A Trio of Crypto Trends: Meme or Hype? Ethereum Tokens, a Bitcoin Code Resurgence and Airdrop Fever

In this installment of “The Protocol,” hosts Brad Keoun, the founding editor of The Protocol Newsletter, and tech journalists Sam Kessler and Margaux Nijkerk, explore three key topics: the inception of DN 404 tokens on Ethereum, the resurgence of the OP_CAT function in Bitcoin and the ongoing airdrop season in the crypto sphere, delving into the implications and controversies surrounding these developments.

#cryptocurrency #digitalfinance #finance #bitcoin #crypto #podcast #airdrops #memes

00:00 – Story 1: Ethereum developers create DN 404 tokens after ERC 404s send network fees surging
08:06- Story 2: Satoshi era Bitcoin function, Opcat dusted off as development fervor grows
18:25- Story 3: Airdrop season and its implications
28:52- Conclusion and Wrap-up

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Hello and welcome to the protocol podcast I’m Brad C here with my co-hosts Margot niker and Sam Kessler excited to dive into Today’s Show with the latest news and developments in technology behind crypto and block chains first please do not forget to subscribe to our Weekly Newsletter the protocol on coindesk.com

Let’s dive right into it our first story we’re talking about ethereum developers create dn44 tokens after ERC 404s send Network fees surging okay that is just a lot of stuff that probably a lot of people have zero idea what any of that is even like regular you know

Crypto people don’t even all this stuff was just invented two weeks ago but anyway um Sam what do you think of why don’t you tell us about this story yeah like you said this is this is new um so ERC 404 um is this new token standard developed by this protocol um nft

Protocol Pandora essentially what it is is it’s just like a fungible nft which sounds kind of um like a sort of misnomer um or or an oxymoron rather um what is a fungible non-f fungible token what they do is they combine fungible tokens um just like a regular cryptocurrency with a non-f funable

Token so that you can for example trade um fractions of NFS have the nft burned in your wallet and then to the person who you’ve traded the fraction to um if they get enough of this fraction they can mint a new version of the nft in

Their wallet um that’s kind of like a vague way of explaining it but that’s at a high level what this concept is and there’s like all this controversy around it that our um great colleague Dan um wrote about so um we can get into all that um Margo you follow the ethereum

World so maybe you’ve got some sense of you know what the response has been up until now yeah what you were sort of getting at was that this is not ERC 404 is not an official standard um that it’s sort of been like created and marketed with that framing ERC stands for

Ethereum request for comment usually when you get these standards you go through like a process and it gets approved by the community and by the devs and this is not the case for ERC 404 it’s just called ERC 404 it’s not an actual uh legitimate standard um and so

It’s been interesting sort of to see The Fallout in The Wider like ethereum ecosystem as this protocol has sort of surged um you know to the front lines of the new news I guess but at the same time I’ve like noticed from the devs like they haven’t said that much about

It um but I don’t know what do do you do you guys have any takes on on this whole controversy around ERC 404 I mean in general the idea seems smart and useful of a way of fractionalizing these nfts I mean some of them are you know they can be

Quite expensive right I mean and and you know I mean an nft can be any anything right I mean nft could be a Super Bowl ticket you know um but uh you know and then you have a Super Bowl ticket that’s whatever like you know 120 Grand fractionalize that you know where

You’re only gonna toss in a thousand bucks but you’re basically going to speculate on the you know cost of a Super Bowl ticket but I don’t know like that’s you know or a piece of Fine Art where you have you know like 5% of it but it seems like there’s lots of

Different ways people have tried to do the this is just kind of the latest is that the way you all think about it maybe one thing um that I didn’t do a good job of is kind of like explaining how this works and why it’s you know

Cool I I I I mean essentially just very simply again what happens is rather than just being able to own one nft um which is you know the way things work now um and it has problems uh namely uh most notably with liquidity like if I want to

Buy an nft only one person has it um you know where am I going to get that N I can buy nfts that are in a collection s but it’s just price Discovery all these things are hard what this does is it says Hey an nft can be broken down so if

You own a whole nft say it’s like a 100 tokens if you own all a hundred of them um you have that nft um if you sell one of those hundred tokens it goes down to 999 you have 99% of the nft that’s actually not a a concept so you don’t

Have 99% you have none of the nft what it does is it burns that nft in your wallet um and then if you send those 99 tokens to somebody who has one and they have a hole now they have 100 it mints a new nft for them so it’s actually not

The same nft before it’s a new minted version but in the context of something Brad you give the example of like tickets that actually makes a lot of sense say you don’t have a ticket that is worthless but if you’re able to scrap together um you know enough pieces of a

Ticket now you have a whole non-fungible T token you have a ticket that’s really cool and also there’s like a bunch of trading applications on top of it that could you know just with liquidity in general like people love to speculate this app opens new avenues for

Speculation so it is like a kind of cool idea but again uh this this whole thing that Margot was talking about around how they didn’t go through the formal process to propose this I is why uh part of you probably the entire reason of why we’re talking about it today was it

False advertising what if this thing’s broken people think it’s legitimate they start using this and they realize they don’t have their tickets um that’s that’s the problem um it’s not as audited as you might hope yeah I I think it’s interesting you bring up the trading perspective because you know

When I came into into uh this podcast or this recording I have sort of rolled my eyes at this like why is this actually needed um and you know there’s so many problems on ethereum like this is what we’re dealing with um but you know I

Guess that that that that does kind of make sense in a um like a narrow scope I wonder though if this is just like another hype cycle like how how persistent is this also because like like you said this is this is not something that’s been officially

Approved we don’t know what the security risks are behind this we hasn’t been properly audited like people I guess crypto is risky but this is very risky in my opinion and so so you know this it’s it’s another one of those interesting stories to follow especially

The Fallout from this but you know I guess with everything in crypto these days is is this really needed is my sort of my take on all that and the fun Strat newsletter I was just reading that this morning they were they were just saying that what we’re actually seeing is just

Another meme coin sure incarn ation and but I mean I think it is important to point out here Sam I don’t know if you I don’t remember if you pointed this out but that it it is causing some congestion right like the the frenzy is real enough that it’s being se you can

Witness it in like a a rise in the gas fees right yeah that’s the other piece of this story that I did neglect to mention which is that gasv on ethereum are rising to you know record levels at least as far as recent history is concerned all on you know or or largely

On account of this new trend um is it a meme is it all hype probably everything has been meeme and hype up until now um basically in crypto and on ethereum defi but broadly there has been this defi Resurgence that we’ve seen on ethereum which I’m I think we’ll get into later

As we talk about air drops um but this also might be kind of a part of that the appetite is there again for these sort of like speculative things which for D5 broadly if not this token standard might be viewed as a some something of a positive but I think you’re right Margo

Like what is the use case for this you know in it this particular technological innovation I don’t know if it has legs or it’s just a step towards something else right but all right well let’s move on um to our next topic okay Satoshi era Bitcoin function opcat dusted off as development feror

Grows so you know this is just more on the ongoing theme of building on bitcoin right I mean people are suddenly excited about the possibility of you know some of the the stuff on bitcoin that we’ve seen on ethereum and some of the other you know

Alt ones and layer 2os and some of the other ecosystems and this is actually I mean Jamie Crawley wrote this story and he did a really good job of kind of figuring it out but there’s some history here which is this opcat function was actually included I think on the Bitcoin

Core software or I don’t think it was called Bitcoin core software at that point it was just the Bitcoin software uh you know very early days you know the network launched the Bitcoin blockchain launched in 2009 and then 2010 Satoshi took it out because there were certain risks um and uh but

Now these some developers are saying let’s bring it back because technology has apparently reduced some of those risks and this will enable uh the next wave of building on bitcoin um I don’t know what do y’all think about this yeah I think it’s great that you know that I I feel like we’ve

Been coming now almost weekly or maybe bi-weekly been talking about building on bitcoin and so it’s great to sort of hear that there’s this Resurgence um you know uh with modifying and uh updating the network yeah so this is interesting I mean I wonder though if you can kind

Of like help me understand having you know knowing very little which is a theme about Bitcoin um uh development um I I I wonder if you can you know explain what this um opcat thing actually is like what does this enable um for the network for developers well I probably

Shouldn’t go at too much technical depth because I will quickly screw it up but what I will say is the the cat refers to the word concatenate and so basically they’re putting two elements together and the idea was that would quickly you know get too much and it would not only uh result

In exponential memory requirements but it would also expose the network to some sort of security risks an OP code is you have these on all blockchains essentially a blockchain can be thought of like an operating system and an OP code is just like at a very root level

You know a a function that you can do on the Chain that’s like when I say root level it’s like addition subtraction in some cases exponentials multiplication you know some some more crazy things this is like concatenating things together and I I don’t yeah I I guess

The idea um for them I is that for for developers of Bitcoin relative to other things um other protocols the idea of something like this being a burden to the network might be more precient because Bitcoin has historically like we’ve alluded to in past episodes and today been much more reticent to expand

On its core functionality because they don’t want to make that big computer that operating system too heavy for the network to run they want to keep things as simple as possible I wonder um knowing like I said very little about this how much of this um concern around

This opcat stuff which is apparently supposed to make things better for l2s Defi and so on on top of Bitcoin I wonder how much of that concern is born out of like a real genuine sense of anxiety around the chain getting bogged down and how much of it is just kind of

A a more you know uh I guess fight ORF flight sort of a thing that you get with Bitcoin developers where they’re just constitutionally incapable of you know adjusting the core programming um the the core rules of the ch do you have any sense of that for I mean I I I don’t

Know if we would from talking to developers I think it gets at some of the core issues which is you know Bitcoin does not have kind of a leading organization it’s it’s it really is much more of this like open-source collaborative you know Spirit which

Means a lot of times things have to have consensus in order to get merged in and so that is kind of one of the perennial debates going on and how do you enable this building on bitcoin do you can you do it without changes to the code so there was a breakthrough Robin

Linus’s it’s called bit VM um you know what the Breakthrough there was they could they could add some of this functionality without having to to get consensus you know um and then separately I was just reading this proposal yesterday um from in fact one of the authors uh is from botanics Labs

Which happens to be building like an evm compatible um Layer Two uh on bitcoin you know it’s like a little proof of stake Network that sits on bitcoin anyway one of the developers works for that company um but they were in their you know proposal they talk about

How some things work without those changes to the code you can build a layer two but it’s a lot easier if you can get this change I guess you know because it just gives you a little more flexibility I don’t know does that answer your question Sam

Yeah it does just become a question it almost feels like talking about government or something when you talk about Bitcoin ethereum to a lesser extent um to an almost non-existent extent on other changes chains like I’m sure you hear like slippery slope sort of arguments where it’s like oh once we

Add you know this back I mean this should be something easy like it used to be in there and now you know machines are strong enough that we can actually you know nodes and clients are and so on are are strong enough that they can handle this like if you can’t get this

In um you know maybe that slippery slope is not something that you’re going to go down Argo you have any thoughts on this yeah it sounded like this change like yes there are these security risks but it’s sort of with the mind it’s being brought back in with the mindset of it

Enables like this additional building like that this building on bitcoin is not stopping that there will be additional um changes maybe to the protocol I wonder specifically like high level like what is it that this change in code can enable in terms of building like what is that goal that they’re

Heading towards I mean they gave some examples um layer 2os should be a little easier they talked about uh decentralized exchanges so I guess some of the defi stuffff mhm um there were a couple other examples in Jamie’s story no I mean that’s that’s great it sounds like it’s you know like

We’ve talked about like MIM mimicking ethereum a little bit but you know we we we love to see it you know the ethereum foundation you know they take a long time to get these things through but more or less like if they say they want it it seems like it probably gets onto

The road map whereas I kind of disagree with with the with the I mean the ethereum foundation is like holds it’s definitely a Central Key component of the ethereum ecosystem um and you know a lot of the core devs are employed by the ethereum foundation um but I wouldn’t say that

The ethereum foundation is involved in um you know the road map and the direction or at least that’s what they would say um and you people can debate it a little bit but it’s not like a um key well key is the wrong word it’s not a sitting like member of making these

Changes you know as an institution um but that is the difference between Bitcoin and ethereum is that you know ethereum the ethereum foundation is so uh vast in its um in what it touches in the ethereum ecos system whether it be grants whether it be you know employing

Cevs whether whether it be helping create these clients that we’ve talked about right um and Bitcoin doesn’t have that anyway back to bitcoin that’s that’s in it’s still still great to see that you know it’s giving room for more of this growth yeah yeah I think it’s all Spectrum too regarding what you’re

Saying Margo like yeah you a lot like the history of this goes back to not a tech conversation um but a conversation around regulatory things and icos and so on and the reason why these foundations might want to distinguish themselves from core development I do think you’re

Right though that in the case of ethereum at least if not relative to bitcoin relative to a lot of other ecosystems you do just by virtue of its like largess it’s much larger than um other um you know comparable ecosystems they’re able to have more people pitching in they’re able to have you

Know more people with dueling incentives pitching in on the development of the of the chain Wares with Bitcoin when they’re not actually doing that much that decentralization you know um means um a little bit more at least in the case of ethereum you see more people you know even centralized parties weighing

In because you know they’re actually making changes in a way that Bitcoin until recently you know doesn’t yeah well all right let’s uh let’s let’s wrap that one there uh let’s take a break when we come back we’re going to talk about well variety of things airdrop

Season and also how it relates to what we’re seeing on enan layer um it’s going to be fun and complicated all right we’ll be right back calling all developers score a consensus 2024 developer pass for just $19 but Act Fast only a limited number of these passes are available you may

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Before the break so Marg why don’t you just kind of tell us what’s the big idea that we’re going to be talking about yeah airdrop season free money basically but um you know um Stark net is among the ones that are leading the airdrop season um with its big announcement that

They much anticipated start token is going to become eligible to a variety of users in the in the Stark net ecosystem ethereum ecosystem and in the non web3 ecos like I guess I don’t know if there’s an ecosystem for that but basically non web3 users um are also

Going to be eligible so you know they they announced um I guess we’re recording on a Wednesday they announced today uh that you know they’re making 1.3 million wallets uh available for this token and it’ll be aird dropped on the on the 20th and they and users have

Until June 20th to claim it so exciting stuff for for the you know much anticipated Stark token Margo let me ask you Stark net you know what is Stark net and why do they you know Stark’s been operating right but why do they need a

Token now yeah so Stark’s a layer two uh built on ethereum there is ZK you use you know ZK r at they use zero knowledge um but they have their own programming language called Cairo so it’s not necessarily uh ZK evm um and so that because of that sort of barrier there’s

Been a little bit more of a distance between um stet and other uh ZK rollups that are ZK evm like polygon like scroll scroll is new but but matter Labs I’m thinking of ZK sync um and so there’s uh there hasn’t been a Tok there hasn’t

Been a token yet on Stark it has his own ecosystem there’s a whole bunch of daps and uh you know exchanges and and just like a gaming I think is also pretty big on Stark net um and so now there’s the Stark token that um the team the St well

The announcement came from the starkware found Stark net foundation and the primary developer fir behind Stark net is the company called starkware um and so they’ve come out with this token that they say they’re that is primarily going to be used for governance purposes and to participate in this Stark net

Ecosystem um but I thought it’s really interesting because I I I I have I do speak a lot to the Stark net folks um and they’re very uh much ethereum aligned is what they call it meaning they are pursuing their interests in the sake of for the sake of ethereum’s

Interest um and so they’ve made this uh Stark net airdrop pretty big um to allow people like home like solo stakers um including people who uh you know stake with Lio and other liquid staking providers as well as um as develop veler or core developers from ethereum people

Who’ve you know been crucial to implementing some of the biggest code changes to make ethereum what it is today um as well as also these non web3 developers who develop in the sake of you know for the sake of Open Source um I so I think it’s really interesting

Because this this airdrop is sort of getting at um not necessarily always what everyone is excited about about you know free money but also that it sort of has this like vision and this Mission and sort of to like give back to the core of uh their ecosystem which is

Ethereum it’ll be interesting to see who claims their tokens and and uh whether you know ethereum developers I mean I think the reaction on Twitter so far has X I should say has been positive I’ve seen a lot of core eth like people um excited to see that you know they’re

Being rewarded for their hard hard work in some sense um but yeah that’s sort of what the takeaway from from this specific air drop has been yeah maybe to place this into a broader context too it’s interesting to see like ethereum defi having a a big I say defi because

We’re talking about tokens I don’t know starkware has defi on it but it’s a layer to but anyway ethereum defi is kind of having this big airdrop moment it follows like um you know a similar moment on the salana blockchain that we talked about a while ago where a bunch

Of these protocols that people have used haven’t used some haven’t even heard of um are are rewarding people a ton of money um essentially what it equates to through these aird drops but you know um I’m I’m always a little bit um maybe to step back um and uh you know give the

The more cynical take on on airdrop season what it’s all about I mean there’s a bunch of reasons why projects and I’m not talking about starware specifically there’s a lot of projects that are launching tokens and a lot of different projects have different motivations and um tokenomics and and

And so on and so forth but broadly an airdrop giving this quote unquote free money to people what it what often happens is you have these teams that have spent a bunch of time and resources building something now what they’re doing is they’re creating a Marketplace

For their token ostensibly as a way to reward people also though um to create a new market for this token and to lure in new users but also as a way to reward um you know right rightly um you know their own contributions um so it’ll go to

Investors it’ll go to their own team members and so on and so forth and all of these different tokens are going to have very different distributions I mean this is basic stuff for anybody who’s been following this ecosystem for a while the crypto ecosystem broadly but it always does bare mentioning when

We’re talking about airdrops like they’re not all created equally you want to be really careful that you’re not like dumped on and so on and so forth but one other thing that I’ll say here is that we have seen the rise of this trend and we might talk about it in the

Future um points so the idea of a bunch of protocols that are kind of incenting users to come and join them um to deposit their money um so on and so forth for the prospect not of um necessarily interest but points um which are this kind of like Loosely defined

Metric that will be used to allocate future airdrops you’re seeing this in the liquid restak landscape which we’ve talked about and we’ll talk about more later but people are acre points that don’t have any value so that they can later maybe get an airdrop that hasn’t been you know confirmed yet for

Regulatory legal like lawyer reasons um it’s all pretty interesting but it is incredibly speculative so this airdrop season you know has a lot of facet the Stark Wares the points the so on and so forth but that’s also why we were going to make the connection to enan layer

Right is that people are piling into Igan layer because they might get the air drops from all these things that igen layer is gonna secure right yeah I mean that’s like a tangible but also like you know you can be cynical about this but you can also be like realistic

About this as like a mechanism to get people in where ien layer the reaking thing on ethereum where you can stake with them and then they’ll help secure other networks and reward you extra interest the whole idea with igen lir which has attracted like6 billion dollar

In deposits in just a few months since it started opening and closing deposits um it’s attracted all this money like 1.5% of all ethereum according to defi llama all ether rather according to defi llama um the reason it’s able to do this is because a bunch of platforms that

Have been built on top of it that are rewarding points on top of native igen layer points to people who deposit into igen layer through them but the whole point of Igan layer ultimately is going to be that it rewards interest people on top of their deposits but today those

Interests again are points because that extra interest that you know comes from core protocols and stuff without getting into the technology of it which we’ll do on a later episode I’m sure and did on a previous episode it doesn’t exist yet so the native like the it’s all speculative

Um and so with airdrop season it’s exciting but it’s also kind of a signal that we’re leading you know we’re moving into these economies that are you know a little bit more precarious in their fundamental um you know structure starnet also Wormhole uh they announced their’s their air drop is coming you know

That’ll be another big one but same kind of question like Wormhole has been operating why do they need a a token now and I I don’t know I was just kind of thinking about this like part of it is because that’s what they’re supposed to do right like if that’s a reasonable

Answer like they’re kind you know the the criticism is these things are all centralized in some way you want to turn it over to the community that is kind of whether that is true that’s sort of you know the Fig Leaf at least but but then you know there’s all these people you

Know to your point Margot they want to get paid you know get paid that’s yeah no and they’re competing against you know I mean the money printer aspect of these things like the all these projects they have they print their own token it’s like they have a money printer so why not use

That every other competitors are using it so they might as well they kind of have to most of these tokens it should be noted also like we’re talking about this on a podcast we all have American accents because we live here um we’re not going to be able to claim these

Things I mean we’re also journalists we’re not claiming these things anyway probably um none of us um but you know like it’s not available in the United States for a reason there’s regulatory reasons in addition to these kind of like high flying like philosophical reasons why one might want to transition

To Dow governance and it gets to the Hoy test it gets into all these other things but you know you’re appealing to the community by transitioning to Dow governments but you’re also looking at the government and saying hey we’re not issuing a security we’re actually transferring governance and we’re

Releasing tokens that give you votes in this system it it’s it it’s you know it’s about a lot more than rewarding the community um and you can be cynical or not about it but it’s like good to be realistic and um yeah our job is journalist is going to be to figure out

You know what the real Dows from the you know loosely you know creating markets that you can dump into again not talking about any specific projects here but anyway Margo any final thoughts here before we wrap yeah Sam nailed it I was going to bring up that you know we’re US Citizens We’re

Recording recording in the United States so US citizens you can’t participate in the star care drop also if you happen to be on the ofac list which I hope you’re not but you know if you are you’re also not part of that list so uh you know

Russia Iran China and the US and whoever else North Koreans here protocol podcast we accept all viewers let’s just put it that way sure sure but your start all right uh thank you Margo and that is a wrap for this week thank you for listening to the protocol podcast if

You have any questions about any stories or comments please reach out to us at podcasts at coindesk.com subject line the protocol you can listen to US Weekly on coindesk podcast podcast Network or wherever you get your podcasts also I’m throwing out reminder here please subscribe to our Weekly Newsletter the

Protocol on coindesk.com thank you and a shout out to our producer Michelle muso who keeps us on track and makes us sound smart um uh we’ll see you next week thanks a lot you