Thirteen years after first Bitcoin purchase, layer-2 solutions struggle to gain traction

May 22, 2023 Coin Telegraph

In an interview with Cointelegraph, Trust Machines CEO Muneeb Ali explains how Ordinals’ hype could support Bitcoin by attracting more developers and capital to layer-2 solutions.

Thirteen years after the world’s first Bitcoin (BTC) pizza purchase, the pioneer cryptocurrency network faces a new wave of disruption thanks to the advent of Ordinals, the recently launched protocol that allows adding digital content such as art — i.e. nonfungible tokens — in the Bitcoin blockchain.

Since the launch of Ordinal NFTs on the Bitcoin mainnet in January 2023, the network's traffic has increased significantly, spiking transaction costs and spotlighting issues surrounding Bitcoin.

Bitcoin mempool, the “waiting area” for incoming transactions on the network, has over 286,000 pending transactions at the time of writing. While the number is lower than the peak of 400,000 clogged transactions at the beginning of the month, it is still historically high.

In an interview with Cointelegraph’s Joe Hall during last week’s Bitcoin Builders, Muneeb Ali, the CEO of Trust Machines, explained how Ordinals NFT’s hype could support Bitcoin in attracting more developers and capital to layer-2 solutions.

“Bitcoin is the largest asset. We should have the best devs, the best scientists trying to work on Bitcoin layer-2s,” said Ali. He believes the fee spike provided clear evidence to developers and investors that layer-2 protocols for Bitcoin are in demand.

The purpose of layer-2 solutions is to improve the scalability, privacy, and other characteristics of layer-1 blockchains, such as the Bitcoin network. Ali's Trust Machines is a layer-agnostic ecosystem for Bitcoin applications, building on various layers in the Bitcoin network.

*Total number of transactions on the Bitcoin blockchain in the past 12 months. Source: Blockchain.com*

There is a $500 billion market potential untapped on the BTC network, claims Ali, referring to BTC’s current market capitalization of $521 billion. Products, users and the amount of Bitcoin sent on the Lightning Network (LN), the layer-2 payment solution built on top of its blockchain, has skyrocketed in 2023. Despite the figures, the Bitcoin space continues to struggle for developers, and there are no entities “playing the game,” explained Ali.

Bitcoin, the CEO says, is “so decent,” a benefit that can still hinder the development of a solid developer ecosystem. “There is no marketing department, there is no foundation, there’s no incentive. That’s why it is grassroots decentralized and most decentralized driven.”

Increasing Bitcoin fees may attract more developers, but won’t unlock its global potential if layer-2 solutions don’t gain traction as a category for venture capitalists, defends Ali. “If collectively, Bitcoin layer-2s emerge as a very attractive category, and there’s better education around why it is interesting, it is a narrative as well. I think the community can have a very grassroots narrative, and there’s a ton of support for Bitcoin out there.”

Magazine: Ordinals turned Bitcoin into a worse version of Ethereum — Can we fix it?

Coinbase’s Base network gets OpenZeppelin security integration

April 19, 2023 Coin Telegraph

Coin Telegraph

Contract upgrades, admin changes and protocol tweaks can now be made using standard APIs that were previously unavailable on Base.

The OpenZeppelin Defender smart contract security platform has now integrated with Coinbase’s Base network, allowing Web3 app developers on Base to automate security tasks.

According to an April 19 announcement from blockchain cybersecurity firm OpenZeppelin, app developers on Base can now use the Defender software to create multi-signature admin contracts and timelocks, employ Relayers to store keys and sign transactions along with creating automated “sentinels” to monitor the blockchain and react when events occur.

These tools can be used for routine but sensitive admin tasks such as upgrading contracts, tweaking numerical parameters, or pausing a contract should an emergency occur according to the program’s documentation.

The Defender app was available on Ethereum and most other networks in the past, but as it was not integrated with Base, developers could not use it on the new testnet until now.

OpenZeppelin's CTO Jonathan Alexander stated in the announcement that the integration will make smart contracts "more secure and expansive” while Base lead Jesse Pollak signaled excitement at the team-up saying that “security is key for a thriving onchain ecosystem."

Coinbase announced the launch of the Base test network on Feb. 23. It plans to produce a mainnet version as a layer-2 of Ethereum once testing is complete.

Some Ethereum users have speculated that Coinbase wants to help onboard institutional investors to Web3 through the new network as it will feature Masa Finance identity verification tools.

OpenZeppelin is most known for its library of open-source smart contracts which are often modified by developers and used for their own purposes throughout the Ethereum ecosystem.

Ethereum layer 2 bridging up sixfold year-on-year in Q1 — Alchemy

April 18, 2023 Coin Telegraph

Arbitrum

Layer 2s also saw increased development activity, with year-over-year smart contract deployment increasing by 160%.

Ethereum layer 2s, such as Optimism, Arbitrum and Polygon, increased in popularity in the first quarter of 2023, according to a report from Web3 development platform Alchemy. Ethereum users bridged over $635,000 worth of crypto assets to these networks from January to March, an increase of 44% over the fourth quarter of 2023 and 518% over the first quarter of 2022.

The report, titled simply “Web3 Development Report,” cited Dune Analytics as its source for this data. It showed that users only bridged approximately $103,000 worth of assets to layer 2s in the first quarter of 2022, whereas the same three months in 2023 produced over $635,000 in bridging volume.

Alchemy suggested that this increased activity may have been reinforced by successful airdrops from Optimism and Arbitrum in Q1, 2023.

In addition to increased asset bridging from users, layer 2s also showed greater activity from developers. Although the deployment of smart contracts related to layer 2s decreased by 30% relative to Q4 2022, it still increased by 160% when compared to Q1, 2022, the report said.

The crypto industry is coming off the back of a steep downturn in trading volume and crypto prices during 2022, with scandals like the UST depegging and FTX collapse causing many investors to shy away. But despite this negative sentiment, users still flocked to these new scalability solutions.

The Ethereum ecosystem as a whole also showed increased developer interest. Ethereum software development kits (SDKs) such as Ethers.js, Web3.js, Hardhat and Web3.py were downloaded 1.3 million times in Q1 2022. This became 1.9 million in the first quarter of 2023, an 8% increase. In addition, downloads of the MetaMask SDK, a tool used to develop apps that can interact with Ethereum wallet MetaMask, increased in each month of the first quarter.

Ethereum layer 2s have been offered as a solution to Ethereum’s scalability problem, which has been periodically causing high gas fees since as early as 2020. Some experts have argued that sharding the Ethereum network will also help to cut down on gas fees.

ERC-20 tool recovers $150M — Coinbase exec explains how

April 13, 2023 Coin Telegraph

ERC-20 tool recovers 0M — Coinbase exec explains how

Coin Telegraph

Will Robinson, vice president of engineering at Coinbase, explains the crypto exchange’s plan to increase its on-chain presence with new tools and the Base network.

In episode 15 of Cointelegraph’s Hashing It Out podcast, Elisha Owusu Akyaw talks with Will Robinson, vice president of engineering at crypto exchange Coinbase. They discuss the exchange’s vision for the future of the cryptocurrency industry, which is tied to its new Ethereum layer-2 network, Base. Robinson provides updates on the exchange’s latest tools, including an ERC-20 recovery function, wallet as a service and more.

The episode starts with Robinson explaining what his role entails. Robinson explains that he manages the developer product group responsible for internal crypto infrastructure, developer-facing products and protocol-facing efforts. Despite the regulatory activity and “drama in the market,” Robinson believes building in the crypto space has never been this exciting

“I think the world is moving on-chain by default. It is going to happen in fits and starts — on-chain is the new online.“

As part of Coinbase’s plan to build more on-chain tools, the United States-based exchange launched Base, an Ethereum layer-2 network. According to Robinson, Base is a product born out of the exchange’s sturdy movement internally to build more things on-chain. Robinson hopes that Base would become the default on-chain home for Coinbase to steer its users into the larger crypto ecosystem, while partnering with developers to build applications for mass adoption.

The cryptocurrency industry has seen multiple layer-2 networks, such as Arbitrum and Optimism, release their ecosystem tokens. Rumors on social media have tipped Coinbase to release a token for the Base network, but Robinson says there will be no token or airdrop.

Late last year, Coinbase launched an asset recovery tool for users who “mistakenly send unsupported tokens” to exchange addresses. According to Robinson says the ERC-20 recovery tool has been used by over 10,000 users who have recovered over $150 million in assets.

Robinson also describes the concept behind the wallet-as-a-service product by Coinbase, which is attracting Web2 applications intending to add Web3 features such as digital collectibles or nonfungible tokens.

Listen to the latest episode of Hashing It Out with Will Robinson on Spotify, Apple Podcasts, Google Podcasts, or TuneIn. You can also explore Cointelegraph’s complete catalog of informative podcasts on the Cointelegraph Podcasts page.

Masa announces soulbound ID tokens for Coinbase’s Base Network

April 4, 2023 Coin Telegraph

Coin Telegraph

The token protocol can be used for a wide variety of applications, including membership badges, loyalty programs, decentralized captcha bots, and credit underwriting.

Masa Finance’s soulbound tokens will soon be available on Coinbase’s Base network, according to an April 4 announcement from Masa Finance. The new tokens will allow users to link identifying and reputational characteristics to their wallet addresses, making credit underwriting possible on the blockchain, the company said.

@getmasafi to Launch Soulbound Token Protocol & Developer Toolkit on @Build0nBase

Blockchain With the Base SBT Developer Toolkit Masa will support the seamless deployment and interaction with SBTs on Basehttps://t.co/MA9RDWYBAA #SBT #web3 #Masa #Soulbound #nft #identity pic.twitter.com/bGRxTXxYqb
— Wartask (,) (, ) (@Wartask1) April 4, 2023

Masa had previously released its Soulbound Token protocol for Ethereum and Celer.

In its announcement, Masa stated that the protocol can be used for a wide variety of applications, including human-readable domain names, membership badges, loyalty programs, achievement badges, decentralized captcha bots, and more.

It will release a Base SBT Developer Toolkit within the coming weeks that “will support the seamless deployment and interaction with SBTs on Base,” which will include a quickstart guide, Masa command line interface, software development kit, REACT developer tools, and examples of how to build applications using Masa soulbound tokens.

Coinbase is the largest centralized crypto exchange in North America. It launched its Base Network testnet on Feb. 23, planning to implement it as an optimistic rollup layer 2 for Ethereum. On March 23, Coinbase issued a Request for Builders asking developers to create several protocol types for Base, including an on-chain reputation system.

In response to this request, Masa began developing a Base version of its soulbound protocol, the company said in its announcement.

The announcement of Base Network’s creation has contributed to bullish sentiment within the Ethereum community, with some users expressing hope that it will lead to greater onboarding of Coinbase users to Ethereum. In an interview with Bloomberg Radio, Coinbase CEO Brian Armstrong claimed that “centralized players” on Base will need to implement some form of identity verification for users.

Arbitrum’s first governance proposal sparks controversy with $1B at stake

April 2, 2023 Coin Telegraph

Arbitrum

The Arbitrum Foundation announced that it was only ratifying an existing decision when it proposed a 750 million ARB tokens budget.

A proposal to fund the Arbitrum Foundation with 750 million ARB tokens — nearly $1 billion — raised controversy in the ARB community over the weekend, as the Foundation announced that it was only ratifying a decision that had already been made.

The conflict comes after a few days the layer-2 protocol airdropped its governance token.

According to the AIP-1 proposal on Arbitrum's DAO, the 750 million tokens would be used to cover "Special Grants, reimbursing applicable service providers [...] and covering ongoing administrative and operational costs of The Arbitrum Foundation."

Among tokens holders, over 70% are against the move at the time of writing.

*Screenshot: AIP-1: Arbitrum Improvement Proposal Framework. Source: Arbitrum DAO.*

After facing backlash from community members, the Foundation said in a forum post on April 2 that AIP-1 was a ratification, not a proposal. It also noted that part of the tokens were already sold for stablecoins. In other words, its billionaire budget and allocations would not be subject to an on-chain governance process.

The Arbitrum Foundation claims the symbolic first governance attempt failed due to communication problems and decisions that were "clearly not articulated correctly":

"One of the mistakes in the drafting of AIP-1 was a failure to note at the outset that this proposal was intended to act as a ratification of the initial setup of both the Arbitrum DAO and the Foundation that has been created to serve the DAO. [...] the point of AIP-1 was to inform the community of all of the decisions that were made in advance."

Commenting on the governance forum, members of the community pointed out that Arbitrum's team "has been dumping tokens that were initially informed to the community as locked tokens," claiming that "all tokenomics page shows only User airdrop + DAO airdrop tokens as unlocked" with remaining "tokens to unlock in March 2024."

Arbitrum foundation made a proposal (AIP-1) to allocate 750M ARB tokens for admin and op costs, but $ARB holders voted against it

Now they said the vote was just a formality, and they have already spent 50.5M (6.7%) of the proposed 750M $ARB

Your vote is not vote pic.twitter.com/lvhBbBesum
— Eden Au (@0xedenau) April 2, 2023

Others highlighted that under the United States securities laws, the anticipated sale would be considered fraud, and that U.S. citizens who have bought ARB tokens or claimed the airdrop "are eligible for legal remedies."

"I will be pursuing this with my lawyers and expect to file a securities fraud lawsuit in the next few days. [...] Immediately, the Arbitrum Foundation is advised to halt all illegal sales of the token that are being done without any authorization and against the provisions of the law," said a community member.

Arbitrum's blockchain holds 65% of the Ethereum layer 2 market share, shows data from the layer-2 analytics site L2Beat. The highly anticipated launch and airdrop of its native governance token took place on March 23, with hundreds of thousands of eligible users and DAOs claiming ARBs. Overwhelming user demand led the airdrop claim page to crash shortly after its launch, Cointelegraph reported.

Injective launches layer-2 testnet for Solana-based apps in Cosmos

March 30, 2023 Coin Telegraph

Coin Telegraph

The new testnet is one of the few networks that uses Solana’s Sea Level Virtual Machine (SVM).

Developers may soon be able to port Solana Web3 apps to the Cosmos ecosystem, bringing new users to these apps and providing a greater variety of uses for Cosmos blockchains.

According to a March 30 announcement from the developer of Cosmos-based network Injective (INJ), the team has released a layer-2 testnet that utilizes Solana’s Sea Level Virtual Machine (SVM). This means that some Solana developers can now test their apps for use in the Cosmos ecosystem without needing to change the programming language or tooling used.

In a conversation with Cointelegraph, a representative from Injective said the name of the new network is “Cascade” and that it uses optimistic rollup technology.

According to the announcement, the new layer was created with the help of Eclipse, a company that provides customized zero-knowledge and optimistic rollups for developers.

Eric Chen, co-founder and CEO of Injective Labs, stated that the integration should help both the Solana developer community and Cosmos users:

“This new SVM rollup for the Cosmos IBC world will not only empower developers from Solana to deploy their DApps on Injective, but it will also create more opportunities for users to experience the best Web3 DApps in one integrated network.”

Injective stated that the testnet is currently private, but it is “offering a limited number of spots exclusively to select Solana developers” beginning on March 30.

The number of active Solana developer teams increased over 1,000% year-over-year in the third quarter of 2022, according to a report by Alchemy. The network features several apps with over 2,000 unique users, including the nonfungible token marketplace Magic Eden and DeFi protocol MeanFi, according to Web3 analytics company DappRadar.

However, Solana Web3 apps are written for use with the Solana SVM, which is used by few networks other than Solana itself. This makes it difficult for Solana developers to port their apps to other networks without extensive rewriting.

Eclipse also created an SVM rollup for Polygon on February 23.

Cosmos is a group of interconnected blockchain networks developed using the same consensus engine and software development kit. They are connected through the Cosmos Inter-Blockchain Communication Protocol (IBC), and assets on one network can be transferred to others within the Cosmos ecosystem. Injective is one of the networks that make up this ecosystem, and the new SVM rollup is a layer-2 of Injective.

Injective Labs isn't the only company trying to make Solana apps compatible with Cosmos. Nitro Labs also announced the development of an SVM rollup for the Sei network in September and released a decentralized exchange for its testnet in February.

The Cosmos ecosystem has been growing over the past two years. On March 11, Cosmos Hub governance approved the V9-Lambda upgrade that begins to implement Interchain Security (ICS), allowing members of the ecosystem to share validations resources. On March 29, Circle announced that it will launch USDC for Cosmos via the Noble Network.

Arbitrum airdrop hype helps zkSync addresses jump over 5X in a week

March 20, 2023 Coin Telegraph

Arbitrum

Airdrops were created as a marketing tool before the ICO era, rewarding traders for promoting the project and holding its token for a certain period.

Arbitrum, a layer-2 scaling solution for Ethereum, announced the airdrop of its ARB governance token on March 16, with eligible receivers expected to get the token by March 23. The hype around its airdrop has now helped another layer-2 solution, zkSync, to see significant week-over-week growth.

ZkSync is another layer-2 scaling solution for Ethereum, supporting nonfungible tokens (NFT), and atomic swaps and transfers of Ether (ETH) and ERC-20 tokens within the Ethereum network.

According to data from crypto on-chain analytic firm Nansen, more than 39,000 addresses have bridged over $871 million to zkSync in the last seven days. The number of addresses bridging to zkSync has swelled by 5x in the last week.

*Ethereum layer 2 trading volume. Source: Nansen*

After the Arbitrum airdrop, zkSync and StarkNet are regarded as the upcoming airdrops with the most potential value. On March 17, nearly 5,000 people deposited more than 536 Ether (ETH) using the zkSync Bridge, and nearly 3,000 users deposited more than 234 ETH using the StarkNet Bridge.

Although zkSync neither have a native token yet nor it has announced any airdrop, the enthusiasm around the Arbitrum airdrop has fueled many proponents to believe they would be rewarded in the near future just like the Arbitrum.

The hype around the airdrops could be understood from the fact that there were multiple fake and scam airdrops being carried out in the name of Arbitrum.

#CertiKSkynetAlert

Be aware of a fake @arbitrum Twitter account which is advertising a token Airdrop.

Do not interact with this Airdrop.

Always verify Twitter accounts and URLs from trusted sources.

Stay vigilant! pic.twitter.com/gTlSNRzd6l
— CertiK Alert (@CertiKAlert) March 19, 2023

A crypto airdrop is a promotional tool for crypto projects to generate hype around the project. The crypto projects behind these airdrops often directly deposit digital tokens into the wallets of active blockchain community members as a gift. Many of these airdrops have certain pre-set eligibility criteria that reward users for spreading awareness around the project.

Although very popular during the early stages of the crypto ecosystem with the first airdrop coming in 2014, the marketing strategy has dimmed down in recent times, owing to regulatory scrutiny.

Not all crypto airdrops are equally valuable owing to multiple factors such as the people behind the projects, the use cases that the project offers and much more, However, Arbitrum, Optimism, and ZkSync are some of the early layer-2 solutions with a proven records. This has attracted more traders to aim for the airdrop as it would prove to be more valuable than the usual crypto airdrops.

Coinbase launches its own layer-2 network for building decentralized apps

February 23, 2023 Coin Telegraph

Coin Telegraph

The network, known as Base, is designed to be a low-cost, secure, developer-friendly environment that Coinbase said will serve as a bridge to bring users into the crypto economy.

On Feb 23, crypto exchange Coinbase announced the launch of Base — an Ethereum layer-2 network. The company claimed that this new network will offer a low-cost, secure, developer-friendly environment for building decentralized apps (DApps) on the blockchain.

According to Coinbase, Base is designed to be a bridge for users into the crypto economy, offering access to other L1 ecosystems like Solana and making it interoperable with other chains. It will also provide access to Coinbase’s products, users and tools as well as easy fiat on-ramps and powerful acquisition tools. The company said it has no plans to issue a new network token.

1/ We’re excited to announce @BuildOnBase.

Base is an Ethereum L2 that offers a secure, low-cost, developer-friendly way for anyone, anywhere, to build decentralized apps.

Our goal with Base is to make onchain the next online and onboard 1B+ users into the cryptoeconomy. pic.twitter.com/RmwZFJzGGs
— Coinbase (@coinbase) February 23, 2023

Base will be built on the “OP Stack” used by Optimism. It will start off highly centralized, though Coinbase has released a detailed plan regarding how the network will decentralize over time.

In its announcement, Coinbase said that Base will be “fully open source and freely available.” The company said it is joining the OP Stack core dev team to “ensure it’s a public good available to everyone.”

According to the announcement, Coinbase will continue to integrate as an exchange with other networks, and Base itself will be “a bridge, not an island.” Coinbase intends Base to be an easy-to-use network for its customers to get familiar with using crypto, but it will encourage users to “start on Base, but go everywhere.”

In its decentralization plan, Coinbase said that it is working with Op Labs and the Optimism Collective to decentralize the Optimism ecosystem by creating a “Superchain” of connecting networks built on the OP Stack. The company judges that the current version of Optimism is a “Stage 0 rollup,” citing Vitalik Buterin’s post on the decentralization of rollups. By the end of 2023, Coinbase said it plans to have progressed Base to “Stage 1.”

Starkware commits to open source its ‘magic wand’ Starknet Prover

February 5, 2023 Coin Telegraph

Coin Telegraph

The prover is the crucial engine Starkware uses to roll up hundreds of thousands of transactions and compress them into a tiny cryptographic proof written on the Ethereum blockchain.

Ethereum layer 2 scaling solution StarkWare announced plans to open source its proprietary Starknet Prover under the Apache 2.0 license, which has processed 327 million transactions and minted 95 million nonfungible tokens (NFTs) to date.

The prover is the crucial engine Starkware uses to roll up hundreds of thousands of transactions and compress them into a tiny cryptographic proof written on the Ethereum blockchain.

“We think of the Prover as the magic wand of Stark technology. It wondrously generates the proofs that allow unimaginable scaling,” said Eli Ben-Sasson, president and co-founder of Starkware.

*Eli Ben-Sasson presenting at the Starkware sessions 2023. Source: Cointelegraph*

Starkware has faced criticism from the crypto community and competing solutions such as ZK Sync and Polygon for holding onto the IP behind its tech, which contradicts blockchain’s open source and interoperable ethics.

Making the prover open source under the Apache 2.0 license will enable any other project or network — or even games or database developers — to make use of the technology, edit the code and customize it. The tech was released in 2020 and is already being used by ImmutableX, Sorare and dYdX.

*A sneak peek of the Starkware sessions 2023. Source: Cointelegraph*

Avihu Levy, Starkware’s head of product, was reluctant to commit to a time frame for open-sourcing the prover but said it would occur after the token launch and decentralization of Starknet itself. He agreed, however, that it would be possible this year.

“We want to move forward with a decentralized, permissionless network and that means that you need to have this critical component out there,” he revealed speaking to Cointelegraph.

Levy said the decision to open source the prover showed Starkware was increasingly confident about its technology and said it would also enable projects to be more confident about using it as a crucial part of their protocols.

“In StarkEx, it’s sometimes considered vendor lock-up or lock-in. So the commitment wasn’t just a business commitment it was a technology commitment to StarkEx,” he explained.

“This is a strong signal that you will have everything you need to run it yourself independent of Starkware.”

Starkware has already open-sourced its programming language and EVM competitor Cairo 1.0, Papyrus Full node and is in the process of open-sourcing its new sequencer.

Ben-Sasson launched the Starkware Sessions conference in Tel Aviv on Sunday, which organizers said was the largest layer 2 conference held so far.

“This is a landmark moment for scaling Ethereum,” he told about 500 developers and guests. “It will put Stark technology in its rightful place, as a public good which will be used to benefit everyone."

layer2