The Protocol: Bitcoin Halving in 3 Weeks, Solana’s Yakovenko on Meme Coins

It’s a sign of how fast crypto moves that Ethereum’s landmark Dencun upgrade last week is already fading from the headlines.

Eyes are now turning to Bitcoin’s next quadrennial halving. There’s also plenty of gawking at the meme coin frenzy on Solana. (Who doesn’t like sloths?)

In this week’s issue of The Protocol:

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HALVE TIME: The expected date of the next Bitcoin halving keeps creeping forward – thanks to miners upgrading to faster, more powerful machines and powering up older models, incentivized by this year’s BTC price runup to a new all-time high around $74,000. The halving’s ETA is now somewhere around mid-April, a couple weeks earlier than was expected a few months ago. A similar thing happened four years ago, when prices were also surging, essentially causing the blockchain to speed up. What’s different this time around – and perhaps different from pretty much every prior halving in the network’s 15-year history – is how many projects are now targeting the event for hype-inducing launches and other frenzy-inciting pursuits. Chief among those is the planned launch of Runes, the fungible-token protocol being developed by Casey Rodarmor, whose launch of the Ordinals protocol last year, with its NFT-like inscriptions, caused a sensation on Bitcoin, driving up transactional activity along with fees and congestion. There could also be a scramble to mine block No. 840,000, where the halving is supposed to automatically occur. In the past, mining the all-important halving block brought little more than bragging rights and the chance to embed a message into the blockchain, for posterity. (In 2020, winner F2Pool wrote something about the U.S. Federal Reserve’s Covid-related money-printing.) But now, with the introduction of the Ordinals protocol, it’s possible to actually trade specific serial numbers to the tiniest increments of Bitcoin, known as satoshis or “sats.” And there’s a premium for the especially precious “rare sats” corresponding with milestones like the halving. Already, as reported by CoinDesk’s Daniel Kuhn, people are predicting that block 840,000 could be “the most valuable block to be mined to date.” There’s also the risk that the competition could get so intense that things go horribly awry, resulting in a nasty “reorg.” Pretty crypto, right?

Computer scientist Craig Wright, who has long claimed he is the inventor of Bitcoin, is not in fact Satoshi Nakamoto, and didn’t author Bitcoin whitepaper, a U.K. judge ruled in the closely-watched Crypto Open Patent Alliance (COPA) trial. The evidence presented during the month-long trial was “overwhelming,” the judge said.

Top picks of the past week from our Protocol Village column, highlighting key blockchain tech upgrades and news.

Schematic from Conio’s new patent for a “Method and apparatus for a blockchain-agnostic safe multi-signature digital-asset management.” (Conio/U.S. Patent Office)

The Solana blockchain is in the midst of what some might call a renaissance, its SOL token rebounding almost entirely from all-time-lows in 2020. But recently, it’s the source of activity on the chain that might give some analysts pause: Meme coins built around images of dogs and sloths, general ridiculousness and even the very concept of memes themselves.

The chain, which aims to offer cheaper and quicker transactions than rival networks like Ethereum, has become the go-to platform for meme coins like dogwifhat (WIF), bonk (BONK), and book of meme (BOME) – tokens whose value lies principally (and unabashedly) in their ability to generate internet buzz. A new arrival is SLERF, a sloth-themed token.

Hordes of “degens” – the accepted jargon for crypto traders who are, well, really into it – have flocked to Solana, chasing the trend. Mature observers might call it a display of some of the crypto industry’s worst excesses, morphing the Solana ecosystem into a carnival of scams, schemes and screw-ups.

“To me, it’s just a bizarre thing, I think, of people being terminally online and kind of having nothing better to do,” Solana co-founder Anatoly Yakovenko told CoinDesk this week in an interview for The Protocol podcast.

The meme coin boom has triggered a flurry of activity for the wider Solana ecosystem, with decentralized exchanges on the network surpassing those on Ethereum in terms of overall transaction volume this week. But users are beginning to notice a problem: Many transactions on Solana are failing to go through – highlighting the consequence of meme coin-induced volatility and congestion.

The meme craze has ultimately been a mixed bag for Solana, leading to an influx in usage and liquidity, but dredging up problems with its architecture that have left a sour taste in the mouths of some traders.

Alex McFarlane and Mélodie Lamarque, co-founders of Keyring Network (Keyring Network)

Ethereum’s milestone “Dencun” upgrade was the biggest story in blockchain last week; it might be a sign of just how smooth and successful the operation was, from a technical standpoint, that the industry has now moved on to other high-minded pursuits, such as gawking at the memecoin trading on Solana.

Median fees on Arbitrum, the biggest Ethereum layer 2, was around 5.8 cents as of Tuesday, down from about 40 cents just before the upgrade went through. Optimism, a rival layer 2, was seeing fees around 0.7 cents, down from about 50 cents. On the publicly traded crypto exchange Coinbase’s own layer 2, Base, the fees dropped from about 30 cents to about 0.6 cents – hitting the company’s target for “sub-cent” transaction costs.

Chart showing drop in cost of median layer-2 network fees before and after last week’s Dencun upgrade. (Dune Analytics)

The blockchain analysis firm Glassnode published a chart, citing data from the website L2fees, that’s a little easier to eyeball:

Table of fees for layer-2 chains, before and after Dencun upgrade. (L2fees/Glassnode)