The Protocol: CZ's out, Altman's in, and Kraken's Sued

The tech news cycle this past week was dominated by the straight-out-of-HBO boardroom drama at OpenAI, but the crypto world – not to be outdone by its AI brethren – has brought its own bombshells.

The big story this week was around Binance, whose high-profile CEO, Changpeng "CZ" Zhao, will be stepping down from his post at the company as part of a sweeping plea agreement with U.S. prosecutors. The world's largest crypto exchange, Binance will pay over $7 billion in fines to the U.S. Treasury and Commodity Futures Trading Commission in "one of the largest penalties" the U.S. has ever obtained from a corporate defendant – money that could help the industry avoid yet another blockbuster criminal trial. Zhao has long been a controversial figure in the crypto space – owing largely to the opaque nature of his exchange giant, whose centralized command structure and shadowy inner workings fly in the face of core blockchain tech principles around transparency and decentralization. But as Zhao's tenure at Binance was eulogized across X (formerly Twitter) this week, fans (and even some critics) credited him for spearheading a period of tremendous growth for the broader industry – even as it's now clear that Binance's own rise came at the cost of U.S. sanction-incompliance and in brazen defiance of money-transmitting laws.

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Network news

ORACLES' NEED FOR SPEED: A single millisecond can make or break a trade in the world of traditional finance, but decentralized finance apps tend to operate on a much slower timescale – with certain market data taking minutes or even hours to populate on-chain. The year 2023 has marked a breakout in the race to provide lower-latency pricing data to blockchains, with oracle firms like Chainlink and Pyth Network duking it out in a battle to make on-chain trading more hospitable to speed-obsessed Wall Street speculators and high-frequency traders. Developers use oracles to shepherd off-chain data, like token prices, onto (or between) blockchains. The main issue until recently has been the inherent latency in decentralized networks, where geographically distributed nodes take time to reach consensus, leading to delays that can slow down data from oracles. Chainlink, a frontrunner in the oracle space, recently introduced Data Streams to reduce latency and operational costs, offering a pull-based oracle system that enhances efficiency. Pyth Network, an oracle firm that was in the news this week for its token airdrop, has also been an early mover in the latency race – it's been particularly active on the Solana blockchain, where it offers low-latency pricing data sourced directly from first-party financial firms. Other players in the oracle race include Band Protocol, Witnet, Tellor, XYO Network, Razor Network and WINkLink. A key focus for the sector moving forward will be reconciling tradeoffs between speed, reliability, and decentralization – a balancing act for virtually all crypto protocols, but one that's particularly prescient in the context of critical oracle infrastructure.

ALSO:

• Sam Altman will be reinstated as CEO of OpenAI less than a week after his surprise-ouster by the artificial intelligence startup's board. Last week's firing of Altman, OpenAI's founder and Silicon Valley's chief AI visionary, upended the tech world and drove OpenAI employees into open revolt.
• HTX, the crypto exchange previously known as Huobi, and Heco Chain, a related blockchain protocol, were hacked for a cumulative $97 million early on Wednesday. It's the second major hack this month to hit the crypto empire of Justin Sun, the TRON blockchain founder who serves as an "advisor" to Huobi.
• Bittrex Global, the crypto exchange that shuttered its U.S. arm last May after incurring a $24 million fine from the U.S. Securities and Exchange Commission, is winding down the whole of its operations.
• Tether, the largest stablecoin issuer, has frozen $225 million worth of its USDT stablecoin following an investigation by the U.S. Department of Justice (DOJ) into an international human trafficking syndicate in Southeast Asia.
• Santander Private Banking International, part of Spanish financial services giant Banco Santander, is offering high-net-worth clients with Swiss accounts trading and investing in the major cryptocurrencies bitcoin (BTC) and ether (ETH), according to an internal announcement seen by CoinDesk.

Protocol Village

Highlighting blockchain tech upgrades and developments.

1. Fhenix, which announced a $7M fundraising in September to build a "confidential blockchain" powered by fully homomorphic encryption or (FHE), disclosed Thursday that it is "introducing FHE Rollups to boost privacy on Ethereum and similar networks." According to a message from the team: "These rollups enable secure on-chain transactions and private applications, letting developers craft confidential layer-2 networks while staying compatible with Ethereum." Fhenix founder Guy Zyskind told CoinDesk in an interview that "We're going to have our canonical Fhenix L2 mainnet," but also "We're trying to be the encrypted rollup stack" that builders can use to create their own networks.

2. DLN, which stands for deSwap Liquidity Network, a cross-chain trading infrastructure build on deBridge, has entered into a strategic partnership with bloXroute, a DeFi performance provider, "to provide MEV searchers, institutional DeFi traders and projects with lightning-fast intents-based cross-chain value exchange," according to the team. (EDITOR'S NOTE: Please go here for my piece last week on what "intents" are and why they're becoming an important design concept in blockchain technology.)

3. Frax Finance's community has approved a plan to use Axelar, a protocol for secure cross-chain communication, for expansion to additional chains.

4. Strike, a bitcoin payments firm, has expanded its services to allow users from 36 countries (soon to be 65+) beyond the U.S. to buy bitcoin through its app.

5. ZkLink, a developer of zero-knowledge-proof-powered blockchain solutions, announced the launch of Nexus, a production-ready and highly customizable layer-3 or "L3" designed to bridge the gap among different ZK Rollup layer-2 or "L2" ecosystems, to reduce liquidity fragmentation, according to the team.

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

Money Center

Funraisings

• Colony Lab, an Avalanche ecosystem developer and accelerator, said it will invest $10 million to support the long-term growth of the network.
• Taproot Wizards, a Bitcoin-focused Ordinals project, raised $7.5 million in seed funding to try and "make bitcoin magical again."
• Privy, a crypto startup focused on consumer tools, has raised $18 million in a Series A round led by Paradigm, with participation from earlier investors including Sequoia Capital, BlueYard Capital and Archetype, according to a blog post.
• Union Labs, which aims to create an efficient zero-knowledge interoperability layer, has successfully raised $4 million in seed funding to build the "first fully trustless bridge that connects appchains, layer-1, and layer-2 networks," according to the team.

Deals and grants

• As the designated blockchain sponsor in Alibaba Cloud’s Innovation Accelerator program, the Aptos Foundation will provide builder resources and ecosystem fund support to promising Aptos-built projects, according to the team.
• After many months on the auction block, CoinDesk gets acquired by Bullish from Digital Currency Group.

Data and tokens

• Ordinals Protocol tokens, a growing class of digital assets based on the Bitcoin blockchain, have gained hype amid mounting speculation that a Bitcoin exchange-traded fund might soon earn approval. The sector's market cap increased by 21% in a 24-hour period late last week, with tokens TRAC, MEME and NALS leading the gains.
• Polygon, the Ethereum side-chain, saw gas fees spike 1000x due to a flurry of activity around its own Ordinals-inspired "POLS" tokens, according to Cointelegraph.
• Bitcoin gained nearly 3% on the news that Javier Milei, a far-right "anarcho-captalist" and self-avowed blockchain supporter, had won a closely-watched runoff election to become Argentina's next president.

Regulatory, Policy, and Legal

• Binance, the largest crypto exchange, has made settlement deals with the U.S. Justice Department and Commodity Futures Trading Commission (CFTC) that will allow it to avoid a lengthy court battle in exchange for fines topping $7 billion.
• Changpeng Zhao (CZ), Binance's high-profile CEO, has pleaded guilty to violating U.S. criminal anti-money-laundering charges and has stepped down from his role at the company.
• Kraken, another leading crypto exchange, has been accused by the U.S. Securities and Exchange Commission of operating an unregistered platform and improperly mixing customer funds.

Calendar

• Nov. 28: EOS native consensus upgrade with “instant finality.”
• Dec. 1-3: Africa Bitcoin Conference, Ghana.
• Jan. 30: Stellar upgrade for Soroban smart contracts, public network readiness date.
• Feb. 22-24: Bitcoin++, Buenos Aires.
• April 2024 (estimate): Next Bitcoin halving.
• April 8-12: Paris Blockchain Week.
• May 29-31, 2024: Consensus, Austin Texas
• July 25-27: Bitcoin 2024, Nashville.