The Protocol: Peter Todd Wants to Fix Satoshi’s Bitcoin Bugs

We watched the HBO documentary on Satoshi Nakamoto’s possible identity just like everyone else. It was one of those where-were-you-when moments. The film was entertaining enough. We’ve got the rundown here – and also: a fresh angle! Some might call it a plot twist! Or a cliffhanger. Possibly a sequel. Read on.

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Screengrab from Polymarket prediction market on HBO documentary. (Polymarket)

SATOSHI BLOOPERS: Bettors on Polymarket, the Polygon-based prediction market, got whipsawed amid speculation over whom a much-promoted HBO documentary would identify as Bitcoin inventor Satoshi Nakamoto. Initially the focus was on Len Sassaman, who was once conjectured to be Satoshi because of his long history of published academic works regarding cryptography, which often showed his strong ideological commitment to privacy and decentralization. (He took his own life in 2011 after a battle with depression, and the theory that he was Satoshi has since been mostly discredited.) Eventually, as purported clips from the documentary started to leak out, the Polymarket odds shifted toward Peter Todd, an early contributor to Bitcoin. Indeed, in a tense scene toward the end of the film, with scary music playing in the background, the documentarian Cullen Hoback confronts Todd with the theory that he is Satoshi. It’s “ludicrous,” Todd says in the undeniably awkward scene. Later, Todd told CoinDesk’s Marc Hochstein in an interview with CoinDesk, “Of course I’m not Satoshi.” Also, Todd posted on X that he agreed with the infamous Satoshi claimant Craig Wright’s not-exactly-PG-rated assessment that the HBO documentary was not to be believed.

Ironically, or perhaps fittingly, Todd now might be trying to undo some of Satoshi’s wrongs. Last month, in a long blog post analyzing Bitcoin layer-2 technologies, he acknowledged the reality that Satoshi was far from perfect when writing the blockchain’s original code: “There’s a number of things that Satoshi got wrong in the initial Bitcoin protocol, in particular, scripting DoS attacks, the timewarp attack, and issues with the merkle tree.” Todd suggested the possibility of a “consensus cleanup soft-fork” – an elaborate way of describing what would essentially be an upgrade to patch the bugs. HOW SUSPICIOUS IS THAT??? We’re kidding of course. But maybe this will provide the gist for a gripping sequel.

ELSEWHERE:

I will reluctantly admit to watching many loops of this marketing video produced by Eigen Foundation in connection with the EIGEN token unlock. In this screenshot, what looks like a rogue sperm appears to leap out of a blueish ball that in turn appears to be falling down an infinity tunnel of concentric squares. (Eigen Foundation)

The headlines on EigenLayer’s unlocking last week of its previously non-transferrable EIGEN tokens managed to sneak into The Protocol just as we went to press. But the drama and controversy unfolded for several days afterward, with fresh revelations, indignant recriminations and cynical reflections that highlighted a couple of the crypto industry’s less savory funding practices.

First on the list is the widespread custom of allowing early investors whose token allocations are still locked up for another year to stake their tokens now – and in doing so to receive additional tokens that are not locked, i.e. they can be dumped immediately. One exasperated poster on X noted that there are “MANY token vesting protocols” out there, and projects could opt to build their own vesting contract, but instead the modus operandi is to “ask them to ‘pretty please don’t sell for a while ok?'” Viktor Bunin, protocol specialist for the U.S. crypto exchange Coinbase, spoke up to clarify that “Eigen Labs worked with companies like Toku, Coinbase, and BitGo to distribute tokens. These companies enforce vesting agreements offchain (rather than using onchain vesting contracts).” He added that, “This is standard practice – most protocols do this,” to which one snarky X user responded, “absolutely cracked that this is considered standard practice in our industry.” For what it’s worth, EigenLayer updated its project documentation to disclose that investors are “not restricted from staking EIGEN,” and that the “EIGEN investors receive from staking will not be subject to the lockup schedule.” So at least there’s that.

Another knotty topic was the practice of citing project’s “fully diluted value” as evidence of its worth, when often the “float” – consisting of unlocked tokens that are ostensibly free to trade – represents a very small percentage of the total potential supply; in many cases these would not actually be available for trading until some very distant point in the future. As analysts at crypto exchange Binance noted in a report in May, when the float is low, “tokens can experience rapid price appreciation due to limited liquidity available for trading at launch.” Former CoinDesk reporter Tracy Wang (now at Framework Ventures) wrote in her February 2022 opus on the well-followed crypto trader GCR that his successful “Big Short” trade included the very specific strategy of betting against tokens with high fully diluted valuations relative to their float.

In the case of the EigenLayer, a breathless Bankless headline noted that EIGEN had launched at a “$7B Fully Diluted Value,” and we did something similar here at CoinDesk, although our Oliver Knight followed quickly afterward with a story highlighting the “supply concerns,” noting that the circulating supply had a value of just $650 million. A common complaint, according to the social-media commentator @DefiIgnas, is that EIGEN is a “VC-funded, low-float, high-FDV token,” though he quickly added that several other “similarly branded” tokens trade at even more ludicrous ratios.

Fundraisings

Layer co-founders Sam Cassatt, Jake Hartnell and Ethan Frey (Layer)

Deals and grants

Screen grab from a demo video for the Archiv3 project (Archiv3)

PROTOCOL VILLAGE EXCLUSIVE: Bluwhale, an AI Web3 startup that uses smartphones as nodes, aims to raise as much as $10 million through a node sale, running now through the end of November. According to a press release shared with CoinDesk: “By participating in the node sale, Bluwhale users can generate passive income on their smartphones by keeping the app running behind the scenes as well as contribute data, and potentially storage and compute, in the near future. Anyone with more than 500 BLUAI points can stake them to operate the Master Nodes on mobile while there are three seasons of airdrops allocated for all node owners. Bluwhale will be selling a total of 100,000 network nodes.

Data and Tokens

Regulatory and Policy

There’s been a lot of discussion among blockchain developers, crypto traders and digital-asset analysts lately about the “parasitic” aspect of Ethereum’s scaling roadmap – the idea that, in pushing most transactional activity off onto layer-2 networks, there’s a lot less to be done on the main blockchain.

That, in turn, may have reduced the case of Ethereum’s ETH token as a compelling investment. (See last week’s The Protocol for a glimpse of just what a laggard ETH was during September among members of the CoinDesk 20 index.)

Binance Research has just published its monthly “Market Insights” report for October, with the chart above showing the bottom-line impact.

Under Ethereum’s monetary rules, higher transactional fees result in more ETH getting burned, but “as L2s cannibalized network activity throughout the year – further impacted by broader market conditions – transaction fees and, consequently, burned fees on Ethereum declined,” according to Binance Research.

As a result, ETH is no longer seeing the deflation witnessed on the blockchain earlier this year, and now it appears to be consistently inflationary, with the token’s supply steadily increasing.

“This increase has raised doubts about the ‘Ultrasound Money’ narrative,” the analysts wrote. “For ETH to regain its deflationary status, increased activity on the Ethereum mainnet may be crucial. However, with the growth of L2s, users are increasingly drawn to these scaling solutions due to their improved usability and lower costs.”

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

Diagram of Mobius Development Stack, from the project’s litepaper (Axelar)

Axelar, a blockchain interoperability project, has launched Mobius Development Stack, described as “a reimagined Web3 design space,” according to the team: “Axelar Mobius Development Stack (MDS), an open interoperability platform for decentralized applications, is live on mainnet. Upcoming L1 launches include Flow, Hedera, Solana, Sui, XRP Ledger. MDS is a new interoperability standard: Advanced token utility, infinite security and scalability.” Sergey Gorbunov, CEO, Interop Labs, said in a statement that “MDS is the first architecture that scales to support thousands of heterogeneous blockchains.”

Multichain layer-2 network Anduro, incubated by mining firm Marathon Digital Holdings (MARA), has developed a platform for issuing and investing in real-world assets (RWAs) on Bitcoin. The platform Avant, developed alongside tokenization specialist Vertalo, is planning a pilot project to tokenize whiskey barrels, according to an announcement shared exclusively with CoinDesk.

Polyhedra Network, a blockchain project specializing in zero-knowledge (ZK) proofs, released the first set of data from its new Proof Arena, a benchmarking platform designed to evaluate and compare different ZK provers. According to the team, “The data includes comparisons of provers from Polyhedra, Polygon, Linea and StarkWare – Expander, Plonky3, GNARK, Halo2 respectively. Results: the Expander prover is significantly faster in terms of proof generation time and peak memory; Plonky3 achieves stellar performance in terms of setup and verification time, and GNARK has the smallest proof size.”

Hex Trust, a fully-licensed digital asset custodian with more than $5 billion in assets under custody attained, said it has joined forces with Clearpool, a DeFi credit protocol, to launch Ozean, described as “the blockchain for RWA yield,” supported by Optimism. According to the team: “The partnership combines Hex Trust’s industry-leading services, 270-plus institutional clients and regulated infrastructure with Clearpool’s RWA lending expertise to position Ozean as the blockchain to unlock the power of DeFi for RWAs, powered by the CPOOL token.”

Oct. 9-11: Permissionless, Salt Lake City.

Oct. 9-10: Bitcoin Amsterdam.

Oct. 10-12: Bitcoin++ mints ecash: Berlin.

Oct. 13-16: Future Blockchain Summit, Dubai Harbour.

Oct. 15-17: Meridian, London.

Oct. 17: Worldcoin’s A New World, San Francisco.

Oct. 18-19: Pacific Bitcoin Festival, Los Angeles.

Oct. 21-22: Cosmoverse, Dubai.

Oct. 23-24: Cardano Summit, Dubai.

Oct. 25-26: Plan B Forum, Lugano.

Oct. 30-31: Chainlink SmartCon, Hong Kong.

Nov. 9-11: NEAR Protocol’s [REDACTED], Bangkok.

Nov. 10: OP_NEXT Bitcoin scaling conference, Boston.Nov. 11-14: Websummit, Lisbon.

Nov 12-14: Devcon 7, Bangkok.

Nov. 15-16: Adopting Bitcoin, San Salvador, El Salvador.

Nov. 20-21: North American Blockchain Summit, Dallas.

Dec. 5-6: Emergence, Prague

Jan. 21-25: WAGMI conference, Miami.

Jan. 30-31: PLAN B Forum, San Salvador, El Salvador.

Feb. 19-20, 2025: ConsensusHK, Hong Kong.

May 14-16: Consensus, Toronto.

May 27-29: Bitcoin 2025, Las Vegas.