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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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:

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.

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