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Welcome to The Protocol, CoinDesk's weekly wrap-up of the most important stories in cryptocurrency tech development. I'm Ben Schiller, CoinDesk’s Opinion and Features editor.
In this issue:
Sony’s blockchain faces memecoin controversy
Bubblemaps readies BMT and new intel desk
Babylon enhances Bitcoin’s interoperability
Prosecutors seek 95k BTC Bitfinex return
This article is featured in the latest issue of The Protocol, our weekly newsletter exploring the tech behind crypto, one block at a time. Sign up here to get it in your inbox every Wednesday. Also please check out our weekly The Protocol podcast.
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SONY EMBRACES BLOCKCHAIN, BATTLES MEMES: Sony, the 78-year-old Japanese electronics giant, is the latest legacy megacorp to explore blockchain technology. On Tuesday, the company announced that it is officially launching "Soneium," its general-purpose blockchain platform built on Optimism's OP Stack. The chain is aimed towards "bridging the gap between Web2 and Web3 audiences, especially for the creators, fans and community,” the team behind the network told CoinDesk's Margaux Nijkerk in a statement. Like similar general-purpose blockchains, the network is built to support a wide variety of use cases, from decentralized finance apps to entertainment and gaming services. While Sony's blockchain tech has attracted eyeballs over the past week, not all the attention has been positive. Within the first couple of hours of Soneium's launch, some X users complained that the network was blocking memecoin trading, leading to allegations that the (ostensibly decentralized) network was "censoring" certain kinds of transactions, a big no-no for some crypto adherents. The controversy underscored the unavoidable tension between hardline blockchain ideals and traditional corporate interests. But the incident also showcased crypto's resilience: Some savvy blockchain users found a workaround allowing them to "force through" transactions to the base Ethereum network, rendering Sony's alleged transaction-blocking moot. Read more.
BUBBLEMAPS WANTS MORE CRYPTO SLEUTHS: Bubblemaps, the blockchain analytics service, announced on X this week that it will be launching a token, BMT, and a new "Intel Desk" that will give holders a voice in driving investigations. Bubblemaps recently introduced the V2 of its platform, which helps crypto sleuths suss out who really owns the supply of a given token. The platform sorts closely related blockchain addresses into clusters, and its easy-to-read visuals have become a common sight on crypto Twitter, where they've been used to demonstrate suspicious supply patterns among popular memecoins and DeFi tokens. Bubblemaps V2, which started rolling out to users in November, added new AI-clustering features and made it easier to examine token distributions over time. Bubblemaps just-announced token, BMT, will be airdropped to users of the V2 platform. Holders will be given a role in the platform's "Intel Desk," where community members can propose investigations and vote on how Bubblemaps allocates in-house investigators and resources.
BABYLON BRINGS ZK MOMENTUM: Babylon Labs, developer of the largest BTC staking protocol, is building a trust-minimized Bitcoin bridge with the Cosmos network to enhance the world's oldest blockchain's interoperability. In partnership with developers Fiamma, Babylon is using the BitVM2 computing paradigm, which is designed to allow Ethereum-style smart contracts on Bitcoin, which then paves the way for zero-knowledge (ZK) technology. ZK computations allow different parties to verify that information is accurate without actually revealing to each other what the information is. In this sense, it is foundational to bridging digital assets between different blockchains. Developers like Babylon Labs and Fiamma are aiming to unlock the deep wells of value stored in BTC to finance other ecosystems and allow it to be transacted on blockchains that are free of some of Bitcoin's limitations of speed and scale. Read more.
BITFINEX: U.S. prosecutors have asked a federal judge to green-light the return of nearly 80% of the 119,754 bitcoins stolen in the 2016 hack of crypto exchange Bitfinex. In a Tuesday court filing, prosecutors said the 94,643 bitcoins recovered by the government from the original wallet used by the hacker, Ilya Lichtenstein, can be paid to Bitfinex as restitution in-kind once the court gives the go-ahead. The Bitcoin Cash, Bitcoin Satoshi Vision and Bitcoin Gold generated via several hard forks following the hack will also be sent to Bitfinex. Last November, Lichtenstein was sentenced to 5 years in prison after pleading guilty to conspiracy to commit money laundering in 2023. His wife, Heather Morgan – better known by her rap moniker Razzlekhan – received an 18-month sentence for helping Lichtenstein to launder a portion of the hack proceeds. Both agreed to forfeit the stolen cryptocurrency as part of their plea agreements. Read more.
Money Center
You Ain’t Seen Nothing
Bitcoin ETFs had record debuts in 2024. Analysts say the best is yet to come.
Treasuries multiply
Four new U.S.-listed companies have added bitcoin treasuries recently.
Regulatory and policy
U.S. banks should loosen rules for crypto companies, new FDIC chair says
Judges ask SEC to “explain itself” over rules refusal
Calendar
Jan. 20-24: World Economic Forum, Davos, Switzerland
January 21-25: WAGMI conference, Miami.
Jan. 24-25: Adopting Bitcoin, Cape Town, South Africa.
Jan. 30-31: PLAN B Forum, San Salvador, El Salvador.
Feb. 1-6: Satoshi Roundtable, Dubai
Feb. 19-20, 2025: ConsensusHK, Hong Kong.
Feb. 23-24: NFT Paris
Feb 23-March 2: ETHDenver
March 18-19: Digital Asset Summit, London
May 14-16: Consensus, Toronto.
May 27-29: Bitcoin 2025, Las Vegas.
XRP, the native token of the XRP Ledger network closely related to Ripple, surged to a six-year high on Wednesday as bitcoin (BTC) rallied to $100,000, with traders encouraged by this morning's highly-anticipated U.S. CPI inflation data report.
The token briefly topped $3 during early U.S. trading session for the first time since early 2018 January, before slightly paring gains. Recently changing hands at $2.95, it was 11% over the past 24 hours, outperforming bitcoin's (BTC) 3.6% and the broad-market benchmark CoinDesk 20 Index's 6.7% advances during the same period.
XRP has been among the best-performing tokens, with a 488% gain since Donald Trump's election victory. It has now become the largest cryptocurrency by market capitalization behind BTC and Ethereum's ether (ETH), reclaiming its third ranking from Tether's USDT stablecoin. At $170 billion of market value, the token is now larger than the market capitalization of asset management giant BlackRock (BLK). The gain was fueled by anticipation of crypto-friendly policies and an overhaul of digital asset regulation in the U.S. The Securities and Exchange Commission (SEC) and Ripple have been in a legal battle for years over XRP token sales.
"This surge is driven by a growing number of partnerships, the launch of Ripple’s stablecoin RLUSD, and speculation about a potential spot XRP ETF," Diego Cardenas, OTC trader and at digital asset platform Abra, said in a note shared with CoinDesk. Ripple President Monica Long said in an interview last week that she expects a spot ETF to be approved "very soon" as approvals with the incoming administration will accelerate.
XRP also broke out of the consolidation pattern started in early December that CoinDesk markets analyst Omkar Godbole noted last week, paving the way for the next leg in the token's rally. Another 15% rise from current prices would mean fresh all-time highs above the 2018 January top of $3.4. Still, adjusting for inflation over the years, XRP has to surpass $4.24 for a new high, Galaxy head of research Alex Thorn said in an X post.
Large investors' accumulating XRP tokens over the past two months could also fuel the rally towards new records.
Analytics firm Santiment noted that addresses holding between 1 million and 10 million tokens increased their holdings by 1.4 billion coins — worth roughly $3.8 billion — since November 12, continuing the accumulation while prices consolidated following early December highs. Read more: XRP Interest Jumps as Brad Garlinghouse Meets With Trump
With only a handful of days remaining until the second inauguration of U.S. President-elect Donald Trump, crypto policy groups are readying to kick things into higher gear.
Blockchain associations from eight U.S. states announced on Tuesday the creation of the North American Blockchain Association (NABA), an organization aiming to provide cohesive crypto policy recommendations to the federal government.
“A few years ago [NABA CEO] Arry Yu and I led an effort to provide more information and best practices sharing between state associations,” Lee Bratcher, president of the Texas Blockchain Council and a member of NABA’s board of directors, told CoinDesk. “NABA is the formalization of that process in which each state association is independent and retains agency but can act in concert with other states when necessary.”
Members include the Texas Blockchain Council, the Alabama Blockchain Alliance, the California Blockchain Advocacy Coalition, the Florida Blockchain Business Association, the Ohio Blockchain Council, the Pennsylvania Blockchain Coalition, the Virginia Blockchain Council and the Washington Technology Industry Association Cascadia Blockchain Council.
A former political science professor and Army officer, Bratcher founded the TBC in 2019. It’s a non-profit trade association, meaning that the organization gets its funding through memberships — large corporations such as Coinbase (COIN) and Galaxy Digital Holdings (GLXY), as well as law firms and banks, pay annual fees to be part of the association.
More than half of the TBC’s funding comes from bitcoin (BTC) miners: MARA Holdings (MARA), Riot Platforms (RIOT), Core Scientific (CORZ), Bitmain and Cipher Mining (CIFR) are among the association’s biggest financial contributors.
The incoming Trump administration isn’t likely to affect the TBC or Texas miners in a meaningful way, Bratcher said. That, in a sense, will already be a departure from the Biden regime, which contemplated passing a 30% tax, called DAME, specifically on bitcoin miners. The Department of Energy similarly attempted to collect proprietary and confidential information from bitcoin miners and make that data available publicly, which led the TBC and Riot Platforms to sue them in federal court.
“The only thing the bitcoin mining industry is asking from the Trump administration is to keep things fair and consistent and apply the rules the same for everybody,” Bratcher said. “We feel optimistic that some of the things that were unfair about the Biden administration will no longer happen.”
Texas and Miners
With its advantageous tax regime, enormous economy and abundant energy, Texas has become one of the most popular jurisdictions in the world for bitcoin miners.
Texas is home to a tremendous amount of renewable energy projects, and these may generate a lot of electricity when there’s little demand for it — think a wind farm on a windy night, for example, when everyone is asleep, and consumption is at its lowest. For the most part, electricity must be consumed immediately; transmitting that electricity from one place to another is also tricky since energy is lost in the process. In other words, Texas undergoes periods of great electricity generation and small demand and periods of great demand but insufficient production.
Why has Texas’ energy mix evolved in such a way? It all has to do with subsidies provided by the federal government, which according to Bratcher can reach $30 per MW/h and give a strong incentive for renewable energy companies to develop wind and solar power. Wind farms have been built in the wind corridor of West Texas; more recently, the number of solar projects has exploded — from about 2,000 megawatts (MW) to 22,000 MW statewide in a matter of five years, Bratcher said.
Enter bitcoin mining. Contrary to other types of data centers, which need almost 100% uptime, bitcoin mines can be turned on and off easily. So they are well-adapted to a grid that sees significant volatility in demand. “You had a period where miners were able to get wholesale power prices and lock in power purchase agreements for extremely low amounts of money,” Bratcher said.
Bitcoin miners now consume about 3,100 MW in Texas, according to Bratcher — enough energy to supply 620,000 homes, per data from the Electric Reliability Council of Texas (ERCOT), the state’s grid operator. “About half of all bitcoin mining in the U.S. is in Texas,” Bratcher said.
That explains why the TBC receives such a big portion of its funding from bitcoin miners. In fact, the TBC has hired a number of consultants with a specific focus on ERCOT and energy policy, whereas other types of businesses — crypto exchanges, money transmission — haven’t had the same need.
Will Texas remain friendly towards bitcoin miners in the years to come? That remains to be seen, Bratcher said. Mining firms aren’t the only ones that have rushed to take advantage of Texas’ unique grid, and there is now concern among elected officials that demand might end up being too high. The TBC estimates that the grid will grow somewhere between 5% and 6% per year for the next 10 years — a fast pace compared to the 1% or 2% per year of prior times.
Even so, ERCOT isn’t likely to discriminate against bitcoin miners specifically; it’s simply concerned with the rate of growth. New bitcoin mining operations, Bratcher said, are being built alongside new residential and industrial projects, and ultimately account for less than 10% of the anticipated growth.
“I think [ERCOT] will institute rules for how any large loads interconnect to the grid, and that will create some new planning requirements for bitcoin miners and other large loads, including data centers and industrial consumers,” Bratcher said.
On Jan. 20, 2025, the United States will start a new chapter in more ways than one. While the nation will be focused on President Trump's inauguration as our 47th President, the U.S. financial sector will be celebrating the resignation of Joe Biden's Securities and Exchange Commission Chair, Gary Gensler.
As a member of the House Financial Services Committee, I am well aware of Gensler's heavy-handed approach in stifling innovation and shackling the American economy's engine. His punitive stance was particularly damaging in the burgeoning field of cryptocurrency and blockchain technology.
While touting his actions as measures to protect investors, Gensler leveraged contrived ambiguity to undermine the growth and technological advancements that make U.S. markets competitive and drive promising projects offshore, including the development of the next generation of the internet.
Under Gensler's leadership, the SEC's enforcement-focused agenda frequently did more harm than good, and "regulatory uncertainty" was used to attack American crypto exchanges like Bittrex, Kraken, and Coinbase, with Bittrex explicitly citing the effects of Gensler's approach when it exited the U.S. market.
The question isn't whether cryptocurrency requires regulation — it unquestionably does. Cryptocurrency, by its very design, challenges traditional financial systems and demands an entirely different regulatory framework — one that balances consumer protection with the need to foster innovation. With the price of bitcoin recently breaking the $100,000 threshold, digital assets have demonstrated their staying power, and investors have already embraced their potential.
Last year, I was proud to help the House pass the Financial Innovation and Technology for the 21st Century Act, a bill championed by our incoming Financial Services Chair French Hill. FIT 21 represents a groundbreaking shift in the legislative landscape and would establish a responsible new regulatory framework that clearly defines the role of the SEC and the Commodity Futures Trading Commission. This would offer much-needed clarity to a rapidly evolving market and, unlike the SEC's enforcement-heavy playbook, FIT 21 both fosters transparency and innovation and protects consumers without stifling creativity. I applaud Rep. Hill for his work on this, and look forward to his ongoing efforts in tandem with President Trump in this arena.
President Trump demonstrated a keen understanding of cryptocurrency's transformative potential during his historic campaign. Polling demonstrates that his embrace of these issues helped him earn broad support from younger and more diverse voters for whom cryptocurrency is a staple of daily life.
During his first administration, President Trump's SEC worked collaboratively with the crypto industry to enforce securities laws without alienating innovators, offering clear guidance through landmark initiatives like the DAO Report and the Framework for Investment Contract Analysis of Digital Assets.
These resources provided critical insights to help entrepreneurs navigate compliance while building groundbreaking technologies.
Beyond the Biden administration's hostility to crypto, Chuck Schumer and Democrats in the Senate refused to consider FIT 21 after it passed the House with overwhelming, bipartisan support. Moreover, in New York, the courts thwarted Governor Hochul's attempt to shutter bitcoin miners by deploying the state's radical climate law.
In anticipation of President Trump's return and Republican majorities in the House and Senate, the crypto market is booming, with the price of bitcoin increasing by up to 33% since Election Day. Moreover, President Trump's new cabinet and the Department of Governmental Efficiency could revolutionize the way federal agencies operate and save taxpayers billions by integrating blockchain technology across government.
With President Trump's appointment of Paul Atkins as the next SEC Chair, we can expect a more thoughtful and transparent approach to governance and policies that encourage innovation while safeguarding investors — setting the stage for the cryptocurrency and blockchain sector to thrive and the creation of high-paying new American jobs. We will be able to move beyond the opportunities missed during the Biden administration and build a framework that positions the U.S. as a leader in the global digital economy.
Last June, a sailing buddy (and aerospace engineer) asked if I could check out a family friend’s “bitcoin.” He forwarded me an image of a plastic bitcoin wallet held with a private key partially obscured. The family friend had received the card as some sort of “gimmick at a conference” and tossed it in a drawer.
This is one of those moments where I find imposter syndrome perched on my shoulder, nodding its head, lips pursed. Two years in the business preceded by another two monkeying around in my personal account didn’t give me nearly enough crypto cred to say, “Oh, yeah, wow. I remember these.” Fine, I’m a noob. I made a no-promises disclaimer and quickly changed the subject.
Back home, I opened the image and set to work with the solemn determination of Quincy, M.E. (although forensic examination is an inapt metaphor, given the complete absence of foul play). How did these ancient wallets work? If the private key is printed on the card, how is that secure? I knew BIP39, but what’s BIP38?
Learning ensued. Then, I checked the bitcoin blockchain and noted that exactly one bitcoin had been moved to this address nine-and-a-half years earlier, when a bitcoin fetched just over $325. No activity since. As for the obscured BIP38 “private” key, you need a passphrase to decrypt it. Uh-oh. Did the family friend save the passphrase for ten years, on a Post-it® now worth $100,000?
—
This week, we were out to see a show with a different group of friends. I offered to reimburse them for our tickets with crypto. “Set up a Phantom wallet, copy and securely store the seed phrase, and send me your Ethereum address. I’ll pay you in ether or USDC, your choice.”
I saw all the faces. Chuckle, eyeroll, are you serious, wait-a-minute, hmmm, why not, OK! I’m still waiting for that Ethereum address, but I have no doubt this will happen. Another “gimmick,” ten years later.
Why ETH or USDC? Why not bitcoin? In 2025, bitcoin is no longer a mystery. Folks get it, and if they are thinking about buying a digital asset, they’ll find bitcoin on many shelves. It’s a store of value. It’s scarce. As more buyers enter the market over time, its value should rise.
Many folks do not get Ethereum, nor smart contract platform blockchains. Folks don’t get stablecoins either, nor the fact that they rely on other blockchains, and involve paying fees in ETH or SOL or a dozen other blockchain coins. For the “5%ers” — those who will eventually spend 5% of their investing energy and resources on crypto — this feels like the next key intuition unlock.
There is no better way to get there than to put a few “learning dollars” (i.e., not “investment dollars”) on-chain and move them around. I hope my friends take their new USDC and throw some on AAVE, bridge some to Solana, and buy something on Uniswap.
This primary research might solidify an investor’s conviction in a single platform. Or, just the opposite: it may solidify conviction that picking winners is hard in what is likely to be a year of explosive growth. XRP, XLM, and HBAR sat atop the 2024 leaderboard of the CoinDesk 20 Index, an outcome few would have predicted. We feel — actually, we are expecting — that investors and advisors will choose diversified market beta over the possibility of selection alpha.
The holders of the plastic-wallet bitcoin did not “take the bait” and become active bitcoin enthusiasts (presumably), although, ex post, they did the right thing by throwing the wallet in a drawer for 10 years (along with a Post-it® with the passphrase; whew!). These days, I’m trying to take as many opportunities as possible to get folks to fire up a wallet and get some blockchain experience. (But if not, I’ll still be good for the theater tickets with fiat.)