Like, why is this making headlines? Like, why should, why, why are we paying attention to this all of a sudden? Like, what, what's the connection?
Sam
That is a very good question. So I did a bunch of calls yesterday trying to get to the bottom of that exact question. Why does it matter that this blockchain is forking? So a fork for those who don't remember famous like Bitcoin to Bitcoin Cash Forks or the Ethereum to Ethereum Classic fork that we saw after a big hack a while ago is just the idea of taking your code, spinning up a new blockchain, and then just operating it as if it was there the whole time.
I mean there's differences, but essentially it's spinning up a new blockchain based on the code of the old chain, but with a new social consensus layer, quote-unquote, which is just like new people running the chain that are more ideologically aligned moving forward. So why did this make headlines? I don't think, based on the conversations that I've had with Cosmos industry figures, I don't think it's made headlines because this is actually going to go anywhere. It's really hard to spin up a fork, and we'll see.
If it happens, there's a ton of politicking that you need to do behind the scenes in order to get people onto your side. But I think this whole fork thing does always get headlines. Because those things I mentioned, Bitcoin Cash, which is still going after many years, which was like a shoot-off from Bitcoin, and Ethereum Classic, which gained more traction following Ethereum's shift to proof of stake last year. Forks are always just like this big headline-grabbing thing, but, you know.
It doesn't really mean anything at its core. So we have stuff in this article where some people are suggesting that, hey, this might be a great thing for Adam as a whole. But if it does even happen, you know, there's tons of stuff that would need to happen. Nor it's not like you just rip off, you know, or ripping a chain in half. You're just spinning up something completely new based on something old. Yeah, a lot has to happen.
Brad
I mean, one of the bits of feedback or information that has kind of come out since this story ran is that Jay Kwan is, he is, at least some of the people who are kind of core Cosmos folks say that he is, you know, maybe not been a core part of this project for a while. And...
Sam
Mm-hmm.
Brad (
So I'm curious, how does that factor into all of this?
Sam
Yeah, I think, yeah, I guess talking about this story means we get to talk a little bit about the crazy founding story of Cosmos, which at a very high level is just that this guy Jay Kwan and another guy Ethan Buckman Buckey founded something called All in Bits. They built Cosmos Hub, which was the original Cosmos chain, and the Tendermint, you know, this blockchain engine that powers a bunch of other blockchains now.
But after a ton of rancor within the organization All in Bits, which was renamed to Tendermint, Ethan first left. And then Jae was basically ousted, even though he retained shares and tokens, because a lot of people disagreed with his leadership. They spun off and formed these other organizations. And a bunch of other people kind of jumped in and seized kind of the leadership vacuum. But then Jae Kwon came back to Tendermint, which was renamed to Ignite by this point. Then he renamed it to New Tendermint. And now people are even more angry at Jay because they say that he's not actually involved in core infrastructure development for Cosmos anymore. He's more interested in this thing called No Land. He also goes by Jaysus on X and has a lot of, well, controversial to put it lightly.
Tweets that have had people concerned about what it would mean for him to be a real figurehead for the community. But he hasn't really been focused on core Cosmos technology outside of some big governance debates that we've seen in recent months. And so this, to some people, is just another example of Jay kind of jumping in and just trying to kind of assert some sort of influence over this project that he has largely stepped back from.
So yeah, I mean, hopefully that makes sense. There's so many more names that I just didn't even name because it becomes a huge, interesting, honestly, mess of people.
Brad
Let's wrap it up there. I mean, in general, you know, Cosmos is just so fascinating, just the people there. I met Ethan Buckman at the permissionless conference here in Austin in September. And it was a fascinating conversation. But as we're gonna talk about layer twos later in today's episode. And, you know, I mean, Sam, you've written about how the Cosmos model, you know, it was in many ways the inspiration for all the kind of Ethereum scaling roadmap that we're seeing now.
So, all right, well, let's move on to...
Our next story here, this was such a fun one, Margaux. And this was actually the story you wrote before Thanksgiving, but we haven't discussed it yet since we didn't do a recording last week. But let's get into this. And Nick Johnson, the man behind the story is on Coin Desk TV on Thursday. But...
Margaux, why don't you tell us a little bit about this interesting story that you wrote.
Margaux : Yeah, so I mean this caught the attention of crypto publications a few weeks ago when Nick Johnson, the founder of the Ethereum name service, the E&S, wrote an open letter on X basically claiming that its competitor Unstoppable Domains had won a patent to, or had won a patent that basically he claimed that.
Johnson claims uses, makes use of ENS's code and work and what he's developed. And so this is an interesting story because it sort of gets at the heart of open source and the ethos of this technology sector that we cover, but also at the balance sort of between this, on the one hand, these values and this viewpoint, and on the other hand,
Um, yeah, like business, you know? Michelle, should I keep going?
Brad
So Margo, okay, so tell us, you know, I think there's a couple of things going on here, right? I mean, number one is this idea of, you know, whether that's cool to patent a bunch of stuff, right? And I, there was a, our former colleague, David Z. Morris circulated this piece.
few months ago about, it was like the early auto industry. And, you know, it was like this whole community of people working to build, okay, now we're gonna build the air conditioner or the, you know, the alternator, like different parts of the vehicle. And then, and then there was this one person who was a complete patent troll who started just patenting stuff.
and everybody in the community kind of hated him because he was like slowing down the pace of innovation. So there's that debate, but then also here, there's actually a separate debate over whether they actually stole the technology, right? Is that another question?
Brad
You know, there is another question here, Margo. I think this came up in some of, you know, our back and forth with the unstoppable team, right? Is whether it's true that the technology was actually first created by ENS.
Margaux
Yeah, well, Unstoppable has come out with their own evidence showing that they have actually, that they have receipts that they also have originated some of this technology. And then they also invited ENS to join this alliance to pledge on working on this kind of stuff. And so...
It's really, like Nick told us that he doesn't believe that this alliance is being done in good faith. He thinks that Unstoppable is sort of using this alliance as to be like a de facto regulator of the industry and that they would hold that sort of power as a leader in that. And so, yeah, I just think it's an interesting story because it's not just about the technology itself, but it's also just about the dynamics between competitors and between like a subsect of an industry. And so,
And so, yeah, we're just gonna, you know, this is a story that's continuing to evolve. Nick is not afraid to, you know, go to court and fight some of the things he claims is being stolen. And so we'll just have to see what they decide to do.
Sam
Do we have any sense of where community figures are kind of landing on this? I've gone through the tweet threads and it's hard to suss out because whenever you're on X, you just see a bunch of people who are in the camp of whatever account you're looking at just supporting them frequently for things like this. It's just hard to figure out real traffic from fake traffic. I don't know. From your conversations, do you think both of them have a good...point or are people more sympathetic to the ENS side, for instance?
Margaux
I think there's a little bit of both. Like you said, I think that the NS community has a strong community. And so any time that Nick says something that X sort of makes their voices more grandiose just because of the algorithm, and also same on the other side with Unstoppable. But I also think that Big Picture, this is almost that we're.
On Twitter, it's sort of being framed as good versus bad. Someone stole intellectual property. The other one is here to do, you know, to create something that's like a community good or what he claims is a community good. And so it's very easy to sort of make the story black and white. But I think there's a lot more nuance in this that is, you know, is trying to be told. So we'll just have to wait and see what, yeah.
Brad
Margo, you know, I mean, just to maybe wrap this segment up, but I mean, I'm curious, when you talk to the Ethereum folks and they say,
Do they agree with this broader idea that we're all going to be interacting?
from these domains, you know, with the way, the basic concept of having a domain and that's gonna, I'm gonna do this and I'm gonna do that and I'm gonna be liquidity, right? I'll probably use that on my Twitter handle, but you know, what do, is that gonna be the normal way that humans are gonna be interacting in the 20, the late 2020s or whatever?
Margaux
That's a really interesting question. I don't know specifically, like this is just my take right now. I think a year and a half ago when ENS was having a huge surge, I think everyone in the Ethereum community did believe that was the way of interacting with different blockchain addresses. I'm not entirely sure now. My guess is it's more complicated as there are more tools being used to easily identify blockchain addresses and also ways to combine certain addresses to make them more unified profile so that it's not all split up in different segments. And so I think there's definitely, I think maybe the ENS and the unstoppable domains people would probably agree together on this, that yes, this is the way forward.
But I think more generally speaking it's more complicated and we'll have to see, we'll have to see, I mean, maybe, you know, it starts to play out on layer twos, but it did for a while.
Brad
Like Vitalik, has Vitalik ever commented on this topic?
Margaux
Not to my knowledge, but I could be wrong about that.
Brad
Yeah, but it's not like a big thing for him. He's focused. They're, yeah. Yeah, yeah, right.
Margaux
This is more social than it is on the dev side. This definitely hits Web three more than it does on the protocol level.
Brad
Right, right, okay. All right, that is a cool story, Margaux. And we're gonna wrap it there for that segment. We're gonna take a quick break. When we come back, we're going to talk about Blast, the blast from the present or the future.
And that was pretty corny, huh? But that's what we're gonna talk about. And Sam has the story there, but we're also gonna talk about some interesting layer two developments, including one that's hot off the presses. We'll be right back.
< Commercial Break >
Brad
Okay, we are back and thank you for being with us here on the protocol podcast. We're gonna talk about a story that really broke last week, right Sam? And we, Sam, Sam took a deep dive on this story for the early this week.
And the big story, why don't I, I'll just give a quick summary, but Blast, we've been writing about the layer two explosion on Ethereum. There's all of these layer twos. Margo's been all over that story. Sam read a big story about blockchain in a box, Arbitrum Optimism, Polygon, Matterlabs, all these teams that have their own L2s basically providing-
kits that people can do to spin up layer twos, new layer twos atop Ethereum. And here was a new one, Blast, and they showed up and they had a new idea where it was going to be a layer two that pays yield. And they said that was a differentiator. And all of a sudden there's like $600 million in this thing and it's not even a live blockchain yet. So Sam, why don't you take it from there?
Sam
Yeah, it kind of, to me, this story shows both how far we've come and how far backwards we seem to still be, at least in terms of the direction we're moving or that money is moving in this ecosystem. So Blast, like you said, is this layer two. In less than a week, it's got $600 million deposited into it. So what is it at this point? It's just a wallet on Ethereum with a three out of five multi-sig, meaning three people.
Out of five people, we don't know who they are, which is kind of a common thing because we want to keep them anonymous for security, but three people kind of have the ability to move these funds wherever. And right now, like I said, it's just a wallet. The BLAST team promises that this wallet will soon become a layer two blockchain. The information though, past the fact that it will be a quote unquote optimistic roll up, sort of like optimism, one of the types of roll ups that we've talked about on this show. The information.
past that is pretty sparse. We don't really know what it's going to be. So the reason why we've seen all this money here is because of this crazy incentive scheme where they say you're going to get yield. If you deposit into this spark contract that does not have withdrawals into this wallet, that doesn't allow you to take your funds back. And that yield comes from two places. First, it comes from rehypothecating assets, putting them into places like Lido.
Essentially, they're just taking user deposits and putting them mostly into Lido, the liquid staking protocol on Ethereum today, and giving users some of the returns. But a lot of the money and a lot of the reason why you've seen hype around this is because of this FOMO marketing, where it's like, hey, not only are you going to get these market leading yields, but also if you invite other people to deposit into this wallet that you can't currently withdraw from, at least for three months until we say we're going to launch this thing, you're also going to be entitled to a larger share of this airdrop this new token that we're going to print out and distribute to early adopters. Um, why that token should be worth money. Just like anything else here, we don't know. The market might give it money. I might say it's worth money. Honestly, my bet is it probably will. I mean, this is not investment advice at all. I don't know if the tone of this would make one want to invest into something like blast, but there's a good chance this is crypto. That airdrop will be worth some money, but it's still kind of harkens back to these days from before where it's like people were willing to put their money into these protocols.
Margaux Nijkerk
Mm-hmm.
Sam
With flimsy technical specs or at least flimsy, you know, kind of opaque inner workings just because of hype. And that's why people are angry about this, including one of their lead investors.
Brad
I mean, it is true. Well, everything you're saying, although it's also true if you go back to DeFi summer of 2020 and just earlier this year, the example of Coinbase's base sometimes, you know, projects just this is the way it works in crypto. It's just somehow people find these things to stick money into. It's pretty fascinating. And so, yeah.
Sam
Well, it's like the bankman freed black box thing. Remember that from the DeFi days where he got in trouble for this, even though he was actually, I think, trying to make fun of this system where all that DeFi was in a lot of cases, or yield farming, was putting money into black boxes, closing your eyes, I don't care what happens there, and money comes out. And that was seen as kind of a silly sort of mechanic and the entire space was roasted, and he was roasted as a result. He made those comments to Matt Levine on Bloomberg.
Brad
Just looking at the DeFi Lama here and 620 million already in this thing on Total Value Lock TVL, that's basically Solana, you know?
Sam
Yeah. You put this into my story too. It's bigger than Coinbase's base, like which was, you know, seen as a huge success. It's got around 582 million in several months. So this is a lot of money. So even though people are yelling about it, right? Like who cares? If people are yelling about it, if the space, you know, hasn't learned if in dollar terms or, or doesn't care in dollar terms. And hey, who's to say this is really, you know, it's probably not a scam.
Margaux
Yeah.
Brad
Yeah.
Sam
otherwise paradigm would go under. That's a big, you know, it would be a huge hit to its reputation. So anyway.
Margaux Nijkerk
We'd have a lot of work to do if paradigm went under. But anyway, but I'm also a little bit off of that. I'm looking at L2B and you're right. There's more money locked into blast than it is in then base. The only two that have more is arbitrum and optimism. So I'm wondering, does this even have a chance to really compete with some of these other L2s? Because.
I was also perusing Twitter X, whatever, when all this was going down and it was really interesting to see some of these L2 founders, specifically Brendan Farmer from Polygon sort of noted that from a technical side, I wouldn't even know why people would wanna put their money into something that claims to be an L2 if there's no documentation showing that there's fraud proofs or fault proofs. The whole debate with...
when Stephen from Arbitrum came back up again about fraud versus fault proofs, or even, sorry, I said fraud versus fault proofs, but I meant, I meant ZK proofs. So you know, just that there's no technology, or at least there's no evidence of technology that's sort of backing this thing. And so, you know, there's all this money locked into it, but there's no security mechanisms in place. And so I'm wondering, even with a price tag, does that mean that it still can compete with these other L2s? Like L2s are some of the-founders that are sort of leaving, leading the space worried about what this means for the ecosystem. Like, I don't know, what's, what, what have you sort of heard about all this?
Sam
Yeah, I mean, back in the days of yield farming, when we were talking about these black boxes, you saw this phenomena where you just have mercenary sort of yield farmers, where they'd come in, drop their money wherever it's going to get the biggest yields or get the most promised airdrop, and then leave as soon as they arrived once withdrawals unlock, once that airdrop comes and hits, whatever the time scale is, or how things are set up, the incentive model in that system. So that's something that we might see here.
Um, and whether it can sustain users is really going to depend on the, a, um, continued incentives, whether it can continue to offer incentives to users, which it says it'll be able to do because it does differentiate itself. At least at a high level, we don't know how it's going to be built, but they do say they're going to give native yields by reinvesting people's money, people's deposits behind the scenes into yield bearing protocols like LIDO. Um, which means that at a surface level for users using it, even if it's not as safe and
That's a whole other conversation. And we don't know because we just don't have the details of what this thing's ultimately gonna look like. Even if it's not as safe of a platform, as far as users are concerned, just looking at it, you know, using this thing, they might just have a system that works the same as Optimism or Arbitrum, but also pays them yields a little bit on top. And you know, the bet here is that that's actually going to be a good retention strategy. But again, we don't actually know how they're going to do that in the longterm. There's so much we don't know.
And there's so much that we still don't know about their security system. There's more to say about how they're currently keeping money secure with this multi-signature wallet, and we have some of that in the story. But, you know, that's another thing. Yeah, anyway, I'll stop there, Brad.
Brad
Well, you know, I think let's just take a tiny little moment and talk about some news that I covered last night, which was the news that Celo blockchain, which is, you know, tiny compared to Ethereum and Solana. Well, not, you know, it's about one, let's see. I think I looked it up last night. It was number 27, the 27th largest blockchain according to DeFi Llama. Okay, you know, a lot of times you're not really talking about the 27th, number 27, you know, who's number 27. But in this case, Celo is seen as a legit project, you know, with a decent community and smart people. And so, and they're looking for somebody to basically merge with or merge into, right?
And so they're talking to all these different layer two teams, they're talking, initially they were, so basically they're standalone blockchain, they're gonna turn into a layer two on Ethereum. And initially they were just gonna use Optimism's OP stack. And then all of a sudden Polygon came in and said, hey, why don't you use us? And then Matter Labs came in after that and said, hey, why don't you use us? So this is one of the rare fun moments where it's not all scripted. You know, we're having some competition. We went from all these layer two announcements that just sort of show up. Blast is kind of like that. Hey, here it's out, you know, or it's up or whatever. In this case, it's more of a, okay, we're gonna have a contest and there's so much money on the line and marketing and pride and first mover advantage and as one of my ideas has just been, it's so hard for anyone from the outside to really judge who's got the best tech on these things.
And so we defer to these teams who are basically the customers making, kicking the tires and making a choice. Are you gonna buy a Hyundai? Are you gonna buy a Honda? Or are you gonna buy a Tesla? You know, so.
Brad
And anyway, they came out last night with the framework they're gonna evaluate over the next month, or actually just over the next couple of weeks. And then they're gonna make a decision by mid January. So we're gonna see who they pick, but it's interesting. I don't think blast has really come clean on who they're using. What do you think about that, Sam? What do we know about that?
Sam
I don't think we know anything. I mean, you kind of just like hit it with what you just said there. Like we still don't know how this thing is going to work, which is kind of at the core of this entire story. Whether they, if they choose one of these big stacks, it would be a boon for that stack on some level because of course more money flowing into any ecosystem is in this world typically deemed a good thing.
But again the sustainability of this business is going to come down to how they continue to retain users in the long term. And whatever ecosystem it chooses, if it can't figure out a strategy to do that, or if it fails to do that, which could be a big PR mess, we'll have ramifications for its partners as well as the core technology or the core team itself.
Margaux
Yeah, I mean, I will say that it sounds like they're like, Cello is gonna make its, has its timeline, its framework ready in January. Blast will blast off in February. So we'll have to, you know, keep an eye on the L2 race and stacks in that time of the year, it seems like. It won't be leaving us in 2024.
Brad
That is entirely fair points, Margaux. And it does, it's just, this never ceases to give us the news, the gift from the news gods on the layer two race. It's just like a new thing all the time.
So anyway, all right, we should probably wrap it there.
Want to thank our amazing producer Michele Musso, who is behind the scenes making us sound good.
And we wanna thank you for joining us this week. And if you have any questions or any stories, tips that you wanna pass off to us or any comments, please reach out to us at podcasts at coindesk.com subject line, The Protocol.
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Thanks a lot. See you next week.
